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<SEC-DOCUMENT>0000950124-04-000867.txt : 20040312
<SEC-HEADER>0000950124-04-000867.hdr.sgml : 20040312
<ACCEPTANCE-DATETIME>20040312133635
ACCESSION NUMBER:		0000950124-04-000867
CONFORMED SUBMISSION TYPE:	10-K
PUBLIC DOCUMENT COUNT:		37
CONFORMED PERIOD OF REPORT:	20031231
FILED AS OF DATE:		20040312

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CONSUMERS ENERGY CO
		CENTRAL INDEX KEY:			0000201533
		STANDARD INDUSTRIAL CLASSIFICATION:	ELECTRIC & OTHER SERVICES COMBINED [4931]
		IRS NUMBER:				380442310
		STATE OF INCORPORATION:			MI
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		10-K
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-05611
		FILM NUMBER:		04665389

	BUSINESS ADDRESS:	
		STREET 1:		212 W MICHIGAN AVE
		CITY:			JACKSON
		STATE:			MI
		ZIP:			49201
		BUSINESS PHONE:		5177881030

	MAIL ADDRESS:	
		STREET 1:		212 W MICHIGAN AVE
		STREET 2:		M 946
		CITY:			JACKSON
		STATE:			MI
		ZIP:			49201

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	CONSUMERS POWER CO
		DATE OF NAME CHANGE:	19920703
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>k82154ae10vk.txt
<DESCRIPTION>ANNUAL REPORT FOR FISCAL YEAR ENDED 12/31/2003
<TEXT>
<PAGE>

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

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549
                            ------------------------

                                   FORM 10-K

[X]             ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
                                       OR
[ ]           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
            FOR THE TRANSITION PERIOD FROM            TO

<Table>
<Caption>
COMMISSION      REGISTRANT; STATE OF INCORPORATION;        IRS EMPLOYER
FILE NUMBER        ADDRESS; AND TELEPHONE NUMBER        IDENTIFICATION NO.
- -----------     -----------------------------------     ------------------
<S>          <C>                                        <C>
1-9513       CMS Energy Corporation                     38-2726431
             (A Michigan Corporation)
             One Energy Plaza, Jackson, Michigan 49201
             (517) 788-0550
1-5611       Consumers Energy Company                   38-0442310
             (A Michigan Corporation)
             One Energy Plaza, Jackson, Michigan 49201
             (517) 788-0550
</Table>

Securities registered pursuant to Section 12(b) of the Act:

<Table>
<Caption>
                                                                                       NAME OF EACH EXCHANGE
      REGISTRANT                               TITLE OF CLASS                           ON WHICH REGISTERED
      ----------                               --------------                          ---------------------
<S>                     <C>                                                           <C>
CMS ENERGY CORPORATION  Common Stock, $.01 par value                                  New York Stock Exchange
CMS ENERGY TRUST I      7.75% Quarterly Income Preferred Securities                   New York Stock Exchange
CONSUMERS ENERGY
  COMPANY               Preferred Stocks, $100 par value: $4.16 Series, $4.50 Series  New York Stock Exchange
CONSUMERS POWER
  COMPANY FINANCING I   8.36% Trust Originated Preferred Securities                   New York Stock Exchange
CONSUMERS ENERGY
  COMPANY FINANCING II  8.20% Trust Originated Preferred Securities                   New York Stock Exchange
CONSUMERS ENERGY
  COMPANY FINANCING
  III                   9.25% Trust Originated Preferred Securities                   New York Stock Exchange
CONSUMERS ENERGY
  COMPANY FINANCING IV  9.00% Trust Originated Preferred Securities                   New York Stock Exchange
</Table>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:  None

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.  Yes X  No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Exchange Act Rule 12 b-2).
CMS ENERGY CORPORATION:  Yes X  No [ ]
CONSUMERS ENERGY COMPANY:  Yes [ ]  No X

The aggregate market value of CMS Energy voting and non-voting common equity
held by non-affiliates was $1.167 billion for the 144,087,569 CMS Energy Common
Stock shares outstanding on June 30, 2003 based on the closing sale price of
$8.10 for CMS Energy Common Stock, as reported by the New York Stock Exchange on
such date. There were 161,148,245 shares of CMS Energy Common Stock outstanding
on March 8, 2004.

On March 8, 2004, CMS Energy held all voting and non-voting common equity of
Consumers

Documents incorporated by reference:  CMS Energy's proxy statement and
Consumers' information statement relating to the 2004 annual meeting of
shareholders to be held May 28, 2004, is incorporated by reference in Parts II
and III, except for the organization and compensation committee report and audit
committee report contained therein.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

                             CMS Energy Corporation
                                      and
                            Consumers Energy Company

 Annual Reports on Form 10-K to the Securities and Exchange Commission for the
                                   Year Ended
                               December 31, 2003

     This combined Form 10-K is separately filed by CMS Energy Corporation and
Consumers Energy Company. Information in this combined Form 10-K relating to
each individual registrant is filed by such registrant on its own behalf.
Consumers Energy Company makes no representation regarding information relating
to any other companies affiliated with CMS Energy Corporation other than its own
subsidiaries.

                               TABLE OF CONTENTS

<Table>
<Caption>
                                                                                 PAGE
                                                                                 ----
<S>               <C>                                                            <C>
Glossary......................................................................       3

PART I:
Item 1.           Business....................................................       9
Item 2.           Properties..................................................      27
Item 3.           Legal Proceedings...........................................      27
Item 4.           Submission of Matters to a Vote of Security Holders.........      29

PART II:
Item 5.           Market for Common Equity and Related Stockholder Matters....      30
Item 6.           Selected Financial Data.....................................      30
Item 7.           Management's Discussion and Analysis of Financial Condition
                  and Results  of Operations..................................      31
Item 7A.          Quantitative and Qualitative Disclosures About Market
                  Risk........................................................      31
Item 8.           Financial Statements and Supplementary Data.................      32
Item 9.           Changes in and Disagreements With Accountants on Accounting
                  and  Financial Disclosure...................................    CO-1
Item 9A.          Controls and Procedures.....................................    CO-1

PART III:
Item 10.          Directors and Executive Officers............................    CO-2
Item 11.          Executive Compensation......................................    CO-2
Item 12.          Security Ownership of Certain Beneficial Owners and
                  Management Related  Stockholder Matters.....................    CO-2
Item 13.          Certain Relationships and Related Transactions..............    CO-2
Item 14.          Principal Accountant Fees and Services......................    CO-3

PART IV:
Item 15.          Exhibits, Financial Statement Schedules, and Reports on Form
                  8-K.........................................................    CO-3
</Table>

                                        2
<PAGE>

                                    GLOSSARY

     Certain terms used in the text and financial statements are defined below

<Table>
<S>                                           <C>
ABATE.....................................    Association of Businesses Advocating Tariff Equity
Accumulated Benefit Obligation............    The liabilities of a pension plan based on service and
                                              pay to date. This differs from the Projected Benefit
                                              Obligation that is typically disclosed in that it does
                                              not reflect expected future salary increases.
AEP.......................................    American Electric Power, a non-affiliated company
AFUDC.....................................    Allowance for Funds Used During Construction
ALJ.......................................    Administrative Law Judge
Alliance RTO..............................    Alliance Regional Transmission Organization
AMT.......................................    Alternative minimum tax
APB.......................................    Accounting Principles Board
APB Opinion No. 18........................    APB Opinion No. 18, "The Equity Method of Accounting for
                                              Investments in Common Stock"
APB Opinion No. 30........................    APB Opinion No. 30, "Reporting Results of Operations --
                                              Reporting the Effects of Disposal of a Segment of a
                                              Business"
APT.......................................    Australian Pipeline Trust
ARO.......................................    Asset retirement obligation
Articles..................................    Articles of Incorporation
Attorney General..........................    Michigan Attorney General
bcf.......................................    Billion cubic feet
Big Rock..................................    Big Rock Point nuclear power plant, owned by Consumers
Board of Directors........................    Board of Directors of CMS Energy
Bookouts..................................    Unplanned netting of transactions from multiple
                                              contracts
Brownfield credit.........................    Provides for a tax incentive for the redevelopment or
                                              improvement of a facility (contaminated property), or
                                              functionally obsolete or blighted property, provided
                                              that certain conditions are met.
Btu.......................................    British thermal unit
Centennial................................    Centennial Pipeline, LLC, in which Panhandle, formerly a
                                              wholly owned subsidiary of CMS Gas Transmission, owned a
                                              one-third interest
CEO.......................................    Chief Executive Officer
CFO.......................................    Chief Financial Officer
CFTC......................................    Commodity Futures Trading Commission
Clean Air Act.............................    Federal Clean Air Act, as amended
CMS Electric and Gas......................    CMS Electric and Gas Company, a subsidiary of
                                              Enterprises
CMS Energy................................    CMS Energy Corporation, the parent of Consumers and
                                              Enterprises
CMS Energy Common Stock or common stock...    Common stock of CMS Energy, par value $.01 per share
CMS ERM...................................    CMS Energy Resource Management Company, formerly CMS
                                              MST, a subsidiary of Enterprises
CMS Field Services........................    CMS Field Services, formerly a wholly owned subsidiary
                                              of CMS Gas Transmission. The sale of this subsidiary
                                              closed in July 2003.
CMS Gas Transmission......................    CMS Gas Transmission Company, a subsidiary of
                                              Enterprises
CMS Generation............................    CMS Generation Co., a subsidiary of Enterprises
CMS Holdings..............................    CMS Midland Holdings Company, a subsidiary of Consumers
CMS Land..................................    CMS Land Company, a subsidiary of Enterprises
CMS Midland...............................    CMS Midland Inc., a subsidiary of Consumers
</Table>

                                        3
<PAGE>
<Table>
<S>                                           <C>
CMS MST...................................    CMS Marketing, Services and Trading Company, a wholly
                                              owned subsidiary of Enterprises, whose name was changed
                                              to CMS ERM effective January 2004
CMS Oil and Gas...........................    CMS Oil and Gas Company, formerly a subsidiary of
                                              Enterprises
CMS Pipeline Assets.......................    CMS Enterprises pipeline assets in Michigan and
                                              Australia
CMS Viron.................................    CMS Viron Energy Services, formerly a wholly owned
                                              subsidiary of CMS MST. The sale of this subsidiary
                                              closed in June 2003.
Common Stock..............................    All classes of Common Stock of CMS Energy and each of
                                              its subsidiaries, or any of them individually, at the
                                              time of an award or grant under the Performance
                                              Incentive Stock Plan
Consumers.................................    Consumers Energy Company, a subsidiary of CMS Energy
Consumers Funding.........................    Consumers Funding LLC, a wholly-owned special purpose
                                              subsidiary of Consumers for the issuance of
                                              securitization bonds dated November 8, 2001
Consumers Receivables Funding II..........    Consumers Receivables Funding II LLC, a wholly-owned
                                              subsidiary of Consumers
Court of Appeals..........................    Michigan Court of Appeals
CPEE......................................    Companhia Paulista de Energia Eletrica, a subsidiary of
                                              Enterprises
Customer Choice Act.......................    Customer Choice and Electricity Reliability Act, a
                                              Michigan statute enacted in June 2000 that allows all
                                              retail customers choice of alternative electric
                                              suppliers as of January 1, 2002, provides for full
                                              recovery of net stranded costs and implementation costs,
                                              establishes a five percent reduction in residential
                                              rates, establishes rate freeze and rate cap, and allows
                                              for Securitization
Detroit Edison............................    The Detroit Edison Company, a non-affiliated company
DIG.......................................    Dearborn Industrial Generation, LLC, a wholly owned
                                              subsidiary of CMS Generation
DOE.......................................    U.S. Department of Energy
DOJ.......................................    U.S. Department of Justice
Dow.......................................    The Dow Chemical Company, a non-affiliated company
EISP......................................    Executive Incentive Separation Plan
EITF......................................    Emerging Issues Task Force
EITF Issue No. 02-03......................    Issues Involved in Accounting for Derivative Contracts
                                              Held for Trading Purposes and Contracts Involved in
                                              Energy Trading and Risk Management Activities
EITF Issue No. 97-04......................    Deregulation of the Pricing of Electricity -- Issues
                                              Related to the Application of FASB Statements No. 71 and
                                              101
El Chocon.................................    The 1,200 MW hydro power plant located in Argentina, in
                                              which CMS Generation holds a 17.23 percent ownership
                                              interest
Enterprises...............................    CMS Enterprises Company, a subsidiary of CMS Energy
EPA.......................................    U.S. Environmental Protection Agency
EPS.......................................    Earnings per share
ERISA.....................................    Employee Retirement Income Security Act
Ernst & Young.............................    Ernst & Young LLP
Exchange Act..............................    Securities Exchange Act of 1934, as amended
FASB......................................    Financial Accounting Standards Board
FERC......................................    Federal Energy Regulatory Commission
FMB.......................................    First Mortgage Bonds
FMLP......................................    First Midland Limited Partnership, a partnership that
                                              holds a lessor interest in the MCV facility
GCR.......................................    Gas cost recovery
</Table>

                                        4
<PAGE>
<Table>
<S>                                           <C>
Guardian..................................    Guardian Pipeline, LLC, in which CMS Gas Transmission
                                              owned a one-third interest
Health Care Plan..........................    The medical, dental, and prescription drug programs
                                              offered to eligible employees of Consumers and CMS
                                              Energy
HL Power..................................    H.L. Power Company, a California Limited Partnership,
                                              owner of the Honey Lake generation project in Wendel,
                                              California
Integrum..................................    Integrum Energy Ventures, LLC
IPP.......................................    Independent Power Production
ITC.......................................    Investment tax credit
JOATT.....................................    Joint Open Access Transmission Tariff
Jorf Lasfar...............................    The 1,356 MW coal-fueled power plant in Morocco, jointly
                                              owned by CMS Generation and ABB Energy Ventures, Inc.
kWh.......................................    Kilowatt-hour
LIBOR.....................................    London Inter-Bank Offered Rate
Loy Yang..................................    The 2,000 MW brown coal fueled Loy Yang A power plant
                                              and an associated coal mine in Victoria, Australia, in
                                              which CMS Generation holds a 50 percent ownership
                                              interest
LNG.......................................    Liquefied natural gas
Ludington.................................    Ludington pumped storage plant, jointly owned by
                                              Consumers and Detroit Edison
MAPL......................................    Marathon Ashland Petroleum, LLC, partner in Centennial
Marysville................................    CMS Marysville Gas Liquids Company, a Michigan
                                              corporation and a subsidiary of CMS Gas Transmission
                                              that held a 100 percent interest in Marysville
                                              Fractionation Partnership and a 51 percent interest in
                                              St. Clair Underground Storage Partnership
mcf.......................................    Thousand cubic feet
MCV Expansion, LLC........................    An agreement entered into with General Electric Company
                                              to expand the MCV Facility
MCV Facility..............................    A natural gas-fueled, combined-cycle cogeneration
                                              facility operated by the MCV Partnership
MCV Partnership...........................    Midland Cogeneration Venture Limited Partnership in
                                              which Consumers has a 49 percent interest through CMS
                                              Midland
MD&A......................................    Management's Discussion and Analysis
METC......................................    Michigan Electric Transmission Company, formerly a
                                              subsidiary of Consumers Energy and now an indirect
                                              subsidiary of Trans-Elect
Michigan Gas Storage......................    Michigan Gas Storage Company, a former subsidiary of
                                              Consumers that merged into Consumers in November 2002
Michigan Power............................    CMS Generation Michigan Power, LLC, owner of the
                                              Kalamazoo River Generating Station and the Livingston
                                              Generating Station
MISO......................................    Midwest Independent System Operator
Moody's...................................    Moody's Investors Service, Inc.
MPSC......................................    Michigan Public Service Commission
MSBT......................................    Michigan Single Business Tax
MTH.......................................    Michigan Transco Holdings, Limited Partnership
MW........................................    Megawatts
NEIL......................................    Nuclear Electric Insurance Limited, an industry mutual
                                              insurance company owned by member utility companies
NMC.......................................    Nuclear Management Company, LLC, formed in 1999 by
                                              Northern States Power Company (now Xcel Energy Inc.),
                                              Alliant Energy, Wisconsin Electric Power Company, and
                                              Wisconsin Public Service Company to operate and manage
                                              nuclear generating facilities owned by the four
                                              utilities
</Table>

                                        5
<PAGE>

<Table>
<S>                                         <C>
NERC......................................  North American Electric Reliability Council
NRC.......................................  Nuclear Regulatory Commission
NYMEX.....................................  New York Mercantile Exchange
OATT......................................  Open Access Transmission Tariff
OPEB......................................  Postretirement benefit plans other than pensions for retired
                                            employees
Palisades.................................  Palisades nuclear power plant, which is owned by Consumers
Panhandle Eastern Pipe Line or
  Panhandle...............................  Panhandle Eastern Pipe Line Company, including its subsidiaries
                                            Trunkline, Pan Gas Storage, Panhandle Storage, and Panhandle
                                            Holdings. Panhandle was a wholly owned subsidiary of CMS Gas
                                            Transmission. The sale of this subsidiary closed in June 2003.
Parmelia..................................  A business located in Australia comprised of a pipeline, processing
                                            facilities, and a gas storage facility, a subsidiary of CMS Gas
                                            Transmission
PCB.......................................  Polychlorinated biphenyl
Pension Plan..............................  The trusteed, non-contributory, defined benefit pension plan of
                                            Panhandle, Consumers and CMS Energy
Powder River..............................  CMS Oil & Gas previously owned a significant interest in coalbed
                                            methane fields or projects developed within the Powder River Basin
                                            which spans the border between Wyoming and Montana. The Powder River
                                            properties have been sold.
PPA.......................................  The Power Purchase Agreement between Consumers and the MCV
                                            Partnership with a 35-year term commencing in March 1990
Price Anderson Act........................  Price Anderson Act, enacted in 1957 as an amendment to the Atomic
                                            Energy Act of 1954, as revised and extended over the years. This act
                                            stipulates between nuclear licensees and the U.S. government the
                                            insurance, financial responsibility, and legal liability for nuclear
                                            accidents.
PSCR......................................  Power supply cost recovery
PUHCA.....................................  Public Utility Holding Company Act of 1935
PURPA.....................................  Public Utility Regulatory Policies Act of 1978
ROA.......................................  Retail Open Access
SCP.......................................  Southern Cross Pipeline in Australia, in which CMS Gas Transmission
                                            holds a 45 percent ownership interest
SEC.......................................  U.S. Securities and Exchange Commission
Securitization............................  A financing method authorized by statute and approved by the MPSC
                                            which allows a utility to sell its right to receive a portion of the
                                            rate payments received from its customers for the repayment of
                                            Securitization bonds issued by a special purpose entity affiliated
                                            with such utility
SENECA....................................  Sistema Electrico del Estado Nueva Esparta, C.A., a subsidiary of
                                            Enterprises
SERP......................................  Supplemental Executive Retirement Plan
SFAS......................................  Statement of Financial Accounting Standards
SFAS No. 5................................  SFAS No. 5, "Accounting for Contingencies"
SFAS No. 52...............................  SFAS No. 52, "Foreign Currency Translation"
SFAS No. 71...............................  SFAS No. 71, "Accounting for the Effects of Certain Types of
                                            Regulation"
SFAS No. 87...............................  SFAS No. 87, "Employers' Accounting for Pensions"
</Table>

                                        6
<PAGE>

<Table>
<Caption>
SFAS No. 88.                                  SFAS No. 88, "Employers' Accounting for Settlements and
                                              Curtailments of Defined Benefit Pension Plans and for
                                              Termination Benefits"
<S>                                           <C>
SFAS No. 106..............................    SFAS No. 106, "Employers' Accounting for Postretirement
                                              Benefits Other Than Pensions"
SFAS No. 109..............................    SFAS No. 109, "Accounting for Income Taxes"
SFAS No. 115..............................    SFAS No. 115, "Accounting for Certain Investments in
                                              Debt and Equity Securities"
SFAS No. 123..............................    SFAS No. 123, "Accounting for Stock-Based Compensation"
SFAS No. 133..............................    SFAS No. 133, "Accounting for Derivative Instruments and
                                              Hedging Activities, as amended and interpreted"
SFAS No. 143..............................    SFAS No. 143, "Accounting for Asset Retirement
                                              Obligations"
SFAS No. 144..............................    SFAS No. 144, "Accounting for the Impairment or Disposal
                                              of Long-Lived Assets"
SFAS No. 148..............................    SFAS No. 148, "Accounting for Stock-Based
                                              Compensation -- Transition and Disclosure"
SFAS No. 149..............................    SFAS No. 149, "Amendment of Statement No. 133 on
                                              Derivative Instruments and Hedging Activities"
SFAS No. 150..............................    SFAS No. 150, "Accounting for Certain Financial
                                              Instruments with Characteristics of Both Liabilities and
                                              Equity"
Southern Union............................    Southern Union Company, a non-affiliated company
Special Committee.........................    A special committee of independent directors,
                                              established by CMS Energy's Board of Directors, to
                                              investigate matters surrounding round-trip trading
Stranded Costs............................    Costs incurred by utilities in order to serve their
                                              customers in a regulated monopoly environment, which may
                                              not be recoverable in a competitive environment because
                                              of customers leaving their systems and ceasing to pay
                                              for their costs. These costs could include owned and
                                              purchased generation and regulatory assets.
Superfund.................................    Comprehensive Environmental Response, Compensation and
                                              Liability Act
Taweelah..................................    Al Taweelah A2, a power and desalination plant of
                                              Emirates CMS Power Company, in which CMS Generation
                                              holds a forty percent interest
TEPPCO....................................    Texas Eastern Products Pipeline Company, LLC
Toledo Power..............................    Toledo Power Company, the 135 MW coal and fuel oil power
                                              plant located on Cebu Island, Phillipines, in which CMS
                                              Generation held a 47.5 percent interest.
Transition Costs..........................    Stranded Costs, as defined, plus the costs incurred in
                                              the transition to competition
Trunkline.................................    Trunkline Gas Company, LLC, formerly a subsidiary of CMS
                                              Panhandle Holdings, LLC
Trunkline LNG.............................    Trunkline LNG Company, LLC, formerly a subsidiary of LNG
                                              Holdings, LLC
Trust Preferred Securities................    Securities representing an undivided beneficial interest
                                              in the assets of statutory business trusts, the
                                              interests of which have a preference with respect to
                                              certain trust distributions over the interests of either
                                              CMS Energy or Consumers, as applicable, as owner of the
                                              common beneficial interests of the trusts
Union.....................................    Utility Workers of America, AFL-CIO
VEBA Trusts...............................    VEBA (voluntary employees' beneficiary association)
                                              Trusts accounts established to specifically set aside
                                              employer contributed assets to pay for future expenses
                                              of the OPEB plan
</Table>

                                        7
<PAGE>

                      (This page intentionally left blank)

                                        8
<PAGE>

                                     PART I

                                ITEM 1. BUSINESS

GENERAL

CMS ENERGY

     CMS Energy was formed in Michigan in 1987 and is an energy holding company
operating through subsidiaries in the United States and in selected markets
around the world. Its two principal subsidiaries are Consumers and Enterprises.
Consumers is a public utility that provides natural gas and/or electricity to
almost 6 million of Michigan's 10 million residents and serves customers in all
68 of the state's Lower Peninsula counties. Through various subsidiaries,
Enterprises is engaged in energy businesses in the United States and in selected
international markets.

     In 2003, CMS Energy's consolidated operating revenue was approximately $5.5
billion. See BUSINESS SEGMENTS later in this Item 1 for further discussion of
each segment.

CONSUMERS

     Consumers was formed in Michigan in 1968 and is the successor to a
corporation organized in Maine in 1910 that conducted business in Michigan from
1915 to 1968. In 1997, Consumers changed its name from Consumers Power Company
to Consumers Energy Company to better reflect its integrated electricity and gas
businesses.

     Consumers' service areas include automotive, metal, chemical and food
products as well as a diversified group of other industries. Consumers'
consolidated operations account for a majority of CMS Energy's total assets and
income, as well as a substantial portion of its operating revenue. At year-end
2003, Consumers' customer base and operating revenues were as follows:

<Table>
<Caption>
                                                           CUSTOMERS     OPERATING         2003 VS. 2002
                                                             SERVED       REVENUE        OPERATING REVENUE
                                                           (MILLIONS)    (MILLIONS)    % INCREASE/(DECREASE)
                                                           ----------    ----------    ---------------------
<S>                                                        <C>           <C>           <C>
Electric Utility Business..............................       1.75         $2,590              (2.2)
Gas Utility Business...................................       1.67          1,845              21.5
  Total................................................       2.85(a)      $4,435               6.4
</Table>

- -------------------------
(a) Reflects total number of customers, taking into account the approximately
    0.6 million combination electric and gas customers that are included in each
    of the Electric Utility Business and Gas Utility Business numbers above.

     Consumers' rates and certain other aspects of its business are subject to
the jurisdiction of the MPSC and FERC, as described in CMS ENERGY AND CONSUMERS
REGULATION later in this Item 1.

     CONSUMERS' PROPERTIES -- GENERAL: Consumers and its subsidiaries own their
principal properties in fee, except that most electric lines and gas mains are
located in public roads or on land owned by others pursuant to easements and
other rights. Almost all of Consumers' properties are subject to the lien of its
First Mortgage Bond Indenture. For additional information on Consumers'
properties see BUSINESS SEGMENTS -- Consumers' Electric Utility
Operations -- Electric Utility Properties, and -- Consumers' Gas Utility
Operations -- Gas Utility Properties, below.

BUSINESS SEGMENTS

CMS ENERGY FINANCIAL INFORMATION

     For information with respect to operating revenue, net operating income,
identifiable assets and liabilities attributable to all of CMS Energy's business
segments and international and domestic operations, see ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- SELECTED FINANCIAL INFORMATION

                                        9
<PAGE>

AND CMS ENERGY'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.

CONSUMERS' ELECTRIC UTILITY OPERATIONS

     Based on the average number of customers, Consumers' electric utility
operations, if independent, would be the thirteenth largest electric utility
company in the United States. Consumers' electric utility operations include the
generation, purchase, distribution and sale of electricity. At year-end 2003, it
served customers in 61 of the 68 counties of Michigan's Lower Peninsula.
Principal cities served include Battle Creek, Flint, Grand Rapids, Jackson,
Kalamazoo, Midland, Muskegon and Saginaw. Consumers' electric utility customer
base includes a mix of residential, commercial and diversified industrial
customers, the largest segment of which is the automotive industry. Consumers'
electric utility operations are not dependent upon a single customer, or even a
few customers, and the loss of any one or even a few of such customers is not
reasonably likely to have a material adverse effect on its financial condition.

     Consumers' electric utility operations are seasonal. The summer months
usually increase demand for electric energy, principally due to the use of air
conditioners and other cooling equipment, thereby affecting revenues. In 2003,
Consumers' electric sales were 36 billion kWh and retail open access deliveries
were 3 billion kWh, for total electric deliveries of 39 billion kWh. In 2002,
Consumers' electric sales were 37 billion kWh and retail open access deliveries
were 2 billion kWh, for total electric deliveries of 39 billion kWh.

     Consumers' 2003 summer peak demand was 7,721 MW (excluding retail open
access loads) and 8,170 MW (including retail open access loads). For the 2002-03
winter period, Consumers' winter peak demand was 5,862 MW (excluding retail open
access loads) and 6,140 MW (including retail open access loads). In December
2003, Consumers experienced peak demand of 5,657 MW (excluding retail open
access loads) and 6,093 MW (including retail open access loads). Based on its
summer 2003 forecast, Consumers carried an 11 percent reserve margin target.
However, as a result of lower than forecasted peak loads, Consumers' ultimate
reserve margin was 14.7 percent compared to 20.6 percent in 2002. Currently,
Consumers has a reserve margin of 5.0 percent, or supply resources equal to 105
percent of projected summer peak load for summer 2004 and is in the process of
securing the additional capacity needed to meet its summer 2004 reserve margin
target of 11 percent (111 percent of projected summer peak load). The ultimate
use of the reserve margin will depend primarily on summer weather conditions,
the level of retail open access requirements being served by others during the
summer, and any unscheduled plant outages.

  ELECTRIC UTILITY PROPERTIES

       GENERATION: At December 31, 2003, Consumers' electric generating system
consists of the following:

<Table>
<Caption>
                                                                                                2003 NET
                                                                           2003 SUMMER NET     GENERATION
                                                     SIZE AND YEAR           DEMONSTRATED      (MILLIONS
        NAME AND LOCATION (MICHIGAN)                ENTERING SERVICE       CAPABILITY (MWS)     OF KWHS)
        ----------------------------                ----------------       ----------------    ----------
<S>                                              <C>                       <C>                 <C>
COAL GENERATION
  J H Campbell 1 & 2 -- West Olive...........    2 Units, 1962-1967               615             4,253
  J H Campbell 3 -- West Olive...............    1 Unit, 1980                     765(a)          5,657
  D E Karn -- Essexville.....................    2 Units, 1959-1961               511             3,429
  B C Cobb -- Muskegon.......................    2 Units, 1956-1957               312             2,166
  J R Whiting -- Erie........................    3 Units, 1952-1953               326             2,256
  J C Weadock -- Essexville..................    2 Units, 1955-1958               302             2,330
                                                                                -----            ------
Total coal generation........................                                   2,831            20,091
                                                                                -----            ------
OIL/GAS GENERATION
  B C Cobb -- Muskegon.......................    3 Units, 1999-2000(b)            183                 6
  D E Karn -- Essexville.....................    2 Units, 1975-1977             1,276               352
                                                                                -----            ------
Total oil/gas generation.....................                                   1,459               358
                                                                                -----            ------
</Table>

                                        10
<PAGE>

<Table>
<Caption>
                                                                                                2003 NET
                                                                           2003 SUMMER NET     GENERATION
                                                     SIZE AND YEAR           DEMONSTRATED      (MILLIONS
        NAME AND LOCATION (MICHIGAN)                ENTERING SERVICE       CAPABILITY (MWS)     OF KWHS)
        ----------------------------                ----------------       ----------------    ----------
<S>                                              <C>                       <C>                 <C>
HYDROELECTRIC
  Conventional Hydro Generation..............    13 Plants, 1906-1949              74               335
  Ludington Pumped Storage...................    6 Units, 1973                    955(c)           (517)(d)
                                                                                -----            ------
Total Hydroelectric..........................                                   1,029              (182)
                                                                                -----            ------
NUCLEAR GENERATION
  Palisades -- South Haven...................    1 Unit, 1971                     767             6,151
                                                                                -----            ------
GAS/OIL COMBUSTION TURBINE
  Generation.................................    7 Plants, 1966-1971              345                13
                                                                                -----            ------
Total owned generation.......................                                   6,431            26,431
                                                                                =====            ======
PURCHASED AND INTERCHANGE POWER
  Capacity...................................                                   1,991(e)
                                                                                -----
Total........................................                                   8,422
                                                                                =====
</Table>

- -------------------------
(a)  Represents Consumers' share of the capacity of the J H Campbell 3 unit, net
     of 6.69 percent (ownership interests of the Michigan Public Power Agency
     and Wolverine Power Supply Cooperative, Inc.).

(b)  Cobb 1-3 are retired coal fired units that were converted to gas fired.
     Units were placed back into service in the years indicated.

(c)  Represents Consumers' share of the capacity of Ludington. Consumers and
     Detroit Edison have 51 percent and 49 percent undivided ownership,
     respectively, in the plant.

(d)  Represents Consumers' share of net pumped storage generation. This facility
     electrically pumps water during off-peak hours for storage to later
     generate electricity during peak-demand hours.

(e)  Includes 1,240 MW of purchased contract capacity from the MCV Facility.

     In 2003, through long-term purchase contracts, options, spot market and
other seasonal purchases, Consumers purchased up to 2,353 MW of net capacity
from other power producers (the largest of which was the MCV Partnership), which
amounted to 30.5 percent of Consumers' total system requirements.

     DISTRIBUTION:

     Consumers' distribution system includes:

     - 347 miles of high-voltage distribution radial lines operating at 120
       kilovolts and above;

     - 4,164 miles of high-voltage distribution overhead lines operating at 23
       kilovolts and 46 kilovolts;

     - 16 subsurface miles of high-voltage distribution underground lines
       operating at 23 kilovolts and 46 kilovolts;

     - 54,922 miles of electric distribution overhead lines;

     - 8,526 subsurface miles of underground distribution lines; and

     - substations having an aggregate transformer capacity of 20,605,680
       kilovoltamperes.

     Consumers formerly owned a high-voltage transmission system that
interconnects Consumers' electric generating plants at many locations with
transmission facilities of unaffiliated systems, including those of other
utilities in Michigan and Indiana. The interconnections permit a sharing of the
reserve capacity of the connected systems. This allows mutual assistance during
emergencies and substantially reduces investment in utility plant facilities. On
May 1, 2002, Consumers transferred its investment in the high-voltage
transmission system to a third party, Michigan Electric Transmission Company,
LLC. Consequently, Consumers no longer owns or controls transmission facilities
either directly or indirectly. For additional information on the sale of the

                                        11
<PAGE>

transmission assets, see ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- NOTE 4 OF CMS ENERGY'S NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNCERTAINTIES) -- CONSUMERS' ELECTRIC UTILITY RESTRUCTURING
MATTERS -- TRANSMISSION SALE and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- NOTE 2 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNCERTAINTIES) -- ELECTRIC RESTRUCTURING MATTERS -- TRANSMISSION SALE.

     FUEL SUPPLY: Consumers has four generating plant sites that burn coal.
These plants constitute 76 percent of Consumers' baseload supply, the capacity
used to serve a constant level of customer demand. In 2003, these plants
produced a combined total of 20,091 million kWhs of electricity and burned 10.1
million tons of coal. On December 31, 2003, Consumers had on hand a 28-day
supply of coal. For additional information on future sources of coal, see ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 2 OF CONSUMERS' NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNCERTAINTIES) -- OTHER ELECTRIC
UNCERTAINTIES -- COMMITMENTS FOR FUTURE PURCHASES -- COAL SUPPLY.

     Consumers owns Palisades, an operating nuclear power plant located near
South Haven, Michigan. In May 2001, with the approval of the NRC, Consumers
transferred its authority to operate Palisades to the NMC. During 2003,
Palisades' net generation was 6,151 million kWhs, constituting 23.3 percent of
Consumers' baseload supply. Palisades' nuclear fuel supply responsibilities are
under NMC's control as agent for Consumers. New fuel contracts are being written
as NMC agreements. Consumers/NMC currently have sufficient contracts for uranium
concentrates to provide up to 42 percent of its fuel supply requirements for the
fall 2004 reload. A mix of spot and medium-term uranium concentrates contracts
are currently being negotiated to provide for the remaining open requirements
for the 2004 and 2006 reloads. Consumers/NMC also have contracts for conversion
services with quantity flexibility to provide up to 100 percent of the
requirements for the 2004 reload and approximately 10 percent of the
requirements for the 2006 reload. Contracts to provide for the future Consumers/
NMC requirements are currently being pursued with all suppliers of conversion
services. Enrichment services contracts with quantity flexibility ranging up to
100 percent of the requirements for the 2004 and 2006 reloads are in place. NMC
is currently negotiating a contract for supply of enrichment services beyond
2006.

     NMC also has contracts for nuclear fuel services and for fabrication of
nuclear fuel assemblies. The fuel contracts are with major private industrial
suppliers of nuclear fuel and related services and with uranium producers,
converters and enrichers who participate in the world nuclear fuel marketplace.
The fabrication contract is effective for the 2004 reload with options to extend
the contract for an additional two reloads in 2006 and 2007.

     As shown below, Consumers generates electricity principally from coal and
nuclear fuel.

<Table>
<Caption>
                                                                      MILLIONS OF KWHS
                                                      ------------------------------------------------
                 POWER GENERATED                       2003      2002      2001        2000      1999
                 ---------------                       ----      ----      ----        ----      ----
<S>                                                   <C>       <C>       <C>         <C>       <C>
Coal..............................................    20,091    19,361    19,203      17,926    19,085
Nuclear...........................................     6,151     6,358     2,326(a)    5,724     5,105
Oil...............................................       242       347       331         645       809
Gas...............................................       129       354       670         400       441
Hydro.............................................       335       387       423         351       365
Net pumped storage................................      (517)     (486)     (553)       (541)     (476)
                                                      ------    ------    ------      ------    ------
Total net generation..............................    26,431    26,321    22,400      24,505    25,329
                                                      ======    ======    ======      ======    ======
</Table>

- -------------------------
(a)  On June 20, 2001, the Palisades reactor was shut down so technicians could
     inspect a small steam leak on a control rod drive assembly. The defective
     components were replaced and the plant returned to service on January 21,
     2002.

                                        12
<PAGE>

     The cost of all fuels consumed, shown below, fluctuates with the mix of
fuel burned.

<Table>
<Caption>
                                                                       COST PER MILLION BTU
                                                             -----------------------------------------
                      FUEL CONSUMED                          2003     2002     2001     2000     1999
                      -------------                          ----     ----     ----     ----     ----
<S>                                                          <C>      <C>      <C>      <C>      <C>
Coal.....................................................    $1.33    $1.34    $1.38    $1.34    $1.38
Oil......................................................     3.92     3.49     4.02     3.30     2.69
Gas......................................................     7.62     3.98     4.05     4.80     2.74
Nuclear..................................................     0.34     0.35     0.39     0.45     0.52
All Fuels(a).............................................     1.16     1.19     1.44     1.27     1.28
</Table>

- -------------------------
(a)  Weighted average fuel costs.

     The Nuclear Waste Policy Act of 1982 made the federal government
responsible for the permanent disposal of spent nuclear fuel and high-level
radioactive waste by 1998. The DOE has not arranged for storage facilities and
it does not expect to receive spent nuclear fuel for storage in 2004. Palisades
currently has spent nuclear fuel that exceeds its temporary on-site storage pool
capacity. Therefore, Consumers is storing spent nuclear fuel in NRC-approved
steel and concrete vaults known as "dry casks." For additional information on
disposal of nuclear fuel and Consumers' use of dry casks, see ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 4 OF CMS ENERGY'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNCERTAINTIES) -- OTHER CONSUMERS' ELECTRIC
UTILITY UNCERTAINTIES -- NUCLEAR MATTERS and ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 2 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (UNCERTAINTIES) -- OTHER ELECTRIC UNCERTAINTIES -- NUCLEAR MATTERS.

CONSUMERS' GAS UTILITY OPERATIONS

     Based on the average number of customers, Consumers' gas utility
operations, if independent, would be the 10th largest gas utility company in the
United States. Consumers' gas utility operations purchase, transport, store,
distribute and sell natural gas. As of December 31, 2003, it was authorized to
provide service in 54 of the 68 counties in Michigan's Lower Peninsula.
Principal cities served include Bay City, Flint, Jackson, Kalamazoo, Lansing,
Pontiac and Saginaw, as well as the suburban Detroit area, where nearly 900,000
of the gas customers are located. Consumers' gas utility operations are not
dependent upon a single customer, or even a few customers, and the loss of any
one or even a few of such customers is not reasonably likely to have a material
adverse effect on its financial condition.

     Consumers' gas utility operations are seasonal. Consumers injects natural
gas into storage during the summer months for use during the winter months when
the demand for natural gas is higher. Peak demand usually occurs in the winter
due to colder temperatures and the resulting increased demand for heating fuels.
In 2003, total deliveries of natural gas sold by Consumers and by other sellers
who deliver natural gas to customers (including the MCV Partnership) through
Consumers' pipeline and distribution network totaled 388 bcf.

     During the winter months of 2002-03, cold weather caused heavy withdrawals
from Consumers' gas storage fields. As a result, water and other liquids entered
certain of Consumers' pipelines. The existence of water and other liquids in the
pipelines could cause pipe corrosion, which in turn may increase future
maintenance problems and costs.

     GAS UTILITY PROPERTIES: Consumers' gas distribution and transmission system
consists of:

     - 25,551 miles of distribution mains throughout Michigan's Lower Peninsula;

     - 1,624 miles of transmission lines throughout Michigan's Lower Peninsula;

     - 7 compressor stations with a total of 162,000 installed horsepower; and

     - 14 gas storage fields located across Michigan with an aggregate storage
       capacity of 331 bcf and a working storage capacity of 130 bcf.

                                        13
<PAGE>

     GAS SUPPLY: In 2003, Consumers purchased 3 percent of its gas from Michigan
producers, 66 percent from United States producers outside Michigan and 22
percent from Canadian producers. Authorized suppliers in the gas customer choice
program supplied the remaining 9 percent of gas that Consumers delivered.

     Consumers' firm transportation agreements are with ANR Pipeline Company,
Great Lakes Gas Transmission, L.P., Trunkline Gas Co. and Panhandle Eastern Pipe
Line Company. Consumers uses these agreements to deliver gas to Michigan for
ultimate deliveries to market. Consumers' firm transportation and city gate
arrangements are capable of delivering over 95 percent of Consumers' total gas
supply requirements. As of December 31, 2003, Consumers' portfolio of firm
transportation from pipelines to Michigan is as follows:

<Table>
<Caption>
                                                                     VOLUME
                                                                (DEKATHERMS/DAY)      EXPIRATION
                                                                ----------------      ----------
<S>                                                             <C>                 <C>        <C>
ANR Pipeline Company........................................          84,054        March      2004
ANR Pipeline Company (starting 04/01/04)....................          50,000        March      2006
ANR Pipeline Company (starting 04/01/04)....................          40,000        October    2004
Great Lakes Gas Transmission, L.P. .........................          85,092        April      2004
Great Lakes Gas Transmission, L.P. (starting 04/01/04)......          50,000        March      2007
Great Lakes Gas Transmission, L.P. .........................          90,000        March      2004
Great Lakes Gas Transmission, L.P. (starting 04/01/04)......         100,000        March      2007
Trunkline Gas Co. ..........................................         336,375        October    2005
Trunkline Gas Co. ..........................................          40,106        March      2004
Panhandle Eastern Pipe Line Company (starting 04/01/04).....          50,000        October    2004
Vector Pipeline.............................................          50,000        March      2007
</Table>

     Consumers purchases the balance of its required gas supply under firm city
gate contracts and as needed, interruptible contracts. The amount of
interruptible transportation service and its use varies primarily with the price
for such service and the availability and price of the spot supplies being
purchased and transported. Consumers' use of interruptible transportation is
generally in off-peak summer months and after Consumers has fully utilized the
services under the firm transportation agreements.

NATURAL GAS TRANSMISSION

     CMS Gas Transmission was formed in 1988 and owns, develops and manages
domestic and international natural gas facilities. In 2003, CMS Gas
Transmission's operating revenue was $22 million.

     In 1999, CMS Gas Transmission acquired Panhandle, which was primarily
engaged in the interstate transmission and storage of natural gas and also
provided LNG terminalling and regasification services. Panhandle operated a
large natural gas pipeline network, which provided customers in the Midwest and
Southwest with a comprehensive array of transportation services. Panhandle's
major customers included 25 utilities located primarily in the United States
Midwest market area, which encompassed large portions of Illinois, Indiana,
Michigan, Missouri, Ohio and Tennessee.

     In February 2003, Panhandle sold its one-third equity interest in
Centennial for $40 million to Centennial's two other partners, MAPL and TE
Products Pipeline Company, Limited Partnership, through its general partner,
TEPPCO.

     In March 2003, Panhandle transferred $63 million previously committed to
collateralize a letter of credit and its one-third ownership interest in
Guardian to CMS Gas Transmission. CMS Gas Transmission sold its interest in
Guardian to a subsidiary of WPS Resources Corporation in May 2003. Proceeds from
the sale were $26 million and the $63 million of cash collateral was released.

     In June 2003, CMS Gas Transmission sold Panhandle to Southern Union
Panhandle Corp., a newly formed entity owned by Southern Union. Southern Union
Panhandle Corp. purchased all of Panhandle's outstanding capital stock for
approximately $582 million in cash and 3 million shares of Southern Union common
stock. Southern Union Panhandle Corp. also assumed approximately $1.166 billion
in debt. In July 2003, Southern Union declared a five percent common stock
dividend resulting in an additional 150,000 shares of common stock

                                        14
<PAGE>

for CMS Gas Transmission. In October 2003, CMS Gas Transmission sold its 3.15
million shares to a private investor for $17.77 per share.

     In July 2003, CMS Gas Transmission completed the sale of CMS Field Services
to Cantera Natural Gas, Inc. for gross cash proceeds of approximately $113
million, subject to post closing adjustments, and a $50 million face value note
of Cantera Natural Gas, Inc. The note is payable to CMS Energy for up to $50
million subject to the financial performance of the Fort Union and Bighorn
natural gas gathering systems from 2004 through 2008.

     NATURAL GAS TRANSMISSION PROPERTIES: CMS Gas Transmission has a total of
288 miles of gathering and transmission pipelines located in the state of
Michigan, with a daily capacity of 0.95 bcf. At December 31, 2003, CMS Gas
Transmission had nominal processing capabilities of approximately 0.33 bcf per
day of natural gas in Michigan.

     At December 31, 2003, CMS Gas Transmission has ownership interests in the
following international pipelines:

<Table>
<Caption>
LOCATION                                                      OWNERSHIP INTEREST (%)    MILES OF PIPELINES
- --------                                                      ----------------------    ------------------
<S>                                                           <C>                       <C>
Argentina.................................................             29.42                  3,362
Argentina to Brazil.......................................             20.00                    262
Argentina to Chile........................................             50.00                    707
Australia (Western Australia).............................             40.00(a)                 927
Australia (Western Australia).............................            100.00                    259
</Table>

- -------------------------
(a)  CMS Gas Transmission has a 45 percent interest in a consortium that
     acquired an 88 percent interest in the pipeline.

     Properties of certain CMS Gas Transmission subsidiaries are subject to
liens of creditors of the respective subsidiaries.

INDEPENDENT POWER PRODUCTION

     CMS Generation was formed in 1986. It invests in, acquires, develops,
constructs and operates non-utility power generation plants in the United States
and abroad. In 2003, the independent power production business segment's
operating revenue, which includes revenues from CMS Generation, CMS Operating,
S.A., the MCV Facility and the MCV Partnership, was $204 million.

     INDEPENDENT POWER PRODUCTION PROPERTIES: As of December 31, 2003, CMS
Generation had ownership interests in operating power plants totaling 8,766
gross MW (4,149 net MW). At December 31, 2003, additional plants totaling
approximately 1,784 gross MW (420 net MW) were under construction or in advanced
stages of development. These plants include the Shuweihat power plant, which is
under construction in the United Arab Emirates, and the Saudi Petrochemical
Company power plant, which is under advanced development and will be located in
the Kingdom of Saudi Arabia. In 2004, CMS Generation plans to complete the
restructuring of its operations by narrowing the scope of its existing
operations and commitments from four to two regions: the U.S. and the Middle
East/North Africa. In addition, it plans to sell designated assets and
investments that are under-performing, non-region focused and non-synergistic
with other CMS Energy business units.

                                        15
<PAGE>

     The following table details CMS Generation's interest in independent power
plants as of year-end 2003 (excluding the plants owned by CMS Operating, S.R.L.
and CMS Electric and Gas and the MCV facility, discussed further below):

<Table>
<Caption>
                                                                                                   PERCENTAGE OF
                                                                                                  GROSS CAPACITY
                                                                                                  UNDER LONG-TERM
                                                      OWNERSHIP INTEREST      GROSS CAPACITY         CONTRACT
LOCATION                             FUEL TYPE               (%)                   (MW)                 (%)
- --------                             ---------        ------------------      --------------      ---------------
<S>                                  <C>              <C>                     <C>                 <C>
California.....................      Wood                     37.8                   36                  100
Connecticut....................      Scrap tire                100                   31                  100
Michigan.......................      Coal                       50                   70                  100
Michigan.......................      Natural gas               100                  710                   85
Michigan.......................      Natural gas               100                  224                    0
Michigan.......................      Wood                       50                   40                  100
Michigan.......................      Wood                       50                   38                  100
New York.......................      Hydro                     0.3                   14                  100
North Carolina.................      Wood                       50                   50                  100
Oklahoma.......................      Natural gas               8.8                  124                  100
                                                                                  -----
DOMESTIC TOTAL.................                                                   1,337

Argentina......................      Hydro                    17.2                1,320                   20(a)
Australia......................      Coal                     49.6                2,000                   55
Chile..........................      Natural gas                50                  720                  100(b)
Ghana..........................      Crude oil                  90                  224                  100
India..........................      Coal                       50                  250                  100
India..........................      Natural gas              33.2                  235                  100
Jamaica........................      Diesel                   42.3                   63                  100
Latin America..................      Various               Various                  484                   51
Morocco........................      Coal                       50                1,356                  100
United Arab Emirates...........      Natural gas                40                  777                  100
                                                                                  -----
INTERNATIONAL TOTAL............                                                   7,429
TOTAL DOMESTIC AND
  INTERNATIONAL................                                                   8,766
                                                                                  =====
PROJECTS UNDER CONSTRUCTION/
  ADVANCED DEVELOPMENT.........                                                   1,784
</Table>

- -------------------------
(a)  El Chocon is primarily on a spot market basis, however, it has a high
     dispatch rate due to low cost.

(b)  Atacama is not allowed to sell more than 440 MW to the grid. 100 percent of
     the 440 MW is under contract.

     Through a CMS International Ventures subsidiary called CMS Operating,
S.R.L., CMS Enterprises, CMS Gas Transmission and CMS Generation have a 100
percent ownership interest in a 128 MW natural gas power plant and a 92.6
percent ownership interest in a 540 MW natural gas power plant, each in
Argentina.

     Through CMS Electric and Gas, CMS Enterprises has an 86 percent ownership
interest in 287 MW of gas turbine and diesel generating capacity in Venezuela.

     CMS Midland owns a 49 percent general partnership interest in the MCV
Partnership, which was formed to construct and operate the MCV Facility. The MCV
Facility was sold to five owner trusts and leased back to the MCV Partnership.
CMS Holdings is a limited partner in the FMLP, which is a beneficiary of one of
these trusts. Through FMLP, CMS Holdings has a 35 percent Lessor interest in the
MCV Facility. The MCV Facility has a net electrical generating capacity of
approximately 1,500 MW.

     CMS Generation has ownership interests in certain facilities such as Loy
Yang, Jorf Lasfar and El Chocon. The Loy Yang assets are owned in fee, but are
subject to the security interests of its lenders. CMS Energy is actively working
to sell its interest in the Loy Yang facility. The Jorf Lasfar facility is held
pursuant to a right of

                                        16
<PAGE>

possession agreement with the Moroccan state-owned Office National de
l'Electricite. The El Chocon facility is held pursuant to a 30-year possession
agreement.

     For information on capital expenditures, see ITEM 7. CMS ENERGY'S
MANAGEMENT'S DISCUSSION AND ANALYSIS -- CAPITAL RESOURCES AND LIQUIDITY AND ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 5 OF CMS ENERGY'S NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (FINANCINGS AND CAPITALIZATION).

OIL AND GAS EXPLORATION AND PRODUCTION

     CMS Energy used to own an oil and gas exploration and production company.
In October 2002, CMS Energy completed its exit from the oil and gas exploration
and production business.

ENERGY RESOURCE MANAGEMENT

     In 2003, CMS ERM moved its headquarters from Houston, Texas to Jackson,
Michigan. In February 2004, CMS ERM changed its name from CMS Marketing,
Services and Trading Company to CMS Energy Resource Management Company. CMS ERM
has reduced its business focus and in the future will concentrate on the
purchase and sale of energy commodities in support of CMS Energy's generating
facilities. CMS ERM previously provided gas, oil, and electric marketing, risk
management and energy management services to industrial, commercial, utility and
municipal energy users throughout the United States. In January 2003, CMS ERM
closed the sale of a major portion of its wholesale natural gas trading book to
Sempra Energy Trading. The cash proceeds were approximately $17 million. In
April 2003, CMS ERM sold its wholesale electric power business to Constellation
Power Source, Inc. Also in April 2003, CMS ERM sold the federal business of CMS
Viron, its energy management service provider, to Pepco Energy Services, Inc. In
July 2003, CMS ERM sold CMS Viron's non-federal business to Chevron Energy
Solutions Company, a division of Chevron U.S.A. In 2003, CMS ERM marketed
approximately 85 bcf of natural gas and 5,314 GWh of electricity and its 2003
operating revenue was $711 million.

INTERNATIONAL ENERGY DISTRIBUTION

     In October 2001, CMS Energy discontinued the operations of its
international energy distribution business. In 2002, CMS Energy discontinued all
new development outside North America, which included closing all non-U.S.
development offices. In 2003, CMS Energy reclassified to continuing operations
SENECA, which is its energy distribution business in Venezuela, and CPEE, which
is its energy distribution business in Brazil, due to its inability to sell
these assets.

CMS ENERGY AND CONSUMERS REGULATION

     CMS Energy is a public utility holding company that is exempt from
registration under PUHCA. CMS Energy, Consumers and their subsidiaries are
subject to regulation by various federal, state, local and foreign governmental
agencies, including those described below.

MICHIGAN PUBLIC SERVICE COMMISSION

     Consumers is subject to the MPSC's jurisdiction, which regulates public
utilities in Michigan with respect to retail utility rates, accounting, utility
services, certain facilities and various other matters. The MPSC also has rate
jurisdiction over several limited liability companies in which CMS Gas
Transmission has ownership interests. These companies own, or will own, and
operate intrastate gas transmission pipelines.

     The Attorney General, ABATE, and the MPSC staff typically intervene in MPSC
electric- and gas-related proceedings concerning Consumers. For many years,
almost every significant MPSC order affecting Consumers has been appealed.
Certain appeals from the MPSC orders are pending in the Court of Appeals.

     RATE PROCEEDINGS: In 1996, the MPSC issued an order that established the
electric authorized rate of return on common equity at 12.25 percent. In 2002,
the MPSC issued an order that established the gas authorized rate of return on
common equity at 11.4 percent.
                                        17
<PAGE>

     MPSC REGULATORY AND MICHIGAN LEGISLATIVE CHANGES: State regulation of the
retail electric and gas utility businesses has undergone significant changes. In
2000, the Michigan Legislature enacted the Customer Choice Act. The Customer
Choice Act provides that as of January 2002, all electric customers have the
choice to buy generation service from an alternative electric supplier. The
Customer Choice Act also imposes rate reductions, rate freezes and rate caps.
For additional information regarding the Customer Choice Act, see ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 4 OF CMS ENERGY'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNCERTAINTIES) -- CONSUMERS' ELECTRIC UTILITY
RESTRUCTURING MATTERS and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- NOTE 2 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNCERTAINTIES) -- ELECTRIC RESTRUCTURING MATTERS.

     As a result of regulatory changes in the natural gas industry, Consumers
transports the natural gas commodity that is sold to some customers by
competitors like gas producers, marketers and others. Pursuant to a gas customer
choice program that Consumers implemented, as of April 2003 all of Consumers'
gas customers are eligible to select an alternative gas commodity supplier.
Consumers' current GCR mechanism allows it to recover from its customers all
prudently incurred costs to purchase natural gas commodity and transport it to
Consumers' facilities. For additional information, see ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 4 OF CMS ENERGY'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNCERTAINTIES) -- CONSUMERS' GAS UTILITY RATE
MATTERS and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 2 OF
CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNCERTAINTIES) -- GAS
RATE MATTERS.

FEDERAL ENERGY REGULATORY COMMISSION

     FERC has exercised limited jurisdiction over several independent power
plants in which CMS Generation has ownership interests, as well as over CMS ERM.
Among other things, FERC jurisdiction relates to the acquisition, operation and
disposal of assets and facilities and to the service provided and rates charged.
Some of Consumers' gas business is also subject to regulation by FERC, including
a blanket transportation tariff pursuant to which Consumers can transport gas in
interstate commerce.

     FERC also regulates certain aspects of Consumers' electric operations
including compliance with FERC accounting rules, wholesale rates, operation of
licensed hydro-electric generating plants, transfers of certain facilities, and
corporate mergers and issuance of securities. FERC is currently soliciting
comments on whether it should exercise jurisdiction over power marketers like
CMS ERM, requiring them to follow FERC's uniform system of accounts and seek
authorization for issuance of securities and assumption of liabilities. These
issues are pending before the agency.

NUCLEAR REGULATORY COMMISSION

     Under the Atomic Energy Act of 1954, as amended, and the Energy
Reorganization Act of 1974, Consumers is subject to the jurisdiction of the NRC
with respect to the design, construction, operation and decommissioning of its
nuclear power plants. Consumers is also subject to NRC jurisdiction with respect
to certain other uses of nuclear material. These and other matters concerning
Consumers' nuclear plants are more fully discussed in ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTES 1 (CORPORATE STRUCTURE AND ACCOUNTING
POLICIES) AND 4 (UNCERTAINTIES) OF CMS ENERGY'S CONSOLIDATED FINANCIAL
STATEMENTS and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTES 1
(CORPORATE STRUCTURE AND ACCOUNTING POLICIES) AND 2 (UNCERTAINTIES) OF
CONSUMERS' CONSOLIDATED FINANCIAL STATEMENTS.

OTHER REGULATION

     The Secretary of Energy regulates the importation and exportation of
natural gas and has delegated various aspects of this jurisdiction to FERC and
the DOE's Office of Fossil Fuels.

                                        18
<PAGE>

     Pipelines owned by system companies are subject to the Natural Gas Pipeline
Safety Act of 1968 and the Pipeline Safety Improvement Act of 2002, which
regulates the safety of gas pipelines. Consumers is also subject to the
Hazardous Liquid Pipeline Safety Act of 1979, which regulates oil and petroleum
pipelines.

CMS ENERGY AND CONSUMERS ENVIRONMENTAL COMPLIANCE

     CMS Energy, Consumers and their subsidiaries are subject to various
federal, state and local regulations for environmental quality, including air
and water quality, waste management, zoning and other matters.

     Consumers has installed and is currently installing modern emission
controls at its electric generating plants and has converted and is converting
electric generating units to burn cleaner fuels. Consumers expects that the cost
of future environmental compliance, especially compliance with clean air laws,
will be significant because of EPA regulations regarding nitrogen oxide and
particulate-related emissions. These regulations will require Consumers to make
significant capital expenditures.

     Consumers is in the process of closing older ash disposal areas at two
plants. Construction, operation, and closure of a modern solid waste disposal
area for ash can be expensive, because of strict federal and state requirements.
In order to significantly reduce ash field closure costs, Consumers has worked
with others to use bottom ash and fly ash as part of temporary and final cover
for ash disposal areas instead of native materials, in cases where such use of
bottom ash and fly ash is compatible with environmental standards. To reduce
disposal volumes, Consumers sells coal ash for use as a filler for asphalt, for
incorporation into concrete products and for other environmentally compatible
uses. The EPA has announced its intention to develop new nationwide standards
for ash disposal areas. Consumers intends to work through industry groups to
help ensure that any such regulations require only the minimum cost necessary to
adhere to standards that are consistent with protection of the environment.

     Like most electric utilities, Consumers has PCB in some of its electrical
equipment. During routine maintenance activities, Consumers identified PCB as a
component in certain paint, grout and sealant materials at the Ludington Pumped
Storage facility. Consumers removed and replaced part of the PCB material.
Consumers has proposed a plan to the EPA to deal with the remaining materials
and is waiting for a response from the EPA.

     Certain environmental regulations affecting CMS Energy and Consumers
include, but are not limited to, the Clean Air Act Amendments of 1990 and
Superfund. Superfund can require any individual or entity that may have owned or
operated a disposal site, as well as transporters or generators of hazardous
substances that were sent to such site, to share in remediation costs for the
site.

     CMS Energy's and Consumers' current insurance coverage does not extend to
certain environmental clean-up costs, such as claims for air pollution, some
past PCB contamination and for some long-term storage or disposal of pollutants.

     For additional information concerning environmental matters, including
estimated capital expenditures to reduce nitrogen oxide related emissions, see
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 4 OF CMS ENERGY'S
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNCERTAINTIES) -- CONSUMERS'
ELECTRIC UTILITY CONTINGENCIES and ITEM 8. FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA -- NOTE 2 OF CONSUMERS' NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (UNCERTAINTIES) -- ELECTRIC CONTINGENCIES.

CMS ENERGY AND CONSUMERS COMPETITION

ELECTRIC COMPETITION

     Consumers' electric utility business experiences actual and potential
competition from many sources, both in the wholesale and retail markets, as well
as in electric generation, electric delivery and retail services.

     In the wholesale electricity markets, Consumers competes with other
wholesale suppliers, marketers and brokers. Electric competition in the
wholesale markets increased significantly since 1996 due to FERC Order 888.
While Consumers is still active in wholesale electricity markets, wholesale for
resale transactions by Consumers

                                        19
<PAGE>

generated an immaterial amount of Consumers' 2003 revenues from electric utility
operations. Consumers believes future loss of wholesale for resale transactions
will be insignificant.

     A significant increase in retail electric competition has occurred because
of the Customer Choice Act and the availability of retail open access. Price is
the principal method of competition for generation services. The Customer Choice
Act gives all electric customers the right to buy generation service from an
alternative electric supplier. As of March 2004, alternative electric suppliers
are providing 735 MW of generation supply to retail open access customers. This
represents nine percent of Consumers' total generating load and an increase of
approximately 42 percent in generation supply being purchased from alternative
electric suppliers by retail open access customers. Consumers has applied for,
but has not yet been granted, reimbursement for implementation costs incurred
for the Electric Customer Choice program. The MPSC is supposed to adopt a
mechanism pursuant to the Customer Choice Act to provide for recovery of
stranded costs. In 2000 and 2001, the MPSC determined the stranded cost recovery
was zero, contrary to Consumers' position. Consumers continues to work toward
the adoption of a stranded cost recovery mechanism that will offset margin loss.
Consumers cannot predict the total amount of electric supply load that may be
lost to competitor suppliers, whether the stranded cost recovery method adopted
by the MPSC will be applied in a manner that will fully offset any associated
margin loss, or whether implementation costs will be fully recovered.

     In addition to retail electric customer choice, Consumers also has
competition or potential competition from:

     - the threat of customers relocating outside Consumers' service territory;

     - the possibility of municipalities owning or operating competing electric
       delivery systems;

     - customer self-generation; and

     - adjacent municipal utilities that extend lines to customers near service
       territory boundaries.

     Consumers addresses this competition by offering special contracts,
providing additional non-energy services, and monitoring and enforcing
compliance with MPSC and FERC rules.

     Consumers offers non-energy revenue services to electric customers,
municipalities and other utilities in an effort to offset costs. These services
include engineering and consulting, construction of customer-owned distribution
facilities, equipment sales (such as transformers), power quality analysis,
fiber optic line construction, meter reading and joint construction for phone
and cable. Consumers faces competition from many sources, including energy
management services companies, other utilities, contractors, and retail
merchandisers.

     CMS ERM, which is a non-utility electric subsidiary, has modified its focus
toward optimization of CMS Energy's independent power production portfolio. CMS
Energy's independent power production business segment, another non-utility
electric subsidiary, faces competition from generators, marketers and brokers,
as well as lower power prices on the wholesale market.

     For additional information concerning electric competition, see ITEM 7. CMS
ENERGY'S MANAGEMENT'S DISCUSSION AND ANALYSIS -- OUTLOOK -- ELECTRIC UTILITY
BUSINESS UNCERTAINTIES and ITEM 7. CONSUMERS' MANAGEMENT'S DISCUSSION AND
ANALYSIS -- OUTLOOK -- ELECTRIC BUSINESS UNCERTAINTIES.

GAS COMPETITION

     Competition has existed for the past decade in various aspects of
Consumers' gas utility business, and is likely to increase. Competition
traditionally comes from alternate fuels and energy sources, such as propane,
oil and electricity.

INSURANCE

     CMS Energy and its subsidiaries, including Consumers, maintain insurance
coverage similar to comparable companies in the same lines of business. The
insurance policies are subject to terms, conditions, limitations and exclusions
that might not fully compensate CMS Energy for all losses. As CMS Energy renews
its policies it is

                                        20
<PAGE>

possible that full insurance coverage may not be obtainable on commercially
reasonable terms due to restrictive insurance markets.

EMPLOYEES

CMS ENERGY

     As of December 31, 2003, CMS Energy and its subsidiaries, including
Consumers, had 8,411 full-time equivalent employees, of whom 8,353 are full-time
employees and 58 are full-time equivalent employees associated with the
part-time work force. Included in the total are 3,800 employees who are covered
by union contracts.

CONSUMERS

     As of December 31, 2003, Consumers and its subsidiaries had 7,947 full-time
equivalent employees, of whom 7,892 are full-time employees and 55 are full-time
equivalent employees associated with the part-time work force. Included in the
total are 3,483 full-time operating, maintenance and construction Consumers'
employees and 293 full-time and part-time Consumers' call center employees who
are represented by the Utility Workers Union of America. Consumers and the Union
negotiated a collective bargaining agreement for the operating, maintenance and
construction employees that became effective as of June 1, 2000 and will
continue in full force and effect until June 1, 2005. Consumers and the Union
negotiated a collective bargaining agreement for the call center employees that
became effective as of April 1, 2003 and will continue in full force and effect
until August 1, 2005.

CMS ENERGY EXECUTIVE OFFICERS

     (as of March 1, 2004)

<Table>
<Caption>
                NAME                     AGE                     POSITION                         PERIOD
                ----                     ---                     --------                         ------
<S>                                      <C>    <C>                                            <C>
Kenneth Whipple......................    69     Chairman of the Board, Chief Executive
                                                Officer of CMS Energy                          2002-Present
                                                Chairman of the Board, Chief Executive
                                                  Officer of Consumers                         2002-Present
                                                Chairman of the Board of CMS Enterprises       2002-2003
                                                Director of CMS Energy                         1993-Present
                                                Director of Consumers                          1993-Present
                                                Chairman, Chief Executive Officer of Ford
                                                  Credit Company                               1997-1999
                                                Executive Vice President, President of Ford
                                                  Financial Services Group                     1989-1999
S. Kinnie Smith, Jr. ................    73     Vice Chairman of the Board of CMS
                                                Enterprises                                    2003-Present
                                                Vice Chairman of the Board, General Counsel
                                                  of CMS Energy                                2002-Present
                                                Vice Chairman of the Board of Consumers        2002-Present
                                                Executive Vice President of CMS Enterprises    2002-2003
                                                Director of CMS Energy                         2002-Present
                                                Director of Consumers                          2002-Present
                                                Director of Enterprises                        2003-Present
                                                Vice Chairman of Trans-Elect, Inc.             2002
                                                Senior Counsel at Skadden, Arps, Slate,
                                                  Meagher, & Flom LLP                          1996-2002
</Table>

                                        21
<PAGE>

<Table>
<Caption>
                NAME                     AGE                     POSITION                         PERIOD
                ----                     ---                     --------                         ------
<S>                                      <C>    <C>                                            <C>
David W. Joos........................    50     Chairman of the Board, Chief Executive
                                                  Officer of CMS Enterprises                   2003-Present
                                                President, Chief Operating Officer of CMS
                                                  Energy                                       2001-Present
                                                President, Chief Operating Officer of
                                                  Consumers                                    2001-Present
                                                President, Chief Operating Officer of CMS
                                                  Enterprises                                  2001-2003
                                                Director of CMS Energy                         2001-Present
                                                Director of Consumers                          2001-Present
                                                Director of Enterprises                        2000-Present
                                                Executive Vice President, Chief Operating
                                                  Officer -- Electric of CMS Energy            2000-2001
                                                Executive Vice President, Chief Operating
                                                  Officer -- Electric of CMS Enterprises       2000-2001
                                                Executive Vice President, President and
                                                  Chief Executive Officer -- Electric of
                                                  Consumers                                    1997-2001
Thomas J. Webb.......................    51     Executive Vice President, Chief Financial
                                                  Officer of CMS Energy                        2002-Present
                                                Executive Vice President, Chief Financial
                                                  Officer of Consumers                         2002-Present
                                                Executive Vice President, Chief Financial
                                                  Officer of CMS Enterprises                   2002-Present
                                                Director of Enterprises                        2002-Present
                                                Executive Vice President, Chief Financial
                                                  Officer of Panhandle Eastern Pipe Line
                                                  Company                                      2002-2003
                                                Executive Vice President, Chief Financial
                                                  Officer of Kellogg Company                   1999-2002
                                                Vice President, Chief Financial Officer of
                                                  Visteon, a division of Ford Motor Company    1996-1999
Thomas W. Elward.....................    55     President, Chief Operating Officer of CMS
                                                  Enterprises                                  2003-Present
                                                President, Chief Executive Officer of CMS
                                                  Generation Co.                               2002-Present
                                                Director of Enterprises                        2003-Present
                                                Senior Vice President of CMS Enterprises       2002-2003
                                                Senior Vice President of CMS Generation Co.    1998-2001
Carl L. English......................    57     Executive Vice President, President and
                                                  Chief Executive Officer -- Gas of
                                                  Consumers                                    1999-Present
                                                Vice President of Consumers                    1990-1999
John G. Russell*.....................    46     Executive Vice President, President and
                                                  Chief Executive Officer -- Electric of
                                                  Consumers                                    2001-Present
                                                Senior Vice President of Consumers             2000-2001
                                                Vice President of Consumers                    1999-2000
David G. Mengebier**.................    46     Senior Vice President of CMS Enterprises       2003-Present
                                                Senior Vice President of CMS Energy            2001-Present
                                                Senior Vice President of Consumers             2001-Present
                                                Vice President of CMS Energy                   1999-2001
                                                Vice President of Consumers                    1999-2001
</Table>

                                        22
<PAGE>

<Table>
<Caption>
                NAME                     AGE                     POSITION                         PERIOD
                ----                     ---                     --------                         ------
<S>                                      <C>    <C>                                            <C>
John F. Drake........................    55     Senior Vice President of CMS Enterprises       2003-Present
                                                Senior Vice President of CMS Energy            2002-Present
                                                Senior Vice President of Consumers             2002-Present
                                                Vice President of CMS Energy                   1997-2002
                                                Vice President of Consumers                    1998-2002
Glenn P. Barba.......................    38     Vice President, Chief Accounting Officer of
                                                  CMS Enterprises                              2003-Present
                                                Vice President, Controller and Chief
                                                  Accounting Officer of CMS Energy             2003-Present
                                                Vice President, Controller and Chief
                                                  Accounting Officer of Consumers              2003-Present
                                                Vice President and Controller of Consumers     2001-2003
                                                Controller of CMS Generation                   1997-2001
</Table>

- -------------------------
 *  From July 1997 until October 1999, Mr. Russell served as Manager -- Electric
    Customer Operations of Consumers.

**  From 1997 to 1999, Mr. Mengebier served as Executive Director of Federal
    Governmental Affairs for CMS Enterprises.

     There are no family relationships among executive officers and directors of
CMS Energy.

     The present term of office of each of the executive officers extends to the
first meeting of the Board of Directors after the next annual election of
Directors of CMS Energy (scheduled to be held on May 28, 2004).

                                        23
<PAGE>

CONSUMERS EXECUTIVE OFFICERS

     (as of March 1, 2004)

<Table>
<Caption>
                NAME                     AGE                    POSITION                        PERIOD
                ----                     ---                    --------                        ------
<S>                                      <C>    <C>                                         <C>
Kenneth Whipple......................    69     Chairman of the Board, Chief Executive
                                                  Officer of CMS Energy                     2002-Present
                                                Chairman of the Board, Chief Executive
                                                  Officer of Consumers                      2002-Present
                                                Chairman of the Board of CMS Enterprises    2002-2003
                                                Director of CMS Energy                      1993-Present
                                                Director of Consumers                       1993-Present
                                                Chairman, Chief Executive Officer of
                                                  Ford Credit Company                       1997-1999
                                                Executive Vice President, President of
                                                  Ford Financial Services Group             1989-1999
S. Kinnie Smith, Jr. ................    73     Vice Chairman of the Board of CMS
                                                  Enterprises                               2003-Present
                                                Vice Chairman of the Board, General
                                                  Counsel of CMS Energy                     2002-Present
                                                Vice Chairman of the Board of Consumers     2002-Present
                                                Executive Vice President of CMS
                                                  Enterprises                               2002-2003
                                                Director of CMS Energy                      2002-Present
                                                Director of Consumers                       2002-Present
                                                Director of Enterprises                     2003-Present
                                                Vice Chairman of Trans-Elect, Inc.          2002
                                                Senior Counsel at Skadden, Arps, Slate,
                                                  Meagher, & Flom LLP                       1996-2002
David W. Joos........................    50     Chairman of the Board, Chief Executive
                                                  Officer of CMS Enterprises                2003-Present
                                                President, Chief Operating Officer of
                                                  CMS Energy                                2001-Present
                                                President, Chief Operating Officer of
                                                  Consumers                                 2001-Present
                                                President, Chief Operating Officer of
                                                  CMS Enterprises                           2001-2003
                                                Director of CMS Energy                      2001-Present
                                                Director of Consumers                       2001-Present
                                                Director of Enterprises                     2000-Present
                                                Executive Vice President, Chief
                                                  Operating Officer -- Electric of CMS
                                                  Energy                                    2000-2001
                                                Executive Vice President, Chief
                                                  Operating Officer -- Electric of CMS
                                                  Enterprises                               2000-2001
                                                Executive Vice President, President and
                                                  Chief Executive Officer -- Electric of
                                                  Consumers                                 1997-2001
</Table>

                                        24
<PAGE>

<Table>
<Caption>
                NAME                     AGE                    POSITION                        PERIOD
                ----                     ---                    --------                        ------
<S>                                      <C>    <C>                                         <C>
Thomas J. Webb.......................    51     Executive Vice President, Chief
                                                  Financial Officer of CMS Energy           2002-Present
                                                Executive Vice President, Chief
                                                  Financial Officer of Consumers            2002-Present
                                                Executive Vice President, Chief
                                                  Financial Officer of CMS Enterprises      2002-Present
                                                Director of Enterprises                     2002-Present
                                                Executive Vice President, Chief
                                                  Financial Officer of Panhandle Eastern
                                                  Pipe Line Company                         2002-2003
                                                Executive Vice President, Chief
                                                  Financial Officer of Kellogg Company      1999-2002
                                                Vice President, Chief Financial Officer
                                                  of Visteon, a division of Ford Motor
                                                  Company                                   1996-1999
Carl L. English......................    57     Executive Vice President, President and
                                                Chief Executive Officer -- Gas of
                                                  Consumers                                 1999-Present
                                                Vice President of Consumers                 1990-1999
John G. Russell*.....................    46     Executive Vice President, President and
                                                  Chief Executive Officer -- Electric of
                                                  Consumers                                 2001-Present
                                                Senior Vice President of Consumers          2000-2001
                                                Vice President of Consumers                 1999-2000
John F. Drake........................    55     Senior Vice President of CMS Enterprises    2003-Present
                                                Senior Vice President of CMS Energy         2002-Present
                                                Senior Vice President of Consumers          2002-Present
                                                Vice President of CMS Energy                1997-2002
                                                Vice President of Consumers                 1998-2002
Robert A. Fenech.....................    56     Senior Vice President of Consumers          1997-Present
                                                  Vice President of Consumers               1994-1997
Preston D. Hopper....................    53     Senior Vice President of CMS Enterprises    2003-Present
                                                Senior Vice President of CMS Energy         2003-Present
                                                Senior Vice President of Consumers          2003-Present
                                                Senior Vice President, Chief Accounting
                                                  Officer of CMS Enterprises                1997-2003
                                                Senior Vice President, Chief Accounting
                                                  Officer and Controller of CMS Energy      1996-2003
                                                Senior Vice President and Controller of
                                                  CMS Enterprises                           1996-1997
Frank Johnson........................    56     Senior Vice President of Consumers          2001-Present
                                                President, Chief Executive Officer of
                                                  CMS Electric and Gas                      2000-2002
                                                Vice President, Chief Operating Officer
                                                  of CMS Electric and Gas                   2000
                                                Vice President of CMS Electric and Gas      1996-2000
</Table>

                                        25
<PAGE>

<Table>
<Caption>
                NAME                     AGE                    POSITION                        PERIOD
                ----                     ---                    --------                        ------
<S>                                      <C>    <C>                                         <C>
David G. Mengebier**.................    46     Senior Vice President of CMS Enterprises    2003-Present
                                                Senior Vice President of CMS Energy         2001-Present
                                                Senior Vice President of Consumers          2001-Present
                                                Vice President of CMS Energy                1999-2001
                                                Vice President of Consumers                 1999-2001
David A. Mikelonis...................    55     Senior Vice President, General Counsel
                                                of Consumers                                1988-Present
Paul N. Preketes.....................    54     Senior Vice President of Consumers          1999-Present
                                                Vice President of Consumers                 1994-1999
Glenn P. Barba.......................    38     Vice President, Chief Accounting Officer
                                                of CMS Enterprises                          2003-Present
                                                Vice President, Controller and Chief
                                                  Accounting Officer of CMS Energy          2003-Present
                                                Vice President, Controller and Chief
                                                  Accounting Officer of Consumers           2003-Present
                                                Vice President and Controller of
                                                  Consumers                                 2001-2003
                                                Controller of CMS Generation                1997-2001
</Table>

- -------------------------
*   From July 1997 until October 1999, Mr. Russell served as Manager -- Electric
    Customer Operations of Consumers.

**  From 1997 to 1999, Mr. Mengebier served as Executive Director of Federal
    Governmental Affairs for CMS Enterprises.

     There are no family relationships among executive officers and directors of
Consumers.

     The present term of office of each of the executive officers extends to the
first meeting of the Board of Directors after the next annual election of
Directors of Consumers (scheduled to be held on May 28, 2004).

AVAILABLE INFORMATION

     CMS Energy's internet address is http://www.cmsenergy.com. You can access
free of charge on our website all of our annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and amendments to those
reports filed pursuant to Section 13(a) or 15(d) of the Exchange Act. Such
reports are available as soon as practical after they are electronically filed
with the SEC. Also on our website are our:

     - Corporate Governance Principles;

     - Code of Conduct (Code of Business Conduct and Ethics);

     - Board Committee Charters (including the Audit Committee and the
       Governance and Nominating Committee)

     We will provide this information in print to any shareholder who requests
it.

                                        26
<PAGE>

                              ITEM 2. PROPERTIES.

     Descriptions of CMS Energy's and Consumers' properties are found in the
following sections of Item 1, all of which are incorporated by reference herein:

     - BUSINESS -- GENERAL -- Consumers -- Consumers Properties -- General;

     - BUSINESS -- BUSINESS SEGMENTS -- Consumers Electric Utility
       Operations -- Electric Utility Properties;

     - BUSINESS -- BUSINESS SEGMENTS -- Consumers Gas Utility Operations -- Gas
       Utility Properties;

     - BUSINESS -- BUSINESS SEGMENTS -- Natural Gas Transmission -- Natural Gas
       Transmission Properties;

     - BUSINESS -- BUSINESS SEGMENTS -- Independent Power
       Production -- Independent Power Production Properties; and

     - BUSINESS -- BUSINESS SEGMENTS -- International Energy Distribution

                           ITEM 3. LEGAL PROCEEDINGS.

     CMS Energy, Consumers and some of their subsidiaries and affiliates are
parties to certain routine lawsuits and administrative proceedings incidental to
their businesses involving, for example, claims for personal injury and property
damage, contractual matters, various taxes, and rates and licensing. For
additional information regarding various pending administrative and judicial
proceedings involving regulatory, operating and environmental matters, see ITEM
1. BUSINESS -- CMS ENERGY AND CONSUMERS REGULATION, both CMS Energy's and
Consumers' ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS and both CMS Energy's
and Consumers' ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.

CMS ENERGY

DEMAND FOR ACTIONS AGAINST OFFICERS AND DIRECTORS

     In May 2002, the Board of Directors of CMS Energy received a demand on
behalf of a shareholder of CMS Energy Common Stock, that it commence civil
actions (i) to remedy alleged breaches of fiduciary duties by certain CMS Energy
officers and directors in connection with round-trip trading by CMS MST, and
(ii) to recover damages sustained by CMS Energy as a result of alleged insider
trades alleged to have been made by certain current and former officers of CMS
Energy and its subsidiaries. In December 2002, two new directors were appointed
to the Board. The Board formed a special litigation committee in January 2003 to
determine whether it is in the best interest of CMS Energy to bring the action
demanded by the shareholder. The disinterested members of the Board appointed
the two new directors to serve on the special litigation committee.

     In December 2003, during the continuing review by the special litigation
committee, CMS Energy was served with a derivative complaint filed on behalf of
the shareholder in the Circuit Court of Jackson County, Michigan in furtherance
of his demands. The date for CMS Energy and other defendants to answer or
otherwise respond to the complaint was extended to June 1, 2004, subject to such
further extensions as may be mutually agreed upon by the parties and authorized
by the Court. CMS Energy cannot predict the outcome of this matter.

INTEGRUM LAWSUIT

     Integrum filed a complaint in Wayne County, Michigan Circuit Court in July
2003 against CMS Energy, CMS Enterprises and APT. Integrum alleges several
causes of action against APT, CMS Energy and CMS Enterprises in connection with
an offer by Integrum to purchase the CMS Pipeline Assets. In addition to seeking
unspecified money damages, Integrum is seeking an order enjoining CMS Energy and
CMS Enterprises from selling and APT from purchasing the CMS Pipeline Assets and
an order of specific performance mandating that CMS Energy, CMS Enterprises and
APT complete the sale of the CMS Pipeline Assets to APT and Integrum. A

                                        27
<PAGE>

certain officer and director of Integrum is a former officer and director of CMS
Energy, Consumers and their subsidiaries. CMS Energy, Consumers or their
subsidiaries did not employ the individual when Integrum made the offer to
purchase the CMS Pipeline Assets. CMS Energy believes that Integrum's claims are
without merit. CMS Energy will vigorously defend itself but cannot predict the
outcome of this lawsuit.

GAS INDEX PRICE REPORTING LITIGATION

     In August 2003, Cornerstone Propane Partners, L.P. ("Cornerstone") filed a
putative class action complaint in the United States District Court for the
Southern District of New York against CMS Energy and dozens of other energy
companies. The court ordered the Cornerstone complaint to be consolidated with
similar complaints filed by Dominick Viola and Roberto Calle Gracey. The
plaintiffs filed a consolidated complaint on January 20, 2004. The consolidated
complaint alleges that false natural gas price reporting by the defendants
manipulated the prices of NYMEX natural gas futures and options. The complaint
contains two counts under the Commodity Exchange Act, one for manipulation and
one for aiding and abetting violations. CMS Energy is no longer a defendant,
however, CMS MST and CMS Field Services are named as defendants. CMS Energy sold
CMS Field Services to Cantera Natural Gas, Inc. in July 2003, but is required to
indemnify Cantera Natural Gas, Inc. with respect to this action.

     In a similar but unrelated matter, Texas-Ohio Energy, Inc. filed a putative
class action lawsuit in the United States District Court for the Eastern
District of California against a number of energy companies engaged in the sale
of natural gas in the United States. CMS Energy is named as a defendant. The
complaint alleges defendants entered into a price-fixing conspiracy by engaging
in activities to manipulate the price of natural gas in California. The
complaint contains counts alleging violations of the Sherman Act, Cartwright Act
(a California statute), and the California Business and Profession Code relating
to unlawful, unfair and deceptive business practices. The plaintiff in the
Texas-Ohio case has agreed to extend the time for all defendants to answer or
otherwise respond to the complaint until after the multi-district court
litigation ("MDL") panel decides whether to take the case. There is currently
pending in the Nevada federal district court a MDL matter involving seven
complaints originally filed in various state courts in California. These
complaints make allegations similar to those in the Texas-Ohio case regarding
price reporting, although none contain a Sherman Act claim. Some of the
defendants in the MDL matter who are also defendants in the Texas-Ohio case are
trying to have the Texas-Ohio case transferred to the MDL proceeding.

     Benscheidt v. AEP Energy Services, Inc., et al, a new class action
complaint containing allegations similar to those made in the Texas-Ohio case
(albeit limited to California state law claims), was filed in California state
court in February 2004. CMS Energy and CMS MST are named as defendants.
Defendants are likely to seek to remove this action to California federal
district court and have it transferred to the MDL proceeding in Nevada.

     CMS Energy and its subsidiaries will vigorously defend themselves but
cannot predict the outcome of these matters.

SEC INVESTIGATION

     The SEC is conducting an investigation regarding round-trip trades at CMS
MST. For additional details about this investigation, see ITEM 8. FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 4 OF CMS ENERGY'S NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNCERTAINTIES) -- SEC and Other
Investigations.

CMS ENERGY AND CONSUMERS

EMPLOYMENT RETIREMENT INCOME SECURITY ACT CLASS ACTION LAWSUITS

     CMS Energy is a named defendant, along with Consumers, CMS MST and certain
named and unnamed officers and directors, in two lawsuits brought as purported
class actions on behalf of participants and beneficiaries of the CMS Employees'
Savings and Incentive Plan (the "Plan"). The trial judge consolidated the two
cases that were originally filed in July 2002 in United States District Court
for the Eastern District of Michigan, and plaintiffs filed an amended
consolidated complaint. Plaintiffs allege breaches of fiduciary duties

                                        28
<PAGE>

under ERISA and seek restitution on behalf of the Plan with respect to a decline
in value of the shares of CMS Energy Common Stock held in the Plan. Plaintiffs
also seek other equitable relief and legal fees. CMS Energy and Consumers will
vigorously defend themselves but cannot predict the outcome of this litigation.

SECURITIES CLASS ACTION LAWSUITS

     Beginning on May 17, 2002, a number of securities class action complaints
were filed against CMS Energy, Consumers, and certain officers and directors of
CMS Energy and its affiliates. The complaints were filed as purported class
actions in the United States District Court for the Eastern District of
Michigan, by shareholders who allege that they purchased CMS Energy's securities
during a purported class period. The cases were consolidated into a single
lawsuit and an amended and consolidated class action complaint was filed on May
1, 2003. The consolidated complaint contains a purported class period beginning
on May 1, 2000 and running through March 31, 2003. It generally seeks
unspecified damages based on allegations that the defendants violated United
States securities laws and regulations by making allegedly false and misleading
statements about CMS Energy's business and financial condition, particularly
with respect to revenues and expenses recorded in connection with round-trip
trading by CMS MST. CMS Energy, Consumers and their affiliates will vigorously
defend themselves but cannot predict the outcome of this litigation.

ENVIRONMENTAL MATTERS

     CMS Energy and Consumers, as well as their subsidiaries and affiliates are
subject to various federal, state and local laws and regulations relating to the
environment. Several of these companies have been named parties to various
actions involving environmental issues. Based on their present knowledge and
subject to future legal and factual developments, they believe it is unlikely
that these actions, individually or in total, will have a material adverse
effect on their financial condition or future results of operations. For
additional information, see both CMS Energy's and Consumers' ITEM 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS and both CMS Energy's and Consumers' ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.

          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

CMS ENERGY

     During the fourth quarter of 2003, CMS Energy did not submit any matters to
a vote of security holders.

CONSUMERS

     During the fourth quarter of 2003, Consumers did not submit any matters to
a vote of security holders.

                                        29
<PAGE>

                                    PART II

       ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

CMS ENERGY

     Market prices for CMS Energy's Common Stock and related security holder
matters are contained in ITEM 7. CMS ENERGY'S MANAGEMENT'S DISCUSSION AND
ANALYSIS and ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- NOTE 19 OF
CMS ENERGY'S NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (QUARTERLY FINANCIAL AND
COMMON STOCK INFORMATION), which is incorporated by reference herein. At March
8, 2004, the number of registered shareholders totaled 60,791. Information
regarding securities authorized for issuance under equity compensation plans is
included in our definitive proxy statement, which is incorporated by reference
herein.

     Recent Sales of Unregistered Securities: On December 5, 2003, in a private
placement to institutional investors pursuant to Rule 144A of the Securities Act
of 1933, as amended, CMS Energy issued $250 million of 4.50 percent cumulative
convertible preferred stock (par value $0.01 per share)(liquidation preference
$50 per share) (the "Preferred Stock"). The Preferred Stock was initially sold
to Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, J.P. Morgan Securities, Inc., Wachovia Capital Markets LLC, and
Banc One Capital Markets, Inc., as initial purchasers. CMS Energy received
approximately $242 million in proceeds after the initial purchasers' discounts
and commissions and offering expenses. Holders of the Preferred Stock may
convert their stock into shares of CMS Energy Common Stock under certain
circumstances. For each share of Preferred Stock surrendered for conversion, the
holder will receive 5.0541 shares of CMS Energy Common Stock, which represents
an initial conversion price of $9.893 per share (subject to adjustment in
certain events). On or after December 5, 2008, under certain circumstances CMS
Energy may have the right to cause the Preferred Stock to be automatically
converted into shares of CMS Energy Common Stock at the then applicable
conversion price. CMS Energy has agreed to file a shelf registration statement
with the SEC by November 5, 2004 relating to the resale of the Preferred Stock
and the CMS Energy Common Stock issuable upon conversion thereof.

CONSUMERS

     Consumers' common stock is privately held by its parent, CMS Energy, and
does not trade in the public market. In January, May, August and November 2003,
Consumers paid $77.5 million, $31 million, $53 million and $56.5 million in cash
dividends, respectively, on its common stock. In February, May, June, November
and December 2002, Consumers paid $55 million, $43 million, $56 million, $52
million and $25 million in cash dividends, respectively, on its common stock.
Pursuant to interim gas rate relief ordered by the MPSC, Consumers has agreed to
limit dividend payments to CMS Energy to a maximum of $190 million annually
during the period in which Consumers receives the interim relief.

                        ITEM 6. SELECTED FINANCIAL DATA.

CMS ENERGY

     Selected financial information is contained in ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA -- CMS ENERGY'S SELECTED FINANCIAL INFORMATION, which is
incorporated by reference herein.

CONSUMERS

     Selected financial information is contained in ITEM 8. FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA -- CONSUMERS' SELECTED FINANCIAL INFORMATION, which is
incorporated by reference herein.

                                        30
<PAGE>

                ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

CMS ENERGY

     Management's discussion and analysis of financial condition and results of
operations is contained in ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- CMS ENERGY'S MANAGEMENT'S DISCUSSION AND ANALYSIS, which is incorporated
by reference herein.

CONSUMERS

     Management's discussion and analysis of financial condition and results of
operations is contained in ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA -- CONSUMERS' MANAGEMENT'S DISCUSSION AND ANALYSIS, which is incorporated
by reference herein.

      ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

CMS ENERGY

     Quantitative and Qualitative Disclosures About Market Risk is contained in
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- CMS ENERGY'S MANAGEMENT'S
DISCUSSION AND ANALYSIS -- CRITICAL ACCOUNTING POLICIES -- ACCOUNTING FOR
FINANCIAL AND DERIVATIVE INSTRUMENTS, TRADING ACTIVITIES, AND MARKET RISK
INFORMATION, which is incorporated by reference herein.

CONSUMERS

     Quantitative and Qualitative Disclosures About Market Risk is contained in
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA -- CONSUMERS' MANAGEMENT'S
DISCUSSION AND ANALYSIS -- CRITICAL ACCOUNTING POLICIES -- ACCOUNTING FOR
FINANCIAL AND DERIVATIVE INSTRUMENTS AND MARKET RISK INFORMATION, which is
incorporated by reference herein.

                                        31
<PAGE>

              ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Financial Statements:

<Table>
<Caption>
                                                                 PAGE
                                                                 ----
<S>                                                             <C>
CMS ENERGY
Selected Financial Information..............................     CMS-2
Management's Discussion and Analysis........................     CMS-4
Consolidated Statements of Income (Loss)....................    CMS-38
Consolidated Statements of Cash Flows.......................    CMS-40
Consolidated Balance Sheets.................................    CMS-42
Consolidated Statements of Common Stockholders' Equity......    CMS-44
Notes to Consolidated Financial Statements..................    CMS-46
Report of Independent Auditors..............................    CMS-120
CONSUMERS ENERGY
Selected Financial Information..............................     CE-2
Management's Discussion and Analysis........................     CE-3
Consolidated Statements of Income...........................     CE-29
Consolidated Statements of Cash Flows.......................     CE-30
Consolidated Balance Sheets.................................     CE-32
Consolidated Statements of Common Stockholder's Equity......     CE-34
Notes to Consolidated Financial Statements..................     CE-36
Report of Independent Auditors..............................     CE-84
</Table>

                                        32
<PAGE>

                               [CMS ENERGY LOGO]

                           2003 FINANCIAL STATEMENTS

                                      CMS-1
<PAGE>

                             CMS ENERGY CORPORATION
                         SELECTED FINANCIAL INFORMATION

<Table>
<Caption>
                                                                       CMS ENERGY CORPORATION
                                            -----------------------------------------------------------------------------
                                                                     RESTATED    RESTATED        RESTATED
                                                           2003      2002(E)     2001(E)         2000(E)           1999
                                                           ----      --------    --------        --------          ----
<S>                                         <C>           <C>        <C>         <C>             <C>             <C>
Operating revenue (in millions).........       ($)          5,513      8,673       8,006           6,623           5,114
Earnings from equity method investees
  (in millions).........................       ($)            164         92         172             213             136
Income (loss) from continuing operations
  (in millions).........................       ($)            (43)      (394)       (327)            (85)            191
Cumulative effect of change in
  accounting (in millions)..............       ($)            (24)        18          (4)             --              --
Consolidated net income (loss) (in
  millions).............................       ($)            (44)      (650)       (459)              5             277
Average common shares outstanding (in
  thousands)............................                  150,434    139,047     130,758         113,128         110,140
Income (loss) from continuing operations
  per average common share
  CMS Energy -- Basic...................       ($)          (0.30)     (2.84)      (2.50)          (0.76)           1.66(a)
             -- Diluted.................       ($)          (0.30)     (2.84)      (2.50)          (0.76)           1.66(a)
  Class G    -- Basic and Diluted.......       ($)             --         --          --              --            4.21(a)
Cumulative effect of change in
  accounting per average common share
  CMS Energy -- Basic...................       ($)          (0.16)      0.13       (0.03)             --              --(a)
             -- Diluted.................       ($)          (0.16)      0.13       (0.03)             --              --(a)
Net income (loss) per average common
  share
  CMS Energy -- Basic...................       ($)          (0.30)     (4.68)      (3.51)           0.04            2.18(a)
             -- Diluted.................       ($)          (0.30)     (4.68)      (3.51)           0.04            2.17(a)
  Class G    -- Basic and Diluted.......       ($)             --         --          --              --            4.21(a)
Cash from (used in) operations (in
  millions).............................       ($)           (251)       614         372             600             917
Capital expenditures, excluding
  acquisitions, capital lease additions
  and DSM (in millions).................       ($)            535        747       1,239           1,032           1,124
Total assets (in millions)(f)...........       ($)         13,838     14,781      17,633          17,801          16,336
Long-term debt, excluding current
  maturities (in millions)..............       ($)          6,020      5,357       5,842           6,052           6,428
Long-term debt, related parties (in
  millions)(b)..........................       ($)            684         --          --              --              --
Non-current portion of capital leases
  (in millions).........................       ($)             58        116          71              49              88
Total preferred stock (in millions).....       ($)            305         44          44              44              44
Total Trust Preferred Securities (in
  millions).............................       ($)             --(b)     883       1,214           1,088           1,119
Cash dividends declared per common share
  CMS Energy............................       ($)             --       1.09        1.46            1.46            1.39
  Class G...............................       ($)             --         --          --              --            0.99
Market price of common stock at year-end
  CMS Energy............................       ($)           8.52       9.44       24.03           31.69           31.19
  Class G...............................       ($)             --         --          --              --           24.56(c)
Book value per common share at year-end
  CMS Energy............................       ($)           9.84       7.48       14.98           19.62           21.17
Number of employees at year-end
  (full-time equivalents)...............                    8,411     10,477      11,510          11,652          11,462
</Table>

                                      CMS-2
<PAGE>

<Table>
<Caption>
                                                                       CMS ENERGY CORPORATION
                                            -----------------------------------------------------------------------------
                                                                     RESTATED    RESTATED        RESTATED
                                                           2003      2002(E)     2001(E)         2000(E)           1999
                                                           ----      --------    --------        --------          ----
<S>                                         <C>           <C>        <C>         <C>             <C>             <C>
ELECTRIC UTILITY STATISTICS
  Sales (billions of kWh)...............                       39         39          40              41              41
  Customers (in thousands)..............                    1,754      1,734       1,712           1,691           1,665
  Average sales rate per kWh............      cents          6.91       6.88        6.65            6.56            6.54
GAS UTILITY STATISTICS
  Sales and transportation deliveries
     (bcf)..............................                      380        376         367             410             389
  Customers (in thousands)(d)...........                    1,671      1,652       1,630           1,611           1,584
  Average sales rate per mcf............       ($)           6.72       5.67        5.34            4.39            4.52
</Table>

- -------------------------
(a)  1999 earnings per average common share includes allocation of the premium
     on redemption of Class G Common Stock of $(0.26) per CMS Energy basic
     share, $(0.25) per CMS Energy diluted share and $3.31 per Class G basic and
     diluted share.

(b)  Effective December 31, 2003, Trust Preferred Securities are classified on
     the balance sheet as Long term debt -- related parties.

(c)  Reflects closing price at the October 25, 1999 exchange date.

(d)  Excludes off-system transportation customers.

(e)  For additional details, see Note 18, Restatement and Reclassification.

(f)  For additional details on the reclassification of non-legal
     cost-of-removal, see Note 16, Asset Retirement Obligations,
     "Reclassification of Non-Legal Cost of Removal." Following is the amount of
     cost of removal reclassified from accumulated depreciation to a regulatory
     liability by year: $983 million in 2003; $907 million in 2002; $870 million
     in 2001; $896 million in 2000; and $874 million in 1999.

                                      CMS-3
<PAGE>

                             CMS Energy Corporation
                      Management's Discussion and Analysis

     This MD&A is a combined report of CMS Energy and Consumers. The terms "we"
and "our" as used in this report refer to CMS Energy and its subsidiaries as a
combined entity, except where it is made clear that such term means only CMS
Energy.

EXECUTIVE OVERVIEW

     CMS Energy is an integrated energy company with a business strategy focused
primarily in Michigan. We are the parent holding company of Consumers and
Enterprises. Consumers is a combination electric and gas utility company serving
Michigan's Lower Peninsula. Enterprises, through subsidiaries, is engaged in
domestic and international diversified energy businesses including: independent
power production; natural gas transmission, storage and processing; and energy
services. We manage our businesses by the nature of services each provides and
operate principally in three business segments: electric utility, gas utility,
and enterprises.

     We earn our revenue and generate cash from operations by providing electric
and natural gas utility services, electric power generation, gas transmission,
storage, and processing, and other energy-related services. Our businesses are
affected by weather, especially during the key heating and cooling seasons,
economic conditions, particularly in Michigan, regulation and regulatory issues
that primarily affect our gas and electric utility operations, interest rates,
our debt credit rating, and energy commodity prices.

     Our strategy involves rebuilding our balance sheet and refocusing on our
core strength: superior utility operation. Over the next few years, we expect
this strategy to reduce our parent company debt substantially, improve our debt
ratings, grow earnings at a mid-single digit rate, restore a meaningful
dividend, and position the company to make new investments consistent with our
strengths. In the near term, our new investments will focus on the utility.

     In 2003, we continued to implement our "utility plus" strategy centered
around growing a healthy utility in Michigan and optimizing the contribution
from key Enterprises assets. We sold over $900 million worth of non-strategic
assets, enabling us to reduce debt by $1.1 billion. We have taken advantage of
historically low interest rates to extend maturities and refinance our debt at
lower cost. We completed over $3 billion of financing and refinancing
transactions to resolve short-term liquidity concerns at the start of 2003. In
addition to improving our capital structure, we contributed $560 million to our
defined benefit pension plan. This should result in lower pension costs in the
future.

     At the foundation of our financial progress was exceptional operating
performance. For the second consecutive year, our Michigan gas utility earned
the J.D. Power and Associates award for highest residential customer
satisfaction with natural gas services in the Midwest. Independent evaluators,
like J.D. Power and Associates recognize value and our regulators do too. The
MPSC authorized an annual increase in our gas utility rates of $56 million in
late 2002, and an additional interim annualized $19 million rate increase in
2003.

     Despite strong financial and operational performance in 2003, we face
important challenges in the future. We continue to lose industrial and
commercial customers to other electric suppliers without receiving compensation
for stranded costs caused by the lost sales. As of March 2004, we lost 735 MW or
nine percent of our electric business to these alternative electric suppliers.
We expect the loss to grow to over 1,000 MW in 2004. Existing state legislation
encourages competition and provides for recovery of stranded costs, but the MPSC
has not yet authorized stranded cost recovery. We continue to work cooperatively
with the MPSC to resolve this issue.

     Further, higher natural gas prices have harmed the economics of the MCV and
we are seeking approval from the MPSC to change the way in which the facility is
used. Our proposal would reduce gas consumption by an estimated 30 to 40 bcf per
year while improving the MCV's financial performance with no change to customer
rates. A portion of the benefits from the proposal will support additional
renewable resource development in Michigan. Resolving the issue is critical for
our shareowners and customers, and we have asked the MPSC to approve it quickly.

                                      CMS-4
<PAGE>

     We also are focused on further reducing our business risk and leverage,
while growing the equity base of our company. Much of our asset sales program is
complete; we are focused on selling the remaining businesses that are not
strategic to us. This creates volatility in earnings as we recognize foreign
currency translation account losses at the time of sale, but it is the right
strategic direction for our company.

     Finally, we are working to resolve outstanding litigation that stemmed from
energy trading activities in 2001 and earlier. Doing so will permit us to devote
more attention to improving business growth. Our business plan is targeted at
predictable earnings growth along with reduction in our debt. We are a full year
into our five-year plan to reduce by half the debt of the CMS Energy holding
company.

     The result of these efforts will be a strong, reliable energy company that
will be poised to take advantage of opportunities for further growth.

RESTATEMENT

     Financial statements of prior years and quarterly data for all three
periods presented have been restated for the following events:

     - International Energy Distribution, which includes SENECA and CPEE, is no
       longer considered "discontinued operations",

     - certain derivative accounting corrections, and

     - Loy Yang deferred tax accounting correction.

     For additional details on the effect of the restatements, see Note 18,
Restatement and Reclassification, and Note 19, Quarterly Financial and Common
Stock Information (Unaudited).

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

     This Form 10-K and other written and oral statements that we make contain
forward-looking statements as defined in Rule 3b-6 of the Securities Exchange
Act of 1934, as amended, Rule 175 of the Securities Act of 1933, as amended, and
relevant legal decisions. Our intention with the use of such words as "may,"
"could," "anticipates," "believes," "estimates," "expects," "intends," "plans,"
and other similar words is to identify forward-looking statements that involve
risk and uncertainty. We designed this discussion of potential risks and
uncertainties to highlight important factors that may impact our business and
financial outlook. We have no obligation to update or revise forward-looking
statements regardless of whether new information, future events or any other
factors affect the information contained in the statements. These
forward-looking statements are subject to various factors that could cause our
actual results to differ materially from the results anticipated in these
statements. Such factors include our inability to predict and/or control:

     - the efficient sale of non-strategic or under-performing domestic or
       international assets and discontinuation of certain operations,

     - achievement of capital expenditure reductions and cost savings,

     - capital and financial market conditions, including the current price of
       CMS Energy Common Stock and the effect on the Pension Plan, interest
       rates and availability of financing to CMS Energy, Consumers, or any of
       their affiliates, and the energy industry,

     - market perception of the energy industry, CMS Energy, Consumers, or any
       of their affiliates,

     - security ratings of CMS Energy, Consumers', or any of their affiliates,

     - currency fluctuations, transfer restrictions, and exchange controls,

     - factors affecting utility and diversified energy operations such as
       unusual weather conditions, catastrophic weather-related damage,
       unscheduled generation outages, maintenance or repairs, environmental
       incidents, or electric transmission or gas pipeline system constraints,

     - ability to access the capital markets successfully,
                                      CMS-5
<PAGE>

     - international, national, regional, and local economic, competitive and
       regulatory policies, conditions and developments,

     - adverse regulatory or legal decisions, including environmental laws and
       regulations,

     - federal regulation of electric sales and transmission of electricity
       including re-examination by federal regulators of the market-based sales
       authorizations by which our subsidiaries participate in wholesale power
       markets without price restrictions, and proposals by FERC to change the
       way it currently lets our subsidiaries and other public utilities and
       natural gas companies interact with each other,

     - energy markets, including the timing and extent of unanticipated changes
       in commodity prices for oil, coal, natural gas, natural gas liquids,
       electricity, and certain related products due to lower or higher demand,
       shortages, transportation problems or other developments,

     - potential disruption, expropriation or interruption of facilities or
       operations due to accidents, war, terrorism, or changing political
       conditions and the ability to obtain or maintain insurance coverage for
       such events,

     - nuclear power plant performance, decommissioning, policies, procedures,
       incidents, and regulation, including the availability of spent nuclear
       fuel storage,

     - technological developments in energy production, delivery, and usage,

     - changes in financial or regulatory accounting principles or policies,

     - outcome, cost, and other effects of legal and administrative proceedings,
       settlements, investigations and claims, including particularly claims,
       damages, and fines resulting from round-trip trading and inaccurate
       commodity price reporting,

     - limitations on our ability to control the development or operation of
       projects in which our subsidiaries have a minority interest,

     - disruptions in the normal commercial insurance and surety bond markets
       that may increase costs or reduce traditional insurance coverage,
       particularly terrorism and sabotage insurance and performance bonds,

     - other business or investment considerations that may be disclosed from
       time to time in CMS Energy's or Consumers' SEC filings or in other
       publicly issued written documents, and

     - other uncertainties that are difficult to predict, and many of which are
       beyond our control.

RESULTS OF OPERATIONS

CMS ENERGY CONSOLIDATED NET LOSS

     Our 2003 net loss was $44 million, an improvement of $606 million from
2002. We are continuing to restructure our business operations, and as our
financial plan moves forward, we will maintain our strategy of

                                      CMS-6
<PAGE>

selling under-performing or non-strategic assets in order to reduce our debt, to
reduce business risk, and to provide for more predictable future earnings.

<Table>
<Caption>
                                                                          RESTATED    RESTATED
YEARS ENDED DECEMBER 31                                          2003       2002        2001
- -----------------------                                          ----     --------    --------
                                                                 IN MILLIONS (EXCEPT FOR PER
                                                                        SHARE AMOUNTS)
<S>                                                             <C>       <C>         <C>
Net Loss....................................................    $  (44)    $ (650)     $ (459)
Basic loss per share........................................    $(0.30)    $(4.68)     $(3.51)
Diluted loss per share......................................    $(0.30)    $(4.68)     $(3.51)
</Table>

<Table>
<Caption>
                                                         RESTATED              RESTATED    RESTATED
YEARS ENDED DECEMBER 31                         2003       2002      CHANGE      2002        2001      CHANGE
- -----------------------                         ----     --------    ------    --------    --------    ------
                                                                         IN MILLIONS
<S>                                             <C>      <C>         <C>       <C>         <C>         <C>
Electric Utility............................    $ 167     $ 264       $(97)     $ 264       $ 120      $ 144
Gas Utility.................................       38        46         (8)        46          21         25
Enterprises.................................        8      (419)       427       (419)       (272)      (147)
Corporate Interest and Other................     (256)     (285)        29       (285)       (196)       (89)
                                                -----     -----       ----      -----       -----      -----
Loss from Continuing Operations.............      (43)     (394)       351       (394)       (327)       (67)
                                                -----     -----       ----      -----       -----      -----
Discontinued Operations.....................       23      (274)       297       (274)       (128)      (146)
Accounting Changes..........................      (24)       18        (42)        18          (4)        22
                                                -----     -----       ----      -----       -----      -----
Net Loss....................................    $ (44)    $(650)      $606      $(650)      $(459)     $(191)
                                                =====     =====       ====      =====       =====      =====
</Table>

     2003 COMPARED TO 2002: Our net loss was reduced significantly from:

     - absence of $379 million, net of tax, of goodwill write downs recorded in
       2002 associated with discontinued operations,

     - an improvement of CMS Enterprises' earnings due to:

      - decrease of $313 million, net of tax, in asset write downs from planned
        and completed divestitures,

      - lower expropriation and devaluation losses at the Argentine facilities
        due to the stabilization of the Argentine Peso,

      - absence of tax charges recorded in 2002 resulting from the loss of
        indefinite tax deferral for several international investments, and

      - higher revenues and lower interest costs within IPP.

     - decrease in corporate interest and other.

     However, our progress was slowed by:

     - Electric Utility earnings:

      - higher electric operating costs resulting from higher pension expense,
        greater depreciation expense reflecting higher levels of plant in
        service, and increased amortization expense associated with securitized
        regulatory assets,

      - lower electric deliveries from milder weather during the summer, and

      - continuation of switching by commercial and industrial customers to
        alternative electric suppliers.

     - loss of $44 million, after-tax, on the sale of Panhandle,

     - employee benefit plans net settlement and curtailment loss of $48
       million, after tax, related to a large number of employees retiring and
       exiting these plans, and

                                      CMS-7
<PAGE>

     - cumulative effect of a change of accounting resulting in a charge of $23
       million, net of tax, due to energy trading contracts that did not meet
       the definition of a derivative.

     2002 COMPARED TO 2001: Our net loss increased $191 million from:

     - after-tax charges in recognition of planned and completed divestitures
       and reduced asset valuations,

     - tax credit write-offs in 2002 at the parent level, and

     - restructuring and other costs in 2002.

ELECTRIC UTILITY RESULTS OF OPERATIONS

<Table>
<Caption>
YEARS ENDED DECEMBER 31                                2003    2002    CHANGE    2002    2001    CHANGE
- -----------------------                                ----    ----    ------    ----    ----    ------
                                                                         IN MILLIONS
<S>                                                    <C>     <C>     <C>       <C>     <C>     <C>
Net income.........................................    $167    $264     $(97)    $264    $120     $144
                                                       ====    ====     ====     ====    ====     ====
REASONS FOR THE CHANGE:
Electric deliveries................................                     $(41)                     $ 41
Power supply costs and related revenue.............                       26                       149
Other operating expenses and non-commodity
  revenue..........................................                      (80)                      (21)
Gain on asset sales................................                      (38)                       38
General taxes......................................                       10                        (3)
Fixed charges......................................                      (22)                        9
Income taxes.......................................                       48                       (69)
                                                                        ----                      ----
Total change.......................................                     $(97)                     $144
                                                                        ====                      ====
</Table>

     ELECTRIC DELIVERIES: In 2003, electric revenues decreased, reflecting lower
deliveries. Most significantly, sales volumes to commercial and industrial
customers were 5.6 percent lower than in 2002, a result of these sectors'
continued switching to alternative electric suppliers as allowed by the Customer
Choice Act. The decrease in revenue is also the result of reduced deliveries to
higher-margin residential customers, from a milder summer's impact on air
conditioning usage. Overall, electric deliveries, including transactions with
other wholesale marketers and other electric utilities, decreased 0.4 billion
kWh or 1.1 percent.

     In 2002, electric revenue increased by $41 million from the previous year,
despite lower deliveries. This was due primarily to increased deliveries to
higher-margin residential customers as a result of a significantly warmer
summer's impact on air conditioning usage. Deliveries, including transactions
with other wholesale marketers and other electric utilities, decreased 0.3
billion kWh or 0.7 percent.

     POWER SUPPLY COSTS AND RELATED REVENUE: In 2003, our recovery of power
supply costs was fixed, as required under the Customer Choice Act. Therefore,
power supply-related revenue in excess of actual power supply costs increased
operating income. By contrast, if power supply-related revenues had been less
than actual power supply costs, the impact would have decreased operating
income. In 2003, this difference between power supply-related revenues and
actual power supply costs benefited operating income by $26 million more than it
had in 2002. This increase is primarily the result of increased intersystem
revenues due to higher market prices and sales made from surplus capacity. The
efficient operation of our generating plants and lower priced purchased power
further decreased power supply costs.

     In 2002, as compared to 2001, power supply costs and related revenues
increased operating income due primarily to reduced purchased power costs
because the Palisades plant returned to service in 2002, following an extended
2001 shutdown.

     OTHER OPERATING EXPENSES AND NON-COMMODITY REVENUE: In 2003, net operating
expenses and non-commodity revenue decreased operating income by $80 million
versus 2002. This decrease relates to increased pension and other benefit costs
of $54 million, a scheduled refueling outage at Palisades, and higher
transmission costs. More plant in service increased depreciation costs by $8
million, and $11 million of higher amortization

                                      CMS-8
<PAGE>

expense from securitized assets further contributed to decreased operating
income. Slightly offsetting the increased operating expenses were higher
non-commodity revenues associated with other income.

     In 2002, net operating expenses and non-commodity revenue decreased
operating income by $21 million compared with 2001. The decrease primarily
related to higher transmission expenses and increased depreciation costs from
more plant in service.

     ASSET SALES: The reduction in operating income from asset sales for 2003
versus 2002, and the increase in operating income from asset sales for 2002
versus 2001 reflect the $31 million pretax gain associated with the 2002 sale of
our electric transmission system and the $7 million pretax gain associated with
the 2002 sale of nuclear equipment from the cancelled Midland project.

     GENERAL TAXES: In 2003, general taxes decreased from 2002 due primarily to
reductions in MSBT expense, resulting primarily from a tax credit received from
the State of Michigan associated with construction of the new corporate
headquarters on a qualifying Brownfield site. In 2002, general taxes increased
over 2001 due to increases in MSBT and property tax accruals.

     FIXED CHARGES: In 2003, fixed charges increased versus 2002 due primarily
to higher average debt levels, but also because of higher average interest
rates. In 2002, fixed charges decreased versus 2001 because of a reduction in
long-term debt.

     INCOME TAXES: In 2003, income tax decreased versus 2002 due primarily to
lower earnings by the electric utility. In 2002, income tax expense increased
versus 2001 due primarily to increased earnings.

GAS UTILITY RESULTS OF OPERATIONS

<Table>
<Caption>
YEARS ENDED DECEMBER 31                                   2003    2002    CHANGE    2002    2001    CHANGE
- -----------------------                                   ----    ----    ------    ----    ----    ------
                                                                            IN MILLIONS
<S>                                                       <C>     <C>     <C>       <C>     <C>     <C>
Net income............................................    $38     $46      $ (8)    $46     $21      $ 25
                                                          ===     ===      ====     ===     ===      ====
Reasons for the change:
Gas deliveries........................................                     $ (1)                     $ 21
Gas rate increase.....................................                       39                        25
Gas wholesale and retail services and other gas
  revenues............................................                        1                         1
Operation and maintenance.............................                      (34)                      (14)
General taxes, depreciation, and other income.........                       (6)                       (3)
Fixed charges.........................................                       (5)                        3
Income taxes..........................................                       (2)                       (8)
                                                                           ----                      ----
Total change..........................................                     $ (8)                     $ 25
                                                                           ====                      ====
</Table>

     GAS DELIVERIES: In 2003, gas deliveries, including miscellaneous
transportation, increased 4.1 bcf or 1.1 percent versus 2002. Despite increased
system deliveries, gas revenues actually declined by $1 million. Colder weather
during the first quarter of 2003 increased deliveries to the residential and
commercial sectors. Increased deliveries resulted in a $6 million increase in
gas revenues. However, the revenue increase was offset by a $7 million gas loss
adjustment recorded as a reduction to gas revenues.

     In 2002, gas revenues increased by $21 million from the previous year.
System deliveries, including miscellaneous transportation, increased 9.4 bcf or
2.6 percent. The increase was due primarily to colder weather that increased
deliveries to the residential and commercial sectors.

     GAS RATE INCREASE: In November 2002, the MPSC issued a final gas rate order
authorizing a $56 million annual increase to gas tariff rates. As a result of
this order, 2003 gas revenues increased $39 million. In 2002, gas rate increases
led to increased gas revenues of $25 million over 2001.

     GAS WHOLESALE AND RETAIL SERVICES AND OTHER GAS REVENUES: In 2003, gas
wholesale and retail services and other gas revenues increased $1 million. The
$1 million increase includes primarily the following two items. In 2003, we
reversed a $4 million reserve, originally recorded in 2002, for non-physical gas
title tracking services.

                                      CMS-9
<PAGE>

In addition, in 2003, we reserved $11 million for the settlement agreement
associated with the 2002-2003 GCR disallowance. For additional details regarding
both of these issues, see the Gas Utility Business Uncertainties in the
"Outlook" section of this MD&A.

     OPERATION AND MAINTENANCE: In 2003, operation and maintenance expenses
increased versus 2002 due to increases in pension and other benefits costs of
$27 million and additional expenditures on safety, reliability, and customer
service. In 2002, operation and maintenance expenses increased versus 2001 due
to the recognition of gas storage inventory losses and additional expenditures
on customer reliability and service.

     GENERAL TAXES, DEPRECIATION, AND OTHER INCOME: In 2003, the net of general
tax expense, depreciation expense, and other income decreased operating income
primarily because of increases in depreciation expense from increased plant in
service. In 2002, the net of general tax expense, depreciation expense, and
other income decreased operating income primarily because of increases in MSBT
and property tax expense accruals.

     FIXED CHARGES: In 2003, fixed charges increased versus 2002 due primarily
to higher average debt levels, but also because of higher average interest
rates. In 2002 versus 2001, fixed charges decreased due to lower long-term debt
levels.

     INCOME TAXES: In 2003 versus 2002, income tax expense increased due to
reduced income tax expense in 2002. The 2002 reduction was attributable to
flow-through accounting on plant, property and equipment as required by past
MPSC rulings. In 2002, income tax expense increased versus 2001 due primarily to
increased earnings of the gas utility.

ENTERPRISES RESULTS OF OPERATIONS

<Table>
<Caption>
                                                 RESTATED                    RESTATED       RESTATED
YEARS ENDED DECEMBER 31               2003         2002         CHANGE         2002           2001         CHANGE
- -----------------------               ----       --------       ------       --------       --------       ------
                                                                      IN MILLIONS
<S>                                   <C>        <C>            <C>          <C>            <C>            <C>
Net Income (Loss)..............        $8         $(419)         $427         $(419)         $(272)        $(147)
                                       ==         =====          ====         =====          =====         =====
</Table>

     In 2003, Enterprises had earnings compared to a significant loss in 2002.
This year over year improvement resulted from the:

     - elimination of $313 million of asset impairments, net of tax, in 2002 for
       divestitures and reduced asset valuations,

     - lower expropriation and devaluation losses at Argentine facilities, and

     - elimination of tax charges in 2002 from the loss of indefinite tax
       deferral for several international investments.

     2002 losses increased by $147 million from 2001 resulting from the:

     - increased asset impairments for divestitures and reduced asset
       valuations, and

     - discontinuing and selling several businesses.

OTHER RESULTS OF OPERATIONS

CORPORATE INTEREST AND OTHER:

<Table>
<Caption>
                                                 RESTATED                    RESTATED       RESTATED
YEARS ENDED DECEMBER 31              2003          2002         CHANGE         2002           2001         CHANGE
- -----------------------              ----        --------       ------       --------       --------       ------
                                                                     IN MILLIONS
<S>                                  <C>         <C>            <C>          <C>            <C>            <C>
Net Loss......................       $(256)       $(285)         $29          $(285)         $(196)         $(89)
                                     =====        =====          ===          =====          =====          ====
</Table>

     Our 2003 corporate interest and other net expenses decreased $29 million
from 2002 primarily due to reduced restructuring costs and reduced taxes,
partially offset by increased interest allocation to continuing operations.

                                      CMS-10
<PAGE>

     Our 2002 corporate interest and other net expenses increased $89 million
from 2001 primarily due to restructuring charges, including the relocation of
corporate offices from Dearborn to Jackson, Michigan, and increased taxes
resulting from the loss of certain AMT credit carryforwards.

     DISCONTINUED OPERATIONS: For the years ended December 31, 2003 and 2002,
discontinued operations included Parmelia, and through their respective dates of
sale, Panhandle, CMS Viron, CMS Field Services, and Marysville. For additional
information, see Note 2, Discontinued Operations, Other Asset Sales,
Impairments, and Restructuring.

CRITICAL ACCOUNTING POLICIES

     The following accounting policies are important to an understanding of our
results and financial condition and should be considered an integral part of our
MD&A:

     - use of estimates in accounting for long-lived assets, equity method
       investments, and contingencies,

     - accounting for financial and derivative instruments,

     - accounting for international operations and foreign currency,

     - accounting for the effects of industry regulation,

     - accounting for pension and postretirement benefits,

     - accounting for asset retirement obligations, and

     - accounting for nuclear decommissioning costs.

     For additional accounting policies, see Note 1, Corporate Structure and
Accounting Policies.

USE OF ESTIMATES

     In preparing our financial statements, we use estimates and assumptions
that may affect reported amounts and disclosures. Accounting estimates are used
for asset valuations, depreciation, amortization, financial and derivative
instruments, employee benefits, and contingencies. For example, we estimate the
rate of return on plan assets and the cost of future health-care benefits to
determine our annual pension and other postretirement benefit costs. There are
risks and uncertainties that may cause actual results to differ from estimated
results, such as changes in the regulatory environment, competition, foreign
exchange, regulatory decisions, and lawsuits.

     LONG-LIVED ASSETS AND EQUITY METHOD INVESTMENTS: Our assessment of the
recoverability of long-lived assets and equity method investments involves
critical accounting estimates. Tests of impairment are performed periodically if
certain conditions that are other than temporary exist that may indicate the
carrying value may not be recoverable. Of our total assets, recorded at $13.838
billion at December 31, 2003, 60 percent represent long-lived assets and equity
method investments that are subject to this type of analysis. We base our
evaluations of impairment on such indicators as:

     - the nature of the assets,

     - projected future economic benefits,

     - domestic and foreign regulatory and political environments,

     - state and federal regulatory and political environments,

     - historical and future cash flow and profitability measurements, and

     - other external market conditions or factors.

     If an event occurs or circumstances change in a manner that indicates the
recoverability of a long-lived asset should be assessed, we evaluate the asset
for impairment. An asset held-in-use is evaluated for impairment by calculating
the undiscounted future cash flows expected to result from the use of the asset
and its eventual disposition. If the undiscounted future cash flows are less
than the carrying amount, we recognize an impairment

                                      CMS-11
<PAGE>

loss. The impairment loss recognized is the amount by which the carrying amount
exceeds the fair value. We estimate the fair market value of the asset utilizing
the best information available. This information includes quoted market prices,
market prices of similar assets, and discounted future cash flow analyses. An
asset considered held-for-sale is recorded at the lower of its carrying amount
or fair value, less cost to sell.

     We also assess our ability to recover the carrying amounts of our equity
method investments. This assessment requires us to determine the fair values of
our equity method investments. The determination of fair value is based on
valuation methodologies including discounted cash flows and the ability of the
investee to sustain an earnings capacity that justifies the carrying amount of
the investment. We also consider the existence of CMS Energy guarantees on
obligations of the investee or other commitments to provide further financial
support. If the fair value is less than the carrying value and the decline in
value is considered to be other than temporary, an appropriate write-down is
recorded.

     Our assessments of fair value using these valuation methodologies represent
our best estimates at the time of the reviews and are consistent with our
internal planning. The estimates we use can change over time. If fair values
were estimated differently, they could have a material impact on the financial
statements.

     In 2003, we analyzed impairment indicators related to our long-lived assets
and equity method investments. Following our analysis, we reduced the carrying
amount of our investment in Parmelia, our investment in SENECA, and an equity
investment at CMS Generation to reflect their fair values. We are still pursuing
the sale of our remaining non-strategic and under-performing assets, including
some assets that were not determined to be impaired. Upon the sale of these
assets, the proceeds realized may be materially different from the remaining
carrying values. Even though these assets have been identified for sale, we
cannot predict when, or make any assurances that, these asset sales will occur.
Further, we cannot predict the amount of cash or the value of consideration that
may be received. For additional details on asset sales, see Note 2, Discontinued
Operations, Other Asset Sales, Impairments, and Restructuring.

     CONTINGENCIES: We are involved in various regulatory and legal proceedings
that arise in the ordinary course of our business. We record accruals for such
contingencies based upon our assessment that the occurrence is probable and an
estimate of the liability amount. The recording of estimated liabilities for
contingencies is guided by the principles in SFAS No. 5. We consider many
factors in making these assessments, including history and the specifics of each
matter. The most significant of these contingencies are our electric and gas
environmental estimates, which are discussed in the "Outlook" section included
in this MD&A, and the potential underrecoveries from our power purchase contract
with the MCV Partnership.

     MCV UNDERRECOVERIES: The MCV Partnership, which leases and operates the MCV
Facility, contracted to sell electricity to Consumers for a 35-year period
beginning in 1990 and to supply electricity and steam to Dow. We hold a 49
percent partnership interest in the MCV Partnership, and a 35 percent lessor
interest in the MCV Facility.

     Under our power purchase agreement with the MCV Partnership, we pay a
capacity charge based on the availability of the MCV Facility whether or not
electricity is actually delivered to us; a variable energy charge for kWh
delivered to us; and a fixed energy charge based on availability up to 915 MW
and based on delivery for the remaining contracted capacity. The cost that we
incur under the MCV Partnership power purchase agreement exceeds the recovery
amount allowed by the MPSC. As a result, we estimate cash underrecoveries of
capacity availability payments will aggregate $206 million from 2004 through
2007. For capacity and fixed energy payments billed by the MCV Partnership after
September 15, 2007, and not recovered from customers, we expect to claim a
regulatory out provision under the MCV Partnership power purchase agreement.
This provision obligates us to pay the MCV Partnership only those capacity and
energy charges that the MPSC has authorized for recovery from electric
customers. The effect of any such action would be to:

     - reduce cash flow to the MCV Partnership, which could have an adverse
       effect on our equity, and

     - eliminate our underrecoveries for capacity and energy payments.

     Further, under the PPA, variable energy payments to the MCV Partnership are
based on the cost of coal burned in our coal plants and operations and
maintenance expenses. However, the MCV Partnership's costs of

                                      CMS-12
<PAGE>

producing electricity are tied to the cost of natural gas. Because natural gas
prices have increased substantially in recent years, while the price the MCV
Partnership can charge us for energy has not, the MCV Partnership's financial
performance has been affected adversely.

     As a result of returning to the PSCR process on January 1, 2004, we
returned to dispatching the MCV Facility on a fixed load basis, as permitted by
the MPSC, in order to maximize recovery from electric customers of our capacity
payments. This fixed load dispatch increases the MCV Facility's output and
electricity production costs, such as natural gas. As the spread between the MCV
Facility's variable electricity production costs and its energy payment revenue
widens, the MCV's Partnership's financial performance and our equity interest in
the MCV Partnership will be harmed.

     In February 2004, we filed a resource conservation plan with the MPSC that
is intended to help conserve natural gas and thereby improve our equity
investment in the MCV Partnership, without raising the costs paid by our
electric customers. The plan's primary objective is to dispatch the MCV Facility
on an economic basis depending on natural gas market prices, which will reduce
the MCV Facility's annual natural gas consumption by an estimated 30 to 40 bcf.
This decrease in the quantity of high-priced natural gas consumed by the MCV
Facility will benefit Consumers' ownership interest in the MCV Partnership. We
requested that the MPSC provide interim approval while it conducts a full review
of the plan. The MPSC has scheduled a prehearing conference with respect to the
MCV resource conservation plan for April 2004. We cannot predict if or when the
MPSC will approve our request.

     The two most significant variables in the analysis of the MCV Partnership's
future financial performance are the forward price of natural gas for the next
22 years and the MPSC's decision in 2007 or beyond related to our recovery of
capacity payments. Natural gas prices have been historically volatile.
Presently, there is no consensus in the marketplace on the price or range of
prices of natural gas in the short term or beyond the next five years.
Therefore, we cannot predict the impact of these issues on our future earnings,
cash flows, or on the value of our equity interest in the MCV Partnership.

     For additional details, see Note 4, Uncertainties, "Other Consumers'
Electric Utility Uncertainties -- The Midland Cogeneration Venture."

ACCOUNTING FOR FINANCIAL AND DERIVATIVE INSTRUMENTS, TRADING ACTIVITIES, AND
MARKET RISK INFORMATION

     FINANCIAL INSTRUMENTS: We account for investments in debt and equity
securities using SFAS No. 115. Debt and equity securities can be classified into
one of three categories: held-to-maturity, trading, or available-for-sale
securities. Our investments in equity securities are classified as
available-for-sale securities. They are reported at fair value, with any
unrealized gains or losses resulting from changes in fair value reported in
equity as part of accumulated other comprehensive income and are excluded from
earnings unless such changes in fair value are determined to be other than
temporary. Unrealized gains or losses resulting from changes in the fair value
of our nuclear decommissioning investments are reported as regulatory
liabilities. The fair value of these investments is determined from quoted
market prices.

     DERIVATIVE INSTRUMENTS: We use the criteria in SFAS No. 133, as amended and
interpreted, to determine if certain contracts must be accounted for as
derivative instruments. The rules for determining whether a contract meets the
criteria for derivative accounting are numerous and complex. Moreover,
significant judgment is required to determine whether a contract requires
derivative accounting, and similar contracts can sometimes be accounted for
differently.

     If a contract is accounted for as a derivative instrument, it is recorded
in the financial statements as an asset or a liability, at the fair value of the
contract. The recorded fair value of the contract is then adjusted quarterly to
reflect any change in the market value of the contract, a practice known as
marking the contract to market. The accounting for changes in the fair value of
a derivative (that is, gains or losses) is reported either in earnings or
accumulated other comprehensive income depending on whether the derivative
qualifies for special hedge accounting treatment. For additional details on the
accounting policies for derivative instruments, see Note 7, Financial and
Derivative Instruments.

                                      CMS-13
<PAGE>

     The types of contracts we typically classify as derivative instruments are
interest rate swaps, foreign currency exchange contracts, electric call options,
gas fuel options, fixed priced weather-based gas supply call options, fixed
price gas supply call and put options, gas futures, gas and power swaps, and
forward purchases and sales. We generally do not account for electric capacity
and energy contracts, gas supply contracts, coal and nuclear fuel supply
contracts, or purchase orders for numerous supply items as derivatives.

     Certain of our electric capacity and energy contracts are not accounted for
as derivatives due to the lack of an active energy market in the state of
Michigan, as defined by SFAS No. 133, and the transportation costs that would be
incurred to deliver the power under the contracts to the closest active energy
market at the Cinergy hub in Ohio. If a market develops in the future, we may be
required to account for these contracts as derivatives. The mark-to-market
impact on earnings related to these contracts, particularly related to the PPA,
could be material to our financial statements.

     To determine the fair value of contracts that are accounted for as
derivative instruments, we use a combination of quoted market prices and
mathematical valuation models. Valuation models require various inputs,
including forward prices, volatilities, interest rates, and exercise periods.
Changes in forward prices or volatilities could change significantly the
calculated fair value of certain contracts. At December 31, 2003, we assumed a
market-based interest rate of 1 percent (six-month U.S. Treasury rate) and
volatility rates ranging between 65 percent and 120 percent to calculate the
fair value of our electric and gas call options.

     TRADING ACTIVITIES: Our wholesale power and gas trading activities are also
accounted for using the criteria in SFAS No. 133. Energy trading contracts that
meet the definition of a derivative are recorded as assets or liabilities in the
financial statements at the fair value of the contracts. Gains or losses arising
from changes in fair value of these contracts are recognized into earnings in
the period in which the changes occur. Energy trading contracts that do not meet
the definition of a derivative are accounted for as executory contracts (i.e.,
on an accrual basis).

     The market prices we use to value our energy trading contracts reflect our
consideration of, among other things, closing exchange and over-the-counter
quotations. In certain contracts, long-term commitments may extend beyond the
period in which market quotations for such contracts are available. Mathematical
models are developed to determine various inputs into the fair value calculation
including price and other variables that may be required to calculate fair
value. Realized cash returns on these commitments may vary, either positively or
negatively, from the results estimated through application of the mathematical
model. We believe that our mathematical models utilize state-of-the-art
technology, pertinent industry data, and prudent discounting in order to
forecast certain elongated pricing curves. Market prices are adjusted to reflect
the impact of liquidating our position in an orderly manner over a reasonable
period of time under present market conditions.

     In connection with the market valuation of our energy trading contracts, we
maintain reserves for credit risks based on the financial condition of
counterparties. We also maintain credit policies that management believes will
minimize its overall credit risk with regard to our counterparties.
Determination of our counterparties' credit quality is based upon a number of
factors, including credit ratings, disclosed financial condition, and collateral
requirements. Where contractual terms permit, we employ standard agreements that
allow for netting of positive and negative exposures associated with a single
counterparty. Based on these policies, our current exposures, and our credit
reserves, we do not anticipate a material adverse effect on our financial
position or results of operations as a result of counterparty nonperformance.

                                      CMS-14
<PAGE>

     The following tables provide a summary of the fair value of our energy
trading contracts as of December 31, 2003.

<Table>
<Caption>
                                                                IN MILLIONS
<S>                                                             <C>
Fair value of contracts outstanding as of December 31,
  2002......................................................       $ 81
Fair value of new contracts when entered into during the
  period....................................................         --
Implementation of EITF Issue No. 02-03(a)...................        (36)
Fair value of derivative contracts sold and received from
  asset sales(b)............................................        (30)
Changes in fair value attributable to changes in valuation
  techniques and assumptions................................         --
Contracts realized or otherwise settled during the period...        (10)
Other changes in fair value(c)..............................         10
                                                                   ----
Fair value of contracts outstanding as of December 31,
  2003......................................................       $ 15
                                                                   ====
</Table>

- -------------------------
(a)  Reflects the removal of contracts that do not qualify as derivatives under
     SFAS No. 133 as of January 1, 2003. See Note 17, Implementation of New
     Accounting Standards.

(b)  Reflects $60 million decrease for price risk management assets sold and $30
     million increase for price risk management assets received related to the
     sales of the gas and power books.

(c)  Reflects changes in price and net increase/(decrease) of forward positions
     as well as changes to mark-to-market and credit reserves.

<Table>
<Caption>
                                                                  FAIR VALUE OF CONTRACTS AT DECEMBER 31, 2003
                                                                -------------------------------------------------
                                                                               MATURITY (IN YEARS)
                                                    TOTAL       -------------------------------------------------
SOURCE OF FAIR VALUE                              FAIR VALUE    LESS THAN 1    1 TO 3    4 TO 5    GREATER THAN 5
- --------------------                              ----------    -----------    ------    ------    --------------
                                                                            IN MILLIONS
<S>                                               <C>           <C>            <C>       <C>       <C>
Prices actively quoted........................       $(23)          $ 2         $(7)      $(16)         $(2)
Prices based on models and other valuation
  methods.....................................         38            11          13         13            1
                                                     ----           ---         ---       ----          ---
Total.........................................       $ 15           $13         $ 6       $ (3)         $(1)
                                                     ====           ===         ===       ====          ===
</Table>

     MARKET RISK INFORMATION: We are exposed to market risks including, but not
limited to, changes in interest rates, commodity prices, currency exchange
rates, and equity security prices. We manage these risks using established
policies and procedures, under the direction of both an executive oversight
committee consisting of senior management representatives and a risk committee
consisting of business-unit managers. We may use various contracts to manage
these risks, including swaps, options, and forward contracts.

     Contracts used to manage market risks may be considered derivative
instruments that are subject to derivative and hedge accounting pursuant to SFAS
No. 133. We intend that any gains or losses on these contracts will be offset by
an opposite movement in the value of the item at risk. We enter into all risk
management contracts for purposes other than trading. These contracts contain
credit risk if the counterparties, including financial institutions and energy
marketers, fail to perform under the agreements. We minimize such risk by
performing financial credit reviews using, among other things, publicly
available credit ratings of such counterparties.

     We perform sensitivity analyses to assess the potential loss in fair value,
cash flows, or future earnings based upon a hypothetical 10 percent adverse
change in market rates or prices. We do not believe that sensitivity analyses
alone provide an accurate or reliable method for monitoring and controlling
risks. Therefore, we use our experience and judgment to revise strategies and
modify assessments. Changes in excess of the amounts determined in sensitivity
analyses could occur if market rates or prices exceed the 10 percent shift used
for the analyses. These risk sensitivities are shown in "Interest Rate Risk,"
"Commodity Price Risk," "Trading Activity Commodity Price Risk," "Currency
Exchange Risk," and "Equity Securities Price Risk" within this section.

     Interest Rate Risk: We are exposed to interest rate risk resulting from
issuing fixed-rate and variable-rate financing instruments and from interest
rate swap agreements. We use a combination of these instruments to

                                      CMS-15
<PAGE>

manage this risk as deemed appropriate, based upon market conditions. These
strategies are designed to provide and maintain a balance between risk and the
lowest cost of capital.

     Interest Rate Risk Sensitivity Analysis (assuming a 10 percent adverse
change in market interest rates):

<Table>
<Caption>
AS OF DECEMBER 31                                               2003    2002
- -----------------                                               ----    ----
                                                                IN MILLIONS
<S>                                                             <C>     <C>
Variable-rate financing -- before tax annual earnings
  exposure..................................................    $  1    $  2
Fixed-rate financing -- potential loss in fair value(a).....     242     293
</Table>

- -------------------------
(a)  Fair value exposure could only be realized if we repurchased all of our
     fixed-rate financing.

     As discussed in "Electric Utility Business Uncertainties -- Competition and
Regulatory Restructuring -- Securitization" within this MD&A, we have filed an
application with the MPSC to securitize certain expenditures. Upon final
approval, we intend to use the proceeds from the securitization to retire
higher-cost debt, which could include a portion of our current fixed-rate debt.
We do not believe that any adverse change in debt price and interest rates would
have a material adverse effect on either our consolidated financial position,
results of operations or cash flows.

     Certain equity method investees have issued interest rate swaps. These
instruments are not required to be included in the sensitivity analysis, but can
have an impact on financial results. See discussion of these instruments in Note
18, Restatement and Reclassification.

     Commodity Price Risk: For purposes other than trading, we enter into
electric call options, fixed-priced weather-based gas supply call options, and
fixed-priced gas supply call and put options. The electric call options are used
to protect against the risk of fluctuations in the market price of electricity,
and to ensure a reliable source of capacity to meet our customers' electric
needs. The weather-based gas supply call options, along with the gas supply call
and put options, are used to purchase reasonably priced gas supply. Call options
give us the right, but not the obligation, to purchase gas supply at
predetermined fixed prices. Put options give third-party suppliers the right,
but not the obligation, to sell gas supply to us at predetermined fixed prices.

     The commodity price risk sensitivity analysis was not material for the
years ending December 31, 2003 and December 31, 2002.

     Trading Activity Commodity Price Risk: We are exposed to market
fluctuations in the price of energy commodities. We employ established policies
and procedures to manage these risks and may use various commodity derivatives,
including futures, options, and swap contracts. The prices of these energy
commodities can fluctuate because of, among other things, changes in the supply
of and demand for those commodities.

     Trading Activity Commodity Price Risk Sensitivity Analysis (assuming a 10
percent adverse change in market prices):

<Table>
<Caption>
AS OF DECEMBER 31                                                  2003
- -----------------                                                  ----
                                                                IN MILLIONS
<S>                                                             <C>
Potential reduction in fair value:
Gas-related swaps and forward contracts.....................        $3
Electricity-related forward contracts.......................         2
Electricity-related call option contracts...................         1
</Table>

     A sensitivity analysis was not performed for the year ended December 31,
2002. There has been a significant change in trading activity in 2003 from the
prior year. As noted in "Trading Activities" within this section, the fair value
of contracts outstanding has decreased from $81 million at December 31, 2002 to
$15 million at December 31, 2003. For further information, see "Trading
Activities" within this section.

     Currency Exchange Risk: We are exposed to currency exchange risk arising
from investments in foreign operations as well as various international projects
in which we have an equity interest and which have debt denominated in U.S.
dollars. We typically use forward exchange contracts and other risk mitigating
instruments

                                      CMS-16
<PAGE>

to hedge currency exchange rates. The impact of hedges on our investments in
foreign operations is reflected in accumulated other comprehensive income as a
component of the foreign currency translation adjustment. Gains or losses from
the settlement of these hedges are maintained in the foreign currency
translation adjustment until we sell or liquidate the investments on which the
hedges were taken. At December 31, 2003, we had no foreign exchange hedging
contracts outstanding. As of December 31, 2003, the total foreign currency
translation adjustment was a net loss of $419 million, which included a net
hedging loss of $18 million related to settled contracts.

     Equity Securities Price Risk: We are exposed to price risk associated with
investments in equity securities. As discussed in "Financial Instruments" within
this section, our investments in equity securities are classified as
available-for-sale securities. They are reported at fair value, with any
unrealized gains or losses resulting from changes in fair value reported in
equity as part of accumulated other comprehensive income and are excluded from
earnings unless such changes in fair value are determined to be other than
temporary. Unrealized gains or losses resulting from changes in the fair value
of our nuclear decommissioning investments are reported as regulatory
liabilities.

     Equity Securities Price Risk Sensitivity Analysis (assuming a 10 percent
adverse change in market prices):

<Table>
<Caption>
AS OF DECEMBER 31                                               2003    2002
- -----------------                                               ----    ----
                                                                IN MILLIONS
<S>                                                             <C>     <C>
Potential reduction in fair value:
  Nuclear decommissioning investments.......................    $57     $49
  Equity investments........................................      7       6
</Table>

     For additional details on market risk and derivative activities, see Note
7, Financial and Derivative Instruments.

INTERNATIONAL OPERATIONS AND FOREIGN CURRENCY

     We have investments in energy-related projects throughout the world. As a
result of a change in business strategy, over the last two years we have been
selling certain foreign investments. For additional details on the divestiture
of foreign investments see Note 2, Discontinued Operations, Other Asset Sales,
Impairments, and Restructuring.

     BALANCE SHEET: Our subsidiaries and affiliates whose functional currency is
other than the U.S. dollar translate their assets and liabilities into U.S.
dollars at the exchange rates in effect at the end of the fiscal period. Gains
or losses that result from this translation and gains or losses on long-term
intercompany foreign currency transactions are reflected as a component of
stockholders' equity in the Consolidated Balance Sheets as "Foreign Currency
Translation." As of December 31, 2003, cumulative foreign currency translation
decreased stockholders' equity by $419 million. We translate the revenue and
expense accounts of these subsidiaries and affiliates into U.S. dollars at the
average exchange rate during the period.

     Australia: At December 31, 2003, the net foreign currency loss due to the
exchange rate of the Australian dollar recorded in the Foreign Currency
Translation component of stockholders' equity using an exchange rate of 1.335
Australian dollars per U.S. dollars was $95 million. This amount includes an
unrealized loss related to our investment in Loy Yang. This unrealized loss, and
the impact of certain deferred taxes associated with the Loy Yang investment,
will be realized upon sale, full liquidation, or other disposition of our
investment in Loy Yang for a total loss of approximately $110 million. In July
2003, we executed a conditional share sale agreement for our investment in Loy
Yang. For additional details, see "Outlook -- Enterprises Outlook" section
within this MD&A.

     Argentina: In January 2002, the Republic of Argentina enacted the Public
Emergency and Foreign Exchange System Reform Act. This law repealed the fixed
exchange rate of one U.S. dollar to one Argentina peso, converted all
dollar-denominated utility tariffs and energy contract obligations into pesos at
the same one-to-one exchange rate, and directed the President of Argentina to
renegotiate such tariffs.

     Effective April 30, 2002, we adopted the Argentine peso as the functional
currency for our Argentine investments. We had used previously the U.S. dollar
as the functional currency. As a result, we translated the assets and
liabilities of our Argentine entities into U.S. dollars using an exchange rate
of 3.45 pesos per

                                      CMS-17
<PAGE>

U.S. dollar, and recorded an initial charge to the Foreign Currency Translation
component of stockholders' equity of $400 million.

     While we cannot predict future peso-to-U.S. dollar exchange rates, we do
expect that these non-cash charges reduce substantially the risk of further
material balance sheet impacts when combined with anticipated proceeds from
international arbitration currently in progress, political risk insurance, and
the eventual sale of these assets. At December 31, 2003, the net foreign
currency loss due to the unfavorable exchange rate of the Argentine peso
recorded in the Foreign Currency Translation component of stockholders' equity
using an exchange rate of 2.94 pesos per U.S. dollar was $264 million. This
amount also reflects the effect of recording, at December 31, 2002, U.S. income
taxes on temporary differences between the book and tax bases of foreign
investments, including the foreign currency translation associated with our
Argentine investments that were no longer considered permanent. For additional
details, see Note 8, Income Taxes.

     INCOME STATEMENT: We use the U.S. dollar as the functional currency of
subsidiaries operating in highly inflationary economies and of subsidiaries that
meet the U.S. dollar functional currency criteria outlined in SFAS No. 52. Gains
and losses that arise from transactions denominated in a currency other than the
U.S. dollar, except those that are hedged, are included in determining net
income.

     HEDGING STRATEGY: We may use forward exchange and option contracts to hedge
certain receivables, payables, long-term debt, and equity value relating to
foreign investments. The purpose of our foreign currency hedging activities is
to reduce risk associated with adverse changes in currency exchange rates that
could affect cash flow materially. These contracts would not subject us to risk
from exchange rate movements because gains and losses on such contracts are
inversely correlated with the losses and gains, respectively, on the assets and
liabilities being hedged.

ACCOUNTING FOR THE EFFECTS OF INDUSTRY REGULATION

     Because we are involved in a regulated industry, regulatory decisions
affect the timing and recognition of revenues and expenses. We use SFAS No. 71
to account for the effects of these regulatory decisions. As a result, we may
defer or recognize revenues and expenses differently than a non-regulated
entity.

     For example, items that a non-regulated entity normally would expense, we
may record as regulatory assets if the actions of the regulator indicate such
expenses will be recovered in future rates. Conversely, items that non-
regulated entities may normally recognize as revenues, we may record as
regulatory liabilities if the actions of the regulator indicate they will
require such revenues be refunded to customers. Judgment is required to
determine the recoverability of items recorded as regulatory assets and
liabilities. As of December 31, 2003, we had $1.105 billion recorded as
regulatory assets and $1.467 billion recorded as regulatory liabilities.

     For additional details on industry regulation, see Note 1, Corporate
Structure and Accounting Policies, "Utility Regulation."

ACCOUNTING FOR PENSION AND OPEB

     Pension: We have established external trust funds to provide retirement
pension benefits to our employees under a non-contributory, defined benefit
Pension Plan. We have implemented a cash balance plan for employees hired after
June 30, 2003. We use SFAS No. 87 to account for pension costs.

     OPEB: We provide postretirement health and life benefits under our OPEB
plan to substantially all our retired employees. We use SFAS No. 106 to account
for other postretirement benefit costs.

     Liabilities for both pension and OPEB are recorded on the balance sheet at
the present value of their future obligations, net of any plan assets. The
calculation of the liabilities and associated expenses requires the expertise of
actuaries. Many assumptions are made including:

     - life expectancies,

     - present-value discount rates,

     - expected long-term rate of return on plan assets,
                                      CMS-18
<PAGE>

     - rate of compensation increases, and

     - anticipated health care costs.

     Any change in these assumptions can change significantly the liability and
associated expenses recognized in any given year.

     The following table provides an estimate of our pension expense, OPEB
expense, and cash contributions for the next three years:

<Table>
<Caption>
                                                         PENSION EXPENSE    OPEB EXPENSE    CONTRIBUTIONS
                                                         ---------------    ------------    -------------
                                                                           IN MILLIONS
<S>                                                      <C>                <C>             <C>
2004.................................................          $21              $66             $ 98
2005.................................................           44               63              123
2006.................................................           67               61              131
</Table>

     Actual future pension expense and contributions will depend on future
investment performance, changes in future discount rates, and various other
factors related to the populations participating in the Pension Plan.

     Lowering the expected long-term rate of return on the Pension Plan assets
by 0.25 percent (from 8.75 percent to 8.50 percent) would increase estimated
pension expense for 2004 by $2 million. Lowering the discount rate by 0.25
percent (from 6.25 percent to 6.00 percent) would increase estimated pension
expense for 2004 by $4 million.

     In August 2003, we made a planned contribution of $210 million to the
Pension Plan. In December 2003, we made an additional contribution of $350
million. As a result of these contributions, we reversed the additional minimum
liability and the resulting decrease in equity that we charged in 2002. As of
December 31, 2003, we have a prepaid pension asset of $408 million recorded on
our consolidated balance sheets.

     Market-Related Valuation: We determine pension expense based on a
market-related valuation of assets, which reduces year-to-year volatility. The
market-related valuation recognizes investment gains or losses over a five-year
period from the year in which the gains or losses occur. Investment gains or
losses for this purpose are the difference between the expected return
calculated using the market-related value of assets and the actual return based
on the market value of assets. Since the market-related value of assets
recognizes gains or losses over a five-year period, the future value of assets
will be impacted as previously deferred gains or losses are recorded.

     Due to the unfavorable performance of the equity markets in the past few
years, as of December 31, 2003, we had cumulative losses of approximately $239
million that remain to be recognized in the calculation of the market-related
value of assets. These unrecognized net actuarial losses may result in increases
in future pension expense in accordance with SFAS No. 87.

     The Medicare Prescription Drug, Improvement and Modernization Act of 2003
was signed into law in December 2003. This Act establishes a prescription drug
benefit under Medicare (Medicare Part D), and a federal subsidy to sponsors of
retiree health care benefit plans that provide a benefit that is actuarially
equivalent to Medicare Part D. We are deferring recognizing the effects of the
Act in our 2003 financial statements, as permitted by FASB Staff Position No.
106-1. When accounting guidance is issued, our retiree health benefit obligation
may be adjusted.

     For additional details on postretirement benefits, see Note 10, Retirement
Benefits.

ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

     SFAS No. 143, Accounting for Asset Retirement Obligations, became effective
January 2003. It requires companies to record the fair value of the cost to
remove assets at the end of their useful lives, if there is a legal obligation
to remove them. We have legal obligations to remove some of our assets,
including our nuclear plants, at the end of their useful lives. As required by
SFAS No. 71, we accounted for the implementation of this standard by recording a
regulatory asset and liability for regulated entities instead of a cumulative
effect of a change in

                                      CMS-19
<PAGE>

accounting principle. Accretion of $1 million related to the Big Rock and
Palisades' profit component included in the estimated cost of removal was
expensed for 2003.

     The fair value of ARO liabilities has been calculated using an expected
present value technique. This technique reflects assumptions, such as costs,
inflation, and profit margin that third parties would consider to assume the
settlement of the obligation. Fair value, to the extent possible, should include
a market risk premium for unforeseeable circumstances. No market risk premium
was included in our ARO fair value estimate since a reasonable estimate could
not be made.

     If a reasonable estimate of fair value cannot be made in the period the
asset retirement obligation is incurred, such as assets with indeterminate
lives, the liability is to be recognized when a reasonable estimate of fair
value can be made. Generally, transmission and distribution assets have
indeterminate lives. Retirement cash flows cannot be determined. There is a low
probability of a retirement date, so no liability has been recorded for these
assets. No liability has been recorded for assets that have insignificant
cumulative disposal costs, such as substation batteries. The measurement of the
ARO liabilities for Palisades and Big Rock are based on decommissioning studies
that are based largely on third-party cost estimates.

     Reclassification of Non-Legal Cost of Removal: Beginning in December 2003,
the SEC requires the quantification and reclassification of the estimated cost
of removal obligations arising from other than legal obligations. These
obligations have been accrued through depreciation charges. We estimate that we
had $983 million in 2003 and $907 million in 2002 of previously accrued asset
removal costs related to our regulated operations, for other than legal
obligations. These obligations, which were previously classified as a component
of accumulated depreciation, were reclassified as regulatory liabilities in the
accompanying consolidated balance sheets.

     For additional details on ARO, see Note 16, Asset Retirement Obligations.

ACCOUNTING FOR NUCLEAR DECOMMISSIONING COSTS

     The MPSC and FERC regulate the recovery of costs to decommission our Big
Rock and Palisades nuclear plants. They require, and we have established,
external trust funds to finance the decommissioning of both plants. Our electric
customers pay a surcharge to fund these trusts. We record the trust fund
balances as a non-current asset on our balance sheet.

     Our decommissioning cost estimates for the Big Rock and Palisades plants
assume:

     - each plant site will be restored to conform to the adjacent landscape,

     - all contaminated equipment and material will be removed and disposed of
       in a licensed burial facility, and

     - the site will be released for unrestricted use.

     Independent contractors with expertise in decommissioning have helped us
develop decommissioning cost estimates. Various inflation rates for labor,
non-labor, and contaminated equipment disposal costs are used to escalate these
cost estimates to the future decommissioning cost. A portion of future
decommissioning cost will result from the failure of the DOE to remove fuel from
the sites, as required by the Nuclear Waste Policy Act of 1982. Spent fuel
storage costs would not be incurred if the DOE took possession of the spent
fuel. There is litigation underway to recover these costs.

     The decommissioning trust funds include equities and fixed income
investments. Equities will be converted to fixed income investments during
decommissioning, and fixed income investments are converted to cash as needed.
In December 2000, funding of the Big Rock trust fund was stopped since it was
considered fully funded, subject to further MPSC review. The funds provided by
the trusts, additional customer surcharges, and potential

                                      CMS-20
<PAGE>

funds from DOE litigation are all required to cover fully the decommissioning
costs, and we currently expect that to happen. The costs of decommissioning
these sites and the adequacy of the trust funds could be affected by:

     - variances from expected trust earnings,

     - a lower recovery of costs from the DOE and lower rate recovery from
       customers, and

     - changes in decommissioning technology, regulations, estimates or
       assumptions.

     For additional details on nuclear decommissioning, see Note 1, Corporate
Structure and Accounting Policies, "Nuclear Plant Decommissioning."

CAPITAL RESOURCES AND LIQUIDITY

     Our liquidity and capital requirements are a function of our results of
operations, capital expenditures, contractual obligations, debt maturities,
working capital needs, and collateral requirements. During the summer months, we
purchase natural gas and store it for resale primarily during the winter heating
season. Recently, the market price for natural gas has increased. Although our
natural gas purchases are recoverable from our customers, the amount paid for
natural gas stored as inventory could require additional liquidity due to the
timing of the cost recoveries. In addition, a few of our commodity suppliers
have requested advance payment or other forms of assurances, including margin
calls, in connection with maintenance of ongoing deliveries of gas and
electricity.

     At the beginning of 2003, we had debt maturities and capital expenditures
that required substantial amounts of cash. We were also subject to liquidity
demands of various commercial commitments, such as guarantees, indemnities, and
letters of credit. As a result, in 2003, we executed a financial improvement
plan to address these critical liquidity issues.

     In January 2003, we suspended payment of the common stock dividend and
increased our efforts to reduce operating expenses and capital expenditures. We
continued to sell non-strategic assets and we used the proceeds to reduce debt.
Gross proceeds from asset sales were $939 million in 2003. Finally, we explored
financing opportunities, such as refinancing debt, issuing new debt and
preferred equity, and negotiating private placement debt. Together, all of these
steps enabled us to meet our liquidity demands.

     In 2004, we will continue to monitor our operating expenses and capital
expenditures, evaluate market conditions for financing opportunities, and sell
assets that are not consistent with our strategy. We do not anticipate paying
dividends in the foreseeable future. The Board of Directors may reconsider or
revise this policy from time to time based upon certain conditions, including
our results of operations, financial condition, and capital requirements, as
well as other relevant factors. We believe our current level of cash and
borrowing capacity, along with anticipated cash flows from operating and
investing activities, will be sufficient to meet our liquidity needs through
2005.

CASH POSITION, INVESTING, AND FINANCING

     Consolidated cash needs are met by our operating, investing and financing
activities. At December 31, 2003, $733 million consolidated cash was on hand
which includes $201 million of restricted cash. For additional details on
restricted cash, see Note 1, Corporate Structure and Accounting Policies.

     Our primary ongoing source of cash is dividends and other distributions
from our subsidiaries, including proceeds from asset sales. In 2003, Consumers
paid $218 million in common stock dividends and Enterprises paid $536 million in
common stock dividends and other distributions to us. Enterprises' other
distributions include a transfer of 1,967,640 shares of CMS Energy Common Stock,
valued at $16 million, in the form of a stock dividend. There was no impact on
shares outstanding or the consolidated income statement from this distribution.

                                      CMS-21
<PAGE>

SELECTED MEASURES OF LIQUIDITY AND CAPITAL RESOURCES:

<Table>
<Caption>
                                                                 2003
                                                                 ----
<S>                                                             <C>
Working capital (in millions)...............................    $  844
Current ratio...............................................    1.51:1
</Table>

     Working capital in 2003 was primarily driven by the following:

     - cash proceeds from long-term debt issuance -- $2.080 billion,

     - cash proceeds from asset sales -- $939 million, and

     - cash proceeds from preferred stock issuance/sale -- $272 million.

     partially offset by:

     - cash used for long-term debt retirements, excluding current
       portion -- $1.531 billion,

     - cash used for pension contributions -- $560 million, and

     - cash used for purchase of property, plant and equipment -- $535 million.

SUMMARY OF CASH FLOWS:

<Table>
<Caption>
                                                                         RESTATED    RESTATED
                                                                2003       2002        2001
                                                                ----     --------    --------
                                                                         IN MILLIONS
<S>                                                             <C>      <C>         <C>
Net cash provided by (used in):
  Operating activities......................................    $(251)   $   614     $   372
  Investing activities......................................      203        829      (1,349)
  Financing activities......................................      230     (1,223)        967
Effect of exchange rates on cash............................       (1)         8         (10)
                                                                -----    -------     -------
Net increase (decrease) in cash and temporary cash
  investments...............................................    $ 181    $   228     $   (20)
                                                                =====    =======     =======
</Table>

OPERATING ACTIVITIES:

     2003: Net cash used in operating activities was $251 million in 2003
compared to net cash provided by operating activities of $614 million in 2002.
The change of $865 million was primarily due to an increase in pension plan
contributions of $496 million, an increase in inventories of $428 million due to
higher gas purchases at higher prices by our gas utility operations, and a
decrease in accounts payable and accrued expenses of $232 million due primarily
to the sale of CMS MST's wholesale gas and power contracts. This change was
partially offset by a decrease in accounts receivable and accrued revenue of
$101 million due primarily to the sale of CMS MST's wholesale gas and power
contracts.

     2002: Net cash provided by operating activities increased $242 million in
2002 primarily due to a decrease in inventories of $479 million due to a lower
volume of gas purchased at lower prices, combined with increased sales volumes
at higher prices at our gas utility. This increase was partially offset by a
smaller decrease in accounts receivable and accrued revenues of $238 million.

INVESTING ACTIVITIES:

     2003: Net cash provided by investing activities decreased $626 million in
2003 due primarily to a decrease in asset sale proceeds of $720 million,
primarily from the sale of Equatorial Guinea, Powder River, and CMS Oil and Gas
in 2002, offset by a decrease in 2003 versus 2002 capital expenditures of $212
million as a result of our strategic plan to reduce capital expenditures.

     2002: Net cash provided by investing activities increased $2.178 billion in
2002 due primarily to a decrease in capital expenditures of $492 million as a
result of our strategic plan to reduce capital expenditures, and an

                                      CMS-22
<PAGE>

increase in asset sale proceeds of $1.525 billion, resulting primarily from the
sales of Equatorial Guinea, Powder River, and CMS Oil and Gas.

FINANCING ACTIVITIES:

     2003: Net cash provided by financing activities increased $1.453 billion in
2003 due primarily to an increase in net proceeds from borrowings of $988
million and net proceeds from preferred securities issuances/ sale of $272
million. For additional details on long-term debt activity, see Note 5,
Financings and Capitalization.

     2002: Net cash used in financing activities increased $2.190 billion in
2002 due primarily to a decrease in net proceeds from borrowings of $1.733
billion and a decrease in net proceeds from common stock and preferred
securities of $454 million.

OBLIGATIONS AND COMMITMENTS

     The following information on our contractual obligations, off-balance sheet
arrangements, and commercial commitments is provided to collect information in a
single location so that a picture of liquidity and capital resources is readily
available. For additional information on our obligations and commitments see
Note 5, Financings and Capitalization.

<Table>
<Caption>
                                                                   PAYMENTS DUE
                                         ----------------------------------------------------------------
DECEMBER 31                               TOTAL      2004      2005      2006     2007    2008    BEYOND
- -----------                               -----      ----      ----      ----     ----    ----    ------
                                                                   IN MILLIONS
<S>                                      <C>        <C>       <C>       <C>       <C>     <C>     <C>
CONTRACTUAL OBLIGATIONS
On-balance sheet:
  Long-term debt.......................  $ 6,529    $  509    $  696    $  490    $516    $987    $ 3,331
  Long-term debt -- related parties....      684        --        --        --      --      --        684
  Capital lease obligations............       68        10        11        10      10       8         19
                                         -------    ------    ------    ------    ----    ----    -------
Total on-balance sheet.................  $ 7,281    $  519    $  707    $  500    $526    $995    $ 4,034
                                         -------    ------    ------    ------    ----    ----    -------
Off-balance sheet:
  Non-recourse debt....................  $ 2,909    $  233    $  123    $  170    $ 85    $101    $ 2,197
  Capital lease obligation -- MCV......      144        16         9         8       8       8         95
  Operating leases.....................       78        12        10        10       9       7         30
  Sale of accounts receivable..........      297       297        --        --      --      --         --
  Unconditional purchase
     obligations(a)....................   16,370     1,895     1,258       892     711     670     10,944
                                         -------    ------    ------    ------    ----    ----    -------
Total off-balance sheet................  $19,798    $2,453    $1,400    $1,080    $813    $786    $13,266
                                         =======    ======    ======    ======    ====    ====    =======
</Table>

- -------------------------
(a)  This excludes purchase obligations that Consumers has with Genesee,
     Grayling, and Filer City generating plants because these entities are
     consolidated under FASB Interpretation No. 46. Purchase obligations related
     to the MCV Facility PPA assume that the regulatory out provision is
     exercised in 2007. For additional details, see Note 4, Uncertainties,
     "Other Consumers' Electric Utility Uncertainties -- The Midland
     Cogeneration Venture."

     REGULATORY AUTHORIZATION FOR FINANCINGS: Consumers must obtain FERC
authority to issue short and long-term securities. For additional details of
Consumers' existing authority, see Note 5, Financings and Capitalization.

     LONG-TERM DEBT: Details on long-term debt and preferred securities
issuances, retirements, and outstanding balances are presented in Note 5,
Financings and Capitalization.

     SHORT-TERM FINANCINGS: CMS Energy has $190 million available and Consumers
has $390 million available under revolving credit facilities. At December 31,
2003, the lines are available for general corporate purposes, working capital,
and letters of credit. Additional details are in Note 5, Financings and
Capitalization.

     CAPITAL LEASE OBLIGATIONS: Our capital leases are comprised mainly of
leased service vehicles and office furniture. The full obligation of our leases
could become due in the event of lease payment default.
                                      CMS-23
<PAGE>

     OFF-BALANCE SHEET ARRANGEMENTS: We use off-balance sheet arrangements in
the normal course of business. Our off-balance sheet arrangements include:

     - operating leases,

     - non-recourse debt,

     - sale of accounts receivable, and

     - unconditional purchase obligations.

     Operating Leases: Our leases of railroad cars, certain vehicles, and
miscellaneous office equipment are accounted for as operating leases.

     Non-recourse Debt: Our share of unconsolidated debt associated with
partnerships and joint ventures in which we have a minority interest is
non-recourse.

     Sale of Accounts Receivable: Under a revolving accounts receivable sales
program, we currently sell up to $325 million of certain accounts receivable.
For additional details, see Note 5, Financings and Capitalization.

     Unconditional Purchase Obligations: Long-term contracts for purchase of
commodities and services are unconditional purchase obligations. These
obligations represent operating contracts used to assure adequate supply with
generating facilities that meet PURPA requirements. The commodities and services
include:

     - natural gas,

     - electricity,

     - coal purchase contracts and their associated cost of transportation, and

     - electric transmission.

     Included in unconditional purchase obligations are long-term power purchase
agreements with various generating plants including the MCV Facility. These
contracts require us to make monthly capacity payments based on the plants'
availability or deliverability. These payments will approximate $43 million per
month during 2004, including $34 million related to the MCV Facility. If a plant
is not available to deliver electricity, we are not obligated to make the
capacity payments to the plant for that period of time. For additional details
on power supply costs, see "Electric Utility Results of Operations" within this
MD&A and Note 4, Uncertainties, "Consumers' Electric Utility Rate
Matters -- Power Supply Costs," and "Other Consumers' Electric Utility
Uncertainties -- The Midland Cogeneration Venture."

     COMMERCIAL COMMITMENTS: Our commercial commitments include indemnities and
letters of credit. Indemnities are agreements to reimburse other companies, such
as an insurance company, if those companies have to complete our contractual
performance in a third party contract. Banks, on our behalf, issue letters of
credit guaranteeing payment to a third party. Letters of credit substitute the
bank's credit for ours and reduce credit risk for the third party beneficiary.
We monitor and approve these obligations and believe it is unlikely that we
would be required to perform or otherwise incur any material losses associated
with these guarantees.

<Table>
<Caption>
                                                                     COMMITMENT EXPIRATION
                                                    -------------------------------------------------------
DECEMBER 31                                         TOTAL    2004    2005    2006    2007    2008    BEYOND
- -----------                                         -----    ----    ----    ----    ----    ----    ------
                                                                          IN MILLIONS
<S>                                                 <C>      <C>     <C>     <C>     <C>     <C>     <C>
COMMERCIAL COMMITMENTS
Off-balance sheet:
  Guarantees......................................  $239     $ 20    $36      $4     $--     $--      $179
  Indemnities.....................................    28        8     --      --      --      --        20
  Letters of Credit(a)............................   254      215     10       5       5       5        14
                                                    ----     ----    ---      --     ---     ---      ----
Total.............................................  $521     $243    $46      $9     $ 5     $ 5      $213
                                                    ====     ====    ===      ==     ===     ===      ====
</Table>

- -------------------------
(a)  At December 31, 2003, we had $175 million of cash collateralized letters of
     credit and the cash used to collateralize the letters of credit is included
     in Restricted Cash on the Consolidated Balance Sheets.

                                      CMS-24
<PAGE>

     DIVIDEND RESTRICTIONS: Under the provisions of its articles of
incorporation, at December 31, 2003, Consumers had $373 million of unrestricted
retained earnings available to pay common dividends. However, covenants in
Consumers debt facilities cap common stock dividend payments at $300 million in
a calendar year. Through December 31, 2003, we received the following common
stock dividend payments from Consumers:

<Table>
<Caption>
                                                                IN MILLIONS
<S>                                                             <C>
January.....................................................       $ 78
May.........................................................         31
June........................................................         53
November....................................................         56
                                                                   ----
Total common stock dividends paid to CMS Energy.............       $218
                                                                   ====
</Table>

     As of December 18, 2003, Consumers is also under an annual dividend cap of
$190 million imposed by the MPSC during the current interim gas rate relief
period. Because all of the $218 million of common stock dividends to CMS energy
were paid prior to December 18, 2003, Consumers was not out of compliance with
this new restriction for 2003. In February 2004, Consumers paid a $78 million
common stock dividend.

     For additional details on the potential cap on common dividends payable
included in the MPSC Securitization order see Note 4, Uncertainties, "Consumers'
Electric Utility Rate Matters -- Securitization." Also, for additional details
on the cap on common dividends payable during the current interim gas rate
relief period, see Note 4, Uncertainties, "Consumers' Gas Utility Rate
Matters -- 2003 Gas Rate Case."

CAPITAL EXPENDITURES

     We estimate the following capital expenditures, including new lease
commitments, by expenditure type and by business segments during 2004 through
2006. We prepare these estimates for planning purposes and may revise them.

<Table>
<Caption>
YEARS ENDING DECEMBER 31                                      2004      2005      2006
- ------------------------                                      ----      ----      ----
                                                                    IN MILLIONS
<S>                                                           <C>       <C>       <C>
Electric utility operations(a)(b)...........................  $395      $370      $570
Gas utility operations(a)...................................   155       185       170
Enterprises.................................................    85         5         5
                                                              ----      ----      ----
                                                              $635      $560      $745
                                                              ====      ====      ====
</Table>

- -------------------------
(a)  These amounts include an attributed portion of Consumers' anticipated
     capital expenditures for plant and equipment common to both the electric
     and gas utility businesses.

(b)  These amounts include estimates for capital expenditures that may be
     required by recent revisions to the Clean Air Act's national air quality
     standards.

OUTLOOK

CORPORATE OUTLOOK

     During 2003, we continued to implement a back-to-basics strategy that
focuses on growing a healthy utility and divesting under-performing or other
non-strategic assets. The strategy is designed to generate cash to pay down
debt, reduce business risk, and provide for more predictable future operating
revenues and earnings.

     Consistent with our back-to-basics strategy, we are pursuing actively the
sale of non-strategic and under-performing assets and have received $3.6 billion
of cash from asset sales, securitization proceeds and proceeds from LNG
monetization since 2001. For additional details, see Note 2, Discontinued
Operations, Other Asset Sales, Impairments, and Restructuring. Some of these
assets are recorded at estimates of their current fair value. Upon the sale of
these assets, the proceeds realized may be different from the recorded values if
market conditions have changed. Even though these assets have been identified
for sale, we cannot predict when, nor

                                      CMS-25
<PAGE>

make any assurance that, these sales will occur. We anticipate that the sales,
if any, will result in additional cash proceeds that will be used to retire
existing debt.

     As we continue to implement our back-to-basics strategy and further reduce
our ownership of non-utility assets, the percentage of our future earnings
relating to Jorf Lasfar and the MCV Partnership may increase and our total
future earnings may depend more significantly upon the performance of Jorf
Lasfar and the MCV Partnership. For the year ended December 31, 2003, earnings
from our equity method investment in Jorf Lasfar were $61 million and earnings
from our equity method investment in the MCV Partnership were $29 million.

ELECTRIC UTILITY BUSINESS OUTLOOK

     GROWTH: Over the next five years, we expect electric deliveries to grow at
an average rate of approximately two percent per year based primarily on a
steadily growing customer base and economy. This growth rate includes both full
service sales and delivery service to customers who choose to buy generation
service from an alternative electric supplier, but excludes transactions with
other wholesale market participants and other electric utilities. This growth
rate reflects a long-range expected trend of growth. Growth from year to year
may vary from this trend due to customer response to abnormal weather conditions
and changes in economic conditions, including utilization and expansion of
manufacturing facilities.

     For 2003, our electric deliveries, including delivery to customers who
chose to buy generation service from an alternative electric supplier, declined
1.4 percent from 2002. This was due to a combination of warmer than normal
summer weather in 2002, cooler than normal summer weather in 2003, and a decline
in manufacturing activity during 2003. In 2004, we project electric deliveries
to grow more than three percent. This short-term outlook for 2004 assumes higher
levels of manufacturing activity than in 2003 and normal weather conditions
throughout the year.

ELECTRIC UTILITY BUSINESS UNCERTAINTIES

     Several electric business trends or uncertainties may affect our financial
results and condition. These trends or uncertainties have, or we reasonably
expect could have, a material impact on revenues or income from continuing
electric operations. Such trends and uncertainties include:

     Environmental

     - increasing capital expenditures and operating expenses for Clean Air Act
       compliance, and

     - potential environmental liabilities arising from various environmental
       laws and regulations, including potential liability or expenses relating
       to the Michigan Natural Resources and Environmental Protection Acts and
       Superfund.

     Restructuring

     - response of the MPSC and Michigan legislature to electric industry
       restructuring issues,

     - ability to meet peak electric demand requirements at a reasonable cost,
       without market disruption,

     - ability to recover any of our net Stranded Costs under the regulatory
       policies being followed by the MPSC,

     - recovery of electric restructuring implementation costs,

     - effects of lost electric supply load to alternative electric suppliers,
       and

     - status as an electric transmission customer instead of an electric
       transmission owner-operator.

     Regulatory

     - effects of conclusions about the causes of the August 14, 2003 blackout,
       including exposure to liability, increased regulatory requirements, and
       new legislation,

     - successful implementation of initiatives to reduce exposure to purchased
       power price increases,

                                      CMS-26
<PAGE>

     - effects of potential performance standards payments, and

     - responses from regulators regarding the storage and ultimate disposal of
       spent nuclear fuel.

     Other

     - effects of commodity fuel prices such as natural gas and coal,

     - pending litigation filed by PURPA qualifying facilities,

     - potential rising pension costs due to market losses and lump sum
       payments. For additional details, see "Accounting for Pension and OPEB"
       section within this MD&A.

     - pending litigation and government investigations.

     For additional details about these trends or uncertainties, see Note 4,
Uncertainties.

     ELECTRIC ENVIRONMENTAL ESTIMATES: Our operations are subject to
environmental laws and regulations. Costs to operate our facilities in
compliance with these laws and regulations generally have been recovered in
customer rates.

     Compliance with the federal Clean Air Act and resulting regulations has
been, and will continue to be, a significant focus for us. The Title I
provisions of the Clean Air Act require significant reductions in nitrogen oxide
emissions. To comply with the regulations, we expect to incur capital
expenditures totaling $771 million. The key assumptions included in the capital
expenditure estimate include:

     - construction commodity prices, especially construction material and
       labor,

     - project completion schedules,

     - cost escalation factor used to estimate future years' costs, and

     - allowance for funds used during construction (AFUDC) rate.

     Our current capital cost estimates include an escalation rate of 2.6
percent and an AFUDC capitalization rate of 8.1 percent. As of December 31,
2003, we have incurred $446 million in capital expenditures to comply with these
regulations and anticipate that the remaining $325 million of capital
expenditures will be made between 2004 and 2009. These expenditures include
installing catalytic reduction technology on coal-fired electric plants. In
addition to modifying the coal-fired electric plants, we expect to purchase
nitrogen oxide emissions credits for years 2004 through 2008. The cost of these
credits is estimated to average $8 million per year and is accounted for as
inventory.

     The EPA has alleged that some utilities have incorrectly classified plant
modifications as "routine maintenance" rather than seek modification permits
from the EPA. We have received and responded to information requests from the
EPA on this subject. We believe that we have properly interpreted the
requirements of "routine maintenance." If our interpretation is found to be
incorrect, we may be required to install additional pollution controls at some
or all of our coal-fired electric plants.

     Future clean air regulations requiring emission controls for sulfur
dioxide, nitrogen oxides, mercury, and nickel may require additional capital
expenditures. Total expenditures will depend upon the final makeup of the new
regulations.

     The EPA continues to make new rules. The EPA has proposed changes to the
rules that govern generating plant cooling water intake systems. The proposed
rules are scheduled to be final in the first quarter of 2004. We are studying
the proposed rules to determine the most cost-effective solutions for
compliance.

     For additional details on electric environmental matters, see Note 4,
Uncertainties, "Consumers' Electric Utility Contingencies -- Electric
Environmental Matters."

     COMPETITION AND REGULATORY RESTRUCTURING: Michigan's Customer Choice Act
and other developments will continue to result in increased competition in the
electric business. Generally, increased competition reduces profitability and
threatens market share for generation services. As of January 1, 2002, the
Customer Choice Act

                                      CMS-27
<PAGE>

allowed all of our electric customers to buy electric generation service from us
or from an alternative electric supplier. As a result, alternative electric
suppliers for generation services have entered our market. As of March 2004,
alternative electric suppliers are providing 735 MW of generation supply to ROA
customers. This amount represents nine percent of our distribution load and an
increase of 42 percent compared to March 2003. We anticipate this upward trend
to continue and expect over 1,000 MW of generation supply to ROA customers in
2004. We cannot predict the total amount of electric supply load that may be
lost to competitor suppliers.

     In February 2004, the MPSC issued an order on Detroit Edison's request for
rate relief for costs associated with customers leaving under electric customer
choice. The MPSC order allows Detroit Edison to charge a transition surcharge of
approximately 0.4 cent per kWh to ROA customers and eliminates securitization
offsets of 0.7 cents per kWh for primary service customers and 0.9 cents per kWh
for secondary service customers. We are seeking similar recovery of Stranded
Costs due to ROA customers leaving our system and are encouraged by this ruling.
This ruling may change significantly the anticipated number of customers who
choose ROA.

     Securitization: In March 2003, we filed an application with the MPSC
seeking approval to issue Securitization bonds. In June 2003, the MPSC issued a
financing order authorizing the issuance of Securitization bonds in the amount
of approximately $554 million. In July 2003, we filed for rehearing and
clarification on a number of features in the financing order.

     In December 2003, the MPSC issued its order on rehearing, which rejected
our requests for clarification and modification to the dividend payment
restriction, failed to rule directly on the accounting clarifications requested,
and remanded the proceeding to the ALJ for additional proceedings to address
rate design. We filed testimony regarding the remanded proceeding in February
2004. The financing order will become effective after acceptance by us and
resolution of any appeals.

     Stranded Costs: To the extent we experience net Stranded Costs as
determined by the MPSC, the Customer Choice Act allows us to recover such costs
by collecting a transition surcharge from customers who switch to an alternative
electric supplier. We cannot predict whether the Stranded Cost recovery method
adopted by the MPSC will be applied in a manner that will fully offset any
associated margin loss.

     In 2002 and 2001, the MPSC issued orders finding that we experienced zero
net Stranded Costs from 1999 to 2001. The MPSC also declined to resolve numerous
issues regarding the net Stranded Cost methodology in a way that would allow a
reliable prediction of the level of Stranded Costs for future years. We
currently are in the process of appealing these orders with the Michigan Court
of Appeals and the Michigan Supreme Court.

     In March 2003, we filed an application with the MPSC seeking approval of
net Stranded Costs incurred in 2002, and for approval of a net Stranded Cost
recovery charge. Our net Stranded Costs incurred in 2002 are estimated to be $38
million with the issuance of Securitization bonds that include Clean Air Act
investments, or $85 million without the issuance of Securitization bonds that
include Clean Air Act investments.

     Once the MPSC issues a final financing order on Securitization, we will
know the amount of our request for net Stranded Cost recovery for 2002. We
cannot predict how the MPSC will rule on our request for the recoverability of
Stranded Costs. Therefore, we have not recorded regulatory assets to recognize
the future recovery of such costs.

     Implementation Costs: Since 1997, we have incurred significant costs to
implement the Customer Choice Act. The Customer Choice Act allows electric
utilities to recover the Act's implementation costs. The MPSC has reviewed and
allowed certain of the implementation costs incurred through 2001, but has not
authorized recovery. Depending upon the outcome of the remanded Securitization
proceeding, a significant portion of the implementation costs could be recovered
through the Securitization process.

     Our application for $2 million of implementation costs in 2002 is currently
pending approval by the MPSC. We deferred these costs as a regulatory asset. In
addition to the implementation costs filed with the MPSC, as of December 31,
2003, we recorded an additional $2 million for total implementation costs of $91
million. Included in total implementation costs is $19 million associated with
the cost of money. We believe the implementation costs and the associated cost
of money are fully recoverable in accordance with the Customer Choice Act. Cash
recovery from customers is expected to begin after the rate cap period has
expired. For additional information on

                                      CMS-28
<PAGE>

rate caps, see "Rate Caps" within this section. Once a final financing order by
the MPSC on Securitization is issued, the recoverability of the implementation
costs requested will be known. We cannot predict the amounts the MPSC will
approve as allowable costs.

     Also, we are pursuing authorization at the FERC for MISO to reimburse us
for approximately $8 million in certain electric utility restructuring
implementation costs related to our former participation in the development of
the Alliance RTO, a portion of which has been expensed. In May 2003, the FERC
issued an order denying MISO's request for authorization to reimburse us. We
appealed the FERC ruling at the United States Court of Appeals for the District
of Columbia. In addition, we continue to pursue other potential means of
recovery with FERC. We cannot predict the outcome of the appeal process or the
ultimate amount, if any, the FERC will allow us to collect for implementation
costs.

     Rate Caps: The Customer Choice Act imposes certain limitations on electric
rates that could result in us being unable to collect our full cost of
conducting business from electric customers. Such limitations include:

     - a rate freeze effective through December 31, 2003, and

     - rate caps effective through December 31, 2004 for small commercial and
       industrial customers, and through December 31, 2005 for residential
       customers.

     As a result, we may be unable to maintain our profit margins in our
electric utility business during the rate cap periods. In particular, if we
needed to purchase power supply from wholesale suppliers while retail rates are
capped, the rate restrictions may make it impossible for us to fully recover
purchased power and associated transmission costs.

     PSCR: Prior to 1998, the PSCR process provided for the reconciliation of
actual power supply costs with power supply revenues. This process assured
recovery of all reasonable and prudent power supply costs actually incurred by
us, including the actual cost for fuel, and purchased and interchange power. In
1998, as part of the electric restructuring efforts, the MPSC suspended the PSCR
process, effective through 2001. As a result of the rate freeze imposed by the
Customer Choice Act, frozen rates remained in effect until December 31, 2003,
and the PSCR process remained suspended. Therefore, changes in power supply
costs due to fluctuating electricity prices were not reflected in rates charged
to our customers during the rate freeze period.

     As a result of meeting the transmission capability expansion requirements
and the market power test, we have met the requirements under the Customer
Choice Act to return to the PSCR process. For additional details see Note 4,
Uncertainties, "Consumers' Electric Utility Restructuring Matters -- Electric
Restructuring Legislation."

     Accordingly, in September 2003, we submitted a PSCR filing to the MPSC that
reinstates the PSCR process for customers whose rates are no longer frozen or
capped as of January 1, 2004. The proposed PSCR charge allows us to recover a
portion of our increased power supply costs from large commercial and industrial
customers, and subject to the overall rate cap, from other customers. We
estimate the recovery of increased power supply costs from large commercial and
industrial customers to be approximately $30 million in 2004. As allowed under
current regulation, we self-implemented the proposed PSCR charge on January 1,
2004. The revenues received from the PSCR charge are also subject to subsequent
reconciliation at the end of the year after actual costs have been reviewed for
reasonableness and prudence. We cannot predict the outcome of this filing.

     Decommissioning Surcharge: When our electric retail rates were frozen in
June 2000, a nuclear decommissioning surcharge related to the decommissioning of
Big Rock was included. We continued to collect the equivalent to the Big Rock
nuclear decommissioning surcharge consistent with the Customer Choice Act rate
freeze in effect through December 31, 2003. Collection of the surcharge stopped,
effective January 1, 2004, when the electric rate freeze expired. As a result,
our electric revenues will be reduced by $35 million in 2004. However, we expect
a portion of this reduction to be offset with increased electric revenues from
returning to the PSCR process.

     Industrial Contracts: We entered into multi-year electric supply contracts
with certain large industrial customers. The contracts provide electricity at
specially negotiated prices, usually at a discount from tariff prices. The MPSC
approved these special contracts totaling approximately 685 MW of load. Unless
terminated or
                                      CMS-29
<PAGE>

restructured, the majority of these contracts are in effect through 2005. As of
December 31, 2003, contracts for 301 MW of load have terminated. Of the
contracts that have terminated, contracts for 64 MW have gone to an alternative
electric supplier and contracts for 237 MW have returned to bundled tariff
rates. In January 2004, new special contracts for 91 MW, with the State of
Michigan and three universities, were approved by the MPSC. Other new special
contracts for 101 MW received interim approval from the MPSC and are awaiting
final approval. All new special contracts end by January 1, 2006. We cannot
predict the ultimate financial impact of changes related to these power supply
contracts, or whether additional special contracts will be necessary or
advisable.

     Transmission Sale: In May 2002, we sold our electric transmission system
for $290 million to MTH. We are currently in arbitration with MTH regarding
property tax items used in establishing the selling price of our electric
transmission system. We cannot predict whether the remaining open items will
impact materially the sale proceeds previously recognized.

     There are multiple proceedings and a proposed rulemaking pending before the
FERC regarding transmission pricing mechanisms and standard market design for
electric bulk power markets and transmission. The results of these proceedings
and proposed rulemakings could significantly affect:

     - transmission cost trends,

     - delivered power costs to us, and

     - delivered power costs to our retail electric customers.

     The financial impact of such proceedings, rulemaking and trends are not
currently quantifiable. In addition, we are evaluating whether or not there may
be impacts on electric reliability associated with the outcomes of these various
transmission related proceedings.

     August 14, 2003 Blackout: On August 14, 2003, the electric transmission
grid serving parts of the Midwest and the Northeast experienced a significant
disturbance that impacted electric service to millions of homes and businesses.
Approximately 100,000 of our 1.7 million electric customers were without power
for approximately 24 hours as a result of the disturbance. We incurred $1
million of immediate expense as a result of the blackout. We continue to
cooperate with investigations of the blackout by several federal and state
agencies. We cannot predict the outcome of these investigations.

     In November 2003, the MPSC released its report on the blackout. The MPSC
report found no evidence to suggest that the events in Michigan, or actions
taken by the Michigan utilities or transmission operators, were factors
contributing to the cause of the blackout. Also in November 2003, the United
States and Canadian power system outage taskforce preliminarily reported that
the primary cause of the blackout was due to transmission line contact with
trees in areas outside of Consumers' operating territory. In December 2003, the
MPSC issued an order requiring Consumers to report by April 1, 2004, the status
of lines used to serve our customers, including details of vegetation trimming
practices in calendar year 2003. Consumers intends to comply with the MPSC's
request.

     In February 2004, the Board of Trustees of NERC approved recommendations to
improve electric transmission reliability. The key recommendations are as
follows:

     - strengthen the NERC compliance enforcement program,

     - evaluate vegetation management procedures, and

     - improve technology to prevent or mitigate future blackouts.

     These recommendations require transmission operators, which Consumers is
not, to submit annual reports on vegetation management beginning March 2005 and
improve technology over various milestones throughout 2004. These
recommendations could result in increased transmission costs payable by
transmission customers in the future. The financial impacts of these
recommendations are not currently quantifiable.

                                      CMS-30
<PAGE>

     For additional details and material changes relating to the rate matters
and restructuring of the electric utility industry, see Note 4, Uncertainties,
"Consumers' Electric Utility Restructuring Matters," and "Consumers' Electric
Utility Rate Matters."

     PERFORMANCE STANDARDS: Electric distribution performance standards
developed by the MPSC became effective in February 2004. The performance
standards establish standards related to restoration after an outage, safety,
and customer relations. Financial incentives and penalties are contained within
the performance standards. An incentive is possible if all of the established
performance standards have been exceeded for a calendar year. However, the value
of such incentive cannot be determined at this point as the performance
standards do not contain an approved incentive mechanism. Financial penalties in
the form of customer credits are also possible. These customer credits are based
on duration and repetition of outages. We cannot predict the likely effects of
the financial incentive or penalties, if any, on us.

GAS UTILITY BUSINESS OUTLOOK

     GROWTH: Over the next five years, we expect gas deliveries to grow at an
average rate of less than one percent per year. Actual gas deliveries in future
periods may be affected by:

     - abnormal weather,

     - use by independent power producers,

     - competition in sales and delivery,

     - Michigan economic conditions,

     - gas consumption per customer, and

     - increases in gas commodity prices.

GAS UTILITY BUSINESS UNCERTAINTIES

     Several gas business trends or uncertainties may affect our financial
results and conditions. These trends or uncertainties could have a material
impact on net sales, revenues, or income from gas operations. The trends and
uncertainties include:

     Environmental

     - potential environmental cost at a number of sites, including sites
       formerly housing manufactured gas plant facilities.

     Regulatory

     - inadequate regulatory response to applications for requested rate
       increases,

     - potential adverse appliance service plan ruling or related legislation,
       and

     - response to increases in gas costs, including adverse regulatory response
       and reduced gas use by customers,

     Other

     - potential rising pension costs due to market losses and lump sum payments
       as discussed in the "Accounting for Pension and OPEB" section within this
       MD&A, and

     - pending litigation and government investigations.

     Consumers sells gas to retail customers under tariffs approved by the MPSC.
These tariffs measure the gas delivered to customers based on the volume (i.e.
mcf) of gas delivered. However, Consumers purchases gas for resale on a Btu
basis. The Btu content of the gas available for purchase has increased and may
result in customers using less gas for the same heating requirement. Consumers
fully recovers what it spends to purchase the gas through the approved GCR.
However, since the customer is using less gas on a volumetric basis, the revenue
from

                                      CMS-31
<PAGE>

the distribution charge (the non-gas cost portion of the customer bill) would be
reduced. This could affect adversely Consumers' earnings from it gas utility.
The amount of the earnings loss in future periods cannot be estimated at this
time.

     In September 2002, the FERC issued an order rejecting our filing to assess
certain rates for non-physical gas title tracking services we offered. In
December 2003, the FERC ruled that no refunds were at issue and we reversed a $4
million reserve related to this matter. In January 2004, three companies filed
with FERC for clarification or rehearing of FERC's December 2003 order. We
cannot predict the outcome of this filing.

     GAS ENVIRONMENTAL ESTIMATES: We expect to incur investigation and remedial
action costs at a number of sites, including 23 former manufactured gas plant
sites. We expect our remaining remedial action costs to be between $37 million
and $90 million. Any significant change in assumptions, such as remediation
techniques, nature and extent of contamination, and legal and regulatory
requirements, could change the remedial action costs for the sites. For
additional details, see Note 4, Uncertainties, "Consumers' Gas Utility
Contingencies -- Gas Environmental Matters."

     GAS COST RECOVERY: The MPSC is required by law to allow us to charge
customers for our actual cost of purchased natural gas. The GCR process is
designed to allow us to recover all of our gas costs; however, the MPSC reviews
these costs for prudency in an annual reconciliation proceeding. In January
2004, the MPSC staff and intervenors filed direct testimony in our 2002-2003 GCR
case proposing GCR recovery disallowances. In February 2004, the parties in the
case reached a tentative settlement agreement that would result in a GCR
disallowance of $11 million for the GCR period plus $1 million accrued interest
through February 2004. A reserve was recorded in December 2003. For additional
details, see Note 4, Uncertainties, "Consumers' Gas Utility Rate Matters -- Gas
Cost Recovery."

     2003 GAS RATE CASE: In March 2003, we filed an application with the MPSC
for a $156 million annual increase in our gas delivery and transportation rates
that included a 13.5 percent return on equity. In September 2003, we filed an
update to our gas rate case that lowered the requested revenue increase from
$156 million to $139 million and reduced the return on common equity from 13.5
percent to 12.75 percent. The MPSC authorized an interim gas rate increase of
$19 million annually. The interim increase is under bond and subject to refund
if the final rate relief is a lesser amount. The interim increase order includes
a $34 million reduction in book depreciation expense and related income taxes
effective only during the period that we receive the interim relief. The MPSC
order allowed us to increase our rates beginning December 19, 2003. As part of
the interim rate order, Consumers agreed to restrict its dividend payments to
CMS Energy, to a maximum of $190 million annually during the period that
Consumers receives the interim relief. On March 5, 2004, the ALJ issued a
Proposal for Decision recommending that the MPSC not rely upon the projected
test year data included in our filing and supported by the MPSC Staff and
further recommended that the application be dismissed. The MPSC is not bound by
these recommendations and will consider the issues anew after receipt of
exceptions and replies to the exception filed by the parties in response to the
Proposal for Decision.

     2001 GAS DEPRECIATION CASE: In December 2003, we filed an update to our gas
utility plant depreciation case originally filed in June 2001. This case is
independent of the 2003 gas rate case. The original filing was based on December
2000 plant balances and historical data. The December 2003 filing updates the
gas depreciation case to include December 2002 plant balances. The proposed
depreciation rates, if approved, will result in an annual increase of $12
million in depreciation expense.

OTHER CONSUMERS' OUTLOOK

     CODE OF CONDUCT: In December 2000, the MPSC issued a new code of conduct
that applies to utilities and alternative electric suppliers. The code of
conduct seeks to prevent financial support, information sharing, and
preferential treatment between a utility's regulated and non-regulated services.
The new code of conduct is broadly written and could affect our:

     - retail gas business energy related services,

     - retail electric business energy related services,

                                      CMS-32
<PAGE>

     - marketing of non-regulated services and equipment to Michigan customers,
       and

     - transfer pricing between our departments and affiliates.

     We appealed the MPSC orders related to the code of conduct and sought a
deferral of the orders until the appeal was complete. We also sought waivers
available under the code of conduct to continue utility activities that provide
approximately $50 million in annual electric and gas revenues. In October 2002,
the MPSC denied waivers for three programs including the appliance service plan
offered by us, which generated $34 million in gas revenue in 2003. In March
2004, the Michigan Court of Appeals upheld the MPSC's implementation of the code
of conduct without modification. We are in the process of filing an application
for leave to appeal with the Michigan Supreme Court, but we cannot predict
whether the Michigan Supreme Court will accept the case or the outcome of any
appeal.

     The Michigan House of Representatives is scheduled to review the proposed
legislation in 2004 that would allow us to remain in the appliance service
business. In the interim, the legislature passed a bill to extend to July 1,
2004, the deadline for exiting this business. The full impact of the new code of
conduct on our business will remain uncertain until the final judicial
resolution of our appeal or the Michigan legislature enacts clarifying
legislation.

OTHER CONSUMERS' MATTERS

     2001 GAS RATE CASE: In June 2001, we filed an application with the MPSC for
a distribution service rate increase. In November 2002, the MPSC approved a $56
million annual distribution service rate increase, with an 11.4 percent
authorized return on equity.

ENTERPRISES OUTLOOK

     INDEPENDENT POWER PRODUCTION: We plan to complete the restructuring of our
IPP business by narrowing the focus of our existing operations and commitments
to North America and the Middle East/North Africa. Accordingly, we will continue
to sell designated assets and investments that are under-performing or are not
synergistic with our other business units. We will continue to operate and
manage our remaining portfolio of assets in a manner that maximizes their
contribution to our earnings and that maintains our reputation for solid
performance in the construction and operation of power plants.

     CMS ERM: CMS ERM has continued to streamline its portfolio in order to
reduce its business risk and outstanding credit guarantees. Our future
activities will be centered around meeting contractual obligations, as well as
purchasing fuel for and marketing the merchant power from DIG, Michigan Power,
LLC, and other IPPs as their current power purchase agreements expire.

     CMS GAS TRANSMISSION: CMS Gas Transmission continues to narrow its scope of
existing operations. We plan to continue to sell international assets and
businesses. Future operations will be mainly in Michigan.

     UNCERTAINTIES: The results of operations and the financial position of our
diversified energy businesses may be affected by a number of trends or
uncertainties. Those that could have a material impact on our income, cash
flows, or balance sheet and credit improvement include:

     - our ability to sell or to improve the performance of assets and
       businesses in accordance with our financial plan,

     - changes in exchange rates or local economic conditions, particularly in
       Argentina, Venezuela, Brazil, and Australia,

     - changes in foreign laws or in governmental or regulatory policies that
       could reduce significantly the tariffs charged and revenues recognized by
       certain foreign subsidiaries, or increase expenses,

     - imposition of stamp taxes on South American contracts that could increase
       substantially project expenses,

     - impact of any future rate cases, or FERC actions, or orders on regulated
       businesses, and

     - impact of ratings downgrades on our liquidity, operating costs, and cost
       of capital.
                                      CMS-33
<PAGE>

     PENDING ASSET SALE: Affiliates of CMS Generation and CMS Gas Transmission
own a 49.6 percent interest in the Loy Yang Power Partnership ("LYPP"), which
owns the 2,000 MW Loy Yang coal-fired power project in Victoria, Australia. Due
to unfavorable power prices in the Australian market, the LYPP is not generating
cash flow sufficient to meet its debt-service obligations. LYPP has A$500
million of term bank debt that, pursuant to extensions from the lenders, is
scheduled to mature on March 31, 2004. The partners in LYPP (including
affiliates of CMS Generation, CMS Gas Transmission, NRG Energy Inc. and Horizon
Energy Australia Investments) have been exploring the possible sale of the
project (or control of the project) and a restructuring of the finances of LYPP.

     In July 2003, a conditional share sale agreement was executed by the LYPP
partners and partners of the Great Energy Alliance Corporation ("GEAC") to sell
the project to GEAC for A$3.5 billion ($2.8 billion in U.S. dollars), including
A$165 million for the project equity. The partners in GEAC are the Australian
Gas Light Company, the Tokyo Electric Power Company, and a group of financial
investors led by the Commonwealth Bank of Australia. A recent resolution of an
Australian Competition and Consumer Commission objection to the sale has led to
an extension of the exclusive arrangement with GEAC to allow enough time to
complete the sale. The conditions to completion of the sale to GEAC include
consents from LYPP's lenders to a restructuring of the debt and rulings on tax
and stamp duty obligations. The project equity portion of the sale price has
been reduced to A$155 million ($122 million in U.S. dollars) as a result of
working capital and other adjustments, and closing is targeted for March 2004.
The share sale agreement and subsequent extensions provide GEAC a period of
exclusivity while the conditions of the purchase are satisfied. The ultimate net
proceeds to CMS Energy for its equity share in LYPP may be subject to a
reduction based on the ultimate resolution of many of the factors described
above as conditions to completion of the sale, as well as closing adjustments
and transaction costs, and could likely range between $20 million and a nominal
amount.

     We cannot predict whether this sale to GEAC will be consummated or, if not,
whether any of the other initiatives will be successful, and it is possible that
CMS Generation may lose all or a substantial part of its remaining equity
investment in the LYPP. We previously have written off our equity investment in
the LYPP, and further write-offs would be limited to cumulative net foreign
currency translation losses. The amount of such cumulative net foreign currency
translation losses is approximately $110 million at December 31, 2003. Any such
write-off would flow through our income statement but would not result in a
reduction in shareholders' equity or cause us to be in noncompliance with our
financing agreements.

OTHER OUTLOOK

     LITIGATION AND REGULATORY INVESTIGATIONS: We are the subject of various
investigations as a result of round-trip trading transactions by CMS MST,
including investigations by the United States Department of Justice and the SEC.
Additionally, we are a party to various litigation including a shareholder
derivative lawsuit, a securities class action lawsuit, a class action lawsuit
alleging ERISA violations, several lawsuits regarding alleged false natural gas
price reporting, and a lawsuit surrounding the possible sale of CMS Pipeline
Assets. For additional details regarding these investigations and litigation,
see Note 4, Uncertainties.

OTHER MATTERS

CONTROL WEAKNESSES AT CMS MST

     In late 2001 and during 2002, we identified a number of deficiencies in CMS
MST's systems of internal accounting controls. The internal control deficiencies
related to, among other things, a lack of account reconciliations, unidentified
differences between subsidiary ledgers and the general ledger, and procedures
and processes surrounding our accounting for energy trading contracts, including
mark-to-market accounting.

     Senior management, the Audit Committee of the Board of Directors, the Board
of Directors, and the independent auditors were notified of these deficiencies
as they were discovered, and we commenced a plan of remediation that included
replacing certain key personnel and deploying additional internal and external
accounting personnel to CMS MST. While a number of these control improvements
and changes were implemented in late 2002, the most important ones occurred in
the first quarter of 2003.

                                      CMS-34
<PAGE>

     We believe that the improvements to our system of internal accounting
controls were appropriate and responsive to the internal control deficiencies
that were identified. We monitored the operation of the improved internal
controls throughout 2003 and have concluded that they were effective.

NEW ACCOUNTING STANDARDS

     See Note 17, Implementation of New Accounting Standards, for discussion of
new standards.

ACCOUNTING STANDARDS NOT YET EFFECTIVE

     FASB INTERPRETATION NO. 46, CONSOLIDATION OF VARIABLE INTEREST
ENTITIES: FASB issued this interpretation in January 2003. The objective of the
Interpretation is to assist in determining when one party controls another
entity in circumstances where a controlling financial interest cannot be
properly identified based on voting interests. Entities with this characteristic
are considered variable interest entities. The Interpretation requires the party
with the controlling financial interest to consolidate the entity.

     On December 24, 2003, the FASB issued Revised FASB Interpretation No. 46.
For entities that have not previously adopted FASB Interpretation No. 46,
Revised FASB Interpretation No. 46 provides an implementation deferral until the
first quarter of 2004. Revised FASB Interpretation No. 46 is effective for the
first quarter of 2004 for all entities other than special purpose entities.
Special purpose entities must apply either FASB Interpretation No. 46 or Revised
FASB Interpretation No. 46 for the first reporting period that ends after
December 15, 2003.

     As of December 31, 2003, we have completed our analysis for and have
adopted Revised FASB Interpretation No. 46 for all entities other than the MCV
Partnership and FMLP. We continue to evaluate and gather information regarding
those entities. We will adopt the provisions of Revised FASB Interpretation No.
46 for the MCV Partnership and FMLP in the first quarter of 2004.

     If our completed analysis shows we have the controlling financial interest
in the MCV Partnership and FMLP, we would consolidate their assets, liabilities,
and activities, including $700 million of non-recourse debt, into our financial
statements. Financial covenants under our financing agreements could be impacted
negatively after such a consolidation. As a result, it may become necessary to
seek amendments to the relevant financing agreements to modify the terms of
certain of these covenants to remove the effect of this consolidation, or to
refinance the relevant debt. As of December 31, 2003, our investment in the MCV
Partnership was $419 million and our investment in the FMLP was $224 million.

     We determined that we have the controlling financial interest in three
entities that are determined to be variable interest entities. We have 50
percent partnership interest in T.E.S Filer City Station Limited Partnership,
Grayling Generating Station Limited Partnership, and Genesee Power Station
Limited Partnership. Additionally, we have operating and management contracts
and are the primary purchaser of power from each partnership through long-term
power purchase agreements. Collectively, these interests provide us with the
controlling financial interest as defined by the Interpretation. Therefore, we
have consolidated these partnerships into our consolidated financial statements
for the first time as of December 31, 2003. At December 31, 2003, total assets
consolidated for these entities are $227 million and total liabilities are $164
million, including $128 million of non-recourse debt. At December 31, 2003, CMS
Energy has outstanding letters of credit and guarantees of $5 million relating
to these entities. At December 31, 2003, minority interest recorded for these
entities totaled $36 million.

     We also determined that we do not hold the controlling financial interest
in our trust preferred security structures. Accordingly, those entities have
been deconsolidated as of December 31, 2003. Company obligated Trust Preferred
Securities totaling $663 million that were previously included in mezzanine
equity have been eliminated due to deconsolidation. As a result of the
deconsolidation, we have reflected $684 million of long-term debt -- related
parties and have reflected an investment in related parties of $21 million.

     We are not required to, and have not, restated prior periods for the impact
of this accounting change.

                                      CMS-35
<PAGE>

     Additionally, we have non-controlling interests in four other variable
interest entities. FASB Interpretation No. 46 requires us to disclose certain
information about these entities. The chart below details our involvement in
these entities at December 31, 2003:

<Table>
<Caption>
                                                                       INVESTMENT       OPERATING        TOTAL
                            NATURE OF                   INVOLVEMENT      BALANCE      AGREEMENT WITH   GENERATING
NAME (OWNERSHIP INTEREST)  THE ENTITY      COUNTRY         DATE       (IN MILLIONS)     CMS ENERGY      CAPACITY
- -------------------------  ----------      -------      -----------   -------------   --------------   ----------
<S>                        <C>           <C>            <C>           <C>             <C>              <C>
Loy Yang Power (49%)....   Power
                           Generator     Australia         1997           $ --             Yes          2,000 MW
Taweelah (40%)..........   Power
                           Generator     United Arab
                                         Emirates          1999           $ 83             Yes            777 MW
Jubail (25%)............   Generator --
                           Under
                           Construction  Saudi Arabia      2001           $ --             Yes            250 MW
Shuweihat (20%).........   Generator --
                           Under
                           Construction  United Arab
                                         Emirates          2001           $(24)(a)         Yes          1,500 MW
                                                                      -------------                    ----------
Total...................                                                  $ 59                          4,527 MW
                                                                      =============                    ==========
</Table>

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

(a)  At December 31, 2003, we recorded a negative investment in Shuweihat. The
     balance is comprised of our investment of $3 million reduced by our
     proportionate share of the negative fair value of derivative instruments of
     $27 million. We are required to record the negative investment due to our
     future commitment to make an equity investment in Shuweihat.

     Our maximum exposure to loss through our interests in these variable
interest entities is limited to our investment balance of $59 million, Loy Yang
currency translation losses of $110 million, net of tax, and letters of credit,
guarantees, and indemnities relating to Taweelah and Shuweihat totaling $146
million. Included in the $146 million is a letter of credit relating to our
required initial investment in Shuweihat of $70 million. We plan to contribute
our initial investment when the project becomes commercially operational in
2004.

     STATEMENT OF POSITION, ACCOUNTING FOR CERTAIN COSTS AND ACTIVITIES RELATED
TO PROPERTY, PLANT, AND EQUIPMENT: At its September 9, 2003 meeting, the
Accounting Standards Executive Committee, of the American Institute of Certified
Public Accountants voted to approve the Statement of Position, Accounting for
Certain Costs and Activities Related to Property, Plant, and Equipment. The
Statement of Position is expected to be presented for FASB clearance in 2004 and
would be applicable for fiscal years beginning after December 15, 2004. An asset
classified as property, plant, and equipment often comprises multiple parts and
costs. A component accounting policy determines the level at which those parts
are recorded. Capitalization of certain costs related to property, plant, and
equipment are included in the total cost. The Statement of Position could impact
our component and capitalization accounting for property, plant, and equipment.
We continue to evaluate the impact, if any, this Statement of Position will have
upon adoption.

                                      CMS-36
<PAGE>

                      (This page intentionally left blank)

                                      CMS-37
<PAGE>

                             CMS ENERGY CORPORATION

                    CONSOLIDATED STATEMENTS OF INCOME (LOSS)

<Table>
<Caption>
                                                                    YEARS ENDED DECEMBER 31
                                                                -------------------------------
                                                                           RESTATED    RESTATED
                                                                 2003        2002        2001
                                                                 ----      --------    --------
                                                                          IN MILLIONS
<S>                                                             <C>        <C>         <C>
OPERATING REVENUE...........................................    $ 5,513    $ 8,673     $ 8,006
EARNINGS FROM EQUITY METHOD INVESTEES.......................        164         92         172
OPERATING EXPENSES
  Fuel for electric generation..............................        256        341         297
  Purchased and interchange power...........................        689      2,677       1,834
  Purchased power -- related parties........................        455        564         555
  Cost of gas sold..........................................      1,791      2,745       3,233
  Other operating expenses..................................        951        915         932
  Maintenance...............................................        226        212         225
  Depreciation, depletion and amortization..................        428        412         408
  General taxes.............................................        191        222         220
  Asset impairment charges..................................         95        602         323
                                                                -------    -------     -------
                                                                  5,082      8,690       8,027
                                                                -------    -------     -------
OPERATING INCOME (LOSS).....................................        595         75         151
OTHER INCOME (DEDUCTIONS)
  Accretion expense.........................................        (29)       (31)        (37)
  Gain (loss) on asset sales, net...........................         (3)        37          (2)
  Interest and dividends....................................         28         15          23
  Other, net................................................         18        (21)          3
                                                                -------    -------     -------
                                                                     14         --         (13)
                                                                -------    -------     -------
FIXED CHARGES
  Interest on long-term debt................................        473        404         420
  Interest on long-term debt -- related parties.............         58         --          --
  Other interest............................................         59         32          83
  Capitalized interest......................................         (9)       (16)        (35)
  Preferred dividends.......................................          3          2           2
  Preferred securities distributions........................         10         86          96
                                                                -------    -------     -------
                                                                    594        508         566
                                                                -------    -------     -------
INCOME (LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS....         15       (433)       (428)
INCOME TAX EXPENSE (BENEFIT)................................         58        (41)        (94)
MINORITY INTERESTS..........................................         --          2          (7)
                                                                -------    -------     -------
LOSS FROM CONTINUING OPERATIONS.............................        (43)      (394)       (327)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF $50 TAX
  EXPENSE IN 2003, $118 TAX BENEFIT IN 2002 AND $92 TAX
  EXPENSE IN 2001...........................................         23       (274)       (128)
                                                                -------    -------     -------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE.................................................        (20)      (668)       (455)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING, NET OF $13 TAX
  BENEFIT IN 2003, $10 TAX EXPENSE IN 2002 AND $-- IN 2001
  DERIVATIVES (NOTE 7 AND NOTE 15)..........................        (23)        18          (4)
  ASSET RETIREMENT OBLIGATION, SFAS NO. 143 (NOTE 16).......         (1)        --          --
                                                                -------    -------     -------
                                                                    (24)        18          (4)
                                                                -------    -------     -------
NET LOSS....................................................    $   (44)   $  (650)    $  (459)
                                                                =======    =======     =======
</Table>

                                      CMS-38
<PAGE>

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                                ------------------------------
                                                                          RESTATED    RESTATED
                                                                 2003       2002        2001
                                                                 ----     --------    --------
                                                                         IN MILLIONS,
                                                                   EXCEPT PER SHARE AMOUNTS
<S>                                                             <C>       <C>         <C>
CMS ENERGY
  NET LOSS
     Net Loss Available to Common Stock.....................    $  (44)    $ (650)     $ (459)
                                                                ======     ======      ======
  BASIC LOSS PER AVERAGE COMMON SHARE
     Loss from Continuing Operations........................    $(0.30)    $(2.84)     $(2.50)
     Income (Loss) from Discontinued Operations.............      0.16      (1.97)      (0.98)
     Income (Loss) from Changes in Accounting...............     (0.16)      0.13       (0.03)
                                                                ------     ------      ------
     Net Loss Attributable to Common Stock..................    $(0.30)    $(4.68)     $(3.51)
                                                                ======     ======      ======
  DILUTED LOSS PER AVERAGE COMMON SHARE
     Loss from Continuing Operations........................    $(0.30)    $(2.84)     $(2.50)
     Income (Loss) from Discontinued Operations.............      0.16      (1.97)      (0.98)
     Income (Loss) from Changes in Accounting...............     (0.16)      0.13       (0.03)
                                                                ------     ------      ------
     Net Loss Attributable to Common Stock..................    $(0.30)    $(4.68)     $(3.51)
                                                                ======     ======      ======
  DIVIDENDS DECLARED PER COMMON SHARE.......................    $   --     $ 1.09      $ 1.46
                                                                ------     ------      ------
</Table>

        The accompanying notes are an integral part of these statements.
                                      CMS-39
<PAGE>

                             CMS ENERGY CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                    YEARS ENDED DECEMBER 31
                                                                -------------------------------
                                                                           RESTATED    RESTATED
                                                                 2003        2002        2001
                                                                 ----      --------    --------
                                                                          IN MILLIONS
<S>                                                             <C>        <C>         <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss..................................................    $   (44)   $  (650)    $  (459)
     Adjustments to reconcile net loss to net cash provided
      by operating activities
       Depreciation, depletion and amortization (includes
        nuclear decommissioning of $6, $6, and $6,
        respectively).......................................        428        412         408
       Depreciation and amortization of discontinued
        operations..........................................         34         73         186
       Loss (gain) on disposal of discontinued operations
        (Note 2)............................................         46        237          (8)
       Asset writedowns (Note 2)............................         95        602         323
       Capital lease and debt discount amortization.........         25         18          11
       Accretion expense....................................         29         31          37
       Bad debt expense.....................................         28         22          22
       Distributions from related parties in excess of (less
        than) earnings......................................        (41)       (39)         68
       Loss (gain) on sale of assets........................          3        (37)          2
       Cumulative effect of accounting changes..............         24        (18)          4
       Pension contribution.................................       (560)       (64)        (65)
       Changes in assets and liabilities:
          Decrease in accounts receivable and accrued
             revenue........................................        200         99         337
          Decrease (increase) in inventories................       (288)       140        (339)
          Decrease in accounts payable and accrued
             expenses.......................................       (280)       (48)       (388)
          Deferred income taxes and investment tax credit...        242       (398)        228
          Changes in other assets and liabilities...........       (192)       234           5
                                                                -------    -------     -------
       Net cash provided by (used in) operating
        activities..........................................       (251)       614         372
                                                                -------    -------     -------
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures (excludes assets placed under capital
     lease).................................................       (535)      (747)     (1,239)
  Investments in partnerships and unconsolidated
     subsidiaries...........................................         --        (55)       (111)
  Cost to retire property...................................        (72)       (66)       (118)
  Restricted cash...........................................       (163)       (34)         (4)
  Investments in Electric Restructuring Implementation
     Plan...................................................         (8)        (8)        (13)
  Investments in nuclear decommissioning trust funds........         (6)        (6)         (6)
  Proceeds from nuclear decommissioning trust funds.........         34         30          29
  Proceeds from sale of assets..............................        939      1,659         134
  Other investing...........................................         14         56         (21)
                                                                -------    -------     -------
       Net cash provided by (used in) investing
        activities..........................................        203        829      (1,349)
                                                                -------    -------     -------
</Table>

                                      CMS-40
<PAGE>

<Table>
<Caption>
                                                                    YEARS ENDED DECEMBER 31
                                                                -------------------------------
                                                                           RESTATED    RESTATED
                                                                 2003        2002        2001
                                                                 ----      --------    --------
                                                                          IN MILLIONS
<S>                                                             <C>        <C>         <C>
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from notes, bonds and other long-term debt.......      2,080        725       2,021
  Proceeds from trust preferred securities..................         --         --         125
  Issuance of common stock..................................         --         --         326
  Issuance of preferred stock...............................        272         --          --
  Retirement of bonds and other long-term debt..............     (1,656)    (1,834)     (1,343)
  Common stock repurchased..................................         --         (8)         (5)
  Payment of common stock dividends.........................         --       (149)       (190)
  Payment of capital lease obligations......................        (13)       (15)        (20)
  Increase (decrease) in notes payable......................       (470)        75          21
  Other financing...........................................         17        (17)         32
                                                                -------    -------     -------
       Net cash provided by (used in) financing
        activities..........................................        230     (1,223)        967
                                                                -------    -------     -------
EFFECT OF EXCHANGE RATES ON CASH............................         (1)         8         (10)
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH
  INVESTMENTS...............................................        181        228         (20)
CASH AND TEMPORARY CASH INVESTMENTS, BEGINNING OF PERIOD....        351        123         143
                                                                -------    -------     -------
CASH AND TEMPORARY CASH INVESTMENTS, END OF PERIOD..........    $   532    $   351     $   123
                                                                =======    =======     =======
OTHER CASH FLOW ACTIVITIES AND NON-CASH INVESTING AND
  FINANCING ACTIVITIES WERE:
CASH TRANSACTIONS
  Interest paid (net of amounts capitalized)................    $   564    $   409     $   447
  Income taxes paid (net of refunds)........................        (33)      (217)        (60)
  OPEB cash contribution....................................         76         84          57
NON-CASH TRANSACTIONS
  Nuclear fuel placed under capital leases..................    $    --    $    --     $    13
  Other assets placed under capital lease...................         19         62          37
                                                                =======    =======     =======
</Table>

        The accompanying notes are an integral part of these statements.

                                      CMS-41
<PAGE>

                             CMS ENERGY CORPORATION
                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                    DECEMBER 31
                                                                -------------------
                                                                           RESTATED
                                                                 2003        2002
                                                                 ----      --------
                                                                    IN MILLIONS
<S>                                                             <C>        <C>
ASSETS
PLANT AND PROPERTY (AT COST)
  Electric utility..........................................    $ 7,600    $ 7,523
  Gas utility...............................................      2,875      2,719
  Enterprises...............................................        895        644
  Other.....................................................         32         45
                                                                -------    -------
                                                                 11,402     10,931
  Less accumulated depreciation, depletion and amortization
     (Note 16)..............................................      4,846      5,385
                                                                -------    -------
                                                                  6,556      5,546
  Construction work-in-progress.............................        388        557
                                                                -------    -------
                                                                  6,944      6,103
                                                                -------    -------
INVESTMENTS
  Enterprises Investments...................................        724        724
  Midland Cogeneration Venture Limited Partnership..........        419        388
  First Midland Limited Partnership.........................        224        255
  Other.....................................................         23          2
                                                                -------    -------
                                                                  1,390      1,369
                                                                -------    -------
CURRENT ASSETS
  Cash and temporary cash investments at cost, which
     approximates market....................................        532        351
  Restricted cash...........................................        201         38
  Accounts receivable, notes receivable and accrued revenue,
     less allowances of $29 in 2003 and $15 in 2002.........        367        349
  Accounts receivable -- Marketing, services and trading,
     less allowances of $11 in 2003 and $8 in 2002..........         36        248
  Accounts receivable and notes receivable -- related
     parties................................................         73        186
  Inventories at average cost
     Gas in underground storage.............................        741        491
     Materials and supplies.................................        110         96
     Generating plant fuel stock............................         41         37
  Assets held for sale......................................         24        595
  Price risk management assets..............................        102        115
  Prepayments and other.....................................        267        233
                                                                -------    -------
                                                                  2,494      2,739
                                                                -------    -------
NON-CURRENT ASSETS
  Regulatory Assets
     Securitized costs......................................        648        689
     Postretirement benefits................................        162        185
     Abandoned Midland project..............................         10         11
     Other..................................................        266        168
  Assets held for sale......................................          2      2,084
  Price risk management assets..............................        177        135
  Nuclear decommissioning trust funds.......................        575        536
  Prepaid pension costs.....................................        388         --
  Goodwill..................................................         25         31
  Notes receivable -- related parties.......................        242        160
  Notes receivable..........................................        125        126
  Other.....................................................        390        445
                                                                -------    -------
                                                                  3,010      4,570
                                                                -------    -------
TOTAL ASSETS................................................    $13,838    $14,781
                                                                =======    =======
</Table>

        The accompanying notes are an integral part of these statements.
                                      CMS-42
<PAGE>

                             CMS ENERGY CORPORATION

<Table>
<Caption>
                                                                    DECEMBER 31
                                                                -------------------
                                                                           RESTATED
                                                                 2003        2002
                                                                 ----      --------
                                                                    IN MILLIONS
<S>                                                             <C>        <C>
STOCKHOLDERS' INVESTMENT AND LIABILITIES
CAPITALIZATION
  Common stockholders' equity
  Common stock, authorized 250.0 shares; outstanding 161.1
     shares in 2003 and 144.1 shares in 2002................    $     2    $     1
  Other paid-in capital.....................................      3,846      3,605
  Accumulated other comprehensive loss......................       (419)      (728)
  Retained deficit..........................................     (1,844)    (1,800)
                                                                -------    -------
                                                                  1,585      1,078
  Preferred stock of subsidiary (Note 5)....................         44         44
  Preferred stock...........................................        261         --
  Company-obligated convertible Trust Preferred Securities
     of subsidiaries (Note 5)...............................         --        393
  Company-obligated mandatorily redeemable Trust Preferred
     Securities of Consumers' subsidiaries (Note 5).........         --        490
  Long-term debt............................................      6,020      5,357
  Long-term debt -- related parties (Note 5)................        684         --
  Non-current portion of capital leases.....................         58        116
                                                                -------    -------
                                                                  8,652      7,478
                                                                -------    -------
MINORITY INTERESTS..........................................         73         38
                                                                -------    -------
CURRENT LIABILITIES
  Current portion of long-term debt and capital leases......        519        646
  Notes payable.............................................         --        458
  Accounts payable..........................................        296        377
  Accounts payable -- Marketing, services and trading.......         21        119
  Accounts payable -- related parties.......................         40         53
  Accrued interest..........................................        130        131
  Accrued taxes.............................................        285        291
  Liabilities held for sale.................................          2        427
  Price risk management liabilities.........................         89         96
  Current portion of purchase power contracts...............         27         26
  Current portion of gas supply contract obligations........         29         25
  Deferred income taxes.....................................         27         15
  Other.....................................................        185        225
                                                                -------    -------
                                                                  1,650      2,889
                                                                -------    -------
NON-CURRENT LIABILITIES
  Postretirement benefits...................................        265        725
  Deferred income taxes.....................................        615        438
  Deferred investment tax credit............................         85         91
  Regulatory liabilities for income taxes, net..............        312        297
  Regulatory liabilities for cost of removal (Note 16)......        983        907
  Other regulatory liabilities..............................        172          4
  Asset retirement obligation...............................        359         --
  Liabilities held for sale.................................         --      1,218
  Price risk management liabilities.........................        175        135
  Gas supply contract obligations...........................        208        241
  Power purchase agreement -- MCV Partnership...............         --         27
  Other.....................................................        289        293
                                                                -------    -------
                                                                  3,463      4,376
                                                                -------    -------
     Commitments and Contingencies (Notes 2, 4, 5, 8, 10,
      11)
TOTAL STOCKHOLDERS' INVESTMENT AND LIABILITIES..............    $13,838    $14,781
                                                                =======    =======
</Table>

                                      CMS-43
<PAGE>

                             CMS ENERGY CORPORATION

             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

<Table>
<Caption>
                                                              YEARS ENDED DECEMBER 31
                                          ----------------------------------------------------------------
                                                                                      RESTATED    RESTATED
                                           2003       2002       2001       2003        2002        2001
                                           ----       ----       ----       ----      --------    --------
                                          NUMBER OF SHARES IN THOUSANDS              IN MILLIONS
<S>                                       <C>        <C>        <C>        <C>        <C>         <C>
COMMON STOCK
  At beginning and end of period........                                   $     2    $     1     $     1
OTHER PAID-IN CAPITAL
  At beginning of period................  144,088    132,989    121,201      3,605      3,257       2,936
  Common stock repurchased..............      (14)       (39)      (232)        --         (8)         (5)
  Common stock reacquired...............     (217)      (220)       (11)        (5)        (1)         (1)
  Common stock issued...................   17,273     11,358     11,681        234        357         320
  Common stock reissued.................       --         --        350          1         --           7
  Issuance cost of preferred stock......       --         --         --         (8)        --          --
  Deferred gain (Note 5)................       --         --         --         19         --          --
                                          -------    -------    -------    -------    -------     -------
       At end of period.................  161,130    144,088    132,989      3,846      3,605       3,257
                                          -------    -------    -------    -------    -------     -------
ACCUMULATED OTHER COMPREHENSIVE LOSS
  Minimum Pension Liability
     At beginning of period.............                                      (241)        --          --
     Minimum pension liability
       adjustments(a)...................                                       241       (241)         --
                                                                           -------    -------     -------
       At end of period.................                                        --       (241)         --
                                                                           -------    -------     -------
  Investments
     At beginning of period.............                                         2         (5)         (2)
     Unrealized gain (loss) on
       investments(a)...................                                         6         --          (3)
     Realized gain on investments(a)....                                        --          7          --
                                                                           -------    -------     -------
       At end of period.................                                         8          2          (5)
                                                                           -------    -------     -------
  Derivative Instruments
     At beginning of period(b)..........                                       (31)       (28)         10
     Unrealized gain (loss) on
       derivative instruments(a)........                                         4         (7)        (31)
     Reclassification adjustments
       included in consolidated net
       income (loss)(a).................                                        19          4          (7)
                                                                           -------    -------     -------
       At end of period.................                                        (8)       (31)        (28)
                                                                           -------    -------     -------
FOREIGN CURRENCY TRANSLATION
  At beginning of period................                                      (458)      (233)       (206)
  Change in foreign currency
     translation(a).....................                                        39       (225)        (27)
                                                                           -------    -------     -------
       At end of period.................                                      (419)      (458)       (233)
                                                                           -------    -------     -------
          At end of period..............                                      (419)      (728)       (266)
                                                                           -------    -------     -------
RETAINED DEFICIT
  At beginning of period(c).............                                    (1,800)    (1,001)       (352)
  Consolidated net loss(a)..............                                       (44)      (650)       (459)
  Common stock dividends declared.......                                        --       (149)       (190)
                                                                           -------    -------     -------
       At end of period.................                                    (1,844)    (1,800)     (1,001)
                                                                           -------    -------     -------
TOTAL COMMON STOCKHOLDERS' EQUITY.......                                   $ 1,585    $ 1,078     $ 1,991
                                                                           =======    =======     =======
</Table>

                                      CMS-44
<PAGE>

<Table>
<Caption>
                                                                 YEARS ENDED DECEMBER 31
                                                              -----------------------------
                                                                        RESTATED   RESTATED
                                                               2003       2002       2001
                                                               ----     --------   --------
                                                                       IN MILLIONS
<S>                                                           <C>       <C>        <C>
(a)  DISCLOSURE OF OTHER COMPREHENSIVE INCOME (LOSS):
     Minimum pension liability
       Minimum pension liability adjustments, net of tax
          (tax benefit) of $132, $(132), and $--,
          respectively......................................  $   241   $  (241)   $    --
     Investments
       Unrealized gain (loss) on investments, net of tax
          (tax benefit) of $3, $--, and $(2),
          respectively......................................        6        --         (3)
       Realized gain on investments, net of tax of $--, $--,
          and $--, respectively.............................       --         7         --
       Derivative Instruments
          Unrealized gain (loss) on derivative instruments,
            net of tax (tax benefit) of $--, $(4), and
            $(13), respectively.............................        4        (7)       (31)
          Reclassification adjustments included in net loss,
            net of tax (tax benefit) of $11, $2, and $(3),
            respectively....................................       19         4         (7)
     Foreign currency translation, net......................       39      (225)       (27)
     Consolidated net loss..................................      (44)     (650)      (459)
                                                              -------   -------    -------
       Total Other Comprehensive Income (Loss)..............  $   265   $(1,112)   $  (527)
                                                              =======   =======    =======
(b) YEAR ENDED DECEMBER 31, 2001 REFLECTS THE CUMULATIVE
    CHANGE IN ACCOUNTING PRINCIPLE, NET OF $7 TAX (NOTE 7.)
(c) BEGINNING BALANCE FOR YEAR ENDED DECEMBER 31, 2001 WAS
    DECREASED BY $38 MILLION DUE TO AN ADJUSTMENT TO
    DEFERRED TAXES RELATED TO LOY YANG (NOTE 8.)
</Table>

        The accompanying notes are an integral part of these statements.
                                      CMS-45
<PAGE>

                             CMS ENERGY CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     We have determined the need to make certain adjustments to our consolidated
financial statements for the fiscal years ended December 31, 2002, December 31,
2001, and December 31, 2000. Therefore, the consolidated financial statements
for 2002 and 2001 have been restated from amounts previously reported. See Note
18, Restatement and Reclassification.

1: CORPORATE STRUCTURE AND ACCOUNTING POLICIES

     CORPORATE STRUCTURE: CMS Energy is the parent holding company of Consumers
and Enterprises. Consumers is a combination electric and gas utility company
serving Michigan's Lower Peninsula. Enterprises, through subsidiaries, is
engaged in domestic and international diversified energy businesses including
independent power production, natural gas transmission, storage and processing,
and energy services.

     PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of CMS Energy, Consumers and Enterprises and all other entities in
which we have a controlling financial interest, in accordance with Revised FASB
Interpretation No. 46. Intercompany transactions and balances have been
eliminated. We use the equity method of accounting for investments in companies
and partnerships that are not consolidated where we have significant influence
over operations and financial policies, but not a controlling financial
interest.

     USE OF ESTIMATES: We prepare our financial statements in conformity with
accounting principles generally accepted in the United States. Management is
required to make estimates using assumptions that affect the reported amounts
and disclosures. Actual results could differ from those estimates.

     We are required to record estimated liabilities in the financial statements
when it is probable that a loss will be incurred in the future as a result of a
current event, and when an amount can be reasonably estimated. We have used this
accounting principle to record estimated liabilities as discussed in Note 4,
Uncertainties.

     REVENUE RECOGNITION POLICY: We recognize revenues from deliveries of
electricity and natural gas, and the transportation, processing, and storage of
natural gas when services are provided. Sales taxes are recorded as liabilities
and are not included in revenues. Revenues on sales of marketed electricity,
natural gas, and other energy products are recognized at delivery.
Mark-to-market changes in the fair values of energy trading contracts that
qualify as derivatives are recognized as revenues in the periods in which the
changes occur.

     CAPITALIZED INTEREST: We are required to capitalize interest on certain
qualifying assets that are undergoing activities to prepare them for their
intended use. Capitalization of interest for the period is limited to the actual
interest cost that is incurred, and our non-regulated businesses are prohibited
from imputing interest costs on any equity funds. Our regulated businesses are
permitted to capitalize an allowance for funds used during construction on
regulated construction projects and to include such amounts in plant in service.

     CASH EQUIVALENTS AND RESTRICTED CASH: All highly liquid investments with an
original maturity of three months or less are considered cash equivalents. At
December 31, 2003, our restricted cash on hand was $201 million. Restricted cash
primarily includes cash collateral for letters of credit to satisfy certain debt
agreements and cash dedicated for repayment of securitization bonds. It is
classified as a current asset as the related letters of credit mature within one
year and the payments on the related securitization bonds occur within one year.

     COAL INVENTORY: We use the weighted average cost method for valuing coal
inventory.

     EARNINGS PER SHARE: Basic and diluted earnings per share are based on the
weighted average number of shares of common stock and potential common stock
outstanding during the period. Potential common stock, for purposes of
determining diluted earnings per share, includes the effects of dilutive stock
options and convertible securities. The effect on number of shares of such
potential common stock is computed using the treasury stock method or the
if-converted method, as applicable. For earnings per share computation, see Note
6, Earnings Per Share and Dividends.

                                      CMS-46
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     FINANCIAL INSTRUMENTS: We account for investments in debt and equity
securities in accordance with SFAS No. 115. These debt and equity securities are
classified into three categories: held-to-maturity, trading, or
available-for-sale. Our investments in equity securities are classified as
available-for-sale. They are reported at fair value, with any unrealized gains
or losses resulting from changes in fair value reported in equity as part of
accumulated other comprehensive income, and are excluded from earnings unless
such changes in fair value are determined to be other than temporary. Unrealized
gains or losses from changes in the fair value of our nuclear decommissioning
investments are reported as regulatory liabilities. The fair value of these
investments is determined from quoted market prices. For additional details
regarding financial instruments, see Note 7, Financial and Derivative
Instruments.

     FOREIGN CURRENCY TRANSLATION: Our subsidiaries and affiliates whose
functional currency is not the U.S. dollar translate their assets and
liabilities into U.S. dollars at the exchange rates in effect at the end of the
fiscal period. We translate revenue and expense accounts of such subsidiaries
and affiliates into U.S. dollars at the average exchange rates that prevailed
during the period. The gains or losses that result from this process, and gains
and losses on intercompany foreign currency transactions that are long-term in
nature that we do not intend to settle in the foreseeable future, are shown in
the stockholders' equity section of the balance sheet. For subsidiaries
operating in highly inflationary economies, the U.S. dollar is considered to be
the functional currency, and transaction gains and losses are included in
determining net income. Gains and losses that arise from exchange rate
fluctuations on transactions denominated in a currency other than the functional
currency, except those that are hedged, are included in determining net income.
The change in the foreign currency translation adjustment increased equity by
$39 million for the year ended December 31, 2003. The change in the foreign
currency translation adjustment decreased equity by $225 million for the year
ended December 31, 2002.

     GAS INVENTORY: Consumers uses the weighted average cost method for valuing
working gas and recoverable cushion gas in underground storage facilities.

     GOODWILL: Goodwill represents the excess of the purchase price over the
fair value of the net assets of acquired companies. Goodwill is not amortized,
but is tested annually for impairment. For additional information, see Note 3,
Goodwill.

     IMPAIRMENT OF INVESTMENTS AND LONG-LIVED ASSETS: We evaluate potential
impairments of our investments in long-lived assets other than goodwill based on
various analyses, including the projection of undiscounted cash flows, whenever
events or changes in circumstances indicate that the carrying amount of the
assets may not be recoverable. If the carrying amount of the asset exceeds its
estimated undiscounted future cash flows, an impairment loss is recognized and
the asset is written down to its estimated fair value.

     MAINTENANCE AND DEPRECIATION: We charge property repairs and minor property
replacements to maintenance expense. We also charge planned major maintenance
activities to operating expense unless the cost represents the acquisition of
additional components or the replacement of an existing component. We capitalize
the cost of plant additions and replacements. We depreciate utility property on
straight-line and units-of-production rates approved by the MPSC. The composite
depreciation rates for our properties are:

<Table>
<Caption>
                                                                     YEARS ENDED
                                                                     DECEMBER 31
                                                                ---------------------
                                                                2003    2002    2001
                                                                ----    ----    ----
<S>                                                             <C>     <C>     <C>
Electric utility property...................................    3.1%    3.1%     3.1%
Gas utility property........................................    4.6%    4.5%     4.4%
Other property..............................................    8.1%    7.2%    11.2%
</Table>

     NUCLEAR FUEL COST: We amortize nuclear fuel cost to fuel expense based on
the quantity of heat produced for electric generation. For nuclear fuel used
after April 6, 1983, we charge disposal costs to nuclear fuel expense, recover
these costs through electric rates, and remit them to the DOE quarterly. We
elected to defer payment for

                                      CMS-47
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

disposal of spent nuclear fuel burned before April 7, 1983. As of December 31,
2003, we have recorded a liability to the DOE for $139 million, including
interest, which is payable upon the first delivery of spent nuclear fuel to the
DOE. The amount of this liability, excluding a portion of interest, was
recovered through electric rates. For additional details on disposal of spent
nuclear fuel, see Note 4, Uncertainties, "Other Consumers' Electric Utility
Uncertainties -- Nuclear Matters."

     NUCLEAR PLANT DECOMMISSIONING: Our site-specific decommissioning cost
estimates for Big Rock and Palisades assume that each plant site will eventually
be restored to conform to the adjacent landscape and all contaminated equipment
will be disassembled and disposed of in a licensed burial facility.

     Trust Funds: MPSC orders, received in March 1999 for Big Rock and December
1999 for Palisades, provided for fully funding the decommissioning trust funds
for both sites. The December 1999 order set the annual decommissioning surcharge
for Palisades at $6 million. In 2003, we collected $6 million from our electric
customers for the decommissioning of our Palisades nuclear plant. Amounts
collected from electric retail customers and deposited in trusts, including
trust earnings, are credited to a regulatory liability.

     In December 2000, we stopped depositing funds in the Big Rock trust fund
based on its funding status at that time. However, the current level of funds
provided by the trust may not be adequate to fully fund the decommissioning of
Big Rock. This is due in part to the DOE's failure to accept spent nuclear fuel
and lower returns on the trust fund. We are attempting to recover our additional
costs for storing spent nuclear fuel through litigation, as discussed in Note 4,
Uncertainties, "Other Consumers' Electric Utility Uncertainties -- Nuclear
Matters." To the extent the funds are not sufficient, we would seek additional
relief from the MPSC. We can make no assurance that the MPSC would grant this
request.

     In March 2001, we filed with the MPSC a "Report on the Adequacy of the
Existing Provision for Nuclear Plant Decommissioning" for each plant reflecting
decommissioning cost estimates of $349 million for Big Rock, excluding spent
nuclear fuel storage costs, and $739 million for Palisades, in 2000 dollars. We
are required to file the next such reports with the MPSC by March 31, 2004 for
Big Rock and Palisades and we are in the process of preparing updated cost
estimates.

     Big Rock: In 1997, Big Rock closed permanently and plant decommissioning
began. We estimate that the Big Rock site will be returned to a natural state by
the end of 2012 if the DOE begins removing the spent nuclear fuel by 2010. The
following table shows our Big Rock decommissioning activities:

<Table>
<Caption>
                                                                  YEAR-TO-DATE       ACCUMULATIVE
                                                                DECEMBER 31, 2003    TOTAL-TO-DATE
                                                                -----------------    -------------
                                                                           IN MILLIONS
<S>                                                             <C>                  <C>
Decommissioning expenditures................................           $45               $263
Withdrawals from trust funds................................            34                243
</Table>

     These activities had no material impact on net income. At December 31,
2003, we have an investment in nuclear decommissioning trust funds of $88
million for Big Rock. In addition, at December 31, 2003, we have charged $7
million to our FERC jurisdictional depreciation reserve for the decommissioning
of Big Rock.

     Palisades: In December 2000, the NRC extended the Palisades operating
license to March 2011 and the impact of this extension was included as part of
our March 2001 filing with the MPSC.

     At December 31, 2003, we have an investment in the MPSC nuclear
decommissioning trust funds of $477 million for Palisades. In addition, at
December 31, 2003, we have a FERC decommissioning trust fund with a balance of
$10 million. For additional details on decommissioning costs accounted for as
asset retirement obligations, see Note 16, Asset Retirement Obligations.

     PROPERTY, PLANT, AND EQUIPMENT: We record property, plant and equipment at
original cost when placed into service. When regulated assets are retired, or
otherwise disposed of in the ordinary course of business, the

                                      CMS-48
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

original cost is charged to accumulated depreciation and cost of removal, less
salvage is recorded as a regulatory liability. For additional details, see Note
16, Asset Retirement Obligations. An allowance for funds used during
construction is capitalized on regulated construction projects. With respect to
the retirement or disposal of non-regulated assets, the resulting gains or
losses are recognized in income.

     Property, plant, and equipment at December 31, 2003 and 2002, was as
follows:

<Table>
<Caption>
                                                                   ESTIMATED
                                                                  DEPRECIABLE
YEARS ENDED DECEMBER 31                                         LIFE IN YEARS(E)     2003      2002
- -----------------------                                         ----------------     ----      ----
                                                                            IN MILLIONS
<S>                                                             <C>                 <C>       <C>
Electric:
  Generation................................................         13-75          $3,332    $3,489
  Distribution..............................................         12-85           3,799     3,619
  Other.....................................................          5-50             388       300
  Capital leases(a).........................................                            81       115
Gas:
  Underground storage facilities(b).........................         30-75             232       217
  Transmission..............................................         15-75             342       310
  Distribution..............................................         35-75           1,976     1,899
  Other.....................................................          5-48             300       237
  Capital leases(a).........................................                            25        56
Enterprises:
  IPP.......................................................          3-40             511       250
  CMS Gas Transmission......................................          5-40             119       120
  CMS Electric and Gas......................................          2-30             241       227
  Other.....................................................          4-25              24        47

Other:......................................................          7-71              32        45
Construction work-in-progress(c)............................                           388       557
Less accumulated depreciation, depletion, and
  amortization..............................................                         4,846     5,385
                                                                                    ------    ------
Net property, plant, and equipment(d).......................                        $6,944    $6,103
                                                                                    ======    ======
</Table>

- -------------------------
(a)  Capital leases presented in this table are gross amounts. Amortization of
     capital leases was $38 million in 2003 and $96 million in 2002.

(b)  Includes unrecoverable base natural gas in underground storage of $23
     million at December 31, 2003 and $23 million at December 31, 2002, which is
     not subject to depreciation.

(c) Included in construction costs at December 31, 2002 was $54 million,
    relating to the capital lease of our main headquarters. We purchased the
    main headquarters in November 2003.

(d) Included in net property, plant and equipment are intangible assets
    primarily related to software development costs, consents, and rights of
    way. The estimated amortization life for software development costs is seven
    years and other intangible amortization lives range from 50 to 75 years.
    Intangible assets at December 31, 2003 and 2002 were as follows:

                                      CMS-49
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<Table>
<Caption>
YEARS ENDED DECEMBER 31                                         2003    2002
- -----------------------                                         ----    ----
                                                                IN MILLIONS
                                                                ------------
<S>                                                             <C>     <C>
Intangible assets at cost...................................    $419    $479
Less accumulated amortization...............................     211     236
                                                                ----    ----
Net intangible assets.......................................    $208    $243
                                                                ====    ====
</Table>

(e) The following table illustrates the depreciable life for electric and gas
    structures and improvements.

<Table>
<Caption>
                         ESTIMATED                                        ESTIMATED
                        DEPRECIABLE                                      DEPRECIABLE
ELECTRIC               LIFE IN YEARS                GAS                 LIFE IN YEARS
- --------               -------------                ---                 -------------
<S>                    <C>             <C>                              <C>
Generation:                            Underground storage facilities      45
  Coal                   39-43         Transmission                        60
  Nuclear                 25           Distribution                        60
  Hydroelectric          55-71         Other                              42-48
  Other                   32
Distribution             50-60
Other                    40-42
</Table>

     RECLASSIFICATIONS: Certain prior year amounts have been reclassified for
comparative purposes. These reclassifications did not affect consolidated net
income for the years presented.

     RELATED-PARTY TRANSACTIONS: Consumers paid $64 million in 2003, $67 million
in 2002, and $71 million in 2001 for electric generating capacity and energy
from affiliates of Enterprises. CMS Energy recorded interest charges on
long-term debt to related parties of $58 million in 2003. Affiliates of CMS
Energy sold, stored and transported natural gas and provided other services to
the MCV Partnership totaling $17 million in 2003, $41 million in 2002, and $35
million in 2001. We expensed purchases of capacity and energy from the MCV
Partnership totaling $455 million in 2003, $497 million in 2002, and $488
million in 2001. For additional discussion of related-party transactions with
the MCV Partnership and the FMLP, see Note 4, Uncertainties and Note 15,
Summarized Financial Information of Significant Related Energy Supplier. Other
related-party transactions are immaterial.

     TRADE RECEIVABLES: We record our accounts receivable at fair value.
Accounts deemed uncollectable are charged to operating expense.

     UNAMORTIZED DEBT PREMIUM, DISCOUNT AND EXPENSE: We amortize premiums,
discounts and expenses incurred in connection with the issuance of outstanding
long-term debt over the terms of the issues. For the regulated portions of our
businesses, if debt is refinanced, we amortize any unamortized premiums,
discounts and expenses over the term of the new debt.

     UTILITY REGULATION: We account for the effects of regulation based on the
regulated utility accounting standard SFAS No. 71. As a result, the actions of
regulators affect when we recognize revenues, expenses, assets, and liabilities.

     In 1999, we received MPSC electric restructuring orders, which, among other
things, identified the terms and timing for implementing electric restructuring
in Michigan. Consistent with these orders and EITF No. 97-4, we discontinued the
application of SFAS No. 71 for the energy supply portion of our business because
we expected to implement ROA at competitive market based rates for our electric
customers.

                                      CMS-50
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Since 1999, there have been significant legislative and regulatory changes
in Michigan that has resulted in:

     - electric supply customers of utilities remaining on cost-based rates, and

     - utilities being provided the opportunity to recover Stranded Costs
       associated with electric restructuring, from customers who choose an
       alternative electric supplier.

     During 2002, we re-evaluated the criteria used to determine if an entity or
a segment of an entity meets the requirements to apply regulated utility
accounting, and determined that the energy supply portion of our business could
meet the criteria if certain regulatory events occurred. In December 2002, we
received a MPSC Stranded Cost order that allowed us to re-apply regulatory
accounting standard SFAS No. 71 to the energy supply portion of our business.
Re-application of SFAS No. 71 had no effect on the prior discontinuation
accounting, but allowed us to apply regulatory accounting treatment to the
energy supply portion of our business beginning in the fourth quarter of 2002,
including regulatory accounting treatment of costs required to be recognized in
accordance with SFAS No. 143. For additional details, see Note 12, Asset
Retirement Obligations.

     SFAS No. 144 imposes strict criteria for retention of regulatory-created
assets by requiring that such assets be probable of future recovery at each
balance sheet date. Management believes these assets are probable of future
recovery.

     The following regulatory assets and liabilities, which include both current
and non-current amounts, are reflected in the Consolidated Balance Sheets. We
expect to recover these costs through rates over periods of up to 14 years. We
recognized an OPEB transition obligation in accordance with SFAS No. 106 and
established a regulatory asset for this amount that we expect to recover in
rates over the next nine years.

<Table>
<Caption>
                                                                  DECEMBER 31
                                                                ----------------
                                                                 2003      2002
                                                                 ----      ----
                                                                  IN MILLIONS
<S>                                                             <C>       <C>
Securitized costs (Note 4)..................................    $  648    $  689
Postretirement benefits (Note 10)...........................       181       204
Electric Restructuring Implementation Plan (Note 4).........        91        83
Manufactured gas plant sites (Note 4).......................        67        69
Abandoned Midland project...................................        10        11
Unamortized debt............................................        51        14
Asset retirement obligation (Note 16).......................        49        --
Other.......................................................         8         2
                                                                ------    ------
Total regulatory assets.....................................    $1,105    $1,072
                                                                ======    ======
Cost of removal (Note 16)...................................    $  983    $  907
Income taxes (Note 8).......................................       312       297
Asset retirement obligation (Note 16).......................       168        --
Other.......................................................         4         4
                                                                ------    ------
Total regulatory liabilities................................    $1,467    $1,208
                                                                ======    ======
</Table>

     In October 2000, we received an MPSC order authorizing us to securitize
certain regulatory assets up to $469 million, net of tax, see Note 4,
Uncertainties, "Consumers' Electric Utility Restructuring Matters --
Securitization." Accordingly, in December 2000, we established a regulatory
asset for securitized costs of $709 million, before tax, that had previously
been recorded in other regulatory asset accounts. To prepare for the financing
of the securitized assets and the subsequent retirement of debt with
Securitization proceeds, issuance

                                      CMS-51
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

fees were capitalized as a part of Securitization costs. These issuance costs
are amortized each month for up to fourteen years. The components of the
unamortized securitized costs are illustrated below.

<Table>
<Caption>
                                                                DECEMBER 31
                                                                ------------
                                                                2003    2002
                                                                ----    ----
                                                                IN MILLIONS
<S>                                                             <C>     <C>
Unamortized nuclear costs...................................    $405    $405
Postretirement benefits.....................................      84      84
Income taxes................................................     203     203
Uranium enrichment facility.................................      16      16
Other.......................................................      12      12
Accumulated Securitization cost amortization................     (72)    (31)
                                                                ----    ----
Total unamortized securitized costs.........................    $648    $689
                                                                ====    ====
</Table>

2: DISCONTINUED OPERATIONS, OTHER ASSET SALES, IMPAIRMENTS, AND RESTRUCTURING

     Our continued focus on financial improvement has led to discontinuing
operations, completing many asset sales, impairing some assets, and incurring
costs to restructure our business. Gross cash proceeds received from the sale of
assets totaled $939 million in 2003 and $1.659 billion in 2002.

DISCONTINUED OPERATIONS

     We have discontinued the following operations:

<Table>
<Caption>
                                                            PRETAX      AFTER-TAX
          BUSINESS/PROJECT               DISCONTINUED     GAIN(LOSS)    GAIN(LOSS)          STATUS
          ----------------               ------------     ----------    ----------          ------
                                                                IN MILLIONS
<S>                                     <C>               <C>           <C>           <C>
Equatorial Guinea(a)................    December 2001       $ 497          $310       Sold January 2002
Powder River........................    March 2002             17            11       Sold May 2002
Zirconium Recovery..................    June 2002             (47)          (31)      Abandoned
CMS Viron...........................    June 2002             (14)           (9)      Sold June 2003
Oil and Gas(b)......................    September 2002       (126)          (82)      Sold September 2002
Panhandle(c)........................    December 2002         (39)          (44)      Sold June 2003
Field Services......................    December 2002          (5)           (1)      Sold July 2003
Marysville..........................    June 2003               2             1       Sold November 2003
Parmelia(d).........................    December 2003          --            --       Held for sale
</Table>

(a)  In the first quarter of 2003, we settled a liability with the purchaser of
     Equatorial Guinea and reversed the remaining excess reserve. This
     settlement resulted in a gain of $6 million after-tax, which is included in
     discontinued operations.

(b)  As a result of the sale of CMS Oil and Gas, we recorded liabilities for
     certain sale indemnification obligations and other matters. In September
     2003, we re-evaluated our exposure to the obligations and reduced the
     carrying value of these liabilities by $8 million after-tax. This
     adjustment is reported in discontinued operations.

(c)  The Pension Plan retained pension payment obligations for Panhandle
     employees who were vested under the Pension Plan. Panhandle employees are
     no longer eligible to accrue additional benefits. Because of the
     significant change in the makeup of the plan, a remeasurement of the
     obligation at the date of sale was required. The remeasurement resulted in
     a $4 million increase in our 2003 OPEB expense, as well as an additional
     charge to accumulated other comprehensive income of approximately $34
     million ($22 million after-tax) as a result of the increase in the
     additional minimum pension liability. Additionally, a significant

                                      CMS-52
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     number of Panhandle employees elected to retire as of July 1, 2003 under
     the CMS Energy Employee Pension Plan. As a result, we have recorded a $25
     million ($16 million after-tax) settlement loss, and a $10 million ($7
     million after-tax) curtailment gain, pursuant to the provisions of SFAS No.
     88, which is reflected in discontinued operations.

(d)  In December 2003, we began reporting the operations of our Parmelia
     business in discontinued operations and reduced the carrying amount of our
     Parmelia business to reflect fair value. The $26 million after-tax
     adjustment is reported in discontinued operations. We expect the sale of
     Parmelia to occur in 2004.

     Due to lack of progress on the sale, we reclassified our international
energy distribution business, which includes CPEE and SENECA, from discontinued
operations to continuing operations for the years 2003, 2002, and 2001. When we
initially reported the international energy distribution business as a
discontinued operation in 2001, we applied APB Opinion No. 30, which allowed us
to record a provision for anticipated operating losses. We currently apply FASB
No. 144, which does not allow us to record a provision for future operating
losses. Therefore, in the process of reclassifying the international energy
distribution business to continuing operations and reversing such provisions, we
increased our net loss by $3 million in 2002 and decreased our net loss by $3
million in 2001. In 2003, there was an increase to net income of $75 million as
a result of reversing the previously recognized impairment loss in discontinued
operations.

     At December 31, 2003, "Assets held for sale" includes Parmelia, Bluewater
Pipeline, and our investment in the American Gas Index fund. Although Bluewater
Pipeline and the American Gas Index fund are considered held for sale, they did
not meet the criteria for discontinued operations. At December 31, 2002, "Assets
held for sale" includes Panhandle, CMS Viron, CMS Field Services, Marysville,
and Parmelia. The major classes of assets and liabilities held for sale are as
follows:

<Table>
<Caption>
                                                                     AS OF
                                                                  DECEMBER 31
                                                                ----------------
                                                                        RESTATED
                                                                2003      2002
                                                                ----    --------
                                                                  IN MILLIONS
<S>                                                             <C>     <C>
Assets
  Cash......................................................    $ 7      $   82
  Accounts receivable.......................................      2         133
  Property, plant and equipment -- net......................      2       2,003
  Goodwill..................................................     --         117
  Other.....................................................     15         344
                                                                ---      ------
Total assets held for sale..................................    $26      $2,679
                                                                ===      ======
Liabilities
  Accounts payable..........................................    $ 2      $   74
  Long-term debt............................................     --       1,150
  Minority interest.........................................     --          45
  Other.....................................................     --         376
                                                                ---      ------
Total liabilities held for sale.............................    $ 2      $1,645
                                                                ===      ======
</Table>

                                      CMS-53
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following amounts are reflected in the Consolidated Statements of
Income (Loss) for discontinued operations:

<Table>
<Caption>
                                                                  YEARS ENDED DECEMBER 31
                                                                ----------------------------
                                                                        RESTATED    RESTATED
                                                                2003      2002        2001
                                                                ----    --------    --------
                                                                        IN MILLIONS
<S>                                                             <C>     <C>         <C>
Revenues....................................................    $504     $ 891       $1,453
                                                                ====     =====       ======
Discontinued operations:
  Pretax gain (loss) from discontinued operations...........    $115     $ (38)      $  (53)
  Income tax expense (benefit)..............................      46        (1)          83
                                                                ----     -----       ------
  Income (loss) from discontinued operations................      69       (37)        (136)
                                                                ====     =====       ======
  Pretax gain (loss) on disposal of discontinued
     operations.............................................     (42)     (354)          17
  Income tax expense (benefit)..............................       4      (117)           9
                                                                ----     -----       ------
  Gain (loss) on disposal of discontinued operations........     (46)     (237)           8
                                                                ----     -----       ------
Income (loss) from discontinued operations..................    $ 23     $(274)      $ (128)
                                                                ====     =====       ======
</Table>

     The income (loss) from discontinued operations includes a reduction in
asset values, a provision for anticipated closing costs, and a portion of the
Parent Company's interest expense. Interest expense of $22 million for 2003, $71
million for 2002 and $86 million for 2001 has been allocated based on a ratio of
the expected proceeds for the asset to be sold divided by the Parent Company's
total capitalization of each discontinued operation times the Parent Company's
interest expense.

OTHER ASSET SALES

     Our other asset sales include the following non-strategic and
under-performing assets. The impacts of these sales are included in "Gain (loss)
on asset sales, net" in the Consolidated Statements of Income (Loss).

     In 2003, we sold the following assets that did not meet the definition of,
and therefore were not reported as, discontinued operations:

<Table>
<Caption>
                                                                               PRETAX        AFTER-TAX
DATE SOLD    BUSINESS/PROJECT                                                GAIN (LOSS)    GAIN (LOSS)
- ---------    ----------------                                                -----------    -----------
                                                                                    IN MILLIONS
<S>          <C>                                                             <C>            <C>
January      CMS MST Wholesale Gas.......................................        $(6)           $(4)
March        CMS MST Wholesale Power.....................................          2              1
June         Guardian Pipeline...........................................         (4)            (3)
December     CMS Land -- Arcadia.........................................          3              2
Various      Other.......................................................          2              1
                                                                                 ---            ---
             Total loss on asset sales...................................        $(3)           $(3)
                                                                                 ===            ===
</Table>

     In June 2003, we received three million shares of Southern Union common
stock worth $49 million from the sale of Panhandle, a discontinued operation. In
July 2003, Southern Union declared a five percent common stock dividend payable
July 31, 2003, to shareholders of record as of July 17, 2003. As a result of the
stock dividend, on September 30, 2003, we held 3.15 million shares of Southern
Union common stock worth $54 million based on the closing price of $17.00 per
share. The $2 million increase in value was recorded in dividend income. In
October 2003, we sold our 3.15 million shares of Southern Union common stock to
a private investor for $17.77 per share. The additional $5 million gain was
recorded in other income in 2003.

                                      CMS-54
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In 2002, we sold the following assets that did not meet the definition of,
and therefore were not reported as, discontinued operations:

<Table>
<Caption>
                                                                               PRETAX        AFTER-TAX
DATE SOLD    BUSINESS/PROJECT                                                GAIN (LOSS)    GAIN (LOSS)
- ---------    ----------------                                                -----------    -----------
                                                                                    IN MILLIONS
<S>          <C>                                                             <C>            <C>
January      Equatorial Guinea -- methanol plant.........................       $ 19           $ 12
April        Toledo Power................................................        (11)            (5)
May          Electric Transmission System................................         38             31
August       National Power Supply.......................................         15             30
October      Vasavi Power Plant..........................................        (25)           (24)
Various      Other.......................................................          1             --
                                                                                ----           ----
             Total gain on asset sales...................................       $ 37           $ 44
                                                                                ====           ====
</Table>

     In 2001, we sold miscellaneous assets for a pretax loss of $2 million.

     In February 2004, we sold Bluewater Pipeline, a 24.9 mile pipeline that
extends from Marysville, Michigan to Armada, Michigan to Bluewater Gas Storage,
LLC, a subsidiary of Sempra Energy Trading Corporation. We do not expect the
gain or loss on the sale to be significant.

ASSET IMPAIRMENTS

     We record an asset impairment when we determine that the expected future
cash flows from an asset would be insufficient to provide for recovery of the
asset's carrying value. An asset held-in-use is evaluated for impairment by
calculating the undiscounted future cash flows expected to result from the use
of the asset and its eventual disposition. If the undiscounted future cash flows
are less than the carrying amount, we recognize an impairment loss. The
impairment loss recognized is the amount by which the carrying amount exceeds
the fair value. We estimate the fair market value of the asset utilizing the
best information available. This information includes quoted market prices,
market prices of similar assets, and discounted future cash flow analyses. The
assets written down include both domestic and foreign electric power plants, gas
processing facilities, and certain equity method and other investments. In
addition, we have written off the carrying value of projects under development
that will no longer be pursued.

                                      CMS-55
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The table below summarizes our asset impairments:

<Table>
<Caption>
                                                                      YEARS ENDED DECEMBER 31
                                                 -----------------------------------------------------------------
                                                                             RESTATED               RESTATED
                                                                        -------------------    -------------------
                                                 PRETAX    AFTER-TAX    PRETAX    AFTER-TAX    PRETAX    AFTER-TAX
                                                  2003       2003        2002       2002        2001       2001
                                                 ------    ---------    ------    ---------    ------    ---------
                                                                            IN MILLIONS
<S>                                              <C>       <C>          <C>       <C>          <C>       <C>
Asset impairments:
  Consumers..................................     $--         $--        $ --       $ --        $  3       $  2
  Enterprises:
     International Energy Distribution(a)....      72          53           4          3          95         62
     CMS Generation
       DIG(b)................................      --          --         460        299          --         --
       Michigan Power........................      --          --          62         40          --         --
       Craven................................      --          --          23         15          --         --
       National Power Supply.................      --          --          --         --          89         88
       El Chocon.............................      --          --          --         --          45         42
       HL Power..............................      --          --          --         --          30         18
       Other(c)..............................      16          11          20         13          16         11
     Natural Gas Transmission................      --          --          --         --          31         20
     Marketing, Services and Trading.........      --          --          18         11          --         --
     Other(d)................................       7           4          15         10          14          9
                                                  ---         ---        ----       ----        ----       ----
Total asset impairments......................     $95         $68        $602       $391        $323       $252
                                                  ===         ===        ====       ====        ====       ====
</Table>

- -------------------------
(a)  In September 2003, we wrote down our investment in CMS Electric and Gas'
     Venezuelan electric distribution utility and an associated equipment lease
     to reflect fair value. The impairment was based on estimates of the
     utility's future cash flows, incorporating certain assumptions about
     Venezuela's regulatory, political, and economic environment.

(b)  DIG's reduced valuation was primarily a reflection of the unfavorable terms
     of its power purchase agreement.

(c)  At CMS Generation, we determined that the fair value of our equity
     investments was lower than its carrying amount, and that this decline in
     value was other than temporary. Therefore, in accordance with APB No. 18,
     we recognized an impairment charge of $16 million ($11 million, net of
     tax).

(d)  Includes development projects of $7 million ($4 million, net of tax) in
     2003 that would no longer be pursued.

RESTRUCTURING AND OTHER COSTS

     In June 2002, we announced a series of initiatives to reduce our annual
operating costs by an estimated $50 million. As such, we:

     - relocated CMS Energy's corporate headquarters from Dearborn, Michigan to
       a new combined CMS Energy and Consumers headquarters in Jackson, Michigan
       in July 2003,

     - implemented changes to our 401(k) savings program,

     - implemented changes to our health care plan, and

     - terminated 64 employees, including five officers. Prior to December 31,
       2002, 123 employees elected severance arrangements. Of these 187 officers
       and employees, 65 had been terminated as of December 31, 2002. All
       remaining terminations were completed in 2003.

                                      CMS-56
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table shows the amount charged to expense for restructuring
costs, the payments made, and the unpaid balance of accrued costs at December
31, 2002 and December 31, 2003.

<Table>
<Caption>
                                                                INVOLUNTARY       LEASE
                                                                TERMINATION    TERMINATION    TOTAL
                                                                -----------    -----------    -----
                                                                            IN MILLIONS
<S>                                                             <C>            <C>            <C>
Beginning accrual balance, January 1, 2002..................       $ --            $--        $ --
Expense.....................................................         22             11          33
Payments....................................................        (10)            (3)        (13)
                                                                   ----            ---        ----
Ending accrual balance at December 31, 2002.................       $ 12            $ 8        $ 20
                                                                   ----            ---        ----
Expense.....................................................          3             --           3
Payments....................................................        (12)            (2)        (14)
                                                                   ----            ---        ----
Ending accrual balance at December 31, 2003.................       $  3            $ 6        $  9
                                                                   ====            ===        ====
</Table>

     Restructuring costs for the year ended December 31, 2003, which are
included in operating expenses, include $3 million of involuntary employee
termination benefits.

3: GOODWILL

     Our goodwill balance was $25 million at December 31, 2003 and $31 million
at December 31, 2002.

     CMS GAS TRANSMISSION: We recorded goodwill as an asset when we purchased
Panhandle and began, over time, to expense a portion of goodwill. Effective
January 1, 2002, a new accounting standard went into effect that required us to
stop expensing goodwill and to test for impairment. We tested the value of the
goodwill related to Panhandle for impairment by comparing the fair value of
goodwill, as determined by independent appraisers, to the value on our books.
The test results showed that the goodwill was impaired. We recorded a loss of
$601 million ($369 million, after-tax), that was the amount by which the value
on our books exceeded the fair value. In 2002, we also discontinued the
operations of Panhandle; therefore, the $369 million after-tax goodwill
impairment is reflected in discontinued operations. In 2003, we sold Panhandle.

     CMS MST: During the third quarter of 1999, we purchased a 100 percent
interest in CMS Viron and recorded goodwill. In 2002, we performed an impairment
test, which determined our goodwill related to CMS Viron was impaired. In the
first quarter of 2002, we recorded a loss of $15 million ($10 million,
after-tax) for goodwill impairment. In 2002, we also discontinued the operations
of CMS Viron; therefore, the $10 million after-tax goodwill impairment is
reflected in discontinued operations. In 2003, we sold CMS Viron.

                                      CMS-57
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Additionally, the following table represents net loss for the year 2001
without goodwill amortization expense.

<Table>
<Caption>
                                                                 RESTATED
                                                                   2001
                                                                 --------
                                                                IN MILLIONS
<S>                                                             <C>
Reported net loss...........................................      $ (459)
Add: goodwill amortization expense(a).......................          13
                                                                  ------
Adjusted net loss...........................................      $ (446)
Adjusted basic and diluted loss per share...................      $(3.41)
                                                                  ======
</Table>

- -------------------------
(a)  Net of tax of $7 million.

4: UNCERTAINTIES

     Several business trends or uncertainties may affect our financial results.
These trends or uncertainties have, or we reasonably expect could have, a
material impact on net sales, revenues, or income from continuing operations.
Such trends and uncertainties are discussed in detail below.

     SEC AND OTHER INVESTIGATIONS: As a result of round-trip trading
transactions by CMS MST, CMS Energy's Board of Directors established a Special
Committee to investigate matters surrounding the transactions and retained
outside counsel to assist in the investigation. The Special Committee completed
its investigation and reported its findings to the Board of Directors in October
2002. The Special Committee concluded, based on an extensive investigation, that
the round-trip trades were undertaken to raise CMS MST's profile as an energy
marketer with the goal of enhancing its ability to promote its services to new
customers. The Special Committee found no effort to manipulate the price of CMS
Energy Common Stock or affect energy prices. The Special Committee also made
recommendations designed to prevent any recurrence of this practice. Previously,
CMS Energy terminated its speculative trading business and revised its risk
management policy. The Board of Directors adopted, and CMS Energy has
implemented the recommendations of the Special Committee.

     CMS Energy is cooperating with other investigations concerning round-trip
trading, including an investigation by the SEC regarding round-trip trades and
CMS Energy's financial statements, accounting policies and controls, and an
investigation by the DOJ. CMS Energy is unable to predict the outcome of these
matters, and what effect, if any, these investigations will have on its
business.

     SECURITIES CLASS ACTION LAWSUITS: Beginning on May 17, 2002, a number of
securities class action complaints were filed against CMS Energy, Consumers, and
certain officers and directors of CMS Energy and its affiliates. The complaints
were filed as purported class actions in the United States District Court for
the Eastern District of Michigan, by shareholders who allege that they purchased
CMS Energy's securities during a purported class period. The cases were
consolidated into a single lawsuit and an amended and consolidated class action
complaint was filed on May 1, 2003. The consolidated complaint contains a
purported class period beginning on May 1, 2000 and running through March 31,
2003. It generally seeks unspecified damages based on allegations that the
defendants violated United States securities laws and regulations by making
allegedly false and misleading statements about CMS Energy's business and
financial condition, particularly with respect to revenues and expenses recorded
in connection with round-trip trading by CMS MST. CMS Energy, Consumers, and
their affiliates will defend themselves vigorously but cannot predict the
outcome of this litigation.

     DEMAND FOR ACTIONS AGAINST OFFICERS AND DIRECTORS: In May 2002, the Board
of Directors of CMS Energy received a demand, on behalf of a shareholder of CMS
Energy Common Stock, that it commence civil actions (i) to remedy alleged
breaches of fiduciary duties by certain CMS Energy officers and directors in
connection with round-trip trading by CMS MST, and (ii) to recover damages
sustained by CMS Energy as a result of alleged insider trades alleged to have
been made by certain current and former officers of CMS Energy

                                      CMS-58
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

and its subsidiaries. In December 2002, two new directors were appointed to the
Board. The Board formed a special litigation committee in January 2003 to
determine whether it is in the best interest of CMS Energy to bring the action
demanded by the shareholder. The disinterested members of the Board appointed
the two new directors to serve on the special litigation committee.

     In December 2003, during the continuing review by the special litigation
committee, CMS Energy was served with a derivative complaint filed on behalf of
the shareholder in the Circuit Court of Jackson County, Michigan in furtherance
of his demands. The date for CMS Energy and other defendants to answer or
otherwise respond to the complaint was extended to June 1, 2004, subject to such
further extensions as may be mutually agreed upon by the parties and authorized
by the Court. CMS Energy cannot predict the outcome of this matter.

     ERISA LAWSUITS: CMS Energy is a named defendant, along with Consumers, CMS
MST, and certain named and unnamed officers and directors, in two lawsuits
brought as purported class actions on behalf of participants and beneficiaries
of the CMS Employees' Savings and Incentive Plan (the "Plan"). The two cases,
filed in July 2002 in United States District Court for the Eastern District of
Michigan, were consolidated by the trial judge and an amended consolidated
complaint was filed. Plaintiffs allege breaches of fiduciary duties under ERISA
and seek restitution on behalf of the Plan with respect to a decline in value of
the shares of CMS Energy Common Stock held in the Plan. Plaintiffs also seek
other equitable relief and legal fees. CMS Energy and Consumers will defend
themselves vigorously but cannot predict the outcome of this litigation.

     GAS INDEX PRICE REPORTING INVESTIGATION: CMS Energy has notified
appropriate regulatory and governmental agencies that some employees at CMS MST
and CMS Field Services appeared to have provided inaccurate information
regarding natural gas trades to various energy industry publications which
compile and report index prices. CMS Energy is cooperating with an investigation
by the DOJ regarding this matter. In November 2003, CMS MST and CMS Field
Services (now Cantera Gas Company) entered into a settlement with the CFTC
pursuant to which they paid a $16 million civil monetary penalty in connection
with the inaccurate reporting of natural gas trading data to publications that
compile and publish price indices. The settlement resolves all matters
investigated by the CFTC involving CMS Energy, including round-trip trading. CMS
Energy neither admits nor denies the CFTC's findings in the settlement order.
CMS Energy is unable to predict the outcome of the DOJ investigation and what
effect, if any, this investigation will have on its business.

     GAS INDEX PRICE REPORTING LITIGATION: In August 2003, Cornerstone Propane
Partners, L.P. ("Cornerstone") filed a putative class action complaint in the
United States District Court for the Southern District of New York against CMS
Energy and dozens of other energy companies. The court ordered the Cornerstone
complaint to be consolidated with similar complaints filed by Dominick Viola and
Roberto Calle Gracey. The plaintiffs filed a consolidated complaint on January
20, 2004. The consolidated complaint alleges that false natural gas price
reporting by the defendants manipulated the prices of NYMEX natural gas futures
and options. The complaint contains two counts under the Commodity Exchange Act,
one for manipulation and one for aiding and abetting violations. CMS Energy is
no longer a defendant, however, CMS MST and CMS Field Services are named as
defendants. (CMS Energy sold CMS Field Services to Cantera Natural Gas, Inc. but
is required to indemnify Cantera Natural Gas, Inc. with respect to this action.)

     In a similar but unrelated matter, Texas-Ohio Energy, Inc. filed a putative
class action lawsuit in the United States District Court for the Eastern
District of California against a number of energy companies engaged in the sale
of natural gas in the United States. CMS Energy is named as a defendant. The
complaint alleges defendants entered into a price-fixing conspiracy by engaging
in activities to manipulate the price of natural gas in California. The
complaint contains counts alleging violations of the Sherman Act, Cartwright Act
(a California Statute), and the California Business and Profession Code relating
to unlawful, unfair and deceptive business practices. The plaintiff in the
Texas-Ohio case has agreed to extend the time for all defendants to answer or
otherwise respond until after the multi district court litigation ("MDL") panel
decides whether to take the case. There is currently pending in the Nevada
federal district court a MDL matter involving seven complaints originally filed
in various state courts in California. These complaints make allegations similar
to those in the
                                      CMS-59
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Texas-Ohio case regarding price reporting, although none contain a Sherman Act
claim. Some of the defendants in the MDL matter who are also defendants in the
Texas-Ohio case are trying to have the Texas-Ohio case transferred to the MDL
proceeding.

     Benscheidt v. AEP Energy Services, Inc., et al., a new class action
complaint containing allegations similar to those made in the Texas-Ohio case,
albeit limited to California state law claims, was filed in California state
court in February 2004. CMS Energy and CMS MST are named as defendants.
Defendants are likely to seek to remove this action from the California federal
district court and have it transferred to the MDL proceeding in Nevada.

     CMS Energy and the other CMS defendants will defend themselves vigorously,
but cannot predict the outcome of these matters.

CONSUMERS' UNCERTAINTIES

     Several business trends or uncertainties may affect Consumers' financial
results and condition. These trends or uncertainties have, or we expect could
have, a material impact on revenues or income from continuing electric and gas
operations. Such trends and uncertainties include:

     Environmental

     - increased capital expenditures and operating expenses for Clean Air Act
       compliance, and

     - potential environmental liabilities arising from various environmental
       laws and regulations, including potential liability or expenses relating
       to the Michigan Natural Resources and Environmental Protection Acts,
       Superfund, and at former manufactured gas plant facilities.

     Restructuring

     - response of the MPSC and Michigan legislature to electric industry
       restructuring issues,

     - ability to meet peak electric demand requirements at a reasonable cost,
       without market disruption,

     - ability to recover any of our net Stranded Costs under the regulatory
       policies being followed by the MPSC,

     - recovery of electric restructuring implementation costs,

     - effects of lost electric supply load to alternative electric suppliers,
       and

     - status as an electric transmission customer, instead of an electric
       transmission owner-operator.

     Regulatory

     - effects of conclusions about the causes of the August 14, 2003 blackout,
       including exposure to liability, increased regulatory requirements, and
       new legislation,

     - effects of potential performance standards payments,

     - successful implementation of initiatives to reduce exposure to purchased
       power price increases,

     - responses from regulators regarding the storage and ultimate disposal of
       spent nuclear fuel,

     - potential adverse appliance service plan ruling or related legislation,

     - inadequate regulatory response to applications for requested rate
       increases, and

     - response to increases in gas costs, including adverse regulatory response
       and reduced gas use by customers.

                                      CMS-60
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Other

     - pending litigation regarding PURPA qualifying facilities, and

     - pending litigation and government investigations.

CONSUMERS' ELECTRIC UTILITY CONTINGENCIES

     ELECTRIC ENVIRONMENTAL MATTERS: Our operations are subject to environmental
laws and regulations. Costs to operate our facilities in compliance with these
laws and regulations generally have been recovered in customer rates.

     Clean Air: In 1998, the EPA issued regulations requiring the state of
Michigan to further limit nitrogen oxide emissions at our coal-fired electric
plants. The Michigan Department of Environmental Quality finalized its rules to
comply with the EPA regulations in December 2002. It submitted these rules to
the EPA for approval in the first quarter of 2003. The EPA has yet to approve
the Michigan rules. If the EPA does not approve the Michigan rules, similar
federal regulations will take effect.

     The EPA and the state regulations require us to make significant capital
expenditures estimated to be $771 million. As of December 31, 2003, we have
incurred $446 million in capital expenditures to comply with the EPA regulations
and anticipate that the remaining $325 million of capital expenditures will be
incurred between 2004 and 2009. These expenditures include installing catalytic
reduction technology on some of our coal-fired electric plants. Based on the
Customer Choice Act, beginning January 2004, an annual return of and on these
types of capital expenditures, to the extent they are above depreciation levels,
is expected to be recoverable from customers, subject to a MPSC prudency
hearing.

     The EPA has alleged that some utilities have incorrectly classified plant
modifications as "routine maintenance" rather than seek modification permits
from the EPA. We have received and responded to information requests from the
EPA on this subject. We believe that we have properly interpreted the
requirements of "routine maintenance." If our interpretation is found to be
incorrect, we may be required to install additional pollution controls at some
or all of our coal-fired electric plants.

     In addition to modifying the coal-fired electric plants, we expect to
purchase nitrogen oxide emissions credits for years 2004 through 2008. The cost
of these credits is estimated to average $8 million per year and is accounted
for as inventory. The credit inventory is expensed as the coal-fired electric
plants generate electricity. The price for nitrogen oxide emissions credits is
volatile and could change substantially.

     Future clean air regulations requiring emission controls for sulfur
dioxide, nitrogen oxides, mercury, and nickel may require additional capital
expenditures. Total expenditures will depend upon the final makeup of the new
regulations.

     Water: The EPA has proposed changes to the rules that govern generating
plant cooling water intake systems. The proposed rules will require significant
reduction in fish killed by operating equipment. The proposed rules are
scheduled to become final in the first quarter of 2004 and some of our
facilities would be required to comply by 2006. We are studying the proposed
rules to determine the most cost-effective solutions for compliance.

     Cleanup and Solid Waste: Under the Michigan Natural Resources and
Environmental Protection Act, we expect that we will ultimately incur
investigation and remedial action costs at a number of sites. We believe that
these costs will be recoverable in rates under current ratemaking policies.

     We are a potentially responsible party at several contaminated sites
administered under Superfund. Superfund liability is joint and several, meaning
that many other creditworthy parties with substantial assets are potentially
responsible with respect to the individual sites. Based on past experience, we
estimate that our share of

                                      CMS-61
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                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

the total liability for the known Superfund sites will be between $1 million and
$9 million. As of December 31, 2003, we have recorded a liability for the
minimum amount of our estimated Superfund liability.

     In October 1998, during routine maintenance activities, we identified PCB
as a component in certain paint, grout, and sealant materials at the Ludington
Pumped Storage facility. We removed and replaced part of the PCB material. We
have proposed a plan to deal with the remaining materials and are awaiting a
response from the EPA.

     LITIGATION: In October 2003, a group of eight PURPA qualifying facilities
selling power to us filed a lawsuit in Ingham County Circuit Court. The lawsuit
alleges that we incorrectly calculated the energy charge payments made pursuant
to power purchase agreements with qualifying facilities. More specifically, the
lawsuit alleges that we should be basing the energy charge calculation on the
cost of more expensive eastern coal, rather than on the cost of the coal
actually burned by us for use in our coal-fired generating plants. We believe we
have been performing the calculation in the manner prescribed by the power
purchase agreements, and have filed a request with the MPSC (as a supplement to
the PSCR plan) that asks the MPSC to review this issue and to confirm that our
method of performing the calculation is correct. We filed a motion to dismiss
the lawsuit in the Ingham County Circuit Court due to the pending request at the
MPSC in regard to the PSCR plan case. In February 2004, the judge ruled on the
motion and deferred to the primary jurisdiction of the MPSC. This ruling
effectively suspends the lawsuit until the MPSC rules. Although only eight
qualifying facilities have raised the issue, the same energy charge methodology
is used in the PPA with the MCV Partnership and in approximately 20 additional
power purchase agreements with us, representing a total of 1,670 MW of electric
capacity. We cannot predict the outcome of this matter.

CONSUMERS' ELECTRIC UTILITY RESTRUCTURING MATTERS

     ELECTRIC RESTRUCTURING LEGISLATION: In June 2000, the Michigan legislature
passed electric utility restructuring legislation known as the Customer Choice
Act. This act:

     - allows all customers to choose their electric generation supplier
       effective January 1, 2002,

     - provides a one-time five percent residential electric rate reduction,

     - froze all electric rates through December 31, 2003, and established a
       rate cap for residential customers through at least December 31, 2005,
       and a rate cap for small commercial and industrial customers through at
       least December 31, 2004,

     - allows deferred recovery of an annual return of and on capital
       expenditures in excess of depreciation levels incurred during and before
       the rate freeze-cap period,

     - allows for the use of Securitization bonds to refinance qualified costs,

     - allows recovery of net Stranded Costs and implementation costs incurred
       as a result of the passage of the act,

     - requires Michigan utilities to join a FERC-approved RTO or sell their
       interest in transmission facilities to an independent transmission owner,

     - requires Consumers, Detroit Edison, and AEP to jointly expand their
       available transmission capability by at least 2,000 MW, and

     - establishes a market power supply test that, if not met, may require
       transferring control of generation resources in excess of that required
       to serve retail sales requirements.

     The following summarizes our status under the last three provisions of the
Customer Choice Act. First, we chose to sell our interest in our transmission
facilities to an independent transmission owner in order to comply with the
Customer Choice Act; for additional details regarding the sale of the
transmission facility, see "Transmission Sale" within this section. Second, in
July 2002, the MPSC issued an order approving our plan to
                                      CMS-62
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

achieve the increased transmission capacity required under the Customer Choice
Act. The MPSC found that once the planned projects were completed and
verification was submitted, a utility was in technical compliance. We have
completed the transmission capacity projects identified in the plan and have
submitted verification of this fact to the MPSC. We believe we are in full
compliance. Lastly, in September 2003, the MPSC issued an order finding that we
are in compliance with the market power supply test set forth in the Customer
Choice Act.

     ELECTRIC ROA PLAN: In 1998, we submitted a plan for electric ROA to the
MPSC. In March 1999, the MPSC issued orders generally supporting the plan. The
Customer Choice Act states that the MPSC orders issued before June 2000 are in
compliance with this act and enforceable by the MPSC. Those MPSC orders:

     - allow electric customers to choose their supplier,

     - authorize recovery of net Stranded Costs from ROA customers and
       implementation costs from all customer classes, and

     - confirm any voluntary commitments of electric utilities.

     The MPSC approved revised tariffs that establish the rates, terms, and
conditions under which retail customers are permitted to choose an electric
supplier. These revised tariffs allow ROA customers, upon as little as 30 days
notice to us, to return to our generation service at current tariff rates. If
any class of customers' (residential, commercial, or industrial) ROA load
reaches ten percent of our total load for that class of customers, then
returning ROA customers for that class must give 60 days notice to return to our
generation service at current tariff rates. However, we may not have capacity
available to serve returning ROA customers that is sufficient or reasonably
priced. As a result, we may be forced to purchase electricity on the spot market
at higher prices than we can recover from our customers during the rate cap
periods.

     We cannot predict the total amount of electric supply load that may be lost
to competitor suppliers. As of March 2004, alternative electric suppliers are
providing 735 MW of load. This amount represents nine percent of the total
distribution load and an increase of 42 percent compared to March 2003.

     We cannot predict whether the Stranded Cost recovery method adopted by the
MPSC will be applied in a manner that will fully offset any associated margin
loss from ROA. In February 2004, the MPSC issued an order on Detroit Edison's
request for rate relief for costs associated with customers leaving under
electric customer choice. The MPSC order allows Detroit Edison to charge a
transition surcharge of approximately 0.4 cent per kWh to ROA customers and
eliminates securitization offsets of 0.7 cents per kWh for primary service
customers and 0.9 cents per kWh for secondary service customers. We are seeking
similar recovery of Stranded Costs due to ROA customers leaving our system and
are encouraged by this ruling.

     ELECTRIC RESTRUCTURING PROCEEDINGS: Below is a discussion of our electric
restructuring proceedings. They are:

     - Securitization,

     - Stranded Costs,

     - implementation costs, and

     - transmission.

     Securitization: The Customer Choice Act allows for the use of
Securitization bonds to refinance certain qualified costs. Since Securitization
involves issuing bonds secured by a revenue stream from rates collected directly
from customers to service the bonds, Securitization bonds typically have a
higher credit rating than

                                      CMS-63
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

conventional utility corporate financing. In 2000 and 2001, the MPSC issued
orders authorizing us to issue Securitization bonds. We issued our first
Securitization bonds in late 2001. Securitization resulted in:

     - lower interest costs, and

     - longer amortization periods for the securitized assets.

     We will recover the repayment of principal, interest, and other expenses
relating to the bond issuance through a Securitization charge and a tax charge
that began in December 2001. These charges are subject to an annual true up
until one year prior to the last scheduled bond maturity date, and no more than
quarterly thereafter. The December 2003 true up modified the total
Securitization and related tax charges from 1.746 mills per kWh to 1.718 mills
per kWh. There will be no impact on customer bills from Securitization for most
of our electric customers until the Customer Choice Act cap period expires, and
an electric rate case is processed. Securitization charge collections, $50
million for the twelve months ended December 31, 2003, and $52 million for the
twelve months ended December 31, 2002, are remitted to a trustee. Securitization
charge collections are restricted to the repayment of the principal and interest
on the Securitization bonds and payment of the ongoing expenses of Consumers
Funding. Consumers Funding is legally separate from Consumers. The assets and
income of Consumers Funding, including the securitized property, are not
available to creditors of Consumers or CMS Energy.

     In March 2003, we filed an application with the MPSC seeking approval to
issue additional Securitization bonds. In June 2003, the MPSC issued a financing
order authorizing the issuance of Securitization bonds in the amount of $554
million. This amount relates to Clean Air Act expenditures and associated return
on those expenditures through December 31, 2002; ROA implementation costs, and
previously authorized return on those expenditures through December 31, 2000;
and other up front qualified costs related to issuance of the Securitization
bonds. The MPSC rejected the portion of the application related to pension
costs. The MPSC based its decision on the reasoning that a rebounding economy
and stock market could potentially reverse recent Pension Plan losses. Also, the
MPSC rejected Palisades expenditures previously not securitized as eligible
securitized costs; therefore, these costs will be included in a future electric
rate case proceeding with the MPSC and as a component of the 2002 net Stranded
Cost calculation. In July 2003, we filed for rehearing and clarification on a
number of features in the financing order.

     In December 2003, the MPSC issued its order on rehearing, which rejected
our requests for clarification and modification to the dividend payment
restriction, failed to rule directly on the accounting clarifications requested,
and remanded the proceeding to the ALJ for additional proceedings to address
rate design. We filed testimony regarding the remanded proceeding in February
2004. The financing order will become effective after acceptance by us and
resolution of any appeals.

     Stranded Costs: The Customer Choice Act allows electric utilities to
recover their net Stranded Costs, without defining the term. The Act directs the
MPSC to establish a method of calculating net Stranded Costs and of conducting
related true-up adjustments. In December 2001, the MPSC Staff recommended a
methodology, which calculated net Stranded Costs as the shortfall between:

     - the revenue required to cover the costs associated with fixed generation
       assets and capacity payments associated with purchase power agreements,
       and

     - the revenues received from customers under existing rates available to
       cover the revenue requirement.

     We are authorized by the MPSC to use deferred accounting to recognize the
future recovery of costs determined to be stranded. According to the MPSC, net
Stranded Costs are to be recovered from ROA customers through a Stranded Cost
transition charge. However, the MPSC has not yet allowed such a transition
charge and we have not recorded regulatory assets to recognize the future
recovery of such costs.

                                      CMS-64
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In 2002 and 2001, the MPSC issued orders finding that we experienced zero
net Stranded Costs from 1999 to 2001. The MPSC also declined to resolve numerous
issues regarding the net Stranded Cost methodology in a way that would allow a
reliable prediction of the level of Stranded Costs for future years. We are
currently in the process of appealing these orders with the Michigan Court of
Appeals and the Michigan Supreme Court.

     In March 2003, we filed an application with the MPSC seeking approval of
net Stranded Costs incurred in 2002, and for approval of a net Stranded Cost
recovery charge. Our net Stranded Costs incurred in 2002 are estimated to be $38
million with the issuance of Securitization bonds that include Clean Air Act
investments, or $85 million without the issuance of Securitization bonds that
include Clean Air Act investments. The MPSC scheduled hearings for our 2002
Stranded Cost application to take place during the second quarter of 2004.

     Once a final financing order on Securitization is reached, we will know the
amount of our request for net Stranded Cost recovery for 2002. We cannot predict
how the MPSC will rule on our request for the recoverability of Stranded Costs.

     Implementation Costs: Since 1997, we have incurred significant electric
utility restructuring implementation costs. The Customer Choice Act allows
electric utilities to recover their implementation costs. The following table
outlines the applications filed by us with the MPSC and the status of recovery
for these costs.

<Table>
<Caption>
                YEAR FILED                    YEAR INCURRED    REQUESTED    PENDING    ALLOWED    DISALLOWED
                ----------                    -------------    ---------    -------    -------    ----------
                                                                                IN MILLIONS
<S>                                           <C>              <C>          <C>        <C>        <C>
1999......................................     1997 & 1998        $20        $ --          $15          $5
2000......................................            1999         30          --           25           5
2001......................................            2000         25          --           20           5
2002......................................            2001          8          --            8          --
2003......................................            2002          2           2      Pending     Pending
</Table>

     The MPSC disallowed certain costs, determining that these amounts did not
represent costs incremental to costs already reflected in electric rates. In the
order received for the year 2001, the MPSC also reserved the right to reevaluate
the implementation costs depending upon the progress and success of the ROA
program, and ruled that due to the rate freeze imposed by the Customer Choice
Act, it was premature to establish a cost recovery method for the allowable
implementation costs. In addition to the amounts shown above, we incurred and
deferred as a regulatory asset, as of December 31, 2003, $2 million of
additional implementation costs and $19 million for the cost of money associated
with total implementation costs. We believe the implementation costs and
associated cost of money are fully recoverable in accordance with the Customer
Choice Act. Cash recovery from customers is expected to begin after the rate cap
period expires. The rate cap expired for large commercial and industrial
customers on December 31, 2003. We have asked to include implementation costs
through December 31, 2000 in the pending Securitization case. If approved, the
sale of Securitization bonds will allow for the recovery of a significant
portion of these costs. We cannot predict the amount the MPSC will approve as
allowable costs.

     Also, we are pursuing authorization at the FERC for MISO to reimburse us
for $8 million in certain electric utility restructuring implementation costs
related to our former participation in the development of the Alliance RTO, a
portion of which has been expensed. In May 2003, the FERC issued an order
denying MISO's request for authorization to reimburse us. In June 2003, we filed
a joint petition with MISO for rehearing with the FERC, which the FERC denied in
September 2003. We appealed the FERC ruling at the United States Court of
Appeals for the District of Columbia and are pursuing other potential means of
recovery at the FERC. In conjunction with our appeal of the September order
denying recovery, MISO agreed to file a request with the FERC seeking authority
to reimburse METC. As part of the contract for the sale of our former
transmission system, should the FERC approve the new MISO filing, METC is
contractually obligated to flow-through to us the full amount of any Alliance
RTO start-up costs that it is authorized to recover by FERC. We cannot predict
the outcome of the

                                      CMS-65
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

appeal process, the MISO request, or the ultimate amount, if any, FERC will
allow us to collect for implementation costs.

     Transmission Rates: Our application of JOATT transmission rates to
customers during past periods is under FERC review. The rates included in these
tariffs were applied to certain transmission transactions affecting both Detroit
Edison's and our transmission systems between 1997 and 2002. We believe our
reserve is sufficient to satisfy our refund obligation to any of our former
transmission customers under our former JOATT.

     TRANSMISSION SALE: In May 2002, we sold our electric transmission system
for $290 million to MTH, a non-affiliated limited partnership whose general
partner is a subsidiary of Trans-Elect, Inc. The pretax gain was $31 million
($26 million, net of tax). We are currently in arbitration with MTH regarding
property tax items used in establishing the selling price of our electric
transmission system. We cannot predict whether the remaining open items will
impact materially the recorded gain on the sale.

     As a result of the sale, after-tax earnings have decreased due to a loss of
revenue from wholesale and ROA customers who will buy services directly from
MTH.

     METC has completed the capital program to expand the transmission system's
capability to import electricity into Michigan, as required by the Customer
Choice Act. We will continue to maintain the system until May 1, 2007 under a
contract with METC.

     Under an agreement with MTH, transmission rates charged to us are fixed by
contract at current levels through December 31, 2005, and are subject to FERC
ratemaking thereafter. However, we are subject to certain additional MISO
surcharges, which are estimated to be $15 million in 2004.

CONSUMERS' ELECTRIC UTILITY RATE MATTERS

     AUGUST 14, 2003 BLACKOUT: On August 14, 2003, the electric transmission
grid serving parts of the Midwest and the Northeast experienced a significant
disturbance that impacted electric service to millions of homes and businesses.
Approximately 100,000 of our 1.7 million electric customers were without power
for approximately 24 hours as a result of the disturbance. We incurred $1
million of immediate expense as a result of the blackout. We continue to
cooperate with investigations of the blackout by several federal and state
agencies. We cannot predict the outcome of these investigations.

     In November 2003, the MPSC released its report on the blackout. The MPSC
report found no evidence to suggest that the events in Michigan or actions taken
by the Michigan utilities or transmission operators were factors contributing to
the cause of the blackout. Also in November 2003, the United States and Canadian
power system outage task force preliminarily reported that the primary cause of
the blackout was due to transmission line contact with trees in areas outside of
Consumers' operating territory. In December 2003, the MPSC issued an order
requiring Michigan investor-owned utilities to file reports by April 1, 2004, on
the status of the transmission and distribution lines used to serve their
customers, including details on vegetation trimming practices in calendar year
2003. Consumers intends to comply with the MPSC's request.

     In February 2004, the Board of Trustees of NERC approved recommendations to
improve electric transmission reliability. The key recommendations are as
follows:

     - strengthen the NERC compliance enforcement program,

     - evaluate vegetation management procedures, and

     - improve technology to prevent or mitigate future blackouts.

     These recommendations require transmission operators, which Consumers is
not, to submit annual reports on vegetation management beginning March 2005 and
improve technology over various milestones throughout

                                      CMS-66
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2004. These recommendations could result in increased transmission costs payable
by transmission customers in the future. The financial impacts of these
recommendations are not currently quantifiable.

     PERFORMANCE STANDARDS: Electric distribution performance standards
developed by the MPSC were in proposal status during 2002 and 2003. The
performance standards were placed into Michigan law in January 2004 and became
effective on February 9, 2004. They relate to restoration after an outage,
safety, and customer relations. During 2002 and 2003, Consumers monitored and
reported to the MPSC its performance relative to the performance standards.
Year-end results for both 2002 and 2003 resulted in compliance with the
acceptable level of performance as established by the approved standards.

     Financial incentives and penalties are contained within the performance
standards. An incentive is possible if all of the established performance
standards have been exceeded for a calendar year. However, the value of such
incentive cannot be determined at this point as the performance standards do not
contain an approved incentive mechanism. Financial penalties in the form of
customer credits are also possible. These customer credits are based on duration
and repetition of outages. We cannot predict the likely effects of the financial
incentive or penalties, if any, on us.

     POWER SUPPLY COSTS: We were required to provide backup service to ROA
customers on a best efforts basis. In October 2003, we provided notice to the
MPSC that we would terminate the provision of backup service in accordance with
the Customer Choice Act, effective January 1, 2004.

     To reduce the risk of high electric prices during peak demand periods and
to achieve our reserve margin target, we employ a strategy of purchasing
electric call option and capacity and energy contracts for the physical delivery
of electricity primarily in the summer months and to a lesser degree in the
winter months. As of December 31, 2003, we purchased capacity and energy
contracts partially covering the estimated reserve margin requirements for 2004
through 2007. As a result, we have recognized an asset of $20 million for
unexpired capacity and energy contracts. Currently, we have a reserve margin of
5 percent, or supply resources equal to 105 percent of projected summer peak
load for summer 2004. We are in the process of securing the additional capacity
needed to meet our summer 2004 reserve margin target of 11 percent (111 percent
of projected summer peak load). The total premium costs of electricity call
option and capacity and energy contracts for 2003 were approximately $10
million.

     As a result of meeting the transmission capability expansion requirements
and the market power test, as discussed in this note, we have met the
requirements under the Customer Choice Act to return to the PSCR process. The
PSCR process provides for the reconciliation of actual power supply costs with
power supply revenues. This process assures recovery of all reasonable and
prudent power supply costs actually incurred by us. In September 2003, we
submitted a PSCR filing to the MPSC that reinstates the PSCR process for
customers whose rates are no longer frozen or capped as of January 1, 2004. The
proposed PSCR charge allows us to recover a portion of our increased power
supply costs from large commercial and industrial customers, and subject to the
overall rate cap, from other customers. We estimate the recovery of increased
power supply costs from large commercial and industrial customers to be
approximately $30 million in 2004. As allowed under current regulation, we
self-implemented the proposed PSCR charge on January 1, 2004. The revenues
received from the PSCR charge are also subject to subsequent reconciliation at
the end of the year after actual costs have been reviewed for reasonableness and
prudence. We cannot predict the outcome of this filing.

OTHER CONSUMERS' ELECTRIC UTILITY UNCERTAINTIES

     THE MIDLAND COGENERATION VENTURE: The MCV Partnership, which leases and
operates the MCV Facility, contracted to sell electricity to Consumers for a
35-year period beginning in 1990 and to supply electricity and

                                      CMS-67
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

steam to Dow. We hold, through two wholly owned subsidiaries, the following
assets related to the MCV Partnership and MCV Facility:

     - CMS Midland owns a 49 percent general partnership interest in the MCV
       Partnership, and

     - CMS Holdings holds, through FMLP, a 35 percent lessor interest in the MCV
       Facility.

     Our consolidated retained earnings include undistributed earnings from the
MCV Partnership, which at December 31, 2003 are $245 million and at December 31,
2002 are $226 million.

Summarized Statements of Income for CMS Midland and CMS Holdings

<Table>
<Caption>
                                                                    YEARS ENDED
                                                                    DECEMBER 31
                                                                --------------------
                                                                2003    2002    2001
                                                                ----    ----    ----
                                                                    IN MILLIONS
<S>                                                             <C>     <C>     <C>
Earnings from equity method investees.......................    $42     $52     $38
Operating expenses, taxes and other.........................     22      18      13
                                                                ---     ---     ---
Income before cumulative effect of accounting change........    $20     $34     $25
Cumulative effect of change in method of accounting for
  derivatives, net of $10 million tax expense in 2002 (Note
  15).......................................................     --      18      --
                                                                ---     ---     ---
Net income..................................................    $20     $52     $25
                                                                ===     ===     ===
</Table>

     Power Supply Purchases from the MCV Partnership: Our annual obligation to
purchase capacity from the MCV Partnership is 1,240 MW through the term of the
PPA ending in 2025. The PPA requires us to pay, based on the MCV Facility's
availability, a levelized average capacity charge of 3.77 cents per kWh and a
fixed energy charge. We also pay a variable energy charge based on our average
cost of coal consumed for all kWh delivered. Effective January 1999, we reached
a settlement agreement with the MCV Partnership that capped payments made on the
basis of availability that may be billed by the MCV Partnership at a maximum
98.5 percent availability level.

     Since January 1993, the MPSC has permitted us to recover capacity charges
averaging 3.62 cents per kWh for 915 MW, plus fixed and variable energy charges.
Since January 1996, the MPSC has also permitted us to recover capacity charges
for the remaining 325 MW of contract capacity with an initial average charge of
2.86 cents per kWh increasing periodically to an eventual 3.62 cents per kWh by
2004 and thereafter. However, due to the frozen retail rates required by the
Customer Choice Act, the capacity charge for the 325 MW was frozen at 3.17 cents
per kWh until December 31, 2003. Recovery of both the 915 MW and 325 MW portions
of the PPA are subject to certain limitations discussed below.

     In 1992, we recognized a loss and established a liability for the present
value of the estimated future underrecoveries of power supply costs under the
PPA based on MPSC cost-recovery orders. The remaining liability associated with
the loss totaled $27 million at December 31, 2003, $53 million at December 31,
2002, and $77 million at December 31, 2001. We expect the PPA liability to be
depleted in late 2004.

     We estimate that 51 percent of the actual cash underrecoveries for 2004
will be charged to the PPA liability, with the remaining portion charged to
operating expense as a result of our 49 percent ownership in the MCV
Partnership. We will expense all cash underrecoveries directly to income once
the PPA liability is depleted. If the

                                      CMS-68
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

MCV Facility's generating availability remains at the maximum 98.5 percent
level, our cash underrecoveries associated with the PPA could be as follows:

<Table>
<Caption>
                                                                2004    2005    2006    2007
                                                                ----    ----    ----    ----
                                                                        IN MILLIONS
<S>                                                             <C>     <C>     <C>     <C>
Estimated cash underrecoveries at 98.5%.....................    $56     $56     $55     $39
Amount to be charged to operating expense...................     29      56      55      39
Amount to be charged to PPA liability.......................     27      --      --      --
</Table>

     Beginning January 1, 2004, the rate freeze for large industrial customers
was no longer in effect and we returned to the PSCR process. Under the PSCR
process, we will recover from our customers the capacity and fixed energy
charges based on availability, up to an availability cap of 88.7 percent as
established in previous MPSC orders.

     Effects on Our Ownership Interest in the MCV Partnership and MCV
Facility: As a result of returning to the PSCR process, we returned to
dispatching the MCV Facility on a fixed load basis, as permitted by the MPSC, in
order to maximize recovery of our capacity payments. This fixed load dispatch
increases the MCV Facility's output and electricity production costs, such as
natural gas. As the spread between the MCV Facility's variable electricity
production costs and its energy payment revenue widens, the MCV's Partnership's
financial performance and our equity interest in the MCV Partnership may be
affected negatively.

     Under the PPA, variable energy payments to the MCV Partnership are based on
the cost of coal burned at our coal plants and operation and maintenance
expenses. However, the MCV Partnership's costs of producing electricity are tied
to the cost of natural gas. Because natural gas prices have increased
substantially in recent years, while the price the MCV Partnership can charge us
for energy has not, the MCV Partnership's financial performance has been
impacted negatively.

     Until September 2007, the PPA and settlement require us to pay capacity and
fixed energy charges based on the MCV Facility's actual availability up to the
98.5 percent cap. After September 2007, we expect to exercise the regulatory out
provision in the PPA, limiting our capacity and fixed energy payments to the MCV
Partnership to the amount collected from our customers. The MPSC's future
actions on the capacity and fixed energy payments recoverable from customers
subsequent to September 2007 may affect negatively the earnings of the MCV
Partnership and the value of our equity interest in the MCV Partnership.

     In February 2004, we filed a resource conservation plan with the MPSC that
is intended to help conserve natural gas and thereby improve our equity
investment in the MCV Partnership. This plan seeks approval to:

     - dispatch the MCV Facility on an economic basis depending on natural gas
       market prices without increased costs to electric customers,

     - give Consumers a priority right to buy excess natural gas as a result of
       the reduced dispatch of the MCV Facility, and

     - fund $5 million annually for renewable energy sources such as wind power
       projects.

     The resource conservation plan will reduce the MCV Facility's annual
natural gas consumption by an estimated 30 to 40 billion cubic feet. This
decrease in the quantity of high-priced natural gas consumed by the MCV Facility
will benefit Consumers' ownership interest in the MCV Partnership. The amount of
PPA capacity and fixed energy payments recovered from retail electric customers
would remain capped at 88.7 percent. Therefore, customers will not be charged
for any increased power supply costs, if they occur. Consumers and the MCV
Partnership have reached an agreement that the MCV Partnership will reimburse
Consumers for any incremental power costs incurred to replace the reduction in
power dispatched from the MCV Facility. We requested that the MPSC provide
interim approval while it conducts a full review of the plan. The MPSC has

                                      CMS-69
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

scheduled a prehearing conference with respect to the MCV resource conservation
plan for April 2004. We cannot predict if or when the MPSC will approve our
request.

     The two most significant variables in the analysis of the MCV Partnership's
future financial performance are the forward price of natural gas for the next
22 years and the MPSC's decision in 2007 or beyond on our recovery of capacity
payments. Natural gas prices have been historically volatile. Presently, there
is no consensus in the marketplace on the price or range of prices of natural
gas in the short term or beyond the next five years. Therefore, we cannot
predict the impact of these issues on our future earnings, cash flows, or on the
value of our equity interest in the MCV Partnership.

     NUCLEAR MATTERS: Big Rock: Significant progress continues to be made in the
decommissioning of Big Rock. We submitted the License Termination Plan to the
NRC staff for review in April 2003. System dismantlement and building demolition
are on schedule to return the 560-acre site to a natural setting for
unrestricted use in early 2006. The NRC and Michigan Department of Environmental
Quality continue to find that all decommissioning activities at Big Rock are
being performed in accordance with applicable regulatory and license
requirements.

     Seven transportable dry casks have been loaded with spent nuclear fuel and
an eighth cask has been loaded with high-level radioactive waste material. These
dry casks will remain onsite until the DOE moves the material to a national
spent nuclear fuel repository.

     Palisades: In July 2003, the NRC completed its mid-cycle plant performance
assessment of Palisades. The mid-cycle assessment for Palisades covered the
period from January 1, 2003 through the end of July 2003. The NRC determined
that Palisades was operated in a manner that preserved public health and safety
and fully met all cornerstone objectives. Based on the plant's performance, only
regularly scheduled inspections are planned through September 2004.

     The amount of spent nuclear fuel exceeds Palisades' temporary onsite
storage pool capacity. We are using dry casks for temporary onsite storage. As
of December 31, 2003, we have loaded 18 dry casks with spent nuclear fuel and we
will need to load additional dry casks by the fall of 2004 in order to continue
operation. Palisades currently has three empty dry casks onsite, with storage
pad capacity for up to seven additional loaded dry casks. We anticipate that
transportable dry casks, along with more storage pad capacity, will be available
by fall 2004.

     DOE Litigation: In 1997, a U.S. Court of Appeals decision confirmed that
the DOE was to begin accepting deliveries of spent nuclear fuel for disposal by
January 1998. Subsequent U.S. Court of Appeals litigation, in which we and other
utilities participated, has not been successful in producing more specific
relief for the DOE's failure to accept the spent nuclear fuel.

     There are two court decisions that support the right of utilities to pursue
damage claims in the United States Court of Claims against the DOE for failure
to take delivery of spent nuclear fuel. A number of utilities have initiated
litigation in the United States Court of Claims; we filed our complaint in
December 2002. If our litigation against the DOE is successful, we anticipate
future recoveries from the DOE. The recoveries will be used to pay the cost of
spent nuclear fuel storage until the DOE takes possession as required by law. We
can make no assurance that the litigation against the DOE will be successful.

     In July 2002, Congress approved and the President signed a bill designating
the site at Yucca Mountain, Nevada, for the development of a repository for the
disposal of high-level radioactive waste and spent nuclear fuel. The next step
will be for the DOE to submit an application to the NRC for a license to begin
construction of the repository. The application and review process is estimated
to take several years.

     Spent nuclear fuel complaint: In March 2003, the Michigan Environmental
Council, the Public Interest Research Group in Michigan, and the Michigan
Consumer Federation filed a complaint with the MPSC, which was served on us by
the MPSC in April 2003. The complaint asks the MPSC to initiate a generic
investigation
                                      CMS-70
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

and contested case to review all facts and issues concerning costs associated
with spent nuclear fuel storage and disposal. The complaint seeks a variety of
relief with respect to Consumers, Detroit Edison, Indiana & Michigan Electric
Company, Wisconsin Electric Power Company, and Wisconsin Public Service
Corporation. The complaint states that amounts collected from customers for
spent nuclear storage and disposal should be placed in an independent trust. The
complaint also asks the MPSC to take additional actions. In May 2003, Consumers
and other named utilities each filed motions to dismiss the complaint. We are
unable to predict the outcome of this matter.

     Insurance: We maintain nuclear insurance coverage on our nuclear plants. At
Palisades, we maintain nuclear property insurance from NEIL, totaling $2.750
billion and insurance that would partially cover the cost of replacement power
during certain prolonged accidental outages. Because NEIL is a mutual insurance
company, we could be subject to assessments of up to $26 million in any policy
year if insured losses in excess of NEIL's maximum policyholders surplus occur
at our, or any other member's, nuclear facility. NEIL's policies include
coverage for acts of terrorism.

     At Palisades, we maintain nuclear liability insurance for third-party
bodily injury and off-site property damage resulting from a nuclear hazard for
up to approximately $10.862 billion, the maximum insurance liability limits
established by the Price-Anderson Act. The United States Congress enacted the
Price-Anderson Act to provide financial liability protection for those parties
who may be liable for a nuclear accident or incident. Part of the Price-Anderson
Act's financial protection is a mandatory industry-wide program where owners of
nuclear generating facilities could be assessed if a nuclear incident occurs at
any nuclear generating facility. The maximum assessment against us could be $101
million per occurrence, limited to maximum annual installment payments of $10
million.

     We also maintain insurance under a program that covers tort claims for
bodily injury to nuclear workers caused by nuclear hazards. The policy contains
a $300 million nuclear industry aggregate limit. Under a previous insurance
program providing coverage for claims brought by nuclear workers, we remain
responsible for a maximum assessment of up to $6 million.

     Big Rock remains insured for nuclear liability by a combination of
insurance and a NRC indemnity totaling $544 million and a nuclear property
insurance policy from NEIL.

     Insurance policy terms, limits, and conditions are subject to change during
the year as we renew our policies.

     COMMITMENTS FOR FUTURE PURCHASES: We enter into a number of unconditional
purchase obligations that represent normal business operating contracts. These
contracts are used to assure an adequate supply of goods and services necessary
for the operation of our business and to minimize exposure to market price
fluctuations. We believe that these future costs are prudent and reasonably
assured of recovery in future rates.

     Coal Supply and Transportation: We have entered into coal supply contracts
with various suppliers for our coal-fired generating stations. Under the terms
of these agreements, we are obligated to take physical delivery of the coal and
make payment based upon the contract terms. Our coal supply contracts expire
from 2004 to 2005, and total an estimated $177 million. Our coal transportation
contracts expire from 2004 to 2007, and total an estimated $139 million.
Long-term coal supply contracts account for approximately 60 to 90 percent of
our annual coal requirements. In 2003, coal purchases totaled $265 million of
which $207 million (78 percent of the tonnage requirement) was under long-term
contract. We supplement our long-term contracts with spot-market purchases.

     Power Supply, Capacity, and Transmission: As of December 31, 2003, we had
future unrecognized commitments to purchase power transmission services under
fixed price forward contracts for 2004 and 2005 totaling $8 million. We also had
commitments to purchase capacity and energy under long-term power purchase
agreements with various generating plants including the MCV Facility. These
contracts require monthly capacity payments based on the plants' availability or
deliverability. These payments for 2004 through 2030 total an

                                      CMS-71
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

estimated $14.483 billion, undiscounted, which includes $11.381 billion related
to the MCV Facility. These payments exclude the obligations that Consumers has
with the Genesee, Grayling, and Filer City generating plants because these
entities are consolidated for CMS Energy under FASB Interpretation No. 46. This
amount may vary depending upon plant availability and fuel costs. If a plant was
not available to deliver electricity to us, then we would not be obligated to
make the capacity payment until the plant could deliver.

CONSUMERS' GAS UTILITY CONTINGENCIES

     GAS ENVIRONMENTAL MATTERS: We expect to have investigation and remedial
costs at a number of sites under the Michigan Natural Resources and
Environmental Protection Act, a Michigan statute that covers environmental
activities including remediation. These sites include 23 former manufactured gas
plant facilities. We operated the facilities on these sites for some part of
their operating lives. For some of these sites, we have no current ownership or
may own only a portion of the original site. We have completed initial
investigations at the 23 sites. We will continue to implement remediation plans
for sites where we have received MDEQ remediation plan approval. We will also
work toward resolving environmental issues at sites as studies are completed.

     We have estimated our costs for investigation and remedial action at all 23
sites using the Gas Research Institute-Manufactured Gas Plant Probabilistic Cost
Model. We expect our remaining costs to be between $37 million and $90 million.
The range reflects multiple alternatives with various assumptions for resolving
the environmental issues at each site. The estimates are based on discounted
2003 costs using a discount rate of three percent. The discount rate represents
a ten-year average of U.S. Treasury bond rates reduced for increases in the
consumer price index. We expect to fund most of these costs through insurance
proceeds and through MPSC approved rates charged to our customers. As of
December 31, 2003, we have recorded a liability of $44 million, net of $38
million of expenditures incurred to date, and a regulatory asset of $67 million.
Any significant change in assumptions, such as an increase in the number of
sites, different remediation techniques, nature and extent of contamination, and
legal and regulatory requirements, could affect our estimate of remedial action
costs.

     In its November 2002 gas distribution rate order, the MPSC authorized us to
continue to recover approximately $1 million of manufactured gas plant
facilities environmental clean-up costs annually. This amount will continue to
be offset by $2 million to reflect amounts recovered from all other sources. We
defer and amortize, over a period of 10 years, manufactured gas plant facilities
environmental clean-up costs above the amount currently included in rates.
Additional amortization of the expense in our rates cannot begin until after a
prudency review in a gas rate case.

CONSUMERS' GAS UTILITY RATE MATTERS

     GAS COST RECOVERY: The MPSC is required by law to allow us to charge
customers for our actual cost of purchased natural gas. The GCR process is
designed to allow us to recover all of our gas costs; however, the MPSC reviews
these costs for prudency in an annual reconciliation proceeding. In June 2003,
we filed a reconciliation of GCR costs and revenues for the 12-months ended
March 2003. We proposed to recover from our customers approximately $6 million
of under-recovered gas costs using a roll-in methodology. The roll-in
methodology incorporates the GCR under-recovery in the next GCR plan year. The
approach was approved by the MPSC in a November 2002 order.

     In January 2004, intervenors filed their positions in our 2003 GCR case.
Their positions were that not all of our gas purchasing decisions were prudent
during April 2002 through March 2003 and they proposed disallowances. In
February 2004, the parties in the case reached a tentative settlement agreement
that would result in a GCR disallowance of $11 million for the GCR period.
Interest on the disallowed amount from April 1, 2003 through February 2004, at
the Consumers' authorized rate of return, adds $1 million to the cost of the
settlement. We believe this settlement agreement will be executed by the parties
in the case in the near future and approved by the MPSC. A reserve was recorded
in December 2003.

                                      CMS-72
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In July 2003, the MPSC approved a settlement agreement authorizing us to
increase our gas cost recovery for the remainder of the current GCR plan year
(August 2003 through March 2004) and to apply a quarterly ceiling price
adjustment, based on a formula that tracks changes in NYMEX natural gas prices.
The terms of the settlement allow a GCR ceiling price of $6.11 per mcf. Our GCR
is $5.36 per mcf for March 2004 bills.

     2003 GAS RATE CASE: In March 2003, we filed an application with the MPSC
for a $156 million annual increase in our gas delivery and transportation rates
that included a 13.5 percent return on equity. In September 2003, we filed an
update to our gas rate case that lowered the requested revenue increase from
$156 million to $139 million and reduced the return on common equity from 13.5
percent to 12.75 percent. The MPSC authorized an interim gas rate increase of
$19 million annually. The interim increase is under bond and subject to refund
if the final rate relief is a lesser amount. The interim increase order includes
a $34 million reduction in book depreciation expense and related income taxes
effective only during the period that we receive the interim relief. The MPSC
order allowed us to increase our rates beginning December 19, 2003. As part of
the interim order, Consumers agreed to restrict its dividend payments to CMS
Energy, to a maximum of $190 million annually during the period that Consumers
receives the interim relief. On March 5, 2004, the ALJ issued a Proposal for
Decision recommending that the MPSC not rely upon the projected test year data
included in our filing and supported by the MPSC Staff and further recommended
that the application be dismissed. The MPSC is not bound by these
recommendations and will consider the issues anew after receipt of exceptions
and replies to the exception filed by the parties in response to the Proposal
for Decision.

     2001 GAS DEPRECIATION CASE: In December 2003, we filed an update to our gas
utility plant depreciation case originally filed in June 2001. This case is
independent of the 2003 gas rate case. The original filing was based on December
2000 plant balances and historical data. The December 2003 filing updates the
gas depreciation case to include December 2002 plant balances. The proposed
depreciation rates, if approved, will result in an annual increase of $12
million in depreciation expense.

OTHER CONSUMERS' GAS UTILITY UNCERTAINTIES

     COMMITMENTS FOR GAS SUPPLIES: We enter into contracts to purchase gas and
gas transportation from various suppliers for our natural gas business. These
contracts have expiration dates that range from 2004 to 2007. Our 2003 gas
purchases totaled 248 bcf at a cost of $1.379 billion. At the end of 2003, we
estimate our gas purchases for 2004 to be 235 bcf, of which 22 percent is
covered by existing fixed price contracts and 37 percent is covered by indexed
price contracts that are subject to price variations. The remaining 2004 gas
purchases will be made at market prices at the time of purchase.

OTHER CONSUMERS' UNCERTAINTIES

     In addition to the matters disclosed in this note, we are parties to
certain lawsuits and administrative proceedings before various courts and
governmental agencies arising from the ordinary course of business. These
lawsuits and proceedings may involve personal injury, property damage,
contractual matters, environmental issues, federal and state taxes, rates,
licensing, and other matters.

     We have accrued estimated losses for certain contingencies discussed in
this note. Resolution of these contingencies is not expected to have a material
adverse impact on our financial position, liquidity, or results of operations.

OTHER UNCERTAINTIES

     INTEGRUM LAWSUIT: Integrum filed a complaint in Wayne County, Michigan
Circuit Court in July 2003 against CMS Energy, Enterprises and APT. Integrum
alleges several causes of action against APT, CMS Energy, and Enterprises in
connection with an offer by Integrum to purchase the CMS Pipeline Assets. In
addition to seeking unspecified money damages, Integrum is seeking an order
enjoining CMS Energy and Enterprises from

                                      CMS-73
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

selling and APT from purchasing the CMS Pipeline Assets and an order of specific
performance mandating that CMS Energy, Enterprises, and APT complete the sale of
the CMS Pipeline Assets to APT and Integrum. A certain officer and director of
Integrum is a former officer and director of CMS Energy, Consumers, and their
subsidiaries. The individual was not employed by CMS Energy, Consumers or their
subsidiaries when Integrum made the offer to purchase the CMS Pipeline Assets.
CMS Energy believes that Integrum's claims are without merit. CMS Energy will
defend itself vigorously but cannot predict the outcome of this lawsuit.

     CMS GENERATION-OXFORD TIRE RECYCLING: In an administrative order, the
California Regional Water Control Board of the state of California named CMS
Generation as a potentially responsible party for the clean up of the waste from
the fire that occurred in September 1999 at the Filbin Tire Pile, which the
State claims was owned by Oxford Tire Recycling of North Carolina, Inc. CMS
Generation reached a settlement with the state, which the court approved,
pursuant to which CMS Generation paid the state $5.5 million, $1.6 million of
which it had paid the state prior to the settlement. CMS Generation continues to
negotiate to have the insurance company pay a portion of the settlement amount,
as well as a portion of its attorney fees.

     At the request of the DOJ in San Francisco, CMS Energy and other parties
contacted by the DOJ in San Francisco entered into separate Tolling Agreements
with the DOJ in San Francisco in September 2002. The Tolling Agreement stops the
running of any statute of limitations during the ninety-day period between
September 13, 2002 and (through several extensions of the tolling period) March
30, 2004, to facilitate settlement discussions between all the parties in
connection with federal claims arising from the fire at the Filbin Tire Pile. On
September 23, 2002, CMS Energy received a written demand from the U.S. Coast
Guard for reimbursement of approximately $3.5 million in costs incurred by the
U.S. Coast Guard in fighting the fire. It is CMS Energy's understanding that
these costs, together with any accrued interest, are the sole basis of any
federal claims. CMS Energy has reached an agreement in principle with the U.S.
Coast Guard to settle this matter for $475,000.

     DEARBORN INDUSTRIAL GENERATION: In October 2001, Duke/Fluor Daniel (DFD)
presented DIG with a change order to their construction contract and filed an
action in Michigan state court claiming damages in the amount of $110 million,
plus interest and costs, which DFD states represents the cumulative amount owed
by DIG for delays DFD believes DIG caused and for prior change orders that DIG
previously rejected. DFD also filed a construction lien for the $110 million.
DIG, in addition to drawing down on three letters of credit totaling $30 million
that it obtained from DFD, has filed an arbitration claim against DFD asserting
in excess of an additional $75 million in claims against DFD. The judge in the
Michigan state court case entered an order staying DFD's prosecution of its
claims in the court case and permitting the arbitration to proceed. DFD has
appealed the decision by the judge in the Michigan state court case to stay the
litigation. DIG will continue to defend itself vigorously and pursue its claims.
DIG cannot predict the outcome of this matter.

     DIG CUSTOMER DISPUTES: As a result of the continued delays in the DIG
project becoming fully operational, DIG's customers, Ford Motor Company, and
Rouge Industries, asserted claims that the continued delays relieve them of
certain contractual obligations, totaling $43 million. In addition, Ford and/or
Rouge asserted several other commercial claims against DIG relating to operation
of the DIG plant. In February 2003, Rouge filed an Arbitration Demand against
DIG and CMS MST Michigan L.L.C. with the American Arbitration Association. Rouge
was seeking a total of approximately $27 million, plus additional accrued
damages at the time of any award, plus interest. More specifically, Rouge was
seeking at least $20 million under a Blast Furnace Gas Delivery Agreement in
connection with DIG's purported failure to declare a Blast Furnace Gas Delivery
Date within a reasonable time period, plus approximately $7 million for assorted
damage claims under several legal theories. As part of this arbitration, DIG
filed claims against Rouge and Ford, and Ford filed claims for unspecified
amounts against DIG. In October 2003, Rouge filed bankruptcy under Chapter 11 of
the United States Bankruptcy Code and as a result, the arbitration was subject
to the automatic stay imposed by the Bankruptcy Code. OAO Severstal, which has
acquired substantially all of Rouge's assets, has indicated it will continue
operations at the Rouge site and will honor the contractual obligations to pay
for the steam and electricity DIG and CMS MST Michigan L.L.C. provide. In
January 2004, DIG and CMS MST Michigan L.L.C. entered into a

                                      CMS-74
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

settlement agreement with Ford and Rouge to resolve all outstanding claims
between the parties, including the arbitration claims and DIG and CMS MST
Michigan L.L.C.'s claims in the Rouge bankruptcy. The settlement was approved by
the bankruptcy court. Under the settlement, Ford paid DIG $12 million cash and
Rouge and Ford paid DIG and CMS MST Michigan L.L.C. a total of $3.8 million owed
by Rouge for steam and electricity supplied to Rouge prior to the filing of the
bankruptcy petition.

     DIG NOISE ABATEMENT LAWSUIT: In February 2003, DIG was served with a
three-count first amended complaint filed in Wayne County Circuit Court in the
matter of Ahmed, et al v. Dearborn Industrial Generation, LLC. The complaint
seeks damages "in excess of $25,000" and injunctive relief based upon
allegations of excessive noise and vibration created by operation of the power
plant. The first amended complaint was filed on behalf of six named plaintiffs,
all alleged to be adjacent or nearby resident or property owners. The damages
alleged are injury to persons and property of the landowners. Certification of a
class of "potentially thousands" who have been similarly affected is requested.
DIG intends to defend this action aggressively but cannot predict the outcome of
this matter.

     MCV EXPANSION, LLC: Under an agreement entered into with General Electric
Company ("GE") in October 2002, MCV Expansion, LLC has a remaining contingent
obligation to GE in the amount of $2.2 million that may become payable in the
fourth quarter of 2004. The agreement provides that this contingent obligation
is subject to a pro rata reduction under a formula based upon certain purchase
orders being entered into with GE by June 30, 2003. MCV Expansion, LLC
anticipates but cannot assure that purchase orders will be executed with GE
sufficient to eliminate contingent obligations of $2.2 million.

     FORMER CMS OIL AND GAS OPERATIONS: A Michigan trial judge granted Star
Energy, Inc. and White Pine Enterprises, LLC a declaratory judgment in an action
filed in 1999 that claimed Terra Energy Ltd., a former CMS Oil and Gas
subsidiary, violated an oil and gas lease and other arrangements by failing to
drill wells it had committed to drill. A jury then awarded the plaintiffs a $7.6
million award. Terra appealed this matter to the Michigan Court of Appeals. The
Michigan Court of Appeals reversed the trial court judgment with respect to the
appropriate measure of damages and remanded the case for a new trial on damages.
The trial judge reinstated the judgment against Terra and awarded Terra title to
the minerals. CMS Energy will appeal this judgment.

     ARGENTINA ECONOMIC SITUATION: In January 2002, the Republic of Argentina
enacted the Public Emergency and Foreign Exchange System Reform Act. This law
repealed the fixed exchange rate of one U.S. dollar to one Argentine peso,
converted all dollar-denominated utility tariffs and energy contract obligations
into pesos at the same one-to-one exchange rate, and directed the President of
Argentina to renegotiate such tariffs.

     Effective April 30, 2002, we adopted the Argentine peso as the functional
currency for our Argentine investments. We had previously used the U.S. dollar
as the functional currency for these investments. As a result, on April 30,
2002, we translated the assets and liabilities of our Argentine entities into
U.S. dollars, in accordance with SFAS No. 52, using an exchange rate of 3.45
pesos per U.S. dollar, and recorded an initial charge to the Foreign Currency
Translation component of Common Stockholders' Equity of approximately $400
million.

     While we cannot predict future peso-to-U.S. dollar exchange rates, we do
expect that these non-cash charges reduce substantially the risk of further
material balance sheet impacts when combined with anticipated proceeds from
international arbitration currently in progress, political risk insurance, and
the eventual sale of these assets. At December 31, 2003, the net foreign
currency loss due to the unfavorable exchange rate of the Argentine peso
recorded in the Foreign Currency Translation component of Common Stockholders'
Equity using an exchange rate of 2.94 pesos per U.S. dollar was $264 million.
This amount also reflects the effect of recording U.S. income taxes with respect
to temporary differences between the book and tax basis of foreign investments,
including the foreign currency translation associated with our Argentine
investments, that were determined to no longer be essentially permanent in
duration.

     OTHER: Certain CMS Gas Transmission and CMS Generation affiliates in
Argentina received notice from various Argentine provinces claiming stamp taxes
and associated penalties and interest arising from various gas
                                      CMS-75
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

transportation transactions. Although these claims total approximately $24
million, we believe the claims are without merit and will continue to contest
them vigorously.

     CMS Generation does not currently expect to incur significant capital costs
at its power facilities for compliance with current U.S. environmental
regulatory standards.

     In addition to the matters disclosed in this Note, Consumers and certain
other subsidiaries of CMS Energy are parties to certain lawsuits and
administrative proceedings before various courts and governmental agencies
arising from the ordinary course of business. These lawsuits and proceedings may
involve personal injury, property damage, contractual matters, environmental
issues, federal and state taxes, rates, licensing, and other matters.

     We have accrued estimated losses for certain contingencies discussed in
this Note. Resolution of these contingencies is not expected to have a material
adverse impact on our financial position, liquidity, or results of operations.

                                      CMS-76
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5: FINANCINGS AND CAPITALIZATION

     CMS Energy's Long-term debt as of December 31 follows:

<Table>
<Caption>
                                                       INTEREST RATE (%)       MATURITY      2003      2002
                                                       -----------------       --------      ----      ----
                                                                                              IN MILLIONS
<S>                                                    <C>                     <C>          <C>       <C>
CMS ENERGY CORPORATION
  Senior notes.....................................          6.750               2004       $   --    $  287
                                                             7.625               2004          176       176
                                                             9.875               2007          468       468
                                                             8.900               2008          260       260
                                                             7.500               2009          409       409
                                                             7.750               2010          300        --
                                                             8.500               2011          300       300
                                                             8.375               2013           --       150
                                                             3.375(a)            2023          150        --
                                                                                            ------    ------
                                                                                             2,063     2,050
                                                                                            ------    ------
  General term notes:
    Series D.......................................          6.938(b)(c)       2004-2008        65        94
    Series E.......................................          7.788(b)(c)       2004-2009       139       227
    Series F.......................................          7.487(b)(c)       2004-2016       292       298
                                                                                            ------    ------
                                                                                               496       619
                                                                                            ------    ------
  Extendible tenor rate adjusted securities........          7.000               2005          180       180
  Revolving credit facilities and other............                                              7       320
                                                                                            ------    ------
       Total -- CMS Energy Corporation.............                                          2,746     3,169
                                                                                            ------    ------
CONSUMERS ENERGY COMPANY
  First mortgage bonds.............................          4.250               2008          250        --
                                                             4.800               2009          200        --
                                                             4.000               2010          250        --
                                                             5.375               2013          375        --
                                                             6.000               2014          200        --
                                                             7.375               2023          208       208
                                                                                            ------    ------
                                                                                             1,483       208
                                                                                            ------    ------
  Senior notes.....................................          6.000               2005          300       300
                                                             6.250               2006          332       332
                                                             6.375               2008          159       159
                                                             6.200               2008           --       250
                                                             6.875               2018          180       180
                                                             6.500(d)            2018          141       141
                                                             6.500(e)            2028          142       142
                                                                                            ------    ------
                                                                                             1,254     1,504
                                                                                            ------    ------
  Securitization bonds.............................          5.097(c)          2005-2015       426       453
  Long-term bank debt..............................     Variable               2006-2009       200       328
  Nuclear fuel disposal liability..................                               (f)          139       138
  Pollution control revenue bonds..................      Various               2010-2018       126       126
  Other............................................                                              4         8
                                                                                            ------    ------
       Total -- Consumers Energy Company...........                                          3,632     2,765
                                                                                            ------    ------
OTHER SUBSIDIARIES.................................                                            191        84
                                                                                            ------    ------
Total principal amount outstanding.................                                          6,569     6,018
  Current amounts..................................                                           (509)     (633)
  Net unamortized discount.........................                                            (40)      (28)
                                                                                            ------    ------
Total consolidated long-term debt..................                                         $6,020    $5,357
                                                                                            ======    ======
</Table>

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

(a)  These notes are putable to CMS Energy by the note holders at par on July
     15, 2008, July 15, 2013 and July 15, 2018, and are convertible at the
     holder's option into CMS Energy Common Stock at $10.671 per share under
     certain circumstances, none of which currently are probable to occur. CMS
     Energy intends to file a registration statement with the SEC by October 16,
     2004, relating to the resale of the notes and the convertibility into
     common stock.

                                      CMS-77
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(b)  $29 million Series D, $112 million Series E, and $104 million Series F have
     been called and redeemed through February 15, 2004.

(c)  Represents the weighted average interest rate at December 31, 2003.

(d)  2018 maturity is subject to successful remarketing by Consumers after June
     15, 2005.

(e)  Callable at par.

(f)  Maturity date uncertain.

LONG-TERM DEBT -- RELATED PARTIES:

     Long-term debt -- related parties as of December 31, 2003 follows:

<Table>
<Caption>
                DEBENTURE AND RELATED PARTY                     INTEREST RATE    MATURITY    2003
                ---------------------------                     -------------    --------    ----
                                                                           IN MILLIONS
<S>                                                             <C>              <C>         <C>
Convertible subordinated debentures, CMS Energy Trust I.....        7.75%          2027      $178
Subordinated deferrable interest notes, Consumers Power
  Company Financing I.......................................        8.36%          2015        73
Subordinated deferrable interest notes, Consumers Energy
  Company Financing II......................................        8.20%          2027       124
Subordinated debentures, Consumers Energy Company Financing
  III.......................................................        9.25%          2029       180
Subordinated debentures, Consumers Energy Company Financing
  IV........................................................        9.00%          2031       129
                                                                                             ----
Total amount outstanding....................................                                 $684
                                                                                             ====
</Table>

     DEBT ISSUANCES: The following is a summary of long-term debt issuances
during 2003:

<Table>
<Caption>
                           PRINCIPAL                                                       USE OF
    FACILITY TYPE        (IN MILLIONS)    ISSUE RATE     ISSUE DATE      MATURITY DATE    PROCEEDS    COLLATERAL
    -------------        -------------    ----------     ----------      -------------    --------    ----------
<S>                      <C>              <C>           <C>              <C>              <C>         <C>
CMS ENERGY
Senior notes(a)......       $  150          3.375%        July 2003        July 2023        (c)       Unsecured
Senior notes(b)......          300          7.750%        July 2003       August 2010       (c)       Unsecured
CONSUMERS ENERGY
Term loan............          140         LIBOR +       March 2003       March 2009        GCP        FMB(h)
                                           475 bps
Term loan............          150         LIBOR +       March 2003       March 2006        GCP        FMB(h)
                                           450 bps                       (paid off)(f)
FMB(i)...............          375          5.375%       April 2003       April 2013        (d)          --
FMB(i)...............          250          4.250%       April 2003       April 2008        (d)          --
FMB(i)...............          250          4.000%        May 2003         May 2010         (e)          --
FMB(i)...............          200          4.800%       August 2003     February 2009      (f)          --
FMB(i)...............          200          6.000%       August 2003     February 2014      (f)          --
Term loan............           60         LIBOR +      November 2003    November 2006      (g)        FMB(h)
                                           135 bps
                            ------
       Total.........       $2,075
                            ======
</Table>

- -------------------------
(bps -- basis points), (GCP -- General corporate purposes)

(a)  These notes are putable to CMS Energy by the note holders at par on July
     15, 2008, July 15, 2013 and July 15, 2018, and are convertible at the
     holder's option into CMS Energy Common Stock at $10.671 per share under
     certain circumstances, none of which currently are probable to occur. CMS
     Energy intends to file a registration statement with the SEC by October 16,
     2004, relating to the resale of the notes and the convertibility into
     common stock.

                                      CMS-78
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(b)  CMS Energy intends to file a registration statement with the SEC by March
     14, 2004, to permit note holders to exchange their securities for ones that
     will be registered under the Securities Act of 1933.

(c)  CMS Energy used the net proceeds to retire revolving debt and redeem a
     portion of a 6.75 percent Senior note due January 2004.

(d)  Consumers used the net proceeds to fund the maturity of a $250 million
     bond, to fund a $32 million option call payment, and for general corporate
     purposes.

(e)  Consumers used the net proceeds to prepay a portion of a term loan that was
     due to mature in July 2004.

(f)  Consumers used the net proceeds to pay off a $150 million term loan, to pay
     off $50 million balance on a term loan that was due to mature in July 2004,
     and for general corporate purposes.

(g)  Consumers used the net proceeds to purchase its headquarters building and
     pay off the capital lease.

(h)  Refer to "Regulatory Authorization for Financings" below for details about
     Consumers' FERC debt authorization.

(i)  Consumers filed a registration statement with the SEC in December 2003 to
     permit holders of these FMBs to exchange their bonds for FMBs that are
     registered under the Securities Act of 1933. The exchange offer was
     completed on February 13, 2004.

     DEBT MATURITIES: The aggregate annual maturities for long-term debt for the
next five years are:

<Table>
<Caption>
                                                                      PAYMENTS DUE DECEMBER 31
                                                                ------------------------------------
                                                                2004    2005    2006    2007    2008
                                                                ----    ----    ----    ----    ----
                                                                            IN MILLIONS
<S>                                                             <C>     <C>     <C>     <C>     <C>
Long-term debt..............................................    $509    $696    $490    $516    $987
</Table>

     DEBT COVENANT RESTRICTIONS: The indenture pursuant to our GTNs contains
certain provisions that can trigger a limitation on our consolidated
indebtedness. The limitation can be activated when our consolidated leverage
ratio, as defined in the indenture (essentially the ratio of consolidated debt
to consolidated capital), exceeds 0.75 to 1.0. At June 30 and September 30,
2003, our consolidated leverage ratio was 0.76 to 1.0. As a result, we were
subject to certain debt limitations. At December 31, 2003, the ratio was 0.72 to
1, and we were no longer subject to the debt limitations.

     The indenture under which Senior notes are issued and certain other debt
agreements contain provisions requiring us to maintain interest coverage ratios,
and debt to earnings ratios. We were in compliance with these ratios, as
defined, at December 31, 2003.

     CMS ENERGY CREDIT FACILITY: CMS Energy has a $185 million revolving credit
facility with banks. This facility matures on May 21, 2005. This facility
provides letter of credit support for Enterprises' subsidiary activities,
principally credit support for project debt. Enterprises provides funds to cash
collateralize the letters of credit issued through this facility. As of December
31, 2003, approximately $165 million of letters of credit were issued under this
facility and the cash used to collateralize the letters of credit is included on
the Consolidated Balance Sheet as Restricted cash.

     REGULATORY AUTHORIZATION FOR FINANCINGS: At December 31, 2003, Consumers
had remaining FERC authorization to issue or guarantee up to $500 million of
short-term securities and up to $700 million of short-term first mortgage bonds
as collateral for such short-term securities.

     At December 31, 2003, Consumers had remaining FERC authorization to issue
up to $740 million of long-term securities for refinancing or refunding
purposes, $560 million of long-term securities for general corporate purposes,
and $2 billion of long-term first mortgage bonds to be issued solely as
collateral for other long-term securities.

                                      CMS-79
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     With the granting of authorization, FERC waived its competitive
bid/negotiated placement requirements applicable to the long-term securities
authorization. The authorizations expire on June 30, 2004.

     SHORT-TERM FINANCINGS: CMS Energy has a $190 million revolving credit
facility with banks. The facility is secured by our investment in Enterprises
and Consumers. The interest rate of the facility is LIBOR plus 325 basis points.
This facility expires in November 2004. At December 31, 2003, all of the $190
million is available.

     Consumers has a $400 million revolving credit facility with banks. The
facility is secured with first mortgage bonds. The interest rate of the facility
is LIBOR plus 175 basis points. This facility expires in March 2004 with two
annual extensions at Consumers' option, which would extend the maturity to March
2006. At December 31, 2003, $390 million is available for general corporate
purposes, working capital, and letters of credit.

     At December 31, 2002, Consumers had $457 million of bank notes outstanding
at a weighted average interest rate of 4.50 percent.

     FIRST MORTGAGE BONDS: Consumers secures its first mortgage bonds by a
mortgage and lien on substantially all of its property. Its ability to issue and
sell securities is restricted by certain provisions in the first mortgage bond
indenture, its articles of incorporation, and the need for regulatory approvals
under federal law.

     POLLUTION CONTROL REVENUE BONDS: In January 2004, Consumers amended the
PCRB indentures to add an auction rate interest mode and switched to that mode
for the two floating rate bonds. Under the auction rate mode, the bonds'
interest rate will be reset every 35 days. While in the auction rate mode, no
letter of credit liquidity facility is required and investors do not have a put
right.

     PREFERRED STOCK ISSUANCE: In December 2003, CMS Energy issued 5 million
shares of 4.50 percent cumulative convertible preferred stock. Each share has a
liquidation value of $50.00 and is convertible into CMS Energy common stock at
the option of the holder under certain circumstances. The initial conversion
price is $9.893 per share, which translates into 5.0541 shares of common stock
for each share of preferred stock converted. The annual dividend of $2.25 per
share is payable quarterly, in cash, in arrears commencing March 1, 2004. We
used the net proceeds of $242 million to retire other long-term debt in January
2004 and February 2004. We have agreed to file a shelf registration with the SEC
by November 5, 2004, covering resales of the preferred stock and of common stock
issuable upon conversion of the preferred stock.

     SALE OF SUBSIDIARY INTEREST: In December 2003, we sold, in a private
placement, a non-voting preferred interest in an indirect subsidiary of CMS
Enterprises that owns certain gas pipeline and power generation assets. CMS
Energy received $30 million for the preferred interest, of which $19 million has
been recorded as an addition to other paid-in capital (deferred gain) and $11
million has been recorded as a preferred stock issuance.

     WARRANTS: We granted warrants to purchase 204,000 shares of our common
stock to a third party and expensed $1 million in 2003. The warrants which are
fully vested are exercisable for seven years at an exercise price of $8.25 per
share.

     CAPITALIZATION: The authorized capital stock of CMS Energy consists of 250
million shares of CMS Energy Common Stock and 10 million shares of CMS Energy
Preferred Stock, $.01 par value.

                                      CMS-80
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     PREFERRED STOCK OF SUBSIDIARY: The follow table describes Consumers'
Preferred Stock outstanding:

<Table>
<Caption>
                                                         OPTIONAL    NUMBER OF SHARES
                                                        REDEMPTION   -----------------
                 DECEMBER 31                   SERIES     PRICE       2003      2002     2003   2002
                 -----------                   ------   ----------    ----      ----     ----   ----
                                                                                         IN MILLIONS
<S>                                            <C>      <C>          <C>       <C>       <C>    <C>
PREFERRED STOCK
  Cumulative, $100 par value, authorized
     7,500,000 shares, with no mandatory
     redemption..............................  $4.16     $103.25      68,451    68,451   $ 7    $ 7
                                                4.50      110.00     373,148   373,148    37     37
                                                                                         ---    ---
TOTAL PREFERRED STOCK........................                                            $44    $44
                                                                                         ===    ===
</Table>

     COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARIES: CMS Energy and Consumers each formed various statutory wholly
owned business trusts for the sole purpose of issuing preferred securities and
lending the gross proceeds to the parent companies. The sole assets of the
trusts are debentures of the parent company with terms similar to those of the
preferred security. Summarized information for company-obligated mandatorily
redeemable preferred securities is as follows:

<Table>
<Caption>
                                                                    AMOUNT
                                                                  OUTSTANDING                        EARLIEST
TRUST AND SECURITIES                                            ---------------                      OPTIONAL
DECEMBER 31                                           RATE      2003       2002      MATURITY      REDEMPTION(B)
- --------------------                                  ----      ----       ----      --------      -------------
                                                                             IN MILLIONS
<S>                                                   <C>       <C>        <C>       <C>           <C>
CMS Energy Trust I(c).............................    7.75%     $ --(a)    $173        2027            2001
CMS Energy Trust III..............................    7.25%       --(d)     220        2004            2003
Consumers Power Company Financing I, Trust
  Originated Preferred Securities.................    8.36%       --(a)      70        2015            2000
Consumers Energy Company Financing II, Trust
  Originated Preferred Securities.................    8.20%       --(a)     120        2027            2002
Consumers Energy Company Financing III, Trust
  Originated Preferred Securities.................    9.25%       --(a)     175        2029            2004
Consumers Energy Company Financing IV, Trust
  Preferred Securities............................    9.00%       --(a)     125        2031            2006
                                                                -----      ----
Total amount outstanding..........................              $ --       $883
                                                                =====      ====
</Table>

- -------------------------
(a)  We determined that we do not hold the controlling financial interest in our
     trust preferred security structures. Accordingly, those entities have been
     deconsolidated as of December 31, 2003. Company obligated Trust Preferred
     Securities totaling $663 million that were previously included in mezzanine
     equity, have been eliminated due to deconsolidation and are reflected in
     Long-term debt -- related parties. For additional details, see "Long-Term
     Debt -- Related Parties" within this Note and Note 17, Implementation of
     New Accounting Standards.

(b)  The trusts must redeem the securities at a liquidation value of $25 per
     share ($50 per share for QUIPS (c)), which is equivalent to the carrying
     cost, plus accrued but unpaid distributions when the securities are paid at
     maturity or upon any earlier redemption. Prior to an early redemption date,
     the securities could be redeemed at market value.

(c)  Represents 3,450,000 shares of Quarterly Income Preferred Securities
     (QUIPS) that are convertible into 1.2255 shares of CMS Energy Common Stock
     (equivalent to a conversion price of $40.80). Conversion is unlikely as of
     December 31, 2003, based on the market price of CMS Energy's Common Stock
     of $8.52. If conversion were to occur in the future, the securities would
     be converted into 4,227,975 shares of CMS Energy Common Stock. Effective
     July 2001, we can revoke the conversion rights if certain conditions are
     met.

                                      CMS-81
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(d)  In August 2003, 8,800,000 units of outstanding 7.25 percent Premium Equity
     Participating Security Units (CMS Energy Trust III) were converted to
     16,643,440 newly issued shares of CMS Energy Common Stock.

     Each trust receives payments on the debenture it holds. Those receipts are
used to make cash distributions on the preferred securities the trust has
issued.

     The securities allow CMS Energy and Consumers the right to defer interest
payment on the debentures, and, as a consequence, the trusts would defer
dividend payments on the preferred securities. Should the parent companies
exercise this right, they cannot declare or pay dividends on, or redeem,
purchase or acquire, any of their capital stock during the deferral period until
all deferred dividends are paid in full.

     In the event of default, holders of the preferred securities would be
entitled to exercise and enforce the trusts' creditor rights against CMS Energy
and Consumers, which may include acceleration of the principal amount due on the
debentures. The parent companies have issued certain guarantees with respect to
payments on the preferred securities. These guarantees, when taken together with
each parent company's obligations under the debentures, related indenture and
trust documents, provide full and unconditional guarantees for the trust's
obligations under the preferred securities.

     SALE OF ACCOUNTS RECEIVABLE: Under a revolving accounts receivable sales
program, we currently sell certain accounts receivable to a wholly owned,
consolidated, bankruptcy remote special purpose entity. In turn, the special
purpose entity may sell an undivided interest in up to $325 million of the
receivables. The amounts sold were $297 million at December 31, 2003 and $325
million at December 31, 2002. The Consolidated Balance Sheets exclude these
amounts from accounts receivable. We continue to service the receivables sold.
The purchaser of the receivables has no recourse against our other assets for
failure of a debtor to pay when due and the purchaser has no right to any
receivables not sold. No gain or loss has been recorded on the receivables sold
and we retain no interest in the receivables sold.

     Certain cash flows received from and paid to us under our accounts
receivable sales program are shown below:

<Table>
<Caption>
                                                                  YEARS ENDED
                                                                  DECEMBER 31
                                                                ----------------
                                                                 2003      2002
                                                                 ----      ----
                                                                  IN MILLIONS
<S>                                                             <C>       <C>
Proceeds from sales (remittance of collections) under the
  program...................................................    $  (28)   $   (9)
Collections reinvested under the program....................     4,361     4,080
</Table>

     DIVIDEND RESTRICTIONS: Under the provisions of its articles of
incorporation, at December 31, 2003, Consumers had $373 million of unrestricted
retained earnings available to pay common dividends. However, covenants in
Consumers' debt facilities cap common stock dividend payments at $300 million in
a calendar year. Through December 31, 2003, we received the following common
stock dividend payments from Consumers:

<Table>
<Caption>
                                                              IN MILLIONS
<S>                                                           <C>
January.....................................................     $ 78
May.........................................................       31
June........................................................       53
November....................................................       56
                                                                 ----
Total common stock dividends paid to CMS Energy.............     $218
                                                                 ====
</Table>

     As of December 18, 2003, Consumers is also under an annual dividend cap of
$190 million imposed by the MPSC during the current interim gas rate relief
period. Because all of the $218 million of common stock dividends to CMS Energy
were paid prior to December 18, 2003, Consumers was not out of compliance with
this new restriction for 2003. In February 2004, Consumers paid a $78 million
common stock dividend.

                                      CMS-82
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     For additional details on the potential cap on common dividends payable
included in the MPSC Securitization order, see Note 4, Uncertainties,
"Consumers' Electric Utility Rate Matters -- Securitization." Also, for
additional details on the cap on common dividends payable during the current
interim gas rate relief period, see Note 4, Uncertainties, "Consumers' Gas
Utility Rate Matters -- 2003 Gas Rate Case."

     FASB INTERPRETATION NO. 45, GUARANTOR'S ACCOUNTING AND DISCLOSURE
REQUIREMENTS FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF
OTHERS: This interpretation became effective January 2003. It describes the
disclosure to be made by a guarantor about its obligations under certain
guarantees that it has issued. At the beginning of a guarantee, it requires a
guarantor to recognize a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and measurement
provision of this interpretation does not apply to some guarantee contracts,
such as warranties, derivatives, or guarantees between either parent and
subsidiaries or corporations under common control, although disclosure of these
guarantees is required. For contracts that are within the recognition and
measurement provision of this interpretation, the provisions were to be applied
to guarantees issued or modified after December 31, 2002.

     The following table describe our guarantees at December 31, 2003:

<Table>
<Caption>
                                                ISSUE     EXPIRATION     MAXIMUM      CARRYING       RECOURSE
GUARANTEE DESCRIPTION                           DATE         DATE       OBLIGATION    AMOUNT(B)    PROVISION(C)
- ---------------------                           -----     ----------    ----------    ---------    ------------
                                                                       IN MILLIONS
<S>                                            <C>        <C>           <C>           <C>          <C>
Indemnifications from asset sales and other
  agreements(a)............................    Various     Various        $1,955         $ 3           $--
Letters of credit..........................    Various     Various           254          --            --
Surety bonds and other indemnifications....    Various     Various            28          --            --
Other guarantees...........................    Various     Various           239          --            --
Nuclear insurance retrospective premiums...    Various     Various           133          --            --
</Table>

- -------------------------
(a)  The majority of this amount arises from routine provisions in stock and
     asset sales agreements under which we indemnify the purchaser for losses
     resulting from events such as failure of title to the assets or stock sold
     by us to the purchaser. Included in this amount is a $739 million
     indemnification obligation related to the sale of CMS Oil and Gas
     facilities in Equatorial Guinea which expired January 3, 2004, and for
     which no loss occurred. We believe the likelihood of a loss for any
     remaining indemnifications to be remote.

(b)  The carrying amount represents the fair market value of guarantees and
     indemnities on our balance sheet that are entered into subsequent to
     January 1, 2003. In addition, $25 million has been recorded prior to 2003
     in accordance with SFAS No. 5.

(c)  Recourse provision indicates the approximate recovery from third parties
     including assets held as collateral.

     The following table provides additional information regarding our
guarantees at December 31, 2003:

<Table>
<Caption>
                                                                        EVENTS THAT WOULD
    GUARANTEE DESCRIPTION             HOW GUARANTEE AROSE              REQUIRE PERFORMANCE
    ---------------------             -------------------              -------------------
<S>                              <C>                              <C>
Indemnifications from asset      Stock and asset sales            Findings of
  sales and other agreements       agreements                       misrepresentation, breach
                                                                    of warranties, and other
                                                                    specific events or
                                                                    circumstances
Standby letters of credit        Normal operations of coal        Noncompliance with
                                   power plants                     environmental regulations
                                 Self-insurance requirement       Nonperformance
Surety bonds                     Normal operating activity,       Nonperformance
                                   permits and license
Nuclear insurance                Normal operations of nuclear     Call by NEIL and Price
  retrospective premiums           plants                           Anderson Act for nuclear
                                                                    incident
</Table>

                                      CMS-83
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     We have entered into typical tax indemnity agreements in connection with a
variety of transactions including transactions for the sale of subsidiaries and
assets, equipment leasing, and financing agreements. These indemnity agreements
generally are not limited in amount and, while a maximum amount of exposure
cannot be identified, the amount and probability of liability is considered
remote.

     We have guaranteed payment of obligations through letters of credit,
indemnities, surety bonds, and other guarantees of unconsolidated affiliates and
related parties of $521 million as of December 31, 2003. We monitor and approve
these obligations and believe it is unlikely that we would be required to
perform or otherwise incur any material losses associated with the above
obligations. The off-balance sheet commitments expire as follows:

<Table>
<Caption>
                                                                      COMMITMENT EXPIRATION
                                                     -------------------------------------------------------
DECEMBER 31                                          TOTAL    2004    2005    2006    2007    2008    BEYOND
- -----------                                          -----    ----    ----    ----    ----    ----    ------
                                                                           IN MILLIONS
<S>                                                  <C>      <C>     <C>     <C>     <C>     <C>     <C>
COMMERCIAL COMMITMENTS
Off-balance sheet:
  Guarantees.....................................    $239     $ 20    $36      $4     $--     $--      $179
  Indemnities....................................      28        8     --      --      --      --        20
  Letters of Credit(a)...........................     254      215     10       5       5       5        14
                                                     ----     ----    ---      --     ---     ---      ----
       Total.....................................    $521     $243    $46      $9     $ 5     $ 5      $213
                                                     ====     ====    ===      ==     ===     ===      ====
</Table>

- -------------------------
(a)  At December 31, 2003, we had $175 million of cash collateralized letters of
     credit and the cash used to collateralize the letters of credit is included
     in Restricted cash on the Consolidated Balance Sheets.

6: EARNINGS PER SHARE AND DIVIDENDS

     The following table presents the basic and diluted earnings per share
computations.

<Table>
<Caption>
                                                                    YEAR ENDED DECEMBER 31
                                                                ------------------------------
                                                                          RESTATED    RESTATED
                                                                 2003       2002        2001
                                                                 ----     --------    --------
                                                                         IN MILLIONS,
                                                                   EXCEPT PER SHARE AMOUNTS
<S>                                                             <C>       <C>         <C>
NET LOSS ATTRIBUTABLE TO COMMON STOCK:
  CMS Energy -- Basic.......................................    $  (44)    $ (650)     $ (459)
  Add conversion of Trust Preferred Securities (net of
     tax)...................................................        --(a)      --(a)       --(a)
                                                                ------     ------      ------
  CMS Energy -- Diluted.....................................    $  (44)    $ (650)     $ (459)
                                                                ======     ======      ======
AVERAGE COMMON SHARES OUTSTANDING APPLICABLE TO BASIC AND
  DILUTED EPS
  CMS Energy:
     Average Shares -- Basic................................     150.4      139.0       130.7
     Add conversion of Trust Preferred Securities...........        --(a)      --(a)       --(a)
     Stock Options and Warrants.............................        --(b)      --          --(b)
                                                                ------     ------      ------
     Average Shares -- Diluted..............................     150.4      139.0       130.7
                                                                ======     ======      ======
LOSS PER AVERAGE COMMON SHARE
  Basic.....................................................    $(0.30)    $(4.68)     $(3.51)
  Diluted...................................................    $(0.30)    $(4.68)     $(3.51)
</Table>

- -------------------------
(a)  Due to antidilution, the computation of diluted earnings per share excluded
     the conversion of Trust Preferred Securities.

(b)  Due to antidilution, the computation of diluted earnings per share excluded
     shares of outstanding stock options and warrants of 0.3 million for the
     year ended 2003 and 0.2 million for the year ended 2001.

                                      CMS-84
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In January 2003, the Board of Directors suspended the payment of common
stock dividends. However, in 2002, we paid the following dividends per share:

<Table>
<Caption>
                                                                 CMS ENERGY COMMON STOCK
                                                                DIVIDENDS PER SHARE PAYOUT
                                                                --------------------------
<S>                                                             <C>
February....................................................              $0.365
April.......................................................              $0.365
August......................................................              $0.180
November....................................................              $0.180
</Table>

7: FINANCIAL AND DERIVATIVE INSTRUMENTS

     FINANCIAL INSTRUMENTS: The carrying amounts of cash, short-term
investments, and current liabilities approximate their fair values because of
their short-term nature. We estimate the fair values of long-term investments
based on quoted market prices or, in the absence of specific market prices, on
quoted market prices of similar investments or other valuation techniques. The
carrying amount of all long-term financial instruments, except as shown below,
approximate fair value. For additional details, see Note 1, Corporate Structure
and Accounting Policies.

<Table>
<Caption>
                                                                       DECEMBER 31
                                            -----------------------------------------------------------------
                                                         2003                               2002
                                            -------------------------------    ------------------------------
                                                       FAIR     UNREALIZED                FAIR     UNREALIZED
                                             COST     VALUE     GAIN (LOSS)     COST     VALUE        GAIN
                                             ----     -----     -----------     ----     -----     ----------
                                                                       IN MILLIONS
<S>                                         <C>       <C>       <C>            <C>       <C>       <C>
Long-term debt(a).......................    $6,020    $6,225       $(205)      $5,357    $5,027       $330
Long-term debt -- related parties(b)....       684       648          36           --        --         --
Trust Preferred Securities(b)...........        --        --          --          883       704        179

Available for sale securities:
Nuclear decommissioning(c)..............       442       575         133          458       536         78
SERP....................................        54        66          12           54        57          3
</Table>

- -------------------------
(a)  Settlement of long-term debt is generally not expected until maturity.

(b)  We determined that we do not hold the controlling financial interest in our
     trust preferred security structures. Accordingly, those entities have been
     deconsolidated as of December 31, 2003. Company obligated Trust Preferred
     Securities totaling $663 million that were previously included in mezzanine
     equity, have been eliminated due to deconsolidation and are reflected in
     Long-term debt -- related parties on the Consolidated Balance Sheets. For
     additional details, refer to Note 5, Financings and Capitalization,
     "Long-Term Debt -- Related Parties" and Note 17, Implementation of New
     Accounting Standards. In addition, company obligated Trust Preferred
     Securities totaling $220 million have been converted to Common Stock as of
     August 2003.

(c)  On January 1, 2003, we adopted SFAS No. 143 and began classifying our
     unrealized gains and losses on nuclear decommissioning investments as
     regulatory liabilities. We previously classified the unrealized gains and
     losses on these investments in accumulated depreciation.

     DERIVATIVE INSTRUMENTS: We are exposed to market risks including, but not
limited to, changes in interest rates, commodity prices, currency exchange
rates, and equity security prices. We manage these risks using established
policies and procedures, under the direction of both an executive oversight
committee consisting of senior management representatives and a risk committee
consisting of business-unit managers. We may use various contracts to manage
these risks including swaps, options, and forward contracts.

                                      CMS-85
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     We intend that any gains or losses on these contracts will be offset by an
opposite movement in the value of the item at risk. We enter into all risk
management contracts for purposes other than trading. These contracts contain
credit risk if the counterparties, including financial institutions and energy
marketers, fail to perform under the agreements. We minimize such risk by
performing financial credit reviews using, among other things, publicly
available credit ratings of such counterparties.

     Contracts used to manage interest rate, foreign currency, and commodity
price risk may be considered derivative instruments that are subject to
derivative and hedge accounting pursuant to SFAS No. 133. If a contract is
accounted for as a derivative instrument, it is recorded in the financial
statements as an asset or a liability, at the fair value of the contract. The
recorded fair value of the contract is then adjusted quarterly to reflect any
change in the market value of the contract, a practice known as marking the
contract to market. The accounting for changes in the fair value of a derivative
(that is, gains or losses) is reported either in earnings or accumulated other
comprehensive income depending on whether the derivative qualifies for special
hedge accounting treatment.

     For derivative instruments to qualify for hedge accounting under SFAS No.
133, the hedging relationship must be formally documented at inception and be
highly effective in achieving offsetting cash flows or offsetting changes in
fair value attributable to the risk being hedged. If hedging a forecasted
transaction, the forecasted transaction must be probable. If a derivative
instrument, used as a cash flow hedge, is terminated early because it is
probable that a forecasted transaction will not occur, any gain or loss as of
such date is immediately recognized in earnings. If a derivative instrument,
used as a cash flow hedge, is terminated early for other economic reasons, any
gain or loss as of the termination date is deferred and recorded when the
forecasted transaction affects earnings. We use a combination of quoted market
prices and mathematical valuation models to determine fair value of those
contracts requiring derivative accounting. The ineffective portion, if any, of
all hedges is recognized in earnings.

     The majority of our contracts are not subject to derivative accounting
because they qualify for the normal purchases and sales exception of SFAS No.
133 or are not derivatives because there is not an active market for the
commodity. Derivative accounting is required for certain contracts used to limit
our exposure to electricity and gas commodity price risk and interest rate risk.

     The following table reflects the fair value of all contracts requiring
derivative accounting:

<Table>
<Caption>
                                                                           DECEMBER 31
                                                   ------------------------------------------------------------
                                                               2003                            2002
                                                   ----------------------------    ----------------------------
                                                           FAIR     UNREALIZED             FAIR     UNREALIZED
            DERIVATIVE INSTRUMENTS                 COST    VALUE    GAIN (LOSS)    COST    VALUE    GAIN (LOSS)
            ----------------------                 ----    -----    -----------    ----    -----    -----------
                                                                           IN MILLIONS
<S>                                                <C>     <C>      <C>            <C>     <C>      <C>
Other than trading
  Electric -- related contracts................    $--     $ --        $ --        $ 8     $  1        $ (7)
  Gas contracts................................      3        2          (1)        --        1           1
  Interest rate risk contracts.................     --       (3)         (3)        --      (28)        (28)
Derivative contracts associated with equity
  investments in:
  Shuweihat....................................     --      (27)        (27)        --      (30)        (30)
  Taweelah.....................................     --      (26)        (26)        --      (33)        (33)
  MCV Partnership..............................     --       15          15         --       13          13
  Jorf Lasfar..................................     --      (11)        (11)        --      (11)        (11)
  Other........................................     --        1           1         --       (2)         (2)
Trading
  Electric -- related contracts................     (2)      --           2         --       43          43
  Gas contracts................................     --       15          15         --       38          38
</Table>

                                      CMS-86
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The fair value of other than trading derivative contracts is included in
either Other Assets or Other Liabilities on the Consolidated Balance Sheets. The
fair value of trading derivative contracts is included in either Price Risk
Management Assets or Price Risk Management Liabilities on the Consolidated
Balance Sheets. The fair value of derivative contracts associated with our
equity investment in the MCV Partnership is included in Investments -- Midland
Cogeneration Venture Limited Partnership on the Consolidated Balance Sheets.
Effective April 1, 2002, the MCV Partnership changed its accounting for
derivatives. For additional details see Note 15, Summarized Financial
Information of Significant Related Energy Supplier. The fair value of derivative
contracts associated with other equity investments is included in Enterprises
Investments on the Consolidated Balance Sheets.

     Cumulative Effect of Change in Accounting Principle: On January 1, 2001,
upon initial adoption of the derivatives standard, we recorded a $10 million,
net of tax, cumulative effect adjustment as an increase in accumulated other
comprehensive income. This adjustment relates to the difference between the fair
value and recorded book value of contracts related to gas call options, gas fuel
for generation swap contracts, and interest rate swap contracts that qualified
for hedge accounting prior to the initial adoption of SFAS No. 133 and our
proportionate share of the effects of adopting SFAS No. 133 related to our
equity investments in the MCV Partnership and Taweelah. Based on the initial
transition adjustment of $21 million, net of tax, recorded in accumulated other
comprehensive income at January 1, 2001, Consumers reclassified to earnings $12
million as a reduction to the cost of gas, $1 million as a reduction to the cost
of power supply, $2 million as an increase in interest expense, and $8 million
as an increase in other revenues for the twelve months ended December 31, 2001.
CMS Energy recorded $12 million as an increase in interest expense during 2001,
which includes the $2 million of additional interest expense at Consumers. The
difference between the initial transition adjustment and the amounts
reclassified to earnings represents an unrealized loss in the fair value of the
derivative instruments since January 1, 2001, resulting in a decrease of
accumulated other comprehensive income. We also recorded a $7 million, net of
tax, cumulative effect adjustment as an increase to earnings. This adjustment
relates to our proportionate share of the difference between the fair value and
the recorded book value of interest rate swaps at Taweelah, and financial gas
and supply contracts that were required to be accounted for as derivatives as of
January 1, 2001.

     In June and December 2001, the FASB issued guidance that resolved the
accounting for certain utility industry contracts. As a result, we recorded a $3
million, net of tax, cumulative effect adjustment as an unrealized loss,
decreasing accumulated other comprehensive income, and on December 31, 2001,
recorded an $11 million, net of tax, cumulative effect adjustment as a decrease
to earnings. These adjustments relate to the difference between the fair value
and the recorded book value of certain electric call option contracts.

     Effective, January 1, 2003, EITF Issue No. 98-10 was rescinded by EITF
Issue No. 02-03 and as a result, only energy contracts that meet the definition
of a derivative in SFAS No. 133 can be carried at fair value. The impact of this
change was recognized as a cumulative effect of a change in accounting principle
loss of $23 million, net of tax. For additional details regarding this loss see
Note 17, Implementation of New Accounting Standards.

     ELECTRIC CONTRACTS: Our electric utility business uses purchased electric
call option contracts to meet, in part, our regulatory obligation to serve. This
obligation requires us to provide a physical supply of electricity to customers,
to manage electric costs and to ensure a reliable source of capacity during peak
demand periods.

     Certain of our electric capacity and energy contracts are not accounted for
as derivatives due to the lack of an active energy market in the state of
Michigan, as defined by SFAS No. 133, and the transportation costs that would be
incurred to deliver the power under the contracts to the closest active energy
market at the Cinergy hub in Ohio. If a market develops in the future, we may be
required to account for these contracts as derivatives. The mark-to-market
impact on earnings related to these contracts, particularly related to the PPA,
could be material to the financial statements.

                                      CMS-87
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Our electric business also uses gas option and swap contracts to protect
against price risk due to the fluctuations in the market price of gas used as
fuel for generation of electricity. These contracts are financial contracts that
are used to offset increases in the price of potential gas purchases. These
contracts do not qualify for hedge accounting. Therefore, we record any change
in the fair value of these contracts directly in earnings as part of power
supply costs.

     For the year ended December 31, 2003, the unrealized gain in accumulated
other comprehensive income related to our proportionate share of the effects of
derivative accounting related to our equity investment in the MCV Partnership is
$10 million, net of tax. We expect to reclassify this gain, if this value
remains, as an increase to earnings from equity method investees during the next
12 months.

     GAS CONTRACTS: Our gas utility business uses fixed price gas supply
contracts, fixed price weather-based gas supply call options, fixed price gas
supply call and put options, and other types of contracts, to meet our
regulatory obligation to provide gas to our customers at a reasonable and
prudent cost. Unrealized gains and losses associated with these options are
reported directly in earnings as part of other income, and then directly offset
in earnings and recorded on the balance sheet as a regulatory asset or
liability.

     ENERGY TRADING ACTIVITIES: Through December 31, 2002, CMS MST's wholesale
power and gas trading activities were accounted for under the mark-to-market
method of accounting. Under mark-to-market accounting, energy-trading contracts
are reflected at fair market value, net of reserves, with unrealized gains and
losses recorded as an asset or liability in the Consolidated Balance Sheets.
These assets and liabilities are affected by the timing of settlements related
to these contracts, current-period changes from newly originated transactions
and the impact of price movements. Changes in fair value are recognized as
revenues in the Consolidated Statements of Income in the period in which the
changes occur. The market prices we use to value our energy trading contracts
reflect our consideration of, among other things, closing exchange and
over-the-counter quotations. In certain contracts, long-term commitments may
extend beyond the period in which market quotations for such contracts are
available. Mathematical models are developed to determine various inputs into
the fair value calculation including price and other variables that may be
required to calculate fair value. Realized cash returns on these commitments may
vary, either positively or negatively, from the results estimated through
application of the mathematical model. We believe that our mathematical models
use state-of-the-art technology, pertinent industry data, and prudent
discounting in order to forecast certain elongated pricing curves. Market prices
are adjusted to reflect the impact of liquidating our position in an orderly
manner over a reasonable period of time under present market conditions.

     In connection with the market valuation of our energy trading contracts, we
maintain reserves for credit risks based on the financial condition of
counterparties. We also maintain credit policies that management believes
minimize overall credit risk with regard to our counterparties. Determination of
our counterparties' credit quality is based upon a number of factors, including
credit ratings, disclosed financial condition, and collateral requirements.
Where contractual terms permit, we employ standard agreements that allow for
netting of positive and negative exposures associated with a single
counterparty. Based on these policies, our current exposures, and our credit
reserves, we do not anticipate a material adverse effect on our financial
position or results of operations as a result of counterparty nonperformance.

     INTEREST RATE RISK CONTRACTS: We use interest rate swaps to hedge the risk
associated with forecasted interest payments on variable-rate debt. Most of our
interest rate swaps are designated as cash flow hedges. As such, we record any
change in the fair value of these contracts in accumulated other comprehensive
income unless the swaps are sold. For interest rate swaps that did not qualify
for hedge accounting treatment, we record any change in the fair value of these
contracts in earnings.

     We have entered into floating-to-fixed interest rate swap agreements to
reduce the impact of interest rate fluctuations. The difference between the
amounts paid and received under the swaps is accrued and recorded as an
adjustment to interest expense over the term of the agreement. We were able to
apply the shortcut method to all

                                      CMS-88
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

interest rate swaps that qualified for hedge accounting treatment; therefore,
there was no ineffectiveness associated with these hedges.

     The following table reflects the outstanding floating-to-fixed interest
rates swaps at year end:

<Table>
<Caption>
                     FLOATING TO FIXED                          NOTIONAL    MATURITY     FAIR
                    INTEREST RATE SWAPS                          AMOUNT       DATE       VALUE
                    -------------------                         --------    --------     -----
                                                                         IN MILLIONS
<S>                                                             <C>         <C>          <C>
December 31, 2003...........................................      $ 28      2005-2006    $ (3)
December 31, 2002...........................................       493      2003-2007     (28)
</Table>

     Notional amounts reflect the volume of transactions but do not represent
the amount exchanged by the parties to the financial instruments. Accordingly,
notional amounts do not necessarily reflect our exposure to credit or market
risks. The weighted average interest rate associated with outstanding swaps was
approximately 7.4 percent at December 31, 2003 and 4.0 percent at December 31,
2002.

     Certain equity method investees have issued interest rate swaps. These
instruments are not included in this analysis, but can have an impact on
financial results. See discussion of these instruments in Note 18, Restatement
and Reclassification.

     FOREIGN EXCHANGE DERIVATIVES: We may use forward exchange and option
contracts to hedge certain receivables, payables, long-term debt, and equity
value relating to foreign investments. The purpose of our foreign currency
hedging activities is to protect the company from the risk associated with
adverse changes in currency exchange rates that could affect cash flow
materially. These contracts would not subject us to risk from exchange rate
movements because gains and losses on such contracts offset losses and gains,
respectively, on assets and liabilities being hedged.

     There were no outstanding foreign exchange contracts at December 31, 2003.
The notional amount of the outstanding foreign exchange contracts at December
31, 2002 was $1 million Canadian. The estimated fair value of the foreign
exchange and option contracts at December 31, 2002 was zero.

8: INCOME TAXES

     CMS Energy and its subsidiaries file a consolidated federal income tax
return. Income taxes generally are allocated based on each company's separate
taxable income. We practice deferred tax accounting for temporary differences in
accordance with SFAS No. 109, Accounting for Income Taxes.

     U.S. income taxes are not recorded on the undistributed earnings of foreign
subsidiaries that have been or are intended to be reinvested indefinitely. Upon
distribution, those earnings may be subject to both U.S. income taxes (adjusted
for foreign tax credits or deductions) and withholding taxes payable to various
foreign countries. We annually determine the amount of undistributed foreign
earnings that we expect will remain invested indefinitely in foreign
subsidiaries. Cumulative undistributed earnings of foreign subsidiaries for
which income taxes have not been provided totaled approximately $106 million at
December 31, 2003. It is impractical to estimate the amount of unrecognized
deferred income taxes or withholding taxes on these undistributed earnings.
Also, at December 31, 2003 and 2002, we recorded U.S. income taxes with respect
to temporary differences between the book and tax bases of foreign investments
that were determined to be no longer essentially permanent in duration.

     The Job Creation and Worker Assistance Act of 2002 provided corporate
taxpayers a 5-year carryback of tax losses incurred in 2001 and 2002. As a
result of this legislation, we carried back consolidated 2001 and 2002 tax
losses to tax years 1996 through 1999 to obtain refunds totaling $250 million.
The tax loss carryback, however, resulted in a reduction in AMT credit
carryforwards that previously had been recorded as deferred tax assets in the
amount of $47 million. This non-cash reduction in AMT credit carryforwards was
reflected in our tax provision in 2002.

                                      CMS-89
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     We use ITC to reduce current income taxes payable, and amortize ITC over
the life of the related property. AMT paid generally becomes a tax credit that
we can carry forward indefinitely to reduce regular tax liabilities in future
periods when regular taxes paid exceed the tax calculated for AMT. At December
31, 2003, we had AMT credit carryforwards in the amount of $214 million that do
not expire, tax loss carryforwards in the amount of $1.151 billion that expire
from 2021 through 2023. In addition, we had capital loss carryforwards in the
amount of $29 million that expire in 2007, and general business credit
carryforwards in the amount of $42 million that primarily expire in 2005, for
which valuation allowances have been provided.

     During the fourth quarter of 2000, we wrote down the value of our
investment in Loy Yang by $329 million ($268 million after-tax). We have now
concluded the tax benefit associated with the write-down should have been
reduced by $38 million. Accordingly, retained earnings as of January 1, 2001
have been reduced by this amount. For additional details, see Note 18,
Restatement and Reclassification.

     The significant components of income tax expense (benefit) on continuing
operations consisted of:

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                                -----------------------------
                                                                         RESTATED    RESTATED
                                                                2003       2002        2001
                                                                ----     --------    --------
                                                                         IN MILLIONS
<S>                                                             <C>      <C>         <C>
Current income taxes:
  Federal...................................................    $ (17)    $(171)      $(209)
  State and local...........................................        1        (8)          6
  Foreign...................................................       17        28           8
                                                                -----     -----       -----
                                                                $   1     $(151)      $(195)
Deferred income taxes
  Federal...................................................    $  54     $ 107       $  97
  State.....................................................        4         7           3
  Foreign...................................................        5         2           8
                                                                -----     -----       -----
                                                                $  63     $ 116       $ 108
Deferred ITC, net...........................................       (6)       (6)         (7)
                                                                -----     -----       -----
Tax expense (benefit).......................................    $  58     $ (41)      $ (94)
                                                                =====     =====       =====
</Table>

                                      CMS-90
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The principal components of deferred tax assets (liabilities) recognized in
the consolidated balance sheet are as follows:

<Table>
<Caption>
                                                                    DECEMBER 31
                                                                -------------------
                                                                           RESTATED
                                                                 2003        2002
                                                                 ----      --------
                                                                    IN MILLIONS
<S>                                                             <C>        <C>
Property....................................................    $  (842)   $  (814)
Securitization costs........................................       (186)      (192)
Prepaid pension.............................................       (136)        --
Unconsolidated investments..................................       (254)        55
Postretirement benefits.....................................        (70)       (72)
Gas inventories.............................................       (100)       (74)
Employee benefit obligations................................        130        265
Tax credit carryforwards....................................        255        247
Tax loss carryforwards......................................        413        190
Valuation allowances........................................        (54)        (4)
Regulatory liabilities......................................        120        115
Other, net..................................................         82       (169)
                                                                -------    -------
  Net deferred tax liabilities..............................    $  (642)   $  (453)
                                                                =======    =======
Deferred tax liabilities....................................    $(1,581)   $(1,339)
Deferred tax assets, net of valuation reserves..............        939        886
                                                                -------    -------
  Net deferred tax liabilities..............................    $  (642)   $  (453)
                                                                =======    =======
</Table>

                                      CMS-91
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The actual income tax expense (benefit) on continuing operations differs
from the amount computed by applying the statutory federal tax rate of 35
percent to income before income taxes as follows:

<Table>
<Caption>
                                                                  YEARS ENDED DECEMBER 31
                                                                ----------------------------
                                                                        RESTATED    RESTATED
                                                                2003      2002        2001
                                                                ----    --------    --------
                                                                        IN MILLIONS
<S>                                                             <C>     <C>         <C>
Income (loss) from continuing operations before income taxes
  and minority interests
  Domestic..................................................    $(73)    $(527)      $(320)
  Foreign...................................................      88        94        (108)
                                                                ----     -----       -----
       Total................................................      15      (433)       (428)
Statutory federal income tax rate...........................    x 35%     x 35%       x 35%
                                                                ----     -----       -----
Expected income tax expense (benefit).......................       5      (152)       (150)
Increase (decrease) in taxes from:
  Property differences......................................      18        18          23
  Income tax effect of foreign investments..................     (18)       47          52
  Tax credits...............................................      (6)       51          (8)
  State and local income taxes, net of federal benefit......      --        (7)          3
  Tax return accrual adjustments............................      (1)       (7)         (4)
  Minority interests........................................      --        (5)         (9)
  Valuation allowance provision (reversal)..................      50        --          (1)
  Other, net................................................      10        14          --
                                                                ----     -----       -----
Recorded income tax expense (benefit)(a)....................    $ 58     $ (41)      $ (94)
                                                                ----     -----       -----
Effective tax rate(b).......................................      (b)      9.5%       22.0%
                                                                ====     =====       =====
</Table>

- -------------------------
(a)  The increased income tax expense for 2003 is primarily attributable to the
     valuation reserve provisions for the possible loss of general business
     credit, capital loss, and charitable contributions carryforwards.

(b)  Because of the small size of the net income in 2003, the effective tax rate
     is not meaningful. Changes in the effective tax rate in 2002 from 2001
     resulted principally from the reduction in AMT credit carryforwards and the
     recording of U.S. taxes on undistributed earnings and basis differences of
     foreign subsidiaries.

9: EXECUTIVE INCENTIVE COMPENSATION

     We provide a Performance Incentive Stock Plan to key management employees
based on their contributions to the successful management of the Company. The
Plan includes the following type of awards for common stock:

     - restricted shares of common stock,

     - stock options, and

     - stock appreciation rights.

     Restricted shares of common stock are outstanding shares with full voting
and dividend rights. These awards vest over five years at the rate of 25 percent
per year after two years. Some restricted shares are subject to achievement of
specified levels of total shareholder return and are subject to forfeiture if
employment terminates before vesting. Restricted shares vest fully if control of
CMS Energy changes, as defined by the plan.

     Stock options give the holder the right to purchase common stock at a given
price over an extended period of time. Stock appreciation rights give the holder
the right to receive common stock appreciation, which is defined

                                      CMS-92
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

as the excess of the market price of the stock at the date of exercise over the
grant date price. Our stock options and stock appreciation rights are valued at
market price when granted. All options and rights may be exercised upon grant
and they expire up to ten years and one month from the date of grant.

     Our Performance Incentive Stock Plan was amended in January 1999. It uses
the following formula to grant awards:

     - Up to five percent of our common stock outstanding at January 1 each year
       less:

      + the number of shares of restricted common stock awarded, and

      + common stock subject to options granted under the plan during the
        immediately preceding four calendar years.

     - the number of shares of restricted common stock awarded under this plan
       cannot exceed 20 percent of the aggregate number of shares reserved for
       awards, and

     - forfeiture of shares previously awarded will increase the number of
       shares available to be awarded under the plan.

     Awards of up to 2,240,247 shares of CMS Energy Common Stock may be issued
as of December 31, 2003.

     The following table summarizes the restricted stock and stock options
granted to our key employees under the Performance Incentive Stock Plan:

<Table>
<Caption>
                                                            RESTRICTED
                                                              STOCK                  OPTIONS
                                                            ----------    -----------------------------
                                                            NUMBER OF     NUMBER OF    WEIGHTED AVERAGE
                                                              SHARES       SHARES       EXERCISE PRICE
                                                            ---------     ---------    ----------------
<S>                                                         <C>           <C>          <C>
CMS ENERGY COMMON STOCK
Outstanding at January 1, 2001..........................      786,427     3,058,186         $31.47
  Granted...............................................      266,500     1,036,000         $30.21
  Exercised or Issued...................................      (82,765)     (150,174)        $19.11
  Forfeited or Expired..................................     (182,177)      (31,832)        $35.10
                                                            ---------     ---------         ------
Outstanding at December 31, 2001........................      787,985     3,912,180         $31.58
  Granted...............................................      512,726     1,492,200         $15.64
  Exercised or Issued...................................     (116,562)      (39,600)        $17.07
  Forfeited or Expired..................................     (225,823)     (243,160)        $28.91
                                                            ---------     ---------         ------
Outstanding at December 31, 2002........................      958,326     5,121,620         $27.18
  Granted...............................................      600,000     1,593,000         $ 6.35
  Exercised or Issued...................................      (80,425)       (8,000)        $ 8.12
  Forfeited or Expired..................................     (213,873)     (885,044)        $28.66
                                                            ---------     ---------         ------
Outstanding at December 31, 2003........................    1,264,028     5,821,576         $21.27
                                                            =========     =========         ======
</Table>

     At December 31, 2003, 186,522 of the 1,264,028 shares of restricted common
stock outstanding are subject to performance objectives. Compensation expense
included in income for restricted stock was $2 million for 2003, less than $1
million in 2002, and $1 million in 2001.

                                      CMS-93
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table summarizes our stock options outstanding at December
31, 2003:

<Table>
<Caption>
                                                        NUMBER OF
                                                         SHARES       WEIGHTED AVERAGE    WEIGHTED AVERAGE
                                                       OUTSTANDING     REMAINING LIFE      EXERCISE PRICE
                                                       -----------    ----------------    ----------------
<S>                                                    <C>            <C>                 <C>
Range of Exercise Prices
CMS ENERGY COMMON STOCK:
$6.35 -- $6.35.....................................     1,593,000        9.72 years            $ 6.35
$8.12 -- $22.00....................................     1,184,300        6.94 years            $13.43
$22.20 -- $31.04...................................     1,785,772        6.65 years            $27.06
$34.80 -- $43.38...................................     1,255,504        4.92 years            $39.31
$44.06 -- $44.06...................................         3,000        4.91 years            $44.06
                                                        ---------        ----------            ------
$6.35 -- $44.06....................................     5,821,576        7.17 years            $21.27
</Table>

     The number of stock options exercisable was 5,795,145 at December 31, 2003,
5,007,329 at December 31, 2002 and 3,760,883 at December 31, 2001.

     In December 2002, we adopted the fair value based method of accounting for
stock-based employee compensation, under SFAS No. 123, as amended by SFAS No.
148. We elected to adopt the prospective method recognition provisions of this
Statement, which applies the recognition provisions to all awards granted,
modified, or settled after the beginning of the fiscal year that the recognition
provisions are first applied.

     The following table summarizes the weighted average fair value of stock
options granted:

<Table>
<Caption>
                     OPTIONS GRANT DATE                         2003       2002(A)       2001
                     ------------------                         ----       -------       ----
<S>                                                             <C>      <C>             <C>
Fair value at grant date....................................    $2.96    $3.84, $1.44    $6.43
</Table>

- -------------------------
(a) For 2002, there were two stock option grants.

     The stock options fair value is estimated using the Black-Scholes model, a
mathematical formula used to value options traded on securities exchanges. The
following assumptions were used in the Black-Scholes model:

<Table>
<Caption>
               YEARS ENDED DECEMBER 31                   2003              2002(A)              2001
               -----------------------                   ----              -------              ----
<S>                                                      <C>         <C>         <C>           <C>
CMS ENERGY COMMON STOCK OPTIONS
Risk-free interest rate..............................     3.02%        3.95%,       3.16%        4.77%
Expected stock price volatility......................    55.46%       32.44%,      40.81%       30.59%
Expected dividend rate...............................       --       $0.365,     $0.1825       $0.365
Expected option life (years).........................      4.2          4.2          4.2          4.2
</Table>

- -------------------------
(a) For 2002, there were two stock option grants.

                                      CMS-94
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     We recorded $5 million as stock-based employee compensation cost for 2003
and $4 million for 2002. All stock options vest at date of grant. If stock-based
compensation costs had been determined under SFAS No. 123 for the year ended
December 31, 2001, consolidated net loss and pro forma net loss would have been
as follows:

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                                -----------------------------
                                                                        RESTATED 2001
                                                                -----------------------------
                                                                NET LOSS    BASIC     DILUTED
                                                                --------    -----     -------
                                                                        IN MILLIONS,
                                                                  EXCEPT PER SHARE AMOUNTS
<S>                                                             <C>         <C>       <C>
Net loss, as reported.......................................     $(459)     $(3.51)   $(3.51)
  Add: Stock-based employee compensation expense included in
     reported net loss, net of related taxes................        --          --        --
  Deduct: Total stock-based employee compensation expense
     determined under fair value based method for all
     awards, net of related taxes...........................        (4)      (0.03)    (0.03)
                                                                 -----      ------    ------
Pro forma net loss..........................................     $(463)     $(3.54)   $(3.54)
                                                                 =====      ======    ======
</Table>

10: RETIREMENT BENEFITS

     We provide retirement benefits to our employees under a number of different
plans, including:

     - non-contributory, defined benefit Pension Plan,

     - a cash balance pension plan for certain employees hired after June 30,
       2003,

     - benefits to certain management employees under SERP,

     - health care and life insurance benefits under OPEB,

     - benefits to a select group of management under EISP, and

     - a defined contribution 401(k) plan.

     Pension Plan: The Pension Plan includes funds for all of our employees, and
the employees of our subsidiaries, including Panhandle. The Pension Plan's
assets are not distinguishable by company.

     In June 2003, we sold Panhandle to Southern Union Panhandle Corp. No
portion of the Pension Plan assets were transferred with the sale and Panhandle
employees are no longer eligible to accrue additional benefits. The Pension Plan
retained pension payment obligations for Panhandle employees that were vested
under the Pension Plan.

     The sale of Panhandle resulted in a significant change in the makeup of the
Pension Plan. A remeasurement of the obligation was required at the date of
sale. The remeasurement further resulted in the following:

     - an increase in OPEB expense of $4 million for 2003, and

     - an additional charge to accumulated other comprehensive income of $34
       million ($22 million after-tax) as a result of the increase in the
       additional minimum pension liability. Due to large contributions, the
       additional minimum pension liability was eliminated as of December 31,
       2003.

     Additionally, a significant number of Panhandle employees elected to retire
as of July 1, 2003 under the CMS Energy Employee Pension Plan. As a result, we
have recorded a $25 million ($16 million after-tax) settlement loss, and a $10
million ($7 million after-tax) curtailment gain, pursuant to the provisions of
SFAS No. 88, which is reflected in discontinued operations.

     In 2003, a substantial number of non-Panhandle retiring employees also
elected a lump sum payment instead of receiving pension benefits as an annuity
over time. Lump sum payments constitute a settlement under SFAS

                                      CMS-95
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

No. 88. A settlement loss must be recognized when the cost of all settlements
paid during the year exceeds the sum of the service and interest costs for that
year. We recorded settlement loss of $59 million ($39 million after-tax) in
December 2003.

     SERP: SERP benefits are paid from a trust established in 1988. SERP is not
a qualified plan under the Internal Revenue Code; SERP trust earnings are
taxable and trust assets are included in consolidated assets. Trust assets were
$66 million at December 31, 2003, and $57 million at December 31, 2002. The
assets are classified as other non-current assets. The Accumulated Benefit
Obligation for SERP was $62 million at December 31, 2003 and $54 million at
December 31, 2002.

     OPEB: Retiree health care costs at December 31, 2003 are based on the
assumption that costs would increase 8.5 percent in 2003. The rate of increase
is expected to be 7.5 percent for 2004. The rate of increase is expected to slow
to an estimated 5.5 percent by 2010 and thereafter.

     The health care cost trend rate assumption significantly affects the
estimated costs recorded. A one-percentage point change in the assumed health
care cost trend assumption would have the following effects:

<Table>
<Caption>
                                                                ONE PERCENTAGE    ONE PERCENTAGE
                                                                POINT INCREASE    POINT DECREASE
                                                                --------------    --------------
                                                                          IN MILLIONS
<S>                                                             <C>               <C>
Effect on total service and interest cost component.........         $ 15             $ (12)
Effect on postretirement benefit obligation.................         $149             $(129)
</Table>

     We adopted SFAS No. 106, effective as of the beginning of 1992. Consumers
recorded a liability of $466 million for the accumulated transition obligation
and a corresponding regulatory asset for anticipated recovery in utility rates
(see Note 1, Corporate Structure and Accounting Policies, "Utility Regulation.")
The MPSC authorized recovery of the electric utility portion of these costs in
1994 over 18 years and the gas utility portion in 1996 over 16 years.

     EISP: We implemented an EISP in 2002 to provide flexibility in separation
of employment by officers, a select group of management, or other highly
compensated employees. Terms of the plan may include payment of a lump sum,
payment of monthly benefits for life, payment of premium for continuation of
health care, or any other legally permissible term deemed to be in our best
interest to offer. EISP expense was $1 million in 2003 and $2 million in 2002.
As of December 31, 2003, the Accumulated Benefit Obligation of the EISP was $3
million.

     The measurement date for all plans is December 31.

     Assumptions: The following table recaps the weighted-average assumptions
used in our retirement benefits plans to determine benefit obligations and net
periodic benefit cost:

<Table>
<Caption>
                                                               YEARS ENDED DECEMBER 31
                                                  --------------------------------------------------
                                                      PENSION & SERP                  OPEB
                                                  -----------------------    -----------------------
                                                  2003     2002     2001     2003     2002     2001
                                                  ----     ----     ----     ----     ----     ----
<S>                                               <C>      <C>      <C>      <C>      <C>      <C>
Discount rate.................................    6.25%    6.75%    7.25%    6.25%    6.75%    7.25%
Expected long-term rate of return on plan
  assets(a)...................................    8.75%    8.75%    9.75%
  Union.......................................                               8.75%    8.75%    9.75%
  Non-Union...................................                               6.00%    6.00%    6.00%
Rate of compensation increase:
  Pension.....................................    3.25%    3.50%    5.25%
  SERP........................................    5.50%    5.50%    5.50%
</Table>

- -------------------------
(a) We determine our long-term rate of return by considering historical market
    returns, the current and future economic environment, the capital market
    principles of risk and return, and the expertise of individuals and firms
    with financial market knowledge. We use the asset allocation of the
    portfolio to forecast the future
                                      CMS-96
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

    expected total return of the portfolio. The goal is to determine a long-term
    rate of return that can be incorporated into the planning of future cash
    flow requirements in conjunction with the change in the liability. The use
    of forecasted returns for various classes of assets used to construct an
    expected return model is reviewed periodically for reasonability and
    appropriateness.

     Costs: The following table recaps the costs incurred in our retirement
benefits plans:

<Table>
<Caption>
                                                                     YEARS ENDED DECEMBER 31
                                                          ---------------------------------------------
                                                             PENSION & SERP                OPEB
                                                          ---------------------    --------------------
                                                          2003    2002     2001    2003    2002    2001
                                                          ----    ----     ----    ----    ----    ----
                                                                           IN MILLIONS
<S>                                                       <C>     <C>      <C>     <C>     <C>     <C>
Service cost..........................................    $ 40    $  44    $ 39    $ 21    $ 20    $ 16
Interest expense......................................      79       89      88      66      69      62
Expected return on plan assets........................     (81)    (103)    (98)    (42)    (43)    (41)
Plan amendments.......................................      --        4      --      --      --      --
Curtailment credit....................................      (2)      --      --      (8)     --      --
Settlement charge.....................................      84       --      --      --      --      --
Amortization of:
  Net transition (asset)..............................      --       --      (5)     --      --      --
  Prior service cost..................................       7        8       8      (7)     (1)     (1)
  Other...............................................       9       (1)     (1)     19      10       1
                                                          ----    -----    ----    ----    ----    ----
Net periodic pension and postretirement benefit
  cost................................................    $136    $  41    $ 31    $ 49    $ 55    $ 37
                                                          ====    =====    ====    ====    ====    ====
</Table>

     Plan Assets: The following table recaps the categories of plan assets in
our retirement benefits plans:

<Table>
<Caption>
                                                                    YEARS ENDED DECEMBER 31
                                                                -------------------------------
                                                                  PENSION              OPEB
                                                                ------------       ------------
                                                                2003    2002       2003    2002
                                                                ----    ----       ----    ----
<S>                                                             <C>     <C>        <C>     <C>
Asset Category:
  Fixed Income..............................................    52%     32%(b)     51%     55%
  Equity Securities.........................................    44%     60%        48%     44%
     CMS Energy Common Stock(a).............................     4%      8%         1%      1%
</Table>

- -------------------------
(a) At December 31, 2003, there were 4,970,000 shares of CMS Energy Common Stock
    in the Pension Plan assets with a fair value of $42 million, and 414,000
    shares in the OPEB plan assets with a fair value of $4 million. At December
    31, 2002, there were 5,099,000 shares of CMS Energy Common Stock in the
    Pension Plan assets with a fair value of $48 million, and 284,000 shares in
    the OPEB plan assets with a fair value of $3 million.

(b) At February 29, 2004, the Pension Plan assets were 66 percent equity, 34
    percent fixed income. We plan to contribute $72 million to our OPEB plan in
    2004. We estimate a contribution of $26 million to our Pension Plan in 2004.

     We have established a target asset allocation for our Pension Plan assets
of 65 percent equity and 35 percent fixed income investments to maximize the
long-term return on plan assets, while maintaining a prudent level of risk. The
level of acceptable risk is a function of the liabilities of the plan. Equity
investments are diversified mostly across the Standard & Poor's 500 Index, with
a lesser allocation to the Standard & Poor's Mid Cap and Small Cap Indexes and a
Foreign Equity Index Fund. Fixed income investments are diversified across
investment grade instruments of both government and corporate issuers. Annual
liability measurements, quarterly portfolio reviews, and periodic
asset/liability studies are used to evaluate the need for adjustments to the
portfolio allocation.

                                      CMS-97
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     We have established union and non-union VEBA trusts to fund our future
retiree health and life insurance benefits. These trusts are funded through the
rate making process for Consumers, and through direct contributions from the
non-utility subsidiaries. The equity portions of the union and non-union health
care VEBA trusts are invested in an Standard & Poor's 500 Index fund. The fixed
income portion of the union health care VEBA trust is invested in domestic
investment grade taxable instruments. The fixed income portion of the non-union
health care VEBA trust is invested in a diversified mix of domestic tax-exempt
securities. The investment selections of each VEBA are influenced by the tax
consequences, as well as the objective of generating asset returns that will
meet the medical and life insurance costs of retirees.

     Reconciliations: The following table reconciles the funding of our
retirement benefit plans with our retirement benefit plans' liability:

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                     ---------------------------------------------------
                                                       PENSION PLAN          SERP             OPEB
                                                     ----------------    ------------    ---------------
                                                      2003      2002     2003    2002     2003     2002
                                                      ----      ----     ----    ----     ----     ----
                                                                         IN MILLIONS
<S>                                                  <C>       <C>       <C>     <C>     <C>       <C>
Benefit obligation January 1.....................    $1,256    $1,195    $ 81    $ 73    $  982    $ 956
Service cost.....................................        38        40       2       4        21       20
Interest cost....................................        74        84       5       5        66       69
Plan amendment...................................       (19)        3      --      --       (47)     (64)
Actuarial loss (gain)............................        55        72     (10)      1        91       41
Business combinations............................        --        --      --      --       (42)      --
Benefits paid....................................      (215)     (138)     (2)     (2)      (42)     (40)
                                                     ------    ------    ----    ----    ------    -----
Benefit obligation December 31(a)................     1,189     1,256      76      81     1,029      982
                                                     ------    ------    ----    ----    ------    -----
Plan assets at fair value at January 1...........       607       845      --      --       508      508
Actual return on plan assets.....................       115      (164)     --      --        75      (43)
Company contribution.............................       560        64       2       2        76       83
Actual benefits paid.............................      (215)     (138)     (2)     (2)      (41)     (40)
                                                     ------    ------    ----    ----    ------    -----
Plan assets at fair value at December 31.........     1,067       607      --      --       618      508
                                                     ------    ------    ----    ----    ------    -----
Benefit obligation in excess of plan assets......      (122)     (649)    (76)    (81)     (411)    (474)
Unrecognized net loss from experience different
  than assumed...................................       501       573       3      13       313      313
Unrecognized prior service cost (benefit)........        29        60       1       1      (112)     (77)
Panhandle adjustment.............................        --        (7)     --      --        --       --
                                                     ------    ------    ----    ----    ------    -----
Net Balance Sheet Asset (Liability)..............       408       (23)    (72)    (67)     (210)    (238)
Additional minimum liability adjustment(b).......        --      (426)     --      --        --       --
                                                     ------    ------    ----    ----    ------    -----
  Total Net Balance Sheet Asset (Liability)......    $  408    $ (449)   $(72)   $(67)   $ (210)   $(238)
                                                     ======    ======    ====    ====    ======    =====
</Table>

- -------------------------
(a)  The Medicare Prescription Drug, Improvement and Modernization Act of 2003
     was signed into law in December 2003. This Act establishes a prescription
     drug benefit under Medicare (Medicare Part D), and a federal subsidy to
     sponsors of retiree health care benefit plans that provide a benefit that
     is actuarially equivalent to Medicare Part D. Accounting guidance for the
     subsidy is not yet available, therefore, we have decided to defer
     recognizing the effects of the Act in our 2003 financial statements, as
     permitted by FASB Staff Position No. 106-1. When accounting guidance is
     issued, our retiree health benefit obligation may be adjusted.

(b)  The Pension Plan's Accumulated Benefit Obligation of $1.055 billion
     exceeded the value of the Pension Plan assets and net balance sheet
     liability at December 31, 2002. As a result, we recorded an additional
     minimum liability, including an intangible asset of $53 million, and $373
     million of accumulated other

                                      CMS-98
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     comprehensive income. In August 2003, we made our planned contribution of
     $210 million to the Pension Plan. In December 2003, we made an additional
     contribution of $350 million to the Pension Plan that eliminated the
     additional minimum liability. The Accumulated Benefit Obligation for the
     pension plan was $1.019 billion at December 31, 2003.

11: LEASES

     We lease various assets including vehicles, railcars, construction
equipment, an airplane, computer equipment, and buildings. We have both
full-service and net leases. A net lease requires us to pay for taxes,
maintenance, operating costs, and insurance. Most of our leases contain options
at the end of the initial lease term to:

     - purchase the asset at the then fair value of the asset, or

     - renew the lease at the then fair rental value.

     Minimum annual rental commitments under our non-cancelable leases at
December 31, 2003 were:

<Table>
<Caption>
                                                                CAPITAL LEASES    OPERATING LEASES
                                                                --------------    ----------------
                                                                           IN MILLIONS
<S>                                                             <C>               <C>
2004........................................................         $13                $12
2005........................................................          12                 10
2006........................................................          12                 10
2007........................................................          11                  9
2008........................................................           9                  7
2009 and thereafter.........................................          21                 30
                                                                     ---                ---
Total minimum lease payments................................          78                $78
                                                                                        ===
Less imputed interest.......................................          10
                                                                     ---
Present value of net minimum lease payments.................          68
Less current portion........................................          10
                                                                     ---
Non-current portion.........................................         $58
                                                                     ===
</Table>

     Consumers is authorized by the MPSC to record both capital and operating
lease payments as operating expense and recover the total cost from our
customers. Operating lease charges were $14 million in 2003, $13 million in
2002, and $15 million in 2001.

     Capital lease expenses were $17 million in 2003, $20 million, in 2002 and
$26 million in 2001. Included in the $26 million for 2001 is $7 million of
nuclear fuel lease expense. In November 2001, our nuclear fuel capital leasing
arrangement expired. At termination of the lease, we paid the lessor $48
million, which was the lessor's remaining investment at that time.

     In April 2001, we entered into a lease agreement for the construction of an
office building to be used as the main headquarters for CMS Energy and Consumers
in Jackson, Michigan. In November 2003, we exercised our purchase option under
the lease agreement and bought the office building with proceeds from a $60
million term loan.

                                      CMS-99
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12: JOINTLY OWNED REGULATED UTILITY FACILITIES

     We are required to provide only our share of financing for the jointly
owned utility facilities. The direct expenses of the jointly owned plants are
included in operating expenses. Operation, maintenance, and other expenses of
these jointly owned utility facilities are shared in proportion to each
participant's undivided ownership interest. The following table indicates the
extent of our investment in jointly owned regulated utility facilities:

<Table>
<Caption>
                                                                        DECEMBER 31
                                                                ----------------------------
                                                                    NET         ACCUMULATED
                                                                 INVESTMENT     DEPRECIATION
                                                                ------------    ------------
                                                                2003    2002    2003    2002
                                                                ----    ----    ----    ----
                                                                        IN MILLIONS
<S>                                                             <C>     <C>     <C>     <C>
Campbell Unit 3 -- 93.3 percent.............................    $299    $298    $328    $313
Ludington -- 51 percent.....................................      84      83      87      85
Distribution -- various.....................................      74      77      32      31
</Table>

13: EQUITY METHOD INVESTMENTS

     Where ownership is more than 20 percent but less than a majority, we
account for certain investments in other companies, partnerships and joint
ventures by the equity method of accounting in accordance with APB Opinion No.
18. The most significant of these investments is our 50 percent interest in Jorf
Lasfar, and our 49 percent interest in the MCV Partnership (Note 15). Our
investment in Jorf Lasfar is $256 million at December 31, 2003 and $240 million
at December 31, 2002. Net income from these investments included undistributed
earnings of $41 million in 2003 and $39 million in 2002 and distributions in
excess of earnings of $68 million in 2001. Summarized financial information of
the MCV Partnership is disclosed separately in

                                     CMS-100
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Note 15, Summarized Financial Information of Significant Related Energy
Supplier. Listed below is the summarized income and balance sheet information
for these investments.

Income Statement Data

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                               -------------------------------------------------------------
                                                                           2003
                                               -------------------------------------------------------------
                                                JORF                             SCP         ALL
                                               LASFAR    FMLP    TAWEELAH    INVESTMENTS    OTHERS    TOTAL
                                               ------    ----    --------    -----------    ------    -----
                                                                        IN MILLIONS
<S>                                            <C>       <C>     <C>         <C>            <C>       <C>
Operating revenue..........................     $369     $79       $99           $74        $1,135    $1,756
Operating expenses.........................      191       4        38            18         1,006     1,257
                                                ----     ---       ---           ---        ------    ------
Operating income...........................      178      75        61            56           129       499
Other expense, net.........................       58      43        18            25            35       179
                                                ----     ---       ---           ---        ------    ------
Net income (loss)..........................     $120     $32       $43           $31        $   94    $  320
                                                ====     ===       ===           ===        ======    ======
</Table>

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                               -------------------------------------------------------------
                                                                           2002
                                               -------------------------------------------------------------
                                                JORF                             SCP         ALL
                                               LASFAR    FMLP    TAWEELAH    INVESTMENTS    OTHERS    TOTAL
                                               ------    ----    --------    -----------    ------    -----
                                                                        IN MILLIONS
<S>                                            <C>       <C>     <C>         <C>            <C>       <C>
Operating revenue..........................     $364     $91       $101          $43        $3,376    $3,975
Operating expenses.........................      176       4         33           13         3,209     3,435
                                                ----     ---       ----          ---        ------    ------
Operating income...........................      188      87         68           30           167       540
Other expense, net.........................       56      49         86           16           206       413
                                                ----     ---       ----          ---        ------    ------
Net income (loss)..........................     $132     $38       $(18)         $14        $  (39)   $  127
                                                ====     ===       ====          ===        ======    ======
</Table>

<Table>
<Caption>
                                                                  YEAR ENDED DECEMBER 31,
                                               -------------------------------------------------------------
                                                                           2001
                                               -------------------------------------------------------------
                                                JORF                             SCP         ALL
                                               LASFAR    FMLP    TAWEELAH    INVESTMENTS    OTHERS    TOTAL
                                               ------    ----    --------    -----------    ------    -----
                                                                        IN MILLIONS
<S>                                            <C>       <C>     <C>         <C>            <C>       <C>
Operating revenue..........................     $357     $99       $ 44          $39        $3,814    $4,353
Operating expenses.........................      151       6         17           12         3,459     3,645
                                                ----     ---       ----          ---        ------    ------
Operating income...........................      206      93         27           27           355       708
Other expense, net.........................       45      63         42           16           237       403
                                                ----     ---       ----          ---        ------    ------
Net income.................................     $161     $30       $(15)         $11        $  118    $  305
                                                ====     ===       ====          ===        ======    ======
</Table>

                                     CMS-101
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Balance Sheet Data

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                              --------------------------------------------------------------
                                                                           2003
                                              --------------------------------------------------------------
                                               JORF                              SCP         ALL
                                              LASFAR    FMLP     TAWEELAH    INVESTMENTS    OTHERS    TOTAL
                                              ------    ----     --------    -----------    ------    -----
                                                                       IN MILLIONS
<S>                                           <C>       <C>      <C>         <C>            <C>       <C>
Assets
  Current assets..........................    $  277    $ --       $ 93         $ 60        $  434    $  864
  Property, plant and equipment, net......        10      --        638          383         2,475     3,506
  Other assets............................     1,152     893         10           --         1,159     3,214
                                              ------    ----       ----         ----        ------    ------
                                              $1,439    $893       $741         $443        $4,068    $7,584
                                              ======    ====       ====         ====        ======    ======
Liabilities
  Current liabilities.....................    $  314    $ 21       $ 81         $ 19        $  425    $  860
  Long-term debt and other non-current
     liabilities..........................       612     411        509          225         3,121     4,878
Equity....................................       513     461        151          199           522     1,846
                                              ------    ----       ----         ----        ------    ------
                                              $1,439    $893       $741         $443        $4,068    $7,584
                                              ======    ====       ====         ====        ======    ======
</Table>

<Table>
<Caption>
                                                                 YEAR ENDED DECEMBER 31,
                                              --------------------------------------------------------------
                                                                           2002
                                              --------------------------------------------------------------
                                               JORF                              SCP         ALL
                                              LASFAR    FMLP     TAWEELAH    INVESTMENTS    OTHERS    TOTAL
                                              ------    ----     --------    -----------    ------    -----
<S>                                           <C>       <C>      <C>         <C>            <C>       <C>
Assets
  Current assets..........................    $  225    $ --       $ 91         $ 36        $  676    $1,028
  Property, plant and equipment, net......         7      --        656          291         2,695     3,649
  Other assets............................     1,118     998         10           --         1,076     3,202
                                              ------    ----       ----         ----        ------    ------
                                              $1,350    $998       $757         $327        $4,447    $7,879
                                              ======    ====       ====         ====        ======    ======
Liabilities
  Current liabilities.....................    $  249    $ 22       $ 95         $ 18        $  692    $1,076
  Long-term debt and other non-current
     liabilities..........................       622     428        530          172         2,896     4,648
Equity....................................       479     548        132          137           859     2,155
                                              ------    ----       ----         ----        ------    ------
                                              $1,350    $998       $757         $327        $4,447    $7,879
                                              ======    ====       ====         ====        ======    ======
</Table>

14: REPORTABLE SEGMENTS

     Our reportable segments consist of business units organized and managed by
their products and services. We evaluate performance based upon the net income
of each segment. We operate principally in three reportable segments: electric
utility, gas utility, and enterprises.

     The electric utility segment consists of the generation and distribution of
electricity in the state of Michigan through its subsidiary, Consumers. The gas
utility segment consists of regulated activities like transportation, storage,
and distribution of natural gas in the state of Michigan through its subsidiary,
Consumers. The enterprises segment consists of:

     - investing in, acquiring, developing, constructing, managing, and
       operating non-utility power generation plants and natural gas facilities
       in the United States and abroad, and

     - providing gas, oil, and electric marketing services to energy users.

                                     CMS-102
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The tables below show financial information by reportable segment. The
"Other" net income segment includes corporate interest and other, discontinued
operations, and the cumulative effect of accounting changes. We restated 2002
and 2001 information due to the management reorganization and the change in our
business strategy in 2003 from five to three operating segments.

Reportable Segments

<Table>
<Caption>
                                                                    YEARS ENDED DECEMBER 31
                                                                -------------------------------
                                                                           RESTATED    RESTATED
                                                                 2003        2002        2001
                                                                 ----      --------    --------
                                                                          IN MILLIONS
<S>                                                             <C>        <C>         <C>
Revenues
  Electric utility..........................................    $ 2,583    $ 2,644     $ 2,630
  Gas utility...............................................      1,845      1,519       1,338
  Enterprises...............................................      1,085      4,508       4,034
  Other.....................................................         --          2           4
                                                                -------    -------     -------
                                                                $ 5,513    $ 8,673     $ 8,006
                                                                =======    =======     =======
Earnings from Equity Method Investees
  Enterprises...............................................    $   164    $    92     $   172
                                                                -------    -------     -------
                                                                $   164    $    92     $   172
                                                                =======    =======     =======
Depreciation, Depletion, and Amortization
  Electric utility..........................................    $   247    $   228     $   219
  Gas utility...............................................        128        118         118
  Enterprises...............................................         52         64          70
  Other.....................................................          1          2           1
                                                                -------    -------     -------
                                                                $   428    $   412     $   408
                                                                =======    =======     =======
Income Taxes
  Electric utility..........................................    $    90    $   138     $    69
  Gas utility...............................................         35         33          25
  Enterprises...............................................         14       (155)        (83)
  Other.....................................................        (81)       (57)       (105)
                                                                -------    -------     -------
                                                                $    58    $   (41)    $   (94)
                                                                =======    =======     =======
Net Income (Loss)
  Electric utility..........................................    $   167    $   264     $   120
  Gas utility...............................................         38         46          21
  Enterprises...............................................          8       (419)       (272)
  Other.....................................................       (257)      (541)       (328)
                                                                -------    -------     -------
                                                                $   (44)   $  (650)    $  (459)
                                                                =======    =======     =======
Investments in Equity Method Investees
  Enterprises...............................................    $ 1,366    $ 1,367     $ 1,912
  Other.....................................................         24          2          36
                                                                -------    -------     -------
                                                                $ 1,390    $ 1,369     $ 1,948
                                                                =======    =======     =======
</Table>

                                     CMS-103
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<Table>
<Caption>
                                                                    YEARS ENDED DECEMBER 31
                                                                -------------------------------
                                                                           RESTATED    RESTATED
                                                                 2003        2002        2001
                                                                 ----      --------    --------
                                                                          IN MILLIONS
<S>                                                             <C>        <C>         <C>
Identifiable Assets
  Electric utility(a).......................................    $ 6,831    $ 6,058     $ 5,784
  Gas utility(a)............................................      2,983      2,586       2,734
  Enterprises...............................................      3,670      5,724       8,891
  Other.....................................................        354        413         224
                                                                -------    -------     -------
                                                                $13,838    $14,781     $17,633
                                                                =======    =======     =======
Capital Expenditures(b)
  Electric utility..........................................    $   310    $   437     $   623
  Gas utility...............................................        135        181         145
  Enterprises...............................................         49        235         427
  Other.....................................................         --          8         263
                                                                -------    -------     -------
                                                                $   494    $   861     $ 1,458
                                                                =======    =======     =======
</Table>

Geographic Areas(c)

<Table>
<Caption>
                                                                           RESTATED    RESTATED
                                                                 2003        2002        2001
                                                                 ----      --------    --------
                                                                          IN MILLIONS
<S>                                                             <C>        <C>         <C>
United States
  Operating Revenue.........................................    $ 5,222    $ 8,361     $ 7,639
  Operating Income (Loss)...................................        511        (36)        189
  Identifiable Assets.......................................     12,372     13,355      14,770
International
  Operating Revenue.........................................    $   291    $   312     $   367
  Operating Income (Loss)...................................         84        111         (38)
  Identifiable Assets.......................................      1,466      1,426       2,863
</Table>

- -------------------------
(a)  Amounts includes a portion of Consumers' assets for both the Electric and
     Gas utility units.

(b)  Amounts include electric restructuring implementation plan, capital leases
     for nuclear fuel, purchase of nuclear fuel and other assets and electric
     DSM costs. Amounts also include a portion of Consumers' capital
     expenditures for plant and equipment that both the electric and gas utility
     units use.

(c)  Revenues are based on the country location of customers.

                                     CMS-104
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

15: SUMMARIZED FINANCIAL INFORMATION OF SIGNIFICANT RELATED ENERGY SUPPLIER

     Under the PPA with the MCV Partnership discussed in Note 4, Uncertainties,
our 2003 obligation to purchase electric capacity from the MCV Partnership
provided 15 percent of our owned and contracted electric generating capacity.
Summarized financial information of the MCV Partnership follows:

Statements of Income

<Table>
<Caption>
                                                                    YEARS ENDED
                                                                    DECEMBER 31
                                                                --------------------
                                                                2003    2002    2001
                                                                ----    ----    ----
                                                                    IN MILLIONS
<S>                                                             <C>     <C>     <C>
Operating revenue(a)........................................    $584    $597    $611
Operating expenses..........................................     416     409     453
                                                                ----    ----    ----
Operating income............................................     168     188     158
Other expense, net..........................................     108     114     110
                                                                ----    ----    ----
Income before cumulative effect of accounting change........      60      74      48
Cumulative effect of change in method of accounting for
  derivative options contracts(b)...........................      --      58      --
                                                                ----    ----    ----
Net Income..................................................    $ 60    $132    $ 48
                                                                ====    ====    ====
</Table>

Balance Sheets

<Table>
<Caption>
                             DECEMBER 31
                           ---------------
                            2003     2002
                            ----     ----
                             IN MILLIONS
<S>                        <C>      <C>
ASSETS
Current assets(c)........  $  389   $  358
Plant, net...............   1,494    1,550
Other assets.............     187      190
                           ------   ------
                           $2,070   $2,098
                           ======   ======
</Table>

<Table>
<Caption>
                             DECEMBER 31
                           ---------------
                            2003     2002
                            ----     ----
                             IN MILLIONS
<S>                        <C>      <C>
LIABILITIES AND EQUITY
Current liabilities......  $  250   $  209
Non-current
  liabilities(d).........   1,021    1,155
Partners' equity(e)......     799      734
                           ------   ------
                           $2,070   $2,098
                           ======   ======
</Table>

- -------------------------
(a)  Revenue from Consumers totaled $514 million in 2003, $557 million in 2002,
     and $550 million in 2001.

(b)  On April 1, 2002, the MCV Partnership implemented a new accounting standard
     for derivatives. As a result, the MCV Partnership began accounting for
     several natural gas contracts containing an option component at fair value.
     The MCV Partnership recorded a $58 million cumulative effect adjustment for
     the change in accounting principle as an increase to earnings. CMS
     Midland's 49 percent ownership share was $28 million ($18 million
     after-tax), which is reflected as a change in accounting principle on our
     Consolidated Statements of Income (Loss).

(c)  Receivables from Consumers totaled $40 million for December 31, 2003 and
     $44 million for December 31, 2002.

(d)  FMLP is the sole beneficiary of a trust that is the lessor in a long-term
     direct finance lease with the MCV Partnership. CMS Holdings holds a 46.4
     percent ownership interest in FMLP. The MCV Partnership's

                                     CMS-105
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     lease obligations, assets, and operating revenues secure FMLP's debt. The
     following table summarizes obligation and payment information regarding the
     direct finance lease.

<Table>
<Caption>
                                                                                             DECEMBER 31
                                                                                             ------------
                                                                                             2003    2002
                                                                                             ----    ----
                                                                                             IN MILLIONS
    <S>                          <C>                                                         <C>     <C>
    Balance Sheet:
      MCV Partnership:           Lease obligation........................................    $894    $975
      FMLP:                      Non-recourse debt.......................................     431     449
                                 Lease payment to service non-recourse debt (including
                                 interest)...............................................     158     370
      CMS Holdings:              Share of interest portion of lease payment..............      37      34
                                 Share of principle portion of lease payment.............      36      65
</Table>

<Table>
<Caption>
                                                                                      YEARS ENDED
                                                                                      DECEMBER 31
                                                                                  --------------------
                                                                                  2003    2002    2001
                                                                                  ----    ----    ----
                                                                                      IN MILLIONS
    <S>                  <C>                                                      <C>     <C>     <C>
    Income Statement:
      FMLP:              Earnings.............................................    $32     $38     $30
</Table>

(e)  CMS Midland's recorded investment in the MCV Partnership includes
     capitalized interest, which we are expensing over the life of our
     investment in the MCV Partnership. The financing agreements prohibit the
     MCV Partnership from distributing any cash to its owners until it meets
     certain financial test requirements. We do not anticipate receiving a cash
     distribution in the near future.

16: ASSET RETIREMENT OBLIGATIONS

     SFAS NO. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS: This standard
became effective January 2003. It requires companies to record the fair value of
the cost to remove assets at the end of their useful life, if there is a legal
obligation to do so. We have legal obligations to remove some of our assets,
including our nuclear plants, at the end of their useful lives.

     Before adopting this standard, we classified the removal cost of assets
included in the scope of SFAS No. 143 as part of the reserve for accumulated
depreciation. For these assets, the removal cost of $448 million that was
classified as part of the reserve at December 31, 2002, was reclassified in
January 2003, in part, as:

     - $364 million ARO liability,

     - $134 million regulatory liability,

     - $42 million regulatory asset, and

     - $7 million net increase to property, plant, and equipment as prescribed
       by SFAS No. 143.

     We are reflecting a regulatory asset and liability as required by SFAS No.
71 for regulated entities instead of a cumulative effect of a change in
accounting principle. Accretion of $1 million related to the Big Rock and
Palisades' profit component included in the estimated cost of removal was
expensed for 2003.

     The fair value of ARO liabilities has been calculated using an expected
present value technique. This technique reflects assumptions, such as costs,
inflation, and profit margin that third parties would consider to assume the
settlement of the obligation. Fair value, to the extent possible, should include
a market risk premium for unforeseeable circumstances. No market risk premium
was included in our ARO fair value estimate since a

                                     CMS-106
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

reasonable estimate could not be made. If a five percent market risk premium
were assumed, our ARO liability would be $381 million.

     If a reasonable estimate of fair value cannot be made in the period the
asset retirement obligation is incurred, such as assets with indeterminate
lives, the liability is to be recognized when a reasonable estimate of fair
value can be made. Generally, transmission and distribution assets have
indeterminate lives. Retirement cash flows cannot be determined. There is a low
probability of a retirement date, so no liability has been recorded for these
assets. No liability has been recorded for assets that have insignificant
cumulative disposal costs, such as substation batteries. The measurement of the
ARO liabilities for Palisades and Big Rock are based on decommissioning studies
that are based largely on third-party cost estimates.

     In addition, in 2003, we recorded an ARO liability for certain pipelines
and non-utility generating plants and a $1 million, net of tax, cumulative
effect of change in accounting for accretion and depreciation expense for ARO
liabilities incurred prior to 2003. The pro forma effect on results of
operations would not have been material for the year ended December 31, 2002.

     The following tables describe our assets that have legal obligations to be
removed at the end of their useful life.

<Table>
<Caption>
                                            IN SERVICE                                               TRUST
            ARO DESCRIPTION                    DATE                LONG LIVED ASSETS                 FUND
            ---------------                 ----------             -----------------                 -----
                                                                                                  IN MILLIONS
<S>                                         <C>           <C>                                     <C>
December 31, 2003
  Palisades-decommission plant site.....        1972      Palisades nuclear plant                    $487
  Big Rock-decommission plant site......        1962      Big Rock nuclear plant                       88
  JHCampbell intake/discharge water
     line...............................        1980      Plant intake/discharge water line            --
  Closure of coal ash disposal areas....     Various      Generating plants coal ash areas             --
  Closure of wells at gas storage
     fields.............................     Various      Gas storage fields                           --
  Indoor gas services equipment
     relocations........................     Various      Gas meters located inside structures         --
  Closure of gas pipelines..............     Various      Gas transmission pipelines                   --
  Dismantle natural gas-fired power
     plant..............................        1997      Gas fueled power plant                       --
</Table>

<Table>
<Caption>
                                    PRO FORMA              ARO LIABILITY                                         ARO
                                  ARO LIABILITY    -----------------------------                 CASH FLOW    LIABILITY
       ARO DESCRIPTION               1/1/02        1/1/03    INCURRED    SETTLED    ACCRETION    REVISIONS    12/31/03
       ---------------            -------------    ------    --------    -------    ---------    ---------    ---------
                                                                       IN MILLIONS
<S>                               <C>              <C>       <C>         <C>        <C>          <C>          <C>
December 31, 2003
  Palisades-decommission......        $232          $249       $--        $ --         $19          $--         $268
  Big Rock-decommission.......          94            61        --         (39)         13           --           35
  JHCampbell intake line......          --            --        --          --          --           --           --
  Coal ash disposal areas.....          46            51        --          (4)          5           --           52
  Wells at gas storage
     fields...................           2             2        --          --          --           --            2
  Indoor gas services
     relocations..............           1             1        --          --          --           --            1
  Closure of gas
     pipelines(a).............           7             8        --          (8)         --           --           --
  Dismantle natural gas-fired
     power plant..............           1             1        --          --          --           --            1
                                      ----          ----       ---        ----         ---          ---         ----
       Total..................        $383          $373       $--        $(51)        $37          $--         $359
                                      ====          ====       ===        ====         ===          ===         ====
</Table>

- -------------------------
(a) ARO Liability was settled in 2003 as a result of the sales of Panhandle and
    CMS Field Services.

     Reclassification of Non-Legal Cost of Removal: Beginning in December 2003,
the SEC requires the quantification and reclassification of the estimated cost
of removal obligations arising from other than legal obligations. These
obligations have been accrued through depreciation charges. We estimate that we
had $983 million in 2003 and $907 million in 2002 of previously accrued asset
removal costs related to our regulated operations, for other than legal
obligations. These obligations, which were previously classified as a component
of

                                     CMS-107
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

accumulated depreciation, were reclassified as regulatory liabilities in the
accompanying consolidated balance sheets.

17: IMPLEMENTATION OF NEW ACCOUNTING STANDARDS

     SFAS NO. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES: Amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement is effective for
contracts entered into or modified after June 30, 2003. Implementation of this
statement has not impacted our Consolidated Financial Statements.

     SFAS NO. 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY:  Establishes standards for how
we classify and measure certain financial instruments with characteristics of
both liabilities and equity. The statement requires us to classify financial
instruments within its scope as liabilities rather than mezzanine equity, the
area between liabilities and equity. SFAS No. 150 became effective July 1, 2003.

     We have five Trust Preferred Securities outstanding as of December 31, 2003
that are issued by our affiliated trusts. Each trust holds a subordinated
debenture from the parent company. The terms of the debentures are identical to
those of the trust-preferred securities, except that the debenture has an
explicit maturity date. The trust documents, in turn, require that the trust be
liquidated upon the repayment of the debenture. The preferred securities are
redeemable upon the liquidation of the subsidiary; therefore, are considered
equity in the financial statements of the subsidiary.

     At their October 29, 2003 Board meeting, the FASB deferred the
implementation of the portion of SFAS No. 150 relating to mandatorily redeemable
noncontrolling interests in subsidiaries when the noncontrolling interests are
classified as equity in the financial statements of the subsidiary. Our Trust
Preferred Securities are included in the deferral action.

     Upon adoption of FASB Interpretation No. 46, we determined that our trusts
that issue Trust Preferred Securities should be deconsolidated and reported as
long-term debt -- related parties. Refer to further discussion under FASB
Interpretation No. 46, Consolidation of Variable Interest Entities.

     EITF ISSUE NO. 02-03, RECOGNITION AND REPORTING OF GAINS AND LOSSES ON
ENERGY TRADING CONTRACTS UNDER EITF ISSUES NO. 98-10 AND 00-17:  At the October
25, 2002 meeting, the EITF reached a consensus to rescind EITF Issue No. 98-10,
Accounting for Contracts Involved in Energy Trading and Risk Management
Activities. As a result, only energy contracts that meet the definition of a
derivative in SFAS No. 133 will be carried at fair value. Energy trading
contracts that do not meet the definition of a derivative must be accounted for
as executory contracts. We recognized a cumulative effect of change in
accounting principle loss of $23 million, net of tax, for the year ended
December 31, 2003.

     EITF ISSUE NO. 01-08, DETERMINING WHETHER AN ARRANGEMENT CONTAINS A
LEASE:  In May 2003, the EITF reached consensus in EITF Issue No. 01-08
requiring both parties to a transaction, such as power purchase agreements, to
determine whether a service contract or similar arrangement is or includes a
lease within the scope of SFAS No. 13, Accounting for Leases. The consensus is
to be applied prospectively to arrangements agreed to, modified, or acquired in
business combinations in fiscal periods beginning July 1, 2003.

     Prospective accounting under EITF Issue No. 01-08, could affect the timing
and classification of revenue and expense recognition. Certain product sales and
service revenue and expenses may be required to be reported as rental or leasing
income and/or expenses. Transactions deemed to be capital lease arrangements
would be included on our balance sheet. The adoption of EITF Issue No. 01-08 has
not impacted our results of operations, cash flows, or financial position.

                                     CMS-108
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     EITF ISSUE NO. 03-04, ACCOUNTING FOR CASH BALANCE PENSION PLANS:  In May
2003, the EITF reached consensus in EITF Issue No. 03-04 to specifically address
the accounting for certain cash balance pension plans. EITF Issue No. 03-04
concluded that certain cash balance plans be accounted for as defined benefit
plans under SFAS No. 87, Employers' Accounting for Pensions. The EITF
requirements must be applied as of our next plan measurement date after
issuance, which is December 31, 2003. In 2003, we started a cash balance pension
plan that covers employees hired after June 30, 2003. We do account for this
plan as a defined benefit plan under SFAS No. 87 and comply with EITF Issue No.
03-04. For further information, see Note 10, Retirement Benefits.

ACCOUNTING STANDARDS NOT YET EFFECTIVE

     FASB INTERPRETATION NO. 46, CONSOLIDATION OF VARIABLE INTEREST
ENTITIES:  FASB issued this interpretation in January 2003. The objective of the
Interpretation is to assist in determining when one party controls another
entity in circumstances where a controlling financial interest cannot be
properly identified based on voting interests. Entities with this characteristic
are considered variable interest entities. The Interpretation requires the party
with the controlling financial interest to consolidate the entity.

     On December 24, 2003, the FASB issued Revised FASB Interpretation No. 46.
For entities that have not previously adopted FASB Interpretation No. 46,
Revised FASB Interpretation No. 46 provides an implementation deferral, until
the first quarter of 2004. Revised FASB Interpretation No. 46 is effective for
the first quarter of 2004 for all entities other than special purpose entities.
Special-purpose entities must apply either FASB Interpretation No. 46 or Revised
FASB Interpretation No. 46 for the first reporting period that ends after
December 15, 2003.

     As of December 31, 2003, we have completed our analysis for and have
adopted Revised FASB Interpretation No. 46 for all entities other than the MCV
Partnership and FMLP. We continue to evaluate and gather information regarding
those entities. We will adopt the provisions of Revised FASB Interpretation No.
46 for the MCV Partnership and FMLP in the first quarter of 2004.

     If our completed analysis shows we have the controlling financial interest
in the MCV Partnership and FMLP, we would consolidate their assets, liabilities,
and activities, including $700 million of non-recourse debt, into our financial
statements. Financial covenants under our financing agreements could be impacted
negatively after such a consolidation. As a result, it may become necessary to
seek amendments to the relevant financing agreements to modify the terms of
certain of these covenants to remove the effect of this consolidation, or to
refinance the relevant debt. As of December 31, 2003, our investment in the MCV
Partnership was $419 million and our investment in the FMLP was $224 million.

     We determined that we have the controlling financial interest in three
entities that are determined to be variable interest entities. We have
50-percent partnership interest in T.E.S Filer City Station Limited Partnership,
Grayling Generating Station Limited Partnership, and Genesee Power Station
Limited Partnership. Additionally, we have operating and management contracts
and are the primary purchaser of power from each partnership through long-term
power purchase agreements. Collectively, these interests provide us with the
controlling financial interest as defined by the Interpretation. Therefore, we
have consolidated these partnerships into our consolidated financial statements
for the first time as of December 31, 2003. At December 31, 2003, total assets
consolidated for these entities are $227 million and total liabilities are $164
million, including $128 million of non-recourse debt. At December 31, 2003, CMS
Energy has outstanding letters of credit and guarantees of $5 million relating
to these entities. At December 31, 2003, minority interest recorded for these
entities totaled $36 million.

     We also determined that we do not hold the controlling financial interest
in our trust preferred security structures. Accordingly, those entities have
been deconsolidated as of December 31, 2003. Company obligated Trust Preferred
Securities totaling $663 million that were previously included in mezzanine
equity, have been

                                     CMS-109
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

eliminated due to deconsolidation. As a result of the deconsolidation, we have
reflected $684 million of long-term debt -- related parties and have reflected
an investment in related parties of $21 million.

     We are not required to, and have not, restated prior periods for the impact
of this accounting change.

     Additionally, we have non-controlling interests in four other variable
interest entities. FASB Interpretation No. 46 requires us to disclose certain
information about these entities. The chart below details our involvement in
these entities at December 31, 2003:
<Table>
<Caption>
                                                                                        INVESTMENT       OPERATING
NAME                                                                     INVOLVEMENT    BALANCE          AGREEMENT WITH
(OWNERSHIP INTEREST)     NATURE OF THE ENTITY    COUNTRY                 DATE           (IN MILLIONS)    CMS ENERGY
- --------------------     --------------------    -------                 -----------    -------------    --------------
<S>                      <C>                     <C>                     <C>            <C>              <C>
Loy Yang Power (49%)     Power Generator         Australia                  1997            $ --              Yes
Taweelah (40%)           Power Generator         United Arab Emirates       1999            $ 83              Yes
Jubail (25%)             Generator --            Saudi Arabia               2001            $ --              Yes
                         Under Construction
Shuweihat (20%)          Generator --            United Arab Emirates       2001            $(24)(a)          Yes
                         Under Construction
                                                                                            ----
Total                                                                                       $ 59
                                                                                            ====

<Caption>
                       TOTAL
NAME                   GENERATING
(OWNERSHIP INTEREST)   CAPACITY
- --------------------   ----------
<S>                    <C>
Loy Yang Power (49%)    2,000 MW
Taweelah (40%)            777 MW
Jubail (25%)              250 MW
Shuweihat (20%)         1,500 MW
                        --------
Total                   4,527 MW
                        ========
</Table>

- -------------------------
(a)  At December 31, 2003, we recorded a negative investment in Shuweihat. The
     balance is comprised of our investment of $3 million reduced by our
     proportionate share of the negative fair value of derivative instruments of
     $27 million. We are required to record the negative investment due to our
     future commitment to make an equity investment in Shuweihat.

     Our maximum exposure to loss through our interests in these variable
interest entities is limited to our investment balance of $59 million, Loy Yang
currency translation losses of $110 million, net of tax, and letters of credit,
guarantees, and indemnities relating to Taweelah and Shuweihat totaling $146
million. Included in the $146 million is a letter of credit relating to our
required initial investment in Shuweihat of $70 million. We plan to contribute
our initial investment when the project becomes commercially operational in
2004.

     STATEMENT OF POSITION, ACCOUNTING FOR CERTAIN COSTS AND ACTIVITIES RELATED
TO PROPERTY, PLANT, AND EQUIPMENT:  At its September 9, 2003 meeting, the
Accounting Standards Executive Committee, of the American Institute of Certified
Public Accountants voted to approve the Statement of Position, Accounting for
Certain Costs and Activities Related to Property, Plant, and Equipment. The
Statement of Position is expected to be presented for FASB clearance in 2004 and
would be applicable for fiscal years beginning after December 15, 2004. An asset
classified as property, plant, and equipment asset often comprises multiple
parts and costs. A component accounting policy determines the level at which
those parts are recorded. Capitalization of certain costs related to property,
plant, and equipment are included in the total cost. The Statement of Position
could impact our component and capitalization accounting for property, plant,
and equipment. We continue to evaluate the impact, if any, this Statement of
Position will have upon adoption.

                                     CMS-110
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

18: RESTATEMENT AND RECLASSIFICATION

     We have determined the need to make certain adjustments to our consolidated
financial statements for the fiscal years ended December 31, 2002, December 31,
2001, and December 31, 2000. Therefore, the consolidated financial statements
for 2002 and 2001 have been restated from amounts previously reported. The table
below summarizes the significant adjustments and the effects on our consolidated
net loss.

<Table>
<Caption>
                NET LOSS (INCREASE) DECREASE                    2002    2001    TOTAL
                ----------------------------                    ----    ----    -----
                                                                     IN MILLIONS
<S>                                                             <C>     <C>     <C>
Interest allocation reclassification for International
  Energy Distribution.......................................    $ (3)   $  3    $ --
Derivatives related to the equity method investments........     (27)    (14)    (41)
                                                                ----    ----    ----
Total.......................................................    $(30)   $(11)   $(41)
                                                                ====    ====    ====
</Table>

     INTEREST ALLOCATION RECLASSIFICATION FOR INTERNATIONAL ENERGY
DISTRIBUTION: Due to lack of progress on the sale, we reclassified our
international energy distribution business, which includes CPEE and SENECA, from
discontinued operations to continuing operations for the years 2003, 2002, and
2001. When we initially reported the international energy distribution business
as a discontinued operation in 2001, we applied APB Opinion No. 30, which
allowed us to record a provision for anticipated operating losses. We currently
apply FASB No. 144 which does not allow us to record a provision for future
operating losses. Therefore, in the process of reclassifying the international
energy distribution business to continuing operations and reversing such
provisions, we increased our net loss by $3 million in 2002 and decreased our
net loss by $3 million in 2001.

     DERIVATIVES RELATED TO THE EQUITY METHOD INVESTMENTS: Some of our equity
affiliates hold derivative instruments, including interest rate swaps and other
similar instruments. Some of these instruments have been accounted for as cash
flow hedges, with changes in the fair value of the hedges reported in
accumulated other comprehensive income in 2003, 2002 and 2001. However, in late
2003 it was determined that certain of our equity affiliates did not formally
designate their instruments as hedges, or did not do so in a timely manner, in
accordance with SFAS No. 133. Therefore, the changes in the fair value of the
hedges should have been reported in earnings in 2003, 2002, and 2001. As a
result, the effects of the changes in the fair value of the hedges require
restatement. Our proportionate share of the adjustments increased our net loss
by $27 million in 2002 and increased our net loss by $14 million in 2001.

     BALANCE SHEET IMPACTS: The most significant effects on our consolidated
balance sheets include the reclassification of International Energy Distribution
from "held for sale" to continuing operations and the change in our investments
due to the correction of the derivatives discussed above.

     During the fourth quarter of 2000, we wrote down the value of our
investment in Loy Yang by $329 million ($268 million after-tax). We have now
concluded that the tax benefit associated with the write-down should have been
reduced by $38 million. Accordingly, our retained deficit as of January 1, 2001
increased by this amount.

                                     CMS-111
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following tables present the effects of the adjustments we made to our
consolidated financial statements for the fiscal years ended December 31, 2002
and December 31, 2001, as well as effects of reclassifying Marysville and
Parmelia into discontinued operations.

                       CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
                                                               2002                          2001
                                                    --------------------------    --------------------------
                                                    AS REPORTED    AS RESTATED    AS REPORTED    AS RESTATED
                                                    -----------    -----------    -----------    -----------
                                                                          IN MILLIONS
<S>                                                 <C>            <C>            <C>            <C>
Operating Revenue...............................      $8,561         $8,673         $7,878         $8,006
Earnings from Equity Method Investees...........         126             92            185            172
Operating expenses
  Operation.....................................       7,177          7,242          6,762          6,851
  Maintenance...................................         211            212            224            225
  Depreciation, depletion and amortization......         403            412            398            408
  General taxes.................................         199            222            196            220
  Asset impairment charges......................         598            602            240            323
                                                      ------         ------         ------         ------
  Total Operating Expenses......................       8,588          8,690          7,820          8,027
                                                      ------         ------         ------         ------
Operating Income................................          99             75            243            151
                                                      ------         ------         ------         ------
Other Income (Deductions):
  Accretion expense.............................         (31)           (31)           (37)           (37)
  Gain (loss) on asset sales, net...............          37             37              -             (2)
  Other, net....................................          (4)            (6)            25             26
                                                      ------         ------         ------         ------
  Total Other Income (Deductions)...............           2             --            (12)           (13)
                                                      ------         ------         ------         ------
Fixed Charges...................................         504            508            562            566
Loss From Continuing Operations Before Income
  Taxes and Minority Interests..................        (403)          (433)          (331)          (428)
                                                      ------         ------         ------         ------
Income Tax Expense (Benefit)....................          13            (41)           (98)           (94)
Minority Interests..............................          --              2              3             (7)
                                                      ------         ------         ------         ------
Loss From Continuing Operations.................        (416)          (394)          (236)          (327)
                                                      ------         ------         ------         ------
Loss From Discontinued Operations...............        (222)          (274)          (210)          (128)
                                                      ------         ------         ------         ------
Loss Before Cumulative Effect of Change in
  Accounting Principle..........................        (638)          (668)          (446)          (455)
                                                      ------         ------         ------         ------
Cumulative Effect of Change in Accounting.......          18             18             (2)            (4)
                                                      ------         ------         ------         ------
Consolidated Net Loss...........................      $ (620)        $ (650)        $ (448)        $ (459)
                                                      ======         ======         ======         ======
Basic and Diluted Loss Per Share................      $(4.46)        $(4.68)        $(3.42)        $(3.51)
                                                      ======         ======         ======         ======
</Table>

                                     CMS-112
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                               2002                          2001
                                                    --------------------------    --------------------------
                                                    AS REPORTED    AS RESTATED    AS REPORTED    AS RESTATED
                                                    -----------    -----------    -----------    -----------
                                                                          IN MILLIONS
<S>                                                 <C>            <C>            <C>            <C>
Consolidated net loss...........................      $  (620)       $  (650)       $  (448)       $  (459)
Net cash provided by operating activities.......          624            614            366            372
Net cash provided by (used in) investing
  activities....................................          863            829         (1,348)        (1,349)
Net cash provided by (used in) financing
  activities....................................       (1,237)        (1,223)           968            967
Effect of Exchange Rate on Cash.................           --              8             --            (10)
Net Increase (Decrease) in Cash and Temporary
  Cash Investments..............................          250            228            (14)           (20)
                                                      -------        -------        -------        -------
Cash and Cash Investments, End of Period........      $   377        $   351        $   127        $   123
                                                      =======        =======        =======        =======
</Table>

                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                               2002                          2001
                                                    --------------------------    --------------------------
                                                    AS REPORTED    AS RESTATED    AS REPORTED    AS RESTATED
                                                    -----------    -----------    -----------    -----------
                                                                          IN MILLIONS
<S>                                                 <C>            <C>            <C>            <C>
ASSETS
Plant and Property (at cost)....................      $ 5,234        $ 6,103        $ 5,848        $ 6,703
                                                      -------        -------        -------        -------
Investments.....................................        1,398          1,369          1,961          1,960
                                                      -------        -------        -------        -------
Current Assets:
  Cash and temporary cash investments...........          377            351            127            123
  Restricted cash...............................           --             38             --              4
  Accounts receivable, notes receivable, and
     accrued revenue............................          757            783            704            743
  Assets held for sale..........................          644            595            471            412
  Price risk management assets..................          115            115            327            327
  Prepayments, inventories, and other...........          855            857            931            951
                                                      -------        -------        -------        -------
Total Current Assets............................        2,748          2,739          2,560          2,560
                                                      -------        -------        -------        -------
Non-current Assets:
  Regulatory assets.............................        1,053          1,053          1,105          1,105
  Assets held for sale..........................        2,081          2,084          3,480          3,438
  Price risk management assets..................          135            135            368            368
  Other.........................................        1,266          1,298          1,453          1,499
                                                      -------        -------        -------        -------
Total Non-current Assets........................        4,535          4,570          6,406          6,410
                                                      -------        -------        -------        -------
Total Assets....................................      $13,915        $14,781        $16,775        $17,633
                                                      =======        =======        =======        =======
</Table>

                                     CMS-113
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<Table>
<Caption>
                                                               2002                          2001
                                                    --------------------------    --------------------------
                                                    AS REPORTED    AS RESTATED    AS REPORTED    AS RESTATED
                                                    -----------    -----------    -----------    -----------
                                                                          IN MILLIONS
<S>                                                 <C>            <C>            <C>            <C>
STOCKHOLDERS' INVESTMENT AND LIABILITIES
Capitalization:
Common stockholders' equity.....................      $ 1,133        $ 1,078        $ 2,038        $ 1,991
Long-term debt..................................        5,356          5,357          5,840          5,842
Non-current portion of capital leases...........          116            116             71             71
Other...........................................          927            927          1,258          1,258
                                                      -------        -------        -------        -------
Total Capitalization............................        7,532          7,478          9,207          9,162
                                                      -------        -------        -------        -------
Minority Interests..............................           21             38             24             43
                                                      -------        -------        -------        -------
Current Liabilities:
  Current portion of long-term debt and capital
     leases.....................................          640            646          1,016          1,016
  Notes payable.................................          458            458            416            416
  Accounts payable..............................          482            496            595            614
  Accrued taxes.................................          291            291            111            111
  Liabilities held for sale.....................          465            427            639            605
  Price risk management liabilities.............           96             96            367            367
  Deferred income taxes.........................           15             15             49             49
  Other.........................................          451            460            478            494
                                                      -------        -------        -------        -------
Total Current Liabilities.......................        2,898          2,889          3,671          3,672
                                                      -------        -------        -------        -------
Non-current Liabilities:
  Deferred income taxes.........................          414            438            824            864
  Regulatory liabilities for cost of removal....           --            907             --            870
  Liabilities held for sale.....................        1,243          1,218          1,376          1,354
  Price risk management liabilities.............          135            135            287            287
  Other.........................................        1,672          1,678          1,386          1,381
                                                      -------        -------        -------        -------
Total Non-current Liabilities...................        3,464          4,376          3,873          4,756
                                                      -------        -------        -------        -------
Total Stockholders' Investment and
  Liabilities...................................      $13,915        $14,781        $16,775        $17,633
                                                      =======        =======        =======        =======
</Table>

                                     CMS-114
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY

<Table>
<Caption>
                                                               2002                          2001
                                                    --------------------------    --------------------------
                                                    AS REPORTED    AS RESTATED    AS REPORTED    AS RESTATED
                                                    -----------    -----------    -----------    -----------
                                                                          IN MILLIONS
<S>                                                 <C>            <C>            <C>            <C>
Retained Deficit
  At beginning of period........................      $  (951)       $(1,001)       $ (313)        $  (352)
  Consolidated net loss.........................         (620)          (650)         (448)           (459)
  Common stock dividends declared...............         (149)          (149)         (190)           (190)
                                                      -------        -------        ------         -------
     At end of period...........................       (1,720)        (1,800)         (951)         (1,001)
                                                      -------        -------        ------         -------
Accumulated Other Comprehensive Loss
  At beginning of period........................         (269)          (266)         (201)           (198)
  Minimum pension liability.....................         (241)          (241)           --              --
  Investments...................................            7              7            (3)             (3)
  Derivative instruments........................          (25)            (3)          (38)            (38)
  Foreign currency translation..................         (225)          (225)          (27)            (27)
                                                      -------        -------        ------         -------
     At end of period...........................         (753)          (728)         (269)           (266)
                                                      -------        -------        ------         -------
Common stock....................................            1              1             1               1
Other paid-in capital...........................        3,605          3,605         3,257           3,257
                                                      -------        -------        ------         -------
Total Common Stockholders' Equity...............      $ 1,133        $ 1,078        $2,038         $ 1,991
                                                      =======        =======        ======         =======
Total Other Comprehensive Loss..................      $(1,104)       $(1,112)       $ (516)        $  (527)
                                                      =======        =======        ======         =======
</Table>

                                     CMS-115
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

19: QUARTERLY FINANCIAL AND COMMON STOCK INFORMATION (UNAUDITED)

     We have determined the need to make certain adjustments to our consolidated
financial statements for the quarterly periods of 2003 and 2002. Therefore, the
consolidated financial statements for the quarterly periods of 2003 and 2002
have been restated from amounts previously reported.

<Table>
<Caption>
                                                                            2003 (RESTATED)
                                                               ------------------------------------------
                      QUARTERS ENDED                           MARCH 31    JUNE 30    SEPT. 30    DEC. 31
                      --------------                           --------    -------    --------    -------
                                                                 IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<S>                                                            <C>         <C>        <C>         <C>
Operating revenue..........................................     $1,968     $1,126      $1,047     $1,372
Operating income...........................................        236        176          78        105
Income (loss) from continuing operations...................         75        (12)        (71)       (35)
Discontinued operations(a).................................         31        (53)          2         43
Cumulative effect of change in accounting principles(a)....        (24)        --          --         --
Consolidated net income (loss).............................         82        (65)        (69)         8
Income (loss) from continuing operations per average common
  share -- basic...........................................       0.52      (0.08)      (0.47)     (0.22)
Income (loss) from continuing operations per average common
  share -- diluted.........................................       0.47      (0.08)      (0.47)     (0.22)
Basic earnings (loss) per average common share(b)..........       0.57      (0.45)      (0.46)      0.05
Diluted earnings (loss) per average common share(b)........       0.52      (0.45)      (0.46)      0.05
Dividends declared per common share........................         --         --          --         --
Common stock prices(c)
  High.....................................................      10.59       8.50        7.99       8.63
                                                                ======     ======      ======     ======
  Low......................................................       3.49       4.58        6.11       7.44
                                                                ======     ======      ======     ======
</Table>

<Table>
<Caption>
                                                                            2002 (RESTATED)
                                                               ------------------------------------------
                      QUARTERS ENDED                           MARCH 31    JUNE 30    SEPT. 30    DEC. 31
                      --------------                           --------    -------    --------    -------
                                                                 IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<S>                                                            <C>         <C>        <C>         <C>
Operating revenue..........................................     $2,248     $2,123      $2,566     $1,736
Operating income (loss)....................................        283        136         178       (522)
Income (loss) from continuing operations...................        103         17          (1)      (513)
Discontinued operations(a).................................        (52)      (128)         26       (120)
Cumulative effect of change in accounting principles(a)....         --         17           1         --
Consolidated net income (loss).............................         51        (94)         26       (633)
Income (loss) from continuing operations per average common
  share -- basic...........................................       0.77       0.14          --      (3.57)
Income (loss) from continuing operations per average common
  share -- diluted.........................................       0.77       0.14          --      (3.57)
Basic earnings (loss) per average common share(b)..........       0.38      (0.69)       0.18      (4.40)
Diluted earnings (loss) per average common share(b)........       0.38      (0.69)       0.18      (4.40)
Dividends declared per common share........................      0.365      0.365        0.18       0.18
Common stock prices(c)
  High.....................................................      24.62      22.24       11.28      10.48
                                                                ======     ======      ======     ======
  Low......................................................      21.27      10.46        7.49       5.79
                                                                ======     ======      ======     ======
</Table>

- -------------------------
(a)  Net of tax

(b)  Sum of the quarters may not equal the annual earnings per share due to
     changes in shares outstanding

(c)  Based on New York Stock Exchange -- Composite transactions

                                     CMS-116
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following tables present the effects of the adjustments we made to our
consolidated financial statements for the quarterly periods of 2003 and 2002, as
well as the effects of reclassifying Marysville and Parmelia into discontinued
operations.

<Table>
<Caption>
                                                                                  2003
                                                                -----------------------------------------
          QUARTERS ENDED -- REPORTED VS. RESTATED               MARCH 31         JUNE 30         SEPT. 30
          ---------------------------------------               --------         -------         --------
                                                                  IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<S>                                                             <C>              <C>             <C>
Operating revenue as reported...............................     $1,992          $1,154           $1,016
Operating revenue as restated...............................      1,968           1,126            1,047
Operating income as reported................................        239             183              129
Operating income as restated................................        236             176               78
Income (loss) from continuing operations as reported........         76              (5)             (34)
Income (loss) from continuing operations as restated........         75             (12)             (71)
Discontinued operations as reported.........................         27             (40)             (43)
Discontinued operations as restated.........................         31             (53)               2
Consolidated net income (loss) as reported..................         79             (45)             (77)
Consolidated net income (loss) as restated..................         82             (65)             (69)
Basic earnings (loss) per average common share as
  reported..................................................       0.55           (0.31)           (0.51)
Basic earnings (loss) per average common share as
  restated..................................................       0.57           (0.45)           (0.46)
Diluted earnings (loss) per average common share as
  reported..................................................       0.51           (0.31)           (0.51)
Diluted earnings (loss) per average common share as
  restated..................................................       0.52           (0.45)           (0.46)
</Table>

<Table>
<Caption>
                                                                                  2002
                                                               ------------------------------------------
          QUARTERS ENDED -- REPORTED VS. RESTATED              MARCH 31    JUNE 30    SEPT. 30    DEC. 31
          ---------------------------------------              --------    -------    --------    -------
                                                                 IN MILLIONS, EXCEPT PER SHARE AMOUNTS
<S>                                                            <C>         <C>        <C>         <C>
Operating revenue as reported..............................     $2,263     $2,135      $2,534     $1,708
Operating revenue as restated..............................      2,248      2,123       2,566      1,736
Operating income (loss) as reported........................        275        152         190       (520)
Operating income (loss) as restated........................        283        136         178       (522)
Income (loss) from continuing operations as reported.......         93         36          11       (557)
Income (loss) from continuing operations as restated.......        103         17          (1)      (513)
Discontinued operations as reported........................        (51)      (127)         25        (68)
Discontinued operations as restated........................        (52)      (128)         26       (120)
Consolidated net income (loss) as reported.................         42        (74)         37       (625)
Consolidated net income (loss) as restated.................         51        (94)         26       (633)
Basic earnings (loss) per average common share as
  reported.................................................       0.32      (0.55)       0.26      (4.34)
Basic earnings (loss) per average common share as
  restated.................................................       0.38      (0.69)       0.18      (4.40)
Diluted earnings (loss) per average common share as
  reported.................................................       0.32      (0.55)       0.26      (4.34)
Diluted earnings (loss) per average common share as
  restated.................................................       0.38      (0.69)       0.18      (4.40)
</Table>

                                     CMS-117
<PAGE>
                             CMS ENERGY CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The table below summarizes the significant adjustments and the effect on
consolidated net income (loss) by quarter.

<Table>
<Caption>
                                                          2003                                   2002
                                             ------------------------------    -----------------------------------------
             QUARTERS ENDED                  MAR. 31    JUNE 30    SEPT. 30    MAR. 31    JUNE 30    SEPT. 30    DEC. 31
             --------------                  -------    -------    --------    -------    -------    --------    -------
                                                                             IN MILLIONS
<S>                                          <C>        <C>        <C>         <C>        <C>        <C>         <C>
Consolidated net income (loss) as
  reported...............................      $79       $(45)       $(77)       $42       $(74)       $37        $(625)
Discontinued operations reclass(a).......       --         --          --         (1)        (1)        (1)          --
Derivative accounting changes(b).........        3         (6)          8         10        (19)       (10)          (8)
Panhandle sale adjustment(c).............       --        (14)         --         --         --         --           --
                                               ---       ----        ----        ---       ----        ---        -----
Consolidated net income (loss) as
  restated...............................      $82       $(65)       $(69)       $51       $(94)       $26        $(633)
                                               ===       ====        ====        ===       ====        ===        =====
</Table>

- -------------------------
(a)  We continue to pursue the sale of International Energy Distribution, which
     includes CPEE and SENECA, but due to the slow progress on the sale, we have
     reclassified this entity from discontinued operations to continuing
     operations for the years 2003, 2002, and 2001. When we initially reported
     the international energy distribution business as a discontinued operation
     in 2001, we applied APB Opinion No. 30, which allowed us to record a
     provision for anticipated closing costs and operating losses. We currently
     apply FASB No. 144 which does not allow us to record a provision for future
     operating losses. Therefore, in the process of reclassifying the
     international energy distribution business to continuing operations and
     reversing such provisions, we increased our net loss by $3 million in 2002
     and decreased our net loss by $3 million in 2001. In 2003, there was an
     increase to net income of $75 million as a result of reversing the
     previously recognized impairment loss in discontinued operations.

(b)  We determined that certain equity method investees inappropriately
     accounted for interest rate swaps as hedges. For additional details, see
     Note 18, Restatement and Reclassification.

(c)  We determined the net loss recorded in the second quarter of 2003 relating
     to the sale of Panhandle, reflected as Discontinued Operations, was
     understated by approximately $14 million, net of tax. The understatement
     occurred because we did not recognize through our second quarter 2003
     earnings an unrealized loss related to certain Panhandle interest rate
     hedging derivative instruments. Pursuant to SFAS No. 133, the unrealized
     loss was accounted for in Other Comprehensive Income, but needed to be
     recognized through earnings upon the sale of Panhandle.

                                     CMS-118
<PAGE>

                      (This page intentionally left blank)

                                     CMS-119
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholders
CMS Energy Corporation

     We have audited the accompanying consolidated balance sheets of CMS Energy
Corporation (a Michigan corporation) and subsidiaries as of December 31, 2003
and 2002, and the related consolidated statements of income (loss), common
stockholders' equity and cash flows for each of three years in the period ended
December 31, 2003. Our audits also included the financial statement schedule
listed in the Index at Item 15(a)(2). These financial statements and schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audits. The financial statements of Midland Cogeneration Venture Limited
Partnership and Jorf Lasfar Energy Company S.C.A., which represent investments
accounted for under the equity method of accounting, have been audited by other
auditors (the other auditors for 2001 for Midland Cogeneration Venture Limited
Partnership have ceased operations) whose reports have been furnished to us;
insofar as our opinion on the consolidated financial statements relates to the
amounts included for Midland Cogeneration Venture Limited Partnership and Jorf
Lasfar Energy Company S.C.A., respectively, it is based solely on their reports.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.

     In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of CMS Energy Corporation
and subsidiaries at December 31, 2003 and 2002, and the consolidated results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2003 in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

     As discussed in Notes 16 and 17 to the consolidated financial statements,
in 2003, the Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 143, "Accounting for Asset Retirement Obligations", EITF
Issue No. 02-03, "Recognition and Reporting of Gains and Losses on Energy
Trading Contracts" and of Financial Accounting Standards Board Interpretation
No. 46, "Consolidation of Variable Interest Entities". As discussed in Notes 3,
9 and 15 to the consolidated financial statements, in 2002, the Company adopted
the provisions of SFAS No. 142, "Goodwill and Other Intangibles", SFAS No. 148,
"Accounting for Stock-Based Compensation" and Midland Cogeneration Venture
Limited Partnership adopted the provisions of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended and interpreted.

     As discussed in Note 18 to the consolidated financial statements, the
Company restated its 2002 and 2001 financial statements.

                                          /s/ ERNST & YOUNG LLP

Detroit, Michigan
February 27, 2004

                                     CMS-120
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

     We have audited the accompanying balance sheets of Jorf Lasfar Energy
Company S.C.A (the "Company") as of December 31, 2003, 2002 and 2001, and the
related statements of income, of stockholders' equity and of cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jorf Lasfar Energy Company
S.C.A at December 31, 2003, 2002 and 2001, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.

Price Waterhouse

Casablanca, Morocco,
February 10, 2004

                                     CMS-121
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Partners and the Management Committee of
Midland Cogeneration Venture Limited Partnership:

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, partners' equity and cash flows
present fairly, in all material respects, the financial position of the Midland
Cogeneration Limited Partnership (a Michigan limited partnership) and its
subsidiaries (MCV) at December 31, 2003 and 2002, and the results of their
operations and their cash flows for the each of the two years ended December 31,
2003 and 2002 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
MCV's management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. The financial statements of
MCV for the year ended December 31, 2001, were audited by other independent
accountants who have ceased operations. Those independent accountants expressed
an unqualified opinion on those financial statements in their report dated
January 18, 2002.

     As explained in Note 2 to the financial statements, effective April 1,
2002, Midland Cogeneration Venture Limited Partnership changed its method of
accounting for derivative and hedging activities in accordance with Derivative
Implementation Group ("DIG") Issue C-16.

                                          /s/ PricewaterhouseCoopers LLP

Detroit, Michigan
February 18, 2004

                                     CMS-122
<PAGE>

                 THIS REPORT IS A COPY OF THE PREVIOUSLY ISSUED
              ARTHUR ANDERSEN REPORT AND THIS REPORT HAS NOT BEEN
                        REISSUED BY ARTHUR ANDERSEN LLP

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners and the Management Committee of the
Midland Cogeneration Venture Limited Partnership:

     We have audited the accompanying consolidated balance sheets of the MIDLAND
COGENERATION VENTURE LIMITED PARTNERSHIP (a Michigan limited partnership) and
subsidiaries (MCV) as of December 31, 2001 and 2000, and the related
consolidated statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of MCV's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Midland
Cogeneration Venture Limited Partnership and subsidiaries as of December 31,
2001 and 2000, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

     As explained in Note 2 to the financial statements, effective January 1,
2001, Midland Cogeneration Venture Limited Partnership changed its method of
accounting related to derivatives and hedging activities.

/s/Arthur Andersen LLP

Detroit, Michigan,
January 18, 2002

                                     CMS-123
<PAGE>

[CONSUMERS ENERGY LOGO]

                           2003 FINANCIAL STATEMENTS

                                       CE-1
<PAGE>

                            CONSUMERS ENERGY COMPANY

                         SELECTED FINANCIAL INFORMATION

<Table>
<Caption>
                                                               2003     2002     2001     2000     1999
                                                               ----     ----     ----     ----     ----
<S>                                                    <C>    <C>       <C>      <C>      <C>      <C>
Operating revenue (in millions)....................    ($)     4,435    4,169    3,976    3,878    3,824
Earnings from equity method investees..............    ($)        42       53       38       57       50
Income before cumulative effect of change in
  accounting principle (in millions)...............    ($)       196      363      199      284      340
Net income (in millions) (a).......................    ($)       196      381      188      284      340
Net income available to common stockholder (in
  millions)........................................    ($)       194      335      145      248      313
Cash from operations (in millions).................    ($)         5      760      518      515      791
Capital expenditures, excluding capital lease
  additions (in millions)..........................    ($)       486      559      745      498      444
Total assets (in millions) (e).....................    ($)    10,745    9,598    9,191    8,672    8,044
Long-term debt, excluding current maturities (in
  millions)........................................    ($)     3,583    2,442    2,472    2,110    2,006
Long-term debt -- related parties (in millions)
  (b)..............................................    ($)       506       --       --       --       --
Non-current portion of capital leases (in
  millions)........................................    ($)        58      116       72       49       85
Total preferred stock (in millions)................    ($)        44       44       44       44       44
Total Trust Preferred Securities (in millions)
  (b)..............................................    ($)        --      490      520      395      395
Number of preferred shareholders at year-end.......            2,032    2,132    2,220    2,365    2,534
Book value per common share at year-end............    ($)     24.51    22.46    22.81    23.85    23.87
Return on average common equity....................    (%)       9.8     17.6      7.4     12.4     16.2
Return on average assets...........................    (%)       3.6      5.3      3.5      4.8      6.0
Number of full-time equivalent employees at
  year-end
     Consumers.....................................            7,947    8,311    8,405    8,698    8,736
     Michigan Gas Storage (c)......................               --       --       62       57       63
ELECTRIC STATISTICS
  Sales (billions of kWh)..........................               39       39       40       41       41
  Customers (in thousands).........................            1,754    1,734    1,712    1,691    1,665
  Average sales rate per kWh.......................    (c)      6.91     6.88     6.65     6.56     6.54
GAS UTILITY STATISTICS
  Sales and transportation deliveries (bcf)........              380      376      367      410      389
  Customers (in thousands) (d).....................            1,671    1,652    1,630    1,611    1,584
  Average sales rate per mcf.......................    ($)      6.72     5.67     5.34     4.39     4.52
</Table>

- -------------------------
(a)  See Notes 1 and 2 in the notes to the consolidated financial statements.

(b)  Effective December 31, 2003, Trust Preferred Securities are classified on
     the balance sheets as Long-term debt -- related parties.

(c)  Effective November 2002, Michigan Gas Storage Company was merged into
     Consumers.

(d)  Excludes off-system transportation customers.

(e)  For additional details on the reclassification of non-legal cost of
     removal, see Note 12, Asset Retirement Obligation, "Reclassification of
     Non-Legal Cost of Removal." Following is the amount of cost of removal
     reclassified from accumulated depreciation to a regulatory liability by
     year: $983 million in 2003; $907 million in 2002; $870 million in 2001;
     $896 million in 2000; and $874 million in 1999.

                                       CE-2
<PAGE>

                            CONSUMERS ENERGY COMPANY

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

     In this MD&A, Consumers Energy, which includes Consumers Energy Company and
all of its subsidiaries, is at times referred to in the first person as "we",
"our" or "us".

EXECUTIVE OVERVIEW

     Consumers, a subsidiary of CMS Energy, a holding company, is a combination
electric and gas utility company that provides service to customers in
Michigan's Lower Peninsula. Our customer base includes a mix of residential,
commercial, and diversified industrial customers, the largest segment of which
is the automotive industry.

     We manage our business by the nature and services each provides and operate
principally in two business segments: electric utility and gas utility. Our
electric utility operations include the generation, purchase, distribution, and
sale of electricity. Our gas utility operations purchase, transport, store,
distribute, and sell natural gas.

     We earn our revenue and generate cash from operations by providing electric
and natural gas services, electric power generation, gas transmission and
storage, and other energy related services. Our businesses are affected by
weather, especially during the traditional heating and cooling seasons, economic
conditions, regulation and regulatory issues, interest rates, our debt credit
rating, and energy commodity prices.

     Our strategy involves rebuilding our balance sheet and refocusing on our
core strength: superior utility operation. Over the next few years, we expect
this strategy to improve our debt ratings, grow earnings at a mid-single digit
rate, and position the company to make new investments.

     In 2003, we continued to implement our strategy centered around growing a
healthy utility in Michigan. We have taken advantage of historically low
interest rates to extend maturities and refinance our debt at lower cost. We
completed financing and refinancing transactions to resolve liquidity concerns
at the start of 2003. In addition, we contributed $501 million to our defined
benefit pension plan. This should result in lower pension costs in the future.

     At the foundation of our financial progress was exceptional operating
performance. For the second consecutive year, our Michigan gas utility earned
the J.D. Power and Associates award for highest residential customer
satisfaction with natural gas services in the Midwest. Independent evaluators,
like J.D. Power and Associates recognize value and our regulators do too. The
MPSC authorized an annual increase in our gas utility rates of $56 million in
late 2002, and an additional interim annualized $19 million rate increase in
2003.

     Despite strong financial and operational performance in 2003, we face
important challenges in the future. We continue to lose industrial and
commercial customers to other electric suppliers without receiving compensation
for stranded costs caused by the lost sales. As of March 2004, we lost 735 MW or
nine percent of our electric business to these alternative electric suppliers.
We expect the loss to grow to over 1,000 MW in 2004. Existing state legislation
encourages competition and provides for recovery of stranded costs, but the MPSC
has not yet authorized stranded cost recovery. We continue to work cooperatively
with the MPSC to resolve this issue.

     Further, higher natural gas prices have harmed the economics of the MCV and
we are seeking approval from the MPSC to change the way in which the facility is
used. Our proposal would reduce gas consumption by an estimated 30 to 40 bcf per
year while improving the MCV's financial performance with no change to customer
rates. A portion of the benefits from the proposal will support additional
renewable resource development in Michigan. Resolving the issue is critical for
our shareowners and customers, and we have asked the MPSC to approve it quickly.

     We also are focused on further reducing our business risk and leverage,
while growing the equity base of our company. Finally, we are planning to devote
more attention to improving business growth. Our business plan is targeted at
predictable earnings growth. The result of these efforts will be a strong,
reliable utility company that will be poised to take advantage of opportunities
for further growth.

                                       CE-3
<PAGE>

FORWARD-LOOKING STATEMENTS AND RISK FACTORS

     This Form 10-K and other written and oral statements that we make contain
forward-looking statements as defined in Rule 3b-6 of the Securities Exchange
Act of 1934, as amended, Rule 175 of the Securities Act of 1933, as amended, and
relevant legal decisions. Our intention with the use of words such as "may,"
"could," "anticipates," "believes," "estimates," "expects," "intends," "plans,"
and other similar words is to identify forward-looking statements that involve
risk and uncertainty. We designed this discussion of potential risks and
uncertainties to highlight important factors that may impact our business and
financial outlook. We have no obligation to update or revise forward-looking
statements regardless of whether new information, future events, or any other
factors affect the information contained in the statements. These
forward-looking statements are subject to various factors that could cause our
actual results to differ materially from the results anticipated in these
statements. Such factors include our inability to predict and/or control:

     - achievement of capital expenditure reductions and cost savings,

     - capital and financial market conditions, including the current price of
       CMS Energy Common Stock and the effect on the Pension Plan, interest
       rates and availability of financing to Consumers, CMS Energy, or any of
       their affiliates and the energy industry,

     - market perception of the energy industry, Consumers, CMS Energy, or any
       of their affiliates,

     - securities ratings of Consumers, CMS Energy, or any of their affiliates,

     - factors affecting utility and diversified energy operations such as
       unusual weather conditions, catastrophic weather-related damage,
       unscheduled generation outages, maintenance or repairs, environmental
       incidents, or electric transmission or gas pipeline system constraints,

     - ability to access the capital markets successfully,

     - international, national, regional, and local economic, competitive, and
       regulatory policies, conditions and developments,

     - adverse regulatory or legal decisions, including environmental laws and
       regulations,

     - federal regulation of electric sales and transmission of electricity
       including re-examination by federal regulators of our market-based sales
       authorizations in wholesale power markets, and proposals by FERC to
       change the way public utilities and natural gas companies, and their
       subsidiaries and affiliates, interact with each other,

     - energy markets, including the timing and extent of unanticipated changes
       in commodity prices for oil, coal, natural gas, natural gas liquids,
       electricity, and certain related products due to lower or higher demand,
       shortages, transportation problems, or other developments,

     - potential disruption or interruption of facilities or operations due to
       accidents or terrorism, and the ability to obtain or maintain insurance
       coverage for such events,

     - nuclear power plant performance, decommissioning, policies, procedures,
       incidents, and regulation, including the availability of spent nuclear
       fuel storage,

     - technological developments in energy production, delivery, and usage,

     - changes in financial or regulatory accounting principles or policies,

     - outcome, cost, and other effects of legal and administrative proceedings,
       settlements, investigations and claims,

     - limitations on our ability to control the development or operation of
       projects in which our subsidiaries have a minority interest,

     - disruptions in the normal commercial insurance and surety bond markets
       that may increase costs or reduce traditional insurance coverage,
       particularly terrorism and sabotage insurance and performance bonds,
                                       CE-4
<PAGE>

     - other business or investment considerations that may be disclosed from
       time to time in CMS Energy's or our SEC filings or in other publicly
       issued written documents, and

     - other uncertainties that are difficult to predict, and many of which are
       beyond our control.

RESULTS OF OPERATIONS

NET INCOME AVAILABLE TO COMMON STOCKHOLDER

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                       ------------------------------------------------
                                                       2003    2002    CHANGE    2002    2001    CHANGE
                                                       ----    ----    ------    ----    ----    ------
                                                                         IN MILLIONS
<S>                                                    <C>     <C>     <C>       <C>     <C>     <C>
Net income available to common stockholder.........    $194    $335    $(141)    $335    $145     $190
                                                       ====    ====    =====     ====    ====     ====
</Table>

     2003 COMPARED TO 2002: Net income in 2003 was reduced $141 million as
compared to 2002 for several reasons. Higher electric and gas operating costs in
2003 were responsible for $80 million of the reduction in net income. Increased
operating costs include $53 million in higher pension and other benefit costs,
see Note 7, Retirement Benefits, $12 million of increased depreciation expense
reflecting higher levels of plant in service, and $7 million of increased
amortization expense associated with securitized regulatory assets. Amortization
expense is recognized as principal is repaid to the Securitization bondholders.

     A significant reduction in 2003 electric deliveries also contributed to
reduced net income. Milder weather during the summer air conditioning season,
and a continuation of the trend of commercial and industrial customers switching
from us to other electric suppliers, impacted net income negatively by $27
million in 2003 versus 2002. Increased costs of borrowing reduced 2003 net
income by $23 million, reflecting higher levels of debt, and higher average
interest rates.

     Our ownership interest in the MCV Partnership reflects a $27 million
reduction, as compared to 2002, in the fair value of certain gas contracts held
by the MCV Partnership. The fair value of these contracts is adjusted through
earnings in accordance with SFAS No. 133. For additional details on SFAS No.
133, see Note 4, Financial and Derivative Instruments.

     The 2003 decrease in net income also reflects a $7 million charge at CMS
Holdings to reflect the loss of certain tax credits.

     Finally, contrary to 2002, net income in 2003 did not reflect any gains or
losses associated with asset sales. In 2002, gains primarily associated with the
sale of the electric transmission system contributed $31 million to net income.

     On the positive side, 2003 net income increased $25 million as compared to
2002 due to a full year of higher gas tariff rates, as authorized by the MPSC in
late 2002. Lower general taxes in 2003 contributed an additional $8 million to
net income during the year. The reduction in general taxes primarily reflects a
MSBT credit received from the State of Michigan associated with the construction
of our headquarters on a qualifying Brownfield site. Our ability to manage our
electric power supply costs also provided additional net income in 2003. Lower
average fuel costs and the availability of higher market prices for our excess
capacity increased net income by $17 million as compared to 2002.

     2002 COMPARED TO 2001: Net income increased $190 million as compared to
2001. This increase was the result of several factors. Reduced electric power
costs in 2002 were responsible for $85 million of the increase in net income.
This reduction in power costs was due primarily to higher cost replacement power
purchased in 2001 because of a refueling outage and an unscheduled forced outage
at Palisades. Lower prices for power options and dispatchable capacity contracts
purchased in 2002 also contributed to the reduction in power costs.

     In 2002, gains primarily associated with the sale of the electric
transmission system contributed $31 million to net income. Net income in 2001
did not reflect any gains or losses associated with asset sales.

     Under SFAS No. 133, certain MCV gas contracts are adjusted, through
earnings, to reflect fair value. Earnings received by our ownership interest in
the MCV Partnership reflect a $25 million increase, compared to 2001, in the
fair value of these contracts held by the MCV Partnership. Net income also
increased as a result of an

                                       CE-5
<PAGE>

$11 million adjustment to electric call option and option-like contracts booked
in 2001, due to SFAS No. 133 implementation.

     Increased electric deliveries to the higher margin residential and
commercial customers contributed $27 million to net income in 2002. The interim
and final gas rate orders issued in 2001 and 2002 increased net income by $16
million. Offsetting these increases to net income is a $9 million decrease
resulting from the recognition of a historic gas inventory adjustment in the
cumulative amount of 4 bcf.

     For additional details, see "Electric Results of Operations" and "Gas
Results of Operations" within this section and Note 2, Uncertainties.

ELECTRIC UTILITY RESULTS OF OPERATIONS

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                       ------------------------------------------------
                                                       2003    2002    CHANGE    2002    2001    CHANGE
                                                       ----    ----    ------    ----    ----    ------
                                                                         IN MILLIONS
<S>                                                    <C>     <C>     <C>       <C>     <C>     <C>
Net income available to common stockholder.........    $167    $264     $(97)    $264    $109     $155
                                                       ====    ====     ====     ====    ====     ====
Reasons for the change:
Electric deliveries................................                     $(41)                     $ 41
Power supply costs and related revenue.............                       26                       149
Other operating expenses and non-commodity
  revenue..........................................                      (80)                      (21)
Implementation of accounting standards (SFAS No.
  133).............................................                       --                        17
Gain on asset sales................................                      (38)                       38
General taxes......................................                       10                        (3)
Fixed charges......................................                      (22)                        9
Income taxes.......................................                       48                       (75)
                                                                        ----                      ----
Total change.......................................                     $(97)                     $155
                                                                        ====                      ====
</Table>

     ELECTRIC DELIVERIES: In 2003, electric revenues decreased, reflecting lower
deliveries. Most significantly, sales volumes to commercial and industrial
customers were 5.6 percent lower than in 2002, a result of these sectors'
continued switching to alternative electric suppliers as allowed by the Customer
Choice Act. The decrease in revenue is also the result of reduced deliveries to
higher-margin residential customers, from a milder summer's impact on air
conditioning usage. Overall, electric deliveries, including transactions with
other wholesale marketers and other electric utilities, decreased 0.4 billion
kWh or 1.1 percent.

     In 2002, electric revenue increased by $41 million from the previous year,
despite lower deliveries. This was due primarily to increased deliveries to
higher-margin residential customers as a result of a significantly warmer
summer's impact on air conditioning usage. Deliveries, including transactions
with other wholesale marketers and other electric utilities, decreased 0.3
billion kWh or 0.7 percent.

     POWER SUPPLY COSTS AND RELATED REVENUE: In 2003, our recovery of power
supply costs was fixed, as required under the Customer Choice Act. Therefore,
power supply-related revenue in excess of actual power supply costs increased
operating income. By contrast, if power supply-related revenues had been less
than actual power supply costs, the impact would have decreased operating
income. In 2003, this difference between power supply-related revenues and
actual power supply costs benefited operating income by $26 million more than it
had in 2002. This increase is primarily the result of increased intersystem
revenues due to higher market prices and sales made from surplus capacity. The
efficient operation of our generating plants and lower priced purchased power
further decreased power supply costs.

     In 2002, as compared to 2001, power supply costs and related revenues
increased operating income due primarily to reduced purchased power costs
because the Palisades plant returned to service in 2002, following an extended
2001 shutdown.

     OTHER OPERATING EXPENSES AND NON-COMMODITY REVENUE: In 2003, net operating
expenses and non-commodity revenue decreased operating income by $80 million
versus 2002. This decrease relates to increased

                                       CE-6
<PAGE>

pension and other benefit costs of $54 million, a scheduled refueling outage at
Palisades, and higher transmission costs. More plant in service increased
depreciation costs by $8 million, and $11 million of higher amortization expense
from securitized assets further contributed to decreased operating income.
Slightly offsetting the increased operating expenses were higher non-commodity
revenues associated with other income.

     In 2002, net operating expenses and non-commodity revenue decreased
operating income by $21 million compared with 2001. The decrease primarily
related to higher transmission expenses and increased depreciation costs from
more plant in service.

     ASSET SALES: The reduction in operating income from asset sales for 2003
versus 2002, and the increase in operating income from asset sales for 2002
versus 2001 reflect the $31 million pretax gain associated with the 2002 sale of
our electric transmission system and the $7 million pretax gain associated with
the 2002 sale of nuclear equipment from the cancelled Midland project.

     GENERAL TAXES: In 2003, general taxes decreased from 2002 due primarily to
reductions in MSBT expense, resulting primarily from a tax credit received from
the State of Michigan associated with construction of the new corporate
headquarters on a qualifying Brownfield site. In 2002, general taxes increased
over 2001 due to increases in MSBT and property tax accruals.

     FIXED CHARGES: In 2003, fixed charges increased versus 2002 due primarily
to higher average debt levels, but also because of higher average interest
rates. In 2002, fixed charges decreased versus 2001 because of a reduction in
long-term debt.

     INCOME TAXES: In 2003, income tax decreased versus 2002 due primarily to
lower earnings by the electric utility. In 2002, income tax expense increased
versus 2001 due primarily to increased earnings.

GAS UTILITY RESULTS OF OPERATIONS

<Table>
<Caption>
                                                                      YEARS ENDED DECEMBER 31
                                                          ------------------------------------------------
                                                          2003    2002    CHANGE    2002    2001    CHANGE
                                                          ----    ----    ------    ----    ----    ------
                                                                            IN MILLIONS
<S>                                                       <C>     <C>     <C>       <C>     <C>     <C>
Net income available to common stockholder............    $38     $46      $ (8)    $46     $21      $ 25
                                                          ===     ===      ====     ===     ===      ====
Reasons for the change:
Gas deliveries........................................                     $ (1)                     $ 21
Gas rate increase.....................................                       39                        25
Gas wholesale and retail services and other gas
  revenues............................................                        1                         1
Operation and maintenance.............................                      (34)                      (14)
General taxes, depreciation, and other income.........                       (6)                       (3)
Fixed charges.........................................                       (5)                        3
Income taxes..........................................                       (2)                       (8)
                                                                          ------                    ------
Total change..........................................                     $ (8)                     $ 25
                                                                          ======                    ======
</Table>

     GAS DELIVERIES: In 2003, gas deliveries, including miscellaneous
transportation, increased 4.1 bcf or 1.1 percent versus 2002. Despite increased
system deliveries, gas revenues actually declined by $1 million. Colder weather
during the first quarter of 2003 increased deliveries to the residential and
commercial sectors. Increased deliveries resulted in a $6 million increase in
gas revenues. However, the revenue increase was offset by a $7 million gas loss
adjustment recorded as a reduction to gas revenues.

     In 2002, gas revenues increased by $21 million from the previous year.
System deliveries, including miscellaneous transportation, increased 9.4 bcf or
2.6 percent. The increase was due primarily to colder weather that increased
deliveries to the residential and commercial sectors.

     GAS RATE INCREASE: In November 2002, the MPSC issued a final gas rate order
authorizing a $56 million annual increase to gas tariff rates. As a result of
this order, 2003 gas revenues increased $39 million. In 2002, gas rate increases
led to increased gas revenues of $25 million over 2001.

                                       CE-7
<PAGE>

     GAS WHOLESALE AND RETAIL SERVICES AND OTHER GAS REVENUES: In 2003, gas
wholesale and retail services and other gas revenues increased $1 million. The
$1 million increase includes primarily the following two items. In 2003, we
reversed a $4 million reserve, originally recorded in 2002, for non-physical gas
title tracking services. In addition, in 2003, we reserved $11 million for the
settlement agreement associated with the 2002-2003 GCR disallowance. For
additional details regarding both of these issues, see the Gas Utility Business
Uncertainties in the "Outlook" section of this MD&A.

     OPERATION AND MAINTENANCE: In 2003, operation and maintenance expenses
increased versus 2002 due to increases in pension and other benefits costs of
$27 million and additional expenditures on safety, reliability, and customer
service. In 2002, operation and maintenance expenses increased versus 2001 due
to the recognition of gas storage inventory losses and additional expenditures
on customer reliability and service.

     GENERAL TAXES, DEPRECIATION, AND OTHER INCOME: In 2003, the net of general
tax expense, depreciation expense, and other income decreased operating income
primarily because of increases in depreciation expense from increased plant in
service. In 2002, the net of general tax expense, depreciation expense, and
other income decreased operating income primarily because of increases in MSBT
and property tax expense accruals.

     FIXED CHARGES: In 2003, fixed charges increased versus 2002 due primarily
to higher average debt levels, but also because of higher average interest
rates. In 2002 versus 2001, fixed charges decreased due to lower long-term debt
levels.

     INCOME TAXES: In 2003 versus 2002, income tax expense increased due to
reduced income tax expense in 2002. The 2002 reduction was attributable to
flow-through accounting on plant, property and equipment as required by past
MPSC rulings. In 2002, income tax expense increased versus 2001 due primarily to
increased earnings of the gas utility.

CRITICAL ACCOUNTING POLICIES

     The following accounting policies are important to an understanding of our
results and financial condition and should be considered an integral part of our
MD&A:

     - use of estimates in accounting for contingencies and equity method
       investments,

     - accounting for the effects of regulatory accounting,

     - accounting for financial and derivative instruments,

     - accounting for pension and postretirement benefits,

     - accounting for asset retirement obligations,

     - accounting for nuclear decommissioning costs, and

     - accounting for related party transactions.

     For additional accounting policies, see Note 1, Corporate Structure and
Accounting Policies.

USE OF ESTIMATES AND ASSUMPTIONS

     In preparing our financial statements, we use estimates and assumptions
that may affect reported amounts and disclosures. Accounting estimates are used
for asset valuations, depreciation, amortization, financial and derivative
instruments, employee benefits, and contingencies. For example, we estimate the
rate of return on plan assets and the cost of future health-care benefits to
determine our annual pension and other postretirement benefit costs. There are
risks and uncertainties that may cause actual results to differ from estimated
results, such as changes in the regulatory environment, competition, regulatory
decisions, and lawsuits.

     CONTINGENCIES: We are involved in various regulatory and legal proceedings
that arise in the ordinary course of our business. We record a liability for
contingencies based upon our assessment that the occurrence is probable and,
where determinable, an estimate of the liability amount. The recording of
estimated liabilities for contingencies is guided by the principles in SFAS No.
5. We consider many factors in making these assessments,

                                       CE-8
<PAGE>

including past history and the specifics of each matter. The most significant of
these contingencies are our electric and gas environmental estimates, which are
discussed in the "Outlook" section included in this MD&A, and the potential
underrecoveries from our power purchase contract with the MCV Partnership.

     MCV UNDERRECOVERIES: The MCV Partnership, which leases and operates the MCV
Facility, contracted to sell electricity to Consumers for a 35-year period
beginning in 1990 and to supply electricity and steam to Dow. We hold a 49
percent partnership interest in the MCV Partnership, and a 35 percent lessor
interest in the MCV Facility.

     Under our power purchase agreement with the MCV Partnership, we pay a
capacity charge based on the availability of the MCV Facility whether or not
electricity is actually delivered to us; a variable energy charge for kWh
delivered to us; and a fixed energy charge based on availability up to 915 MW
and based on delivery for the remaining contracted capacity. The cost that we
incur under the MCV Partnership power purchase agreement exceeds the recovery
amount allowed by the MPSC. As a result, we estimate cash underrecoveries of
capacity availability payments will aggregate $206 million from 2004 through
2007. For capacity and fixed energy payments billed by the MCV Partnership after
September 15, 2007, and not recovered from customers, we expect to claim a
regulatory out provision under the MCV Partnership power purchase agreement.
This provision obligates us to pay the MCV Partnership only those capacity and
energy charges that the MPSC has authorized for recovery from electric
customers. The effect of any such action would be to:

     - reduce cash flow to the MCV Partnership, which could have an adverse
       effect on our equity, and

     - eliminate our underrecoveries for capacity and energy payments.

     Further, under the PPA, variable energy payments to the MCV Partnership are
based on the cost of coal burned in our coal plants and operations and
maintenance expenses. However, the MCV Partnership's costs of producing
electricity are tied to the cost of natural gas. Because natural gas prices have
increased substantially in recent years, while the price the MCV Partnership can
charge us for energy has not, the MCV Partnership's financial performance has
been affected adversely.

     As a result of returning to the PSCR process on January 1, 2004, we
returned to dispatching the MCV Facility on a fixed load basis, as permitted by
the MPSC, in order to maximize recovery from electric customers of our capacity
payments. This fixed load dispatch increases the MCV Facility's output and
electricity production costs, such as natural gas. As the spread between the MCV
Facility's variable electricity production costs and its energy payment revenue
widens, the MCV's Partnership's financial performance and our equity interest in
the MCV Partnership will be harmed.

     In February 2004, we filed a resource conservation plan with the MPSC that
is intended to help conserve natural gas and thereby improve our equity
investment in the MCV Partnership, without raising the costs paid by our
electric customers. The plan's primary objective is to dispatch the MCV Facility
on an economic basis depending on natural gas market prices, which will reduce
the MCV Facility's annual natural gas consumption by an estimated 30 to 40 bcf.
This decrease in the quantity of high-priced natural gas consumed by the MCV
Facility will benefit Consumers' ownership interest in the MCV Partnership. We
requested that the MPSC provide interim approval while it conducts a full review
of the plan. The MPSC has scheduled a prehearing conference with respect to the
MCV resource conservation plan for April 2004. We cannot predict if or when the
MPSC will approve our request.

     The two most significant variables in the analysis of the MCV Partnership's
future financial performance are the forward price of natural gas for the next
22 years and the MPSC's decision in 2007 or beyond related to our recovery of
capacity payments. Natural gas prices have been historically volatile.
Presently, there is no consensus in the marketplace on the price or range of
prices of natural gas in the short term or beyond the next five years.
Therefore, we cannot predict the impact of these issues on our future earnings,
cash flows, or on the value of our equity interest in the MCV Partnership.

     For additional details, see Note 2, Uncertainties, "Other Electric
Uncertainties -- The Midland Cogeneration Venture."

                                       CE-9
<PAGE>

ACCOUNTING FOR THE EFFECTS OF INDUSTRY REGULATION

     Because we are involved in a regulated industry, regulatory decisions
affect the timing and recognition of revenues and expenses. We use SFAS No. 71
to account for the effects of these regulatory decisions. As a result, we may
defer or recognize revenues and expenses differently than a non-regulated
entity.

     For example, items that a non-regulated entity normally would expense, we
may record as regulatory assets if the actions of the regulator indicate such
expenses will be recovered in future rates. Conversely, items that non-
regulated entities may normally recognize as revenues, we may record as
regulatory liabilities if the actions of the regulator indicate they will
require such revenues be refunded to customers. Judgment is required to
determine the recoverability of items recorded as regulatory assets and
liabilities. As of December 31, 2003, we had $1.105 billion recorded as
regulatory assets and $1.467 billion recorded as regulatory liabilities.

     For additional details on industry regulation, see Note 1, Corporate
Structure and Accounting Policies, "Utility Regulation."

ACCOUNTING FOR FINANCIAL AND DERIVATIVE INSTRUMENTS AND MARKET RISK INFORMATION

     FINANCIAL INSTRUMENTS: We account for investments in debt and equity
securities using SFAS No. 115. Debt and equity securities can be classified into
one of three categories: held-to-maturity, trading, or available-for-sale
securities. Our investments in equity securities, including our investment in
CMS Energy Common Stock, are classified as available-for-sale securities. They
are reported at fair value, with any unrealized gains or losses resulting from
changes in fair value reported in equity as part of accumulated other
comprehensive income and are excluded from earnings unless such changes in fair
value are determined to be other than temporary. Unrealized gains or losses
resulting from changes in the fair value of our nuclear decommissioning
investments are reported as regulatory liabilities. The fair value of these
investments is determined from quoted market prices.

     DERIVATIVE INSTRUMENTS: We use the criteria in SFAS No. 133, as amended and
interpreted, to determine if certain contracts must be accounted for as
derivative instruments. The rules for determining whether a contract meets the
criteria for derivative accounting are numerous and complex. Moreover,
significant judgment is required to determine whether a contract requires
derivative accounting, and similar contracts can sometimes be accounted for
differently.

     If a contract is accounted for as a derivative instrument, it is recorded
in the financial statements as an asset or a liability, at the fair value of the
contract. The recorded fair value of the contract is then adjusted quarterly to
reflect any change in the market value of the contract, a practice known as
marking the contract to market. The accounting for changes in the fair value of
a derivative (that is, gains or losses) is reported either in earnings or
accumulated other comprehensive income depending on whether the derivative
qualifies for special hedge accounting treatment. For additional details on the
accounting policies for derivative instruments, see Note 4, Financial and
Derivative Instruments.

     The types of contracts we typically classify as derivative instruments are
interest rate swaps, electric call options, gas fuel options, fixed priced
weather-based gas supply call options, and fixed price gas supply call and put
options. We generally do not account for electric capacity and energy contracts,
gas supply contracts, coal and nuclear fuel supply contracts, or purchase orders
for numerous supply items as derivatives.

     Certain of our electric capacity and energy contracts are not accounted for
as derivatives due to the lack of an active energy market in the state of
Michigan, as defined by SFAS No. 133, and the transportation costs that would be
incurred to deliver the power under the contracts to the closest active energy
market at the Cinergy hub in Ohio. If a market develops in the future, we may be
required to account for these contracts as derivatives. The mark-to-market
impact on earnings related to these contracts, particularly related to the PPA,
could be material to our financial statements.

     To determine the fair value of contracts that are accounted for as
derivative instruments, we use a combination of quoted market prices and
mathematical valuation models. Valuation models require various inputs,
including forward prices, volatilities, interest rates, and exercise periods.
Changes in forward prices or volatilities could change significantly the
calculated fair value of certain contracts. At December 31, 2003, we

                                      CE-10
<PAGE>

assumed a market-based interest rate of 1 percent (six-month U.S. Treasury rate)
and an average volatility rate of 79 percent to calculate the fair value of our
gas call options.

     MARKET RISK INFORMATION: We are exposed to market risks including, but not
limited to, changes in interest rates, commodity prices, and equity security
prices. We manage these risks using established policies and procedures, under
the direction of both an executive oversight committee consisting of senior
management representatives and a risk committee consisting of business-unit
managers. We may use various contracts to manage these risks, including swaps,
options, and forward contracts.

     Contracts used to manage market risks may be considered derivative
instruments that are subject to derivative and hedge accounting pursuant to SFAS
No. 133. We intend that any gains or losses on these contracts will be offset by
an opposite movement in the value of the item at risk. We enter into all risk
management contracts for purposes other than trading. These contracts contain
credit risk if the counterparties, including financial institutions and energy
marketers, fail to perform under the agreements. We minimize such risk by
performing financial credit reviews using, among other things, publicly
available credit ratings of such counterparties.

     We perform sensitivity analyses to assess the potential loss in fair value,
cash flows, or future earnings based upon a hypothetical 10 percent adverse
change in market rates or prices. We do not believe that sensitivity analyses
alone provide an accurate or reliable method for monitoring and controlling
risks. Therefore, we use our experience and judgment to revise strategies and
modify assessments. Changes in excess of the amounts determined in sensitivity
analyses could occur if market rates or prices exceed the 10 percent shift used
for the analyses. These risk sensitivities are shown in "Interest Rate Risk,"
"Commodity Price Risk," and "Equity Securities Price Risk" within this section.

     Interest Rate Risk: We are exposed to interest rate risk resulting from
issuing fixed-rate and variable-rate financing instruments, and from interest
rate swap agreements. We use a combination of these instruments to manage this
risk as deemed appropriate, based upon market conditions. These strategies are
designed to provide and maintain a balance between risk and the lowest cost of
capital.

     Interest Rate Risk Sensitivity Analysis (assuming a 10 percent adverse
change in market interest rates):

<Table>
<Caption>
                                                                   AS OF
                                                                DECEMBER 31
                                                                ------------
                                                                2003    2002
                                                                ----    ----
                                                                IN MILLIONS
<S>                                                             <C>     <C>
Variable-rate financing -- before tax annual earnings
  exposure..................................................    $  1    $  2
Fixed-rate financing -- potential loss in fair value(a).....     154     137
</Table>

- -------------------------
(a)  Fair value exposure could only be realized if we repurchased all of our
     fixed-rate financing.

     As discussed in "Electric Business Uncertainties -- Competition and
Regulatory Restructuring -- Securitization" within this MD&A, we have filed an
application with the MPSC to securitize certain expenditures. Upon final
approval, we intend to use the proceeds from the securitization to retire
higher-cost debt, which could include a portion of our current fixed-rate debt.
We do not believe that any adverse change in debt price and interest rates would
have a material adverse effect on either our consolidated financial position,
results of operations or cash flows.

     Commodity Price Risk: For purposes other than trading, we enter into
electric call options, fixed-priced weather-based gas supply call options, and
fixed-priced gas supply call and put options. The electric call options are used
to protect against the risk of fluctuations in the market price of electricity,
and to ensure a reliable source of capacity to meet our customers' electric
needs. The weather-based gas supply call options, along with the gas supply call
and put options, are used to purchase reasonably priced gas supply. Call options
give us the right, but not the obligation, to purchase gas supply at
predetermined fixed prices. Put options give third-party suppliers the right,
but not the obligation, to sell gas supply to us at predetermined fixed prices.

                                      CE-11
<PAGE>

     The commodity price risk sensitivity analysis was not material for the
years ending December 31, 2003 and December 31, 2002.

     Equity Securities Price Risk: We are exposed to price risk associated with
investments in equity securities. As discussed in "Financial Instruments" within
this section, our investments in equity securities are classified as
available-for-sale securities. They are reported at fair value, with any
unrealized gains or losses resulting from changes in fair value reported in
equity as part of accumulated other comprehensive income and are excluded from
earnings unless such changes in fair value are determined to be other than
temporary. Unrealized gains or losses resulting from changes in the fair value
of our nuclear decommissioning investments are reported as regulatory
liabilities.

     Equity Securities Price Risk Sensitivity Analysis (assuming a 10 percent
adverse change in market prices):

<Table>
<Caption>
                                                                    AS OF
                                                                 DECEMBER 31
                                                                --------------
                                                                2003      2002
                                                                ----      ----
                                                                 IN MILLIONS
<S>                                                             <C>       <C>
Potential reduction in fair value:
  Nuclear decommissioning investments.......................    $57       $49
  Equity investments........................................      4         4
</Table>

     For additional details on market risk and derivative activities, see Note
4, Financial and Derivative Instruments.

ACCOUNTING FOR PENSION AND OPEB

     Pension: We have established external trust funds to provide retirement
pension benefits to our employees under a non-contributory, defined benefit
Pension Plan. We implemented a cash balance plan for employees hired after June
30, 2003. We use SFAS No. 87 to account for pension costs.

     OPEB: We provide postretirement health and life benefits under our OPEB
plan to substantially all our retired employees. We use SFAS No. 106 to account
for other postretirement benefit costs.

     Liabilities for both pension and OPEB are recorded on the balance sheet at
the present value of their future obligations, net of any plan assets. The
calculation of the liabilities and associated expenses requires the expertise of
actuaries. Many assumptions are made including:

     - life expectancies,

     - present value discount rates,

     - expected long-term rate of return on plan assets,

     - rate of compensation increases, and

     - anticipated health care costs.

     Any change in these assumptions can change significantly the liability and
associated expenses recognized in any given year.

     The following table provides an estimate of our pension expense, OPEB
expense, and cash contributions for the next three years:

<Table>
<Caption>
                                                                          EXPECTED COSTS
                                                         ------------------------------------------------
                                                         PENSION EXPENSE    OPEB EXPENSE    CONTRIBUTIONS
                                                         ---------------    ------------    -------------
                                                                           IN MILLIONS
<S>                                                      <C>                <C>             <C>
2004.................................................          $20              $62             $ 94
2005.................................................           41               60              117
2006.................................................           63               58              124
</Table>

     Actual future pension expense and contributions will depend on future
investment performance, changes in future discount rates, and various other
factors related to the populations participating in the Pension Plan.

                                      CE-12
<PAGE>

Lowering the expected long-term rate of return on the Pension Plan assets by
0.25 percent (from 8.75 percent to 8.50 percent) would increase estimated
pension expense for 2004 by $2 million. Lowering the discount rate by 0.25
percent (from 6.25 percent to 6.00 percent) would increase estimated pension
expense for 2004 by $4 million.

     In August 2003, we made a planned contribution of $172 million to the
Pension Plan. In December 2003, we made an additional contribution of $329
million. As a result of these contributions, we reversed the additional minimum
liability and the resulting decrease in equity that we charged in 2002. As of
December 31, 2003, we have a prepaid pension asset of $384 million recorded on
our consolidated balance sheets.

     Market-Related Valuation: We determine pension expense on a market-related
valuation of assets, which reduces year-to-year volatility. The market-related
valuation includes investment gains or losses over a five-year period from the
year in which the gains or losses occur. Investment gains or losses for this
purpose are the difference between the expected return calculated using the
market-related value of assets and the actual return based on the market value
of assets. Since the market-related value of assets recognizes gains or losses
over a five-year period, the future value of assets will be impacted as
previously deferred gains or losses are recorded.

     The Pension Plan includes funds for our employees and our non-utility
affiliates. The Pension Plan assets are not distinguishable by company. Due to
the unfavorable performance of the equity markets in the past few years, as of
December 31, 2003, we had cumulative losses of approximately $239 million that
remain to be included in the calculation of the market-related value of assets.
These unrecognized net actuarial losses may result in increases in future
pension expense in accordance with SFAS No. 87.

     The Medicare Prescription Drug, Improvement and Modernization Act of 2003
was signed into law in December 2003. This Act establishes a prescription drug
benefit under Medicare (Medicare Part D), and a federal subsidy to sponsors of
retiree health care benefit plans that provide a benefit that is actuarially
equivalent to Medicare Part D. We are deferring recognizing the effects of the
Act in our 2003 financial statements, as permitted by FASB Staff Position No.
106-1. When accounting guidance is issued, our retiree health benefit obligation
may be adjusted.

     For additional details on postretirement benefits, see Note 7, Retirement
Benefits.

ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS

     SFAS No. 143, Accounting for Asset Retirement Obligations, became effective
January 2003. It requires companies to record the fair value of the cost to
remove assets at the end of their useful lives, if there is a legal obligation
to remove them. We have legal obligations to remove some of our assets,
including our nuclear plants, at the end of their useful lives. As required by
SFAS No. 71, we accounted for the implementation of this standard by recording a
regulatory asset and liability instead of a cumulative effect of a change in
accounting principle. Accretion of $1 million related to the Big Rock and
Palisades' profit component included in the estimated cost of removal was
expensed in 2003.

     The fair value of ARO liabilities has been calculated using an expected
present value technique. This technique reflects assumptions, such as costs,
inflation, and profit margin that third parties would consider to assume the
settlement of the obligation. Fair value, to the extent possible, should include
a market risk premium for unforeseeable circumstances. No market risk premium
was included in our ARO fair value estimate since a reasonable estimate could
not be made.

     If a reasonable estimate of fair value cannot be made in the period the
asset retirement obligation is incurred, such as assets with indeterminate
lives, the liability is to be recognized when a reasonable estimate of fair
value can be made. Generally, transmission and distribution assets have
indeterminate lives. Retirement cash flows cannot be determined. There is a low
probability of a retirement date, so no liability has been recorded for these
assets. No liability has been recorded for assets that have insignificant
cumulative disposal costs, such as substation batteries. The measurement of the
ARO liabilities for Palisades and Big Rock are based on decommissioning studies
that are based largely on third-party cost estimates.

                                      CE-13
<PAGE>

     Reclassification of Non-Legal Cost of Removal: Beginning in December 2003,
the SEC requires the quantification and reclassification of the estimated cost
of removal obligations arising from other than legal obligations. These
obligations have been accrued through depreciation charges. We estimate that we
had $983 million in 2003 and $907 million in 2002 of previously accrued asset
removal costs related to our regulated operations, for other than legal
obligations. These obligations, which were previously classified as a component
of accumulated depreciation, were reclassified as regulatory liabilities in the
accompanying consolidated balance sheets.

     For additional details on ARO, see Note 12, Asset Retirement Obligations.

ACCOUNTING FOR NUCLEAR DECOMMISSIONING COSTS

     The MPSC and FERC regulate the recovery of costs to decommission our Big
Rock and Palisades nuclear plants. They require, and we have established,
external trust funds to finance the decommissioning of both plants. Our electric
customers pay a surcharge to fund these trusts. We record the trust fund
balances as a non-current asset on our balance sheet.

     Our decommissioning cost estimates for the Big Rock and Palisades plants
assume:

     - each plant site will be restored to conform to the adjacent landscape,

     - all contaminated equipment and material will be removed and disposed of
       in a licensed burial facility, and

     - the site will be released for unrestricted use.

     Independent contractors with expertise in decommissioning have helped us
develop decommissioning cost estimates. Various inflation rates for labor,
non-labor, and contaminated equipment disposal costs are used to escalate these
cost estimates to the future decommissioning cost. A portion of future
decommissioning cost will result from the failure of the DOE to remove fuel from
the sites, as required by the Nuclear Waste Policy Act of 1982. Spent fuel
storage costs would not be incurred if the DOE took possession of the spent
fuel. There is litigation underway to recover these costs.

     The decommissioning trust funds include equities and fixed income
investments. Equities will be converted to fixed income investments during
decommissioning, and fixed income investments are converted to cash as needed.
In December 2000, funding of the Big Rock trust fund was stopped since it was
considered fully funded, subject to further MPSC review. The funds provided by
the trusts, additional customer surcharges, and potential funds from DOE
litigation are all required to cover fully the decommissioning costs and we
currently expect that to happen. The costs of decommissioning these sites and
the adequacy of the trust funds could be affected by:

     - variances from expected trust earnings,

     - a lower recovery of costs from the DOE and lower rate recovery from
       customers, and

     - changes in decommissioning technology, regulations, estimates or
       assumptions.

     For additional details on nuclear decommissioning, see Note 1, Corporate
Structure and Accounting Policies, "Nuclear Plant Decommissioning."

RELATED PARTY TRANSACTIONS

     We enter into a number of significant transactions with related parties.
These transactions include:

     - purchases of capacity and energy from the MCV Partnership and from
       affiliates of Enterprises,

     - sale of storage and transportation of natural gas and other services to
       the MCV Partnership,

     - issuance of Trust Preferred Securities with Consumers' affiliated
       companies,

     - purchases and sales of electricity and gas for generation from CMS ERM,

     - purchase of gas transportation from CMS Bay Area Pipeline, L.L.C.,

                                      CE-14
<PAGE>

     - payment of parent company overhead costs to CMS Energy, and

     - investment in CMS Energy Common Stock.

     Transactions involving CMS Energy and its affiliates, and the sale of
storage and transportation of natural gas and other services to the MCV
Partnership are generally based on regulated prices, market prices or
competitive bidding. Transactions involving the power supply purchases from the
MCV Partnership, and certain affiliates of Enterprises, are based upon avoided
costs under PURPA and competitive bidding. The payment of parent company
overhead costs is based on use of accepted industry allocation methodologies.

     In 2002, MTH purchased our transmission facilities. MTH is a non-affiliated
limited partnership whose general partner is a subsidiary of Trans-Elect, Inc.,
an independent company, whose management includes former executive employees of
CMS Energy. The sale was based on competitive bidding. We continue to use the
transmission facilities now owned by MTH, and one of our directors is currently
a stockholder of Trans-Elect, Inc.

     For additional details on related party transactions, see Note 1, Corporate
Structure and Accounting Policies, "Related Party Transactions," Note 2,
Uncertainties, "Electric Restructuring Matters - Transmission Sales," and "Other
Electric Uncertainties -- The Midland Cogeneration Venture."

CAPITAL RESOURCES AND LIQUIDITY

     Our liquidity and capital requirements are a function of our results of
operations, capital expenditures, contractual obligations, debt maturities,
working capital needs, and collateral requirements. During the summer months, we
purchase natural gas and store it for resale primarily during the winter heating
season. Recently, the market price for natural gas has increased. Although our
natural gas purchases are recoverable from our customers, the amount paid for
natural gas stored as inventory could require additional liquidity due to the
timing of the cost recoveries. In addition, a few of our commodity suppliers
have requested advance payment or other forms of assurances, including margin
calls, in connection with maintenance of ongoing deliveries of gas and
electricity.

     In 2003, we had debt maturities and capital expenditures that required
substantial amounts of cash. As a result, in 2003, we executed a financial
improvement plan to address these critical liquidity issues. We explored
financing opportunities, such as refinancing debt and issuing new debt. We also
implemented our strategic plan, including reducing capital expenditures.

     In 2004, we will continue to monitor our operating expenses and capital
expenditures and evaluate market conditions for financing opportunities. We
believe that our current level of cash and borrowing capacity, along with
anticipated cash flows from operating activities, and reduced capital
expenditures, will be sufficient to meet our liquidity needs through 2005.

CASH POSITION, INVESTING, AND FINANCING

SELECTED MEASURES OF LIQUIDITY AND CAPITAL RESOURCES:

<Table>
<Caption>
                                                                 2003
                                                                 ----
<S>                                                             <C>
Working capital (in millions)...............................      $450
Current ratio...............................................    1.47:1
</Table>

     In 2003, working capital was driven primarily by the following:

     - cash proceeds from long-term debt issuance -- $1,603 million

     partially offset by:

     - cash used for long-term debt retirements, excluding current
       portion -- $483 million,

     - cash used for pension contributions, excluding notes payable to related
       party -- $301 million, and

     - cash used for capital expenditures -- $486 million.

                                      CE-15
<PAGE>

SUMMARY OF CASH FLOWS:

<Table>
<Caption>
                                                                2003     2002     2001
                                                                ----     ----     ----
                                                                      IN MILLIONS
<S>                                                             <C>      <C>      <C>
Net cash provided by (used in):
  Operating activities......................................    $   5    $ 760    $ 518
  Investing activities......................................     (528)    (325)    (807)
  Financing activities......................................      325     (204)     281
                                                                -----    -----    -----
Net Increase (Decrease) in Cash and Cash Equivalents........    $(198)   $ 231    $  (8)
                                                                =====    =====    =====
</Table>

OPERATING ACTIVITIES:

     2003: Net cash provided by operating activities decreased $755 million in
2003 primarily due to an increase in pension plan contributions of $454 million
and an increase in gas inventory of $346 million due to higher gas purchases at
higher prices.

     2002: Net cash provided by operating activities increased $242 million in
2002 primarily due to a decrease in gas inventory of $397 million due to a lower
volume of gas purchased at lower prices, combined with increased sales volume at
higher prices. This increase was partially offset by an increase in accounts
receivable and accrued revenue of $247 million due to a gas rate increase,
colder weather in the fourth quarter of 2002, and increased electric deliveries
to higher margin customer sectors.

INVESTING ACTIVITIES:

     2003: Net cash used in investing activities increased $203 million in 2003
primarily due to a decrease in asset sale proceeds of $288 million resulting
from the sale of METC in 2002, offset by a decrease in 2003 versus 2002 capital
expenditures of $73 million as a result of our strategic plan to reduce capital
expenditures.

     2002: Net cash used in investing activities decreased $482 million in 2002
primarily due to a decrease in capital expenditures of $186 million as a result
of our strategic plan to reduce capital expenditures, and an increase in asset
sale proceeds of $298 million resulting from the sale of METC.

FINANCING ACTIVITIES:

     2003: Net cash provided by financing activities increased $529 million in
2003 primarily due to an increase in net proceeds from borrowings of $490
million. For additional details on long-term debt activity, see Note 3,
Financings and Capitalization.

     2002: Net cash used in financing activities increased $485 million in 2002
primarily due to a decrease in proceeds from securitization bonds of $459
million and a decrease in proceeds from preferred securities of $121 million.
The decrease in proceeds was partially offset by an increase in net proceeds
from borrowings of $101 million. For additional details on long-term debt
activity, see Note 3, Financings and Capitalization.

                                      CE-16
<PAGE>

OBLIGATIONS AND COMMITMENTS

     The following schedule is a summary of our contractual obligations and
commercial commitments. We aggregate this information into a single location so
that a picture of our obligations and commitments is readily available. For
additional details, see Note 2, Uncertainties, and Note 3, Financings and
Capitalization.

<Table>
<Caption>
                                                                          DECEMBER 31
                                                      ----------------------------------------------------
                                                                          PAYMENTS DUE
                                                      ----------------------------------------------------
                                                                                                  2009 AND
                                            TOTAL      2004      2005     2006    2007    2008     BEYOND
                                            -----      ----      ----     ----    ----    ----    --------
                                                                     IN MILLIONS
<S>                                        <C>        <C>       <C>       <C>     <C>     <C>     <C>
CONTRACTUAL OBLIGATIONS
On-balance sheet:
  Long-term debt.......................    $ 3,611    $   28    $  328    $422    $ 31    $441    $ 2,361
  Long-term debt -- related parties....        506        --        --      --      --      --        506
  Notes payable -- related parties.....        200       200        --      --      --      --         --
  Capital lease obligations............         68        10        11      10      10       8         19
                                           -------    ------    ------    ----    ----    ----    -------
     Total on-balance sheet............    $ 4,385    $  238    $  339    $432    $ 41    $449    $ 2,886
                                           -------    ------    ------    ----    ----    ----    -------
Off-balance sheet:
  Operating leases.....................    $    64    $    9    $    8    $  7    $  6    $  5    $    29
  Non-recourse debt....................        200        63        41      26      13      29         28
  Capital lease obligation - MCV.......        144        16         9       8       8       8         95
  Sale of accounts receivable..........        297       297        --      --      --      --         --
  Unconditional purchase obligations
     (a)...............................     17,903     1,961     1,323     958     776     736     12,149
                                           -------    ------    ------    ----    ----    ----    -------
     Total off-balance sheet...........    $18,608    $2,346    $1,381    $999    $803    $778    $12,301
                                           =======    ======    ======    ====    ====    ====    =======
</Table>

- -------------------------
(a) Purchase obligations related to the MCV Facility PPA assume that the
    regulatory out provision is exercised in 2007. For additional details, see
    Note 2, Uncertainties, "Other Electric Uncertainties - The Midland
    Cogeneration Venture," "Commitments for Future Purchases," and "Gas
    Contingencies - Other Gas Uncertainties."

     REGULATORY AUTHORIZATION FOR FINANCINGS: Consumers must obtain FERC
authority to issue short and long-term securities. For additional details of
Consumers' existing authority, see Note 3, Financings and Capitalization.

     LONG-TERM DEBT: Details on our long-term debt issuances, retirements, and
outstanding balances are presented in Note 3, Financings and Capitalization.

     SHORT-TERM FINANCINGS: We have $390 million available under a revolving
credit facility. At December 31, 2003, the line is available for general
corporate purposes, working capital, and letters of credit. For additional
details, see Note 3, Financings and Capitalization.

     CAPITAL LEASE OBLIGATIONS: Our capital leases are comprised mainly of
leased service vehicles and office furniture. The full obligation of our leases
could become due in the event of lease payment default.

     OFF-BALANCE SHEET ARRANGEMENTS: We use off-balance sheet arrangements in
the normal course of business. Our off-balance sheet arrangements include:

     - operating leases,

     - non-recourse debt,

     - sale of accounts receivable, and

     - unconditional purchase obligations.

     Operating Leases: Leases of railroad cars are accounted for as operating
leases.

                                      CE-17
<PAGE>

     Non-recourse Debt: Our share of unconsolidated debt associated with
partnerships and joint ventures in which we have a minority interest is
non-recourse.

     Sale of Accounts Receivable: Under a revolving accounts receivable sales
program, we currently sell up to $325 million of certain accounts receivable.
For additional details, see Note 3, Financings and Capitalization.

     Unconditional Purchase Obligations: Long-term contracts for purchase of
commodities and services are unconditional purchase obligations. These
obligations represent operating contracts used to assure adequate supply with
generating facilities that meet PURPA requirements. The commodities and services
include:

     - natural gas,

     - electricity,

     - coal purchase contracts and their associated cost of transportation, and

     - electric transmission.

     Included in unconditional purchase obligations are long-term power purchase
agreements with various generating plants including the MCV Facility. These
contracts require us to make monthly capacity payments based on the plants'
availability or deliverability. These payments will approximate $47 million per
month during 2004, including $34 million related to the MCV Facility. If a plant
is not available to deliver electricity, we are not obligated to make the
capacity payments to the plant for that period of time. For additional details
on power supply costs, see "Electric Utility Results of Operations" within this
MD&A and Note 2, Uncertainties, "Electric Rate Matters -- Power Supply Costs,"
and "Other Electric Uncertainties -- The Midland Cogeneration Venture."

     COMMERCIAL COMMITMENTS: Our commercial commitments include indemnities and
letters of credit. Indemnities are agreements to reimburse other companies, such
as an insurance company, if those companies have to complete our contractual
performance in a third party contract. Banks, on our behalf, issue letters of
credit guaranteeing payment to a third party. Letters of credit substitute the
bank's credit for ours and reduce credit risk for the third party beneficiary.

<Table>
<Caption>
                                                                              DECEMBER 31
                                                     -------------------------------------------------------------
                                                                         COMMITMENT EXPIRATION
                                                     -------------------------------------------------------------
                                                                                                          2009 AND
                                                     TOTAL    2004    2005     2006     2007     2008      BEYOND
                                                     -----    ----    ----     ----     ----     ----     --------
                                                                              IN MILLIONS
<S>                                                  <C>      <C>     <C>      <C>      <C>      <C>      <C>
COMMERCIAL COMMITMENTS
Off-balance sheet:
  Indemnities....................................     $ 8      $8     $ --     $ --     $ --     $ --      $  --
  Letters of credit..............................      10       5        5       --       --       --         --
</Table>

     DIVIDEND RESTRICTIONS: Under the provisions of our articles of
incorporation, at December 31, 2003, we had $373 million of unrestricted
retained earnings available to pay common dividends. However, covenants in our
debt facilities cap common stock dividend payments at $300 million in a calendar
year. Through December 31, 2003, we made the following common stock dividend
payments:

<Table>
<Caption>
                                                                IN MILLIONS
                                                                -----------
<S>                                                             <C>
January.....................................................       $ 78
May.........................................................         31
June........................................................         53
November....................................................         56
                                                                   ----
Total common stock dividends paid to CMS Energy.............       $218
                                                                   ====
</Table>

     As of December 18, 2003, we are also under an annual dividend cap of $190
million imposed by the MPSC during the current interim gas rate relief period.
Because all of the $218 million of common stock dividends to

                                      CE-18
<PAGE>

CMS Energy were paid prior to December 18, 2003, we were not out of compliance
with this new restriction for 2003. In February 2004, we paid a $78 million
common stock dividend.

     For additional details on the potential cap on common dividends payable
included in the MPSC Securitization order, see Note 2, Uncertainties, "Electric
Restructuring Matters -- Securitization." Also, for additional details on the
cap on common dividends payable during the current interim gas rate relief
period, see Note 2, Uncertainties, "Gas Rate Matters -- 2003 Gas Rate Case."

CAPITAL EXPENDITURES:

     We estimate the following capital expenditures, including new lease
commitments, by expenditure type and by business segments during 2004 through
2006. We prepare these estimates for planning purposes and may revise them.

<Table>
<Caption>
                                                                    YEARS ENDING
                                                                    DECEMBER 31
                                                                --------------------
                                                                2004    2005    2006
                                                                ----    ----    ----
                                                                    IN MILLIONS
<S>                                                             <C>     <C>     <C>
Construction................................................    $505    $541    $687
Nuclear fuel................................................      36      --      32
Other capital leases........................................       9      14      21
                                                                ----    ----    ----
                                                                $550    $555    $740
                                                                ====    ====    ====
Electric utility operations(a)(b)...........................    $395    $370    $570
Gas utility operations(a)...................................     155     185     170
                                                                ----    ----    ----
                                                                $550    $555    $740
                                                                ====    ====    ====
</Table>

- -------------------------
(a)  These amounts include a portion of our anticipated capital expenditures for
     plant and equipment attributable to both the electric and gas utility
     businesses.

(b)  These amounts include estimates for capital expenditures that may be
     required by revisions to the Clean Air Act's national air quality
     standards.

OUTLOOK

ELECTRIC BUSINESS OUTLOOK

     GROWTH: Over the next five years, we expect electric deliveries to grow at
an average rate of approximately two percent per year based primarily on a
steadily growing customer base and economy. This growth rate includes both full
service sales and delivery service to customers who choose to buy generation
service from an alternative electric supplier, but excludes transactions with
other wholesale market participants and other electric utilities. This growth
rate reflects a long-range expected trend of growth. Growth from year to year
may vary from this trend due to customer response to abnormal weather conditions
and changes in economic conditions, including utilization and expansion of
manufacturing facilities.

     For 2003, our electric deliveries, including delivery to customers who
chose to buy generation service from an alternative electric supplier, declined
1.4 percent from 2002. This was due to a combination of warmer than normal
summer weather in 2002, cooler than normal summer weather in 2003, and a decline
in manufacturing activity during 2003. In 2004, we project electric deliveries
to grow more than three percent. This short-term outlook for 2004 assumes higher
levels of manufacturing activity than in 2003 and normal weather conditions
throughout the year.

                                      CE-19
<PAGE>

ELECTRIC BUSINESS UNCERTAINTIES

     Several electric business trends or uncertainties may affect our financial
results and condition. These trends or uncertainties have, or we reasonably
expect could have, a material impact on revenues or income from continuing
electric operations. Such trends and uncertainties include:

     Environmental

     - increasing capital expenditures and operating expenses for Clean Air Act
       compliance, and

     - potential environmental liabilities arising from various environmental
       laws and regulations, including potential liability or expenses relating
       to the Michigan Natural Resources and Environmental Protection Acts and
       Superfund.

     Restructuring

     - response of the MPSC and Michigan legislature to electric industry
       restructuring issues,

     - ability to meet peak electric demand requirements at a reasonable cost,
       without market disruption,

     - ability to recover any of our net Stranded Costs under the regulatory
       policies being followed by the MPSC,

     - recovery of electric restructuring implementation costs,

     - effects of lost electric supply load to alternative electric suppliers,
       and

     - status as an electric transmission customer instead of an electric
       transmission owner-operator.

     Regulatory

     - effects of conclusions about the causes of the August 14, 2003 blackout,
       including exposure to liability, increased regulatory requirements, and
       new legislation,

     - successful implementation of initiatives to reduce exposure to purchased
       power price increases,

     - effects of potential performance standards payments, and

     - responses from regulators regarding the storage and ultimate disposal of
       spent nuclear fuel.

     Other

     - effects of commodity fuel prices such as natural gas and coal,

     - pending litigation filed by PURPA qualifying facilities,

     - potential rising pension costs due to market losses and lump sum
       payments. For additional details, see "Accounting for Pension and OPEB"
       section within this MD&A.

     - pending litigation and government investigations.

     For additional details about these trends or uncertainties, see Note 2,
Uncertainties.

     ELECTRIC ENVIRONMENTAL ESTIMATES: Our operations are subject to
environmental laws and regulations. Costs to operate our facilities in
compliance with these laws and regulations generally have been recovered in
customer rates.

     Compliance with the federal Clean Air Act and resulting regulations has
been, and will continue to be, a significant focus for us. The Title I
provisions of the Clean Air Act require significant reductions in nitrogen oxide
emissions. To comply with the regulations, we expect to incur capital
expenditures totaling $771 million. The key assumptions included in the capital
expenditure estimate include:

     - construction commodity prices, especially construction material and
       labor,

     - project completion schedules,

                                      CE-20
<PAGE>

     - cost escalation factor used to estimate future years' costs, and

     - allowance for funds used during construction (AFUDC) rate.

     Our current capital cost estimates include an escalation rate of 2.6
percent and an AFUDC capitalization rate of 8.1 percent. As of December 31,
2003, we have incurred $446 million in capital expenditures to comply with these
regulations and anticipate that the remaining $325 million of capital
expenditures will be made between 2004 and 2009. These expenditures include
installing catalytic reduction technology on coal-fired electric plants. In
addition to modifying the coal-fired electric plants, we expect to purchase
nitrogen oxide emissions credits for years 2004 through 2008. The cost of these
credits is estimated to average $8 million per year and is accounted for as
inventory.

     The EPA has alleged that some utilities have incorrectly classified plant
modifications as "routine maintenance" rather than seek modification permits
from the EPA. We have received and responded to information requests from the
EPA on this subject. We believe that we have properly interpreted the
requirements of "routine maintenance." If our interpretation is found to be
incorrect, we may be required to install additional pollution controls at some
or all of our coal-fired electric plants.

     Future clean air regulations requiring emission controls for sulfur
dioxide, nitrogen oxides, mercury, and nickel may require additional capital
expenditures. Total expenditures will depend upon the final makeup of the new
regulations.

     The EPA continues to make new rules. The EPA has proposed changes to the
rules that govern generating plant cooling water intake systems. The proposed
rules are scheduled to be final in the first quarter of 2004. We are studying
the proposed rules to determine the most cost-effective solutions for
compliance.

     For additional details on electric environmental matters, see Note 2,
Uncertainties, "Electric Contingencies -- Electric Environmental Matters."

     COMPETITION AND REGULATORY RESTRUCTURING: Michigan's Customer Choice Act
and other developments will continue to result in increased competition in the
electric business. Generally, increased competition reduces profitability and
threatens market share for generation services. As of January 1, 2002, the
Customer Choice Act allowed all of our electric customers to buy electric
generation service from us or from an alternative electric supplier. As a
result, alternative electric suppliers for generation services have entered our
market. As of March 2004, alternative electric suppliers are providing 735 MW of
generation supply to ROA customers. This amount represents nine percent of our
distribution load and an increase of 42 percent compared to March 2003. We
anticipate this upward trend to continue and expect over 1,000 MW of generation
supply to ROA customers in 2004. We cannot predict the total amount of electric
supply load that may be lost to competitor suppliers.

     In February 2004, the MPSC issued an order on Detroit Edison's request for
rate relief for costs associated with customers leaving under electric customer
choice. The MPSC order allows Detroit Edison to charge a transition surcharge of
approximately 0.4 cent per kWh to ROA customers and eliminates securitization
offsets of 0.7 cents per kWh for primary service customers and 0.9 cents per kWh
for secondary service customers. We are seeking similar recovery of Stranded
Costs due to ROA customers leaving our system and are encouraged by this ruling.
This ruling may change significantly the anticipated number of customers who
choose ROA.

     Securitization: In March 2003, we filed an application with the MPSC
seeking approval to issue Securitization bonds. In June 2003, the MPSC issued a
financing order authorizing the issuance of Securitization bonds in the amount
of approximately $554 million. In July 2003, we filed for rehearing and
clarification on a number of features in the financing order.

     In December 2003, the MPSC issued its order on rehearing, which rejected
our requests for clarification and modification to the dividend payment
restriction, failed to rule directly on the accounting clarifications requested,
and remanded the proceeding to the ALJ for additional proceedings to address
rate design. We filed testimony regarding the remanded proceeding in February
2004. The financing order will become effective after acceptance by us and
resolution of any appeals.

                                      CE-21
<PAGE>

     Stranded Costs: To the extent we experience net Stranded Costs as
determined by the MPSC, the Customer Choice Act allows us to recover such costs
by collecting a transition surcharge from customers who switch to an alternative
electric supplier. We cannot predict whether the Stranded Cost recovery method
adopted by the MPSC will be applied in a manner that will fully offset any
associated margin loss.

     In 2002 and 2001, the MPSC issued orders finding that we experienced zero
net Stranded Costs from 1999 to 2001. The MPSC also declined to resolve numerous
issues regarding the net Stranded Cost methodology in a way that would allow a
reliable prediction of the level of Stranded Costs for future years. We
currently are in the process of appealing these orders with the Michigan Court
of Appeals and the Michigan Supreme Court.

     In March 2003, we filed an application with the MPSC seeking approval of
net Stranded Costs incurred in 2002, and for approval of a net Stranded Cost
recovery charge. Our net Stranded Costs incurred in 2002 are estimated to be $38
million with the issuance of Securitization bonds that include Clean Air Act
investments, or $85 million without the issuance of Securitization bonds that
include Clean Air Act investments.

     Once the MPSC issues a final financing order on Securitization, we will
know the amount of our request for net Stranded Cost recovery for 2002. We
cannot predict how the MPSC will rule on our request for the recoverability of
Stranded Costs. Therefore, we have not recorded regulatory assets to recognize
the future recovery of such costs.

     Implementation Costs: Since 1997, we have incurred significant costs to
implement the Customer Choice Act. The Customer Choice Act allows electric
utilities to recover the Act's implementation costs. The MPSC has reviewed and
allowed certain of the implementation costs incurred through 2001, but has not
authorized recovery. Depending upon the outcome of the remanded Securitization
proceeding, a significant portion of the implementation costs could be recovered
through the Securitization process.

     Our application for $2 million of implementation costs in 2002 is currently
pending approval by the MPSC. We deferred these costs as a regulatory asset. In
addition to the implementation costs filed with the MPSC in 2003, we recorded an
additional $2 million for total implementation costs of $91 million. Included in
total implementation costs is $19 million associated with the cost of money. We
believe the implementation costs and the associated cost of money are fully
recoverable in accordance with the Customer Choice Act. Cash recovery from
customers is expected to begin after the rate cap period has expired. For
additional information on rate caps, see "Rate Caps" within this section. Once a
final financing order by the MPSC on Securitization is issued, the
recoverability of the implementation costs requested will be known. We cannot
predict the amounts the MPSC will approve as allowable costs. Also, we are
pursuing authorization at the FERC for MISO to reimburse us for approximately $8
million in certain electric utility restructuring implementation costs related
to our former participation in the development of the Alliance RTO, a portion of
which has been expensed. In May 2003, the FERC issued an order denying MISO's
request for authorization to reimburse us. We appealed the FERC ruling at the
United States Court of Appeals for the District of Columbia. In addition, we
continue to pursue other potential means of recovery with FERC. We cannot
predict the outcome of the appeal process or the ultimate amount, if any, the
FERC will allow us to collect for implementation costs.

     Rate Caps: The Customer Choice Act imposes certain limitations on electric
rates that could result in us being unable to collect our full cost of
conducting business from electric customers. Such limitations include:

     - a rate freeze effective through December 31, 2003, and

     - rate caps effective through December 31, 2004 for small commercial and
       industrial customers, and through December 31, 2005 for residential
       customers.

     As a result, we may be unable to maintain our profit margins in our
electric utility business during the rate cap periods. In particular, if we
needed to purchase power supply from wholesale suppliers while retail rates are
capped, the rate restrictions may make it impossible for us to fully recover
purchased power and associated transmission costs.

     PSCR: Prior to 1998, the PSCR process provided for the reconciliation of
actual power supply costs with power supply revenues. This process assured
recovery of all reasonable and prudent power supply costs actually incurred by
us, including the actual cost for fuel, and purchased and interchange power. In
1998, as part of the
                                      CE-22
<PAGE>

electric restructuring efforts, the MPSC suspended the PSCR process, effective
through 2001. As a result of the rate freeze imposed by the Customer Choice Act,
frozen rates remained in effect until December 31, 2003, and the PSCR process
remained suspended. Therefore, changes in power supply costs due to fluctuating
electricity prices were not reflected in rates charged to our customers during
the rate freeze period.

     As a result of meeting the transmission capability expansion requirements
and the market power test, we have met the requirements under the Customer
Choice Act to return to the PSCR process. For additional details see Note 2,
Uncertainties, "Electric Restructuring Matters -- Electric Restructuring
Legislation."

     Accordingly, in September 2003, we submitted a PSCR filing to the MPSC that
reinstates the PSCR process for customers whose rates are no longer frozen or
capped as of January 1, 2004. The proposed PSCR charge allows us to recover a
portion of our increased power supply costs from large commercial and industrial
customers, and subject to the overall rate cap, from other customers. We
estimate the recovery of increased power supply costs from large commercial and
industrial customers to be approximately $30 million in 2004. As allowed under
current regulation, we self-implemented the proposed PSCR charge on January 1,
2004. The revenues received from the PSCR charge are also subject to subsequent
reconciliation at the end of the year after actual costs have been reviewed for
reasonableness and prudence. We cannot predict the outcome of this filing.

     Decommissioning Surcharge: When our electric retail rates were frozen in
June 2000, a nuclear decommissioning surcharge related to the decommissioning of
Big Rock was included. We continued to collect the equivalent to the Big Rock
nuclear decommissioning surcharge consistent with the Customer Choice Act rate
freeze in effect through December 31, 2003. Collection of the surcharge stopped,
effective January 1, 2004, when the electric rate freeze expired. As a result,
our electric revenues will be reduced by $35 million in 2004. However, we expect
a portion of this reduction to be offset with increased electric revenues from
returning to the PSCR process.

     Industrial Contracts: We entered into multi-year electric supply contracts
with certain large industrial customers. The contracts provide electricity at
specially negotiated prices, usually at a discount from tariff prices. The MPSC
approved these special contracts totaling approximately 685 MW of load. Unless
terminated or restructured, the majority of these contracts are in effect
through 2005. As of December 31, 2003, contracts for 301 MW of load have
terminated. Of the contracts that have terminated, contracts for 64 MW have gone
to an alternative electric supplier and contracts for 237 MW have returned to
bundled tariff rates. In January 2004, new special contracts for 91 MW, with the
State of Michigan and three universities, were approved by the MPSC. Other new
special contracts for 101 MW received interim approval from the MPSC and are
awaiting final approval. All new special contracts end by January 1, 2006. We
cannot predict the ultimate financial impact of changes related to these power
supply contracts, or whether additional special contracts will be necessary or
advisable.

     Transmission Sale: In May 2002, we sold our electric transmission system
for $290 million to MTH. We are currently in arbitration with MTH regarding
property tax items used in establishing the selling price of our electric
transmission system. We cannot predict whether the remaining open items will
impact materially the sale proceeds previously recognized.

     There are multiple proceedings and a proposed rulemaking pending before the
FERC regarding transmission pricing mechanisms and standard market design for
electric bulk power markets and transmission. The results of these proceedings
and proposed rulemakings could significantly affect:

     - transmission cost trends,

     - delivered power costs to us, and

     - delivered power costs to our retail electric customers.

     The financial impact of such proceedings, rulemaking and trends are not
currently quantifiable. In addition, we are evaluating whether or not there may
be impacts on electric reliability associated with the outcomes of these various
transmission related proceedings.

                                      CE-23
<PAGE>

     August 14, 2003 Blackout: On August 14, 2003, the electric transmission
grid serving parts of the Midwest and the Northeast experienced a significant
disturbance that impacted electric service to millions of homes and businesses.
Approximately 100,000 of our 1.7 million electric customers were without power
for approximately 24 hours as a result of the disturbance. We incurred $1
million of immediate expense as a result of the blackout. We continue to
cooperate with investigations of the blackout by several federal and state
agencies. We cannot predict the outcome of these investigations.

     In November 2003, the MPSC released its report on the blackout. The MPSC
report found no evidence to suggest that the events in Michigan, or actions
taken by the Michigan utilities or transmission operators, were factors
contributing to the cause of the blackout. Also in November 2003, the United
States and Canadian power system outage taskforce preliminarily reported that
the primary cause of the blackout was due to transmission line contact with
trees in areas outside of Consumers' operating territory. In December 2003, the
MPSC issued an order requiring Consumers to report by April 1, 2004, the status
of lines used to serve our customers, including details of vegetation trimming
practices in calendar year 2003. Consumers intends to comply with the MPSC's
request.

     In February 2004, the Board of Trustees of NERC approved recommendations to
improve electric transmission reliability. The key recommendations are as
follows:

     - strengthen the NERC compliance enforcement program,

     - evaluate vegetation management procedures, and

     - improve technology to prevent or mitigate future blackouts.

     These recommendations require transmission operators, which Consumers is
not, to submit annual reports on vegetation management beginning March 2005 and
improve technology over various milestones throughout 2004. These
recommendations could result in increased transmission costs payable by
transmission customers in the future. The financial impacts of these
recommendations are not currently quantifiable.

     For additional details and material changes relating to the rate matters
and restructuring of the electric utility industry, see Note 2, Uncertainties,
"Electric Restructuring Matters," and "Electric Rate Matters."

     PERFORMANCE STANDARDS: Electric distribution performance standards
developed by the MPSC became effective in February 2004. The performance
standards establish standards related to restoration after an outage, safety,
and customer relations. Financial incentives and penalties are contained within
the performance standards. An incentive is possible if all of the established
performance standards have been exceeded for a calendar year. However, the value
of such incentive cannot be determined at this point as the performance
standards do not contain an approved incentive mechanism. Financial penalties in
the form of customer credits are also possible. These customer credits are based
on duration and repetition of outages. We cannot predict the likely effects of
the financial incentive or penalties, if any, on us.

GAS BUSINESS OUTLOOK

     GROWTH: Over the next five years, we expect gas deliveries to grow at an
average rate of less than one percent per year. Actual gas deliveries in future
periods may be affected by:

     - abnormal weather,

     - use by independent power producers,

     - competition in sales and delivery,

     - Michigan economic conditions,

     - gas consumption per customer, and

     - increases in gas commodity prices.

                                      CE-24
<PAGE>

GAS BUSINESS UNCERTAINTIES

     Several gas business trends or uncertainties may affect our financial
results and conditions. These trends or uncertainties could have a material
impact on net sales, revenues, or income from gas operations. The trends and
uncertainties include:

     Environmental

     - potential environmental cost at a number of sites, including sites
       formerly housing manufactured gas plant facilities.

     Regulatory

     - inadequate regulatory response to applications for requested rate
       increases,

     - potential adverse appliance service plan ruling or related legislation,
       and

     - response to increases in gas costs, including adverse regulatory response
       and reduced gas use by customers,

     Other

     - potential rising pension costs due to market losses and lump sum payments
       as discussed in the "Accounting for Pension and OPEB" section within this
       MD&A, and

     - pending litigation and government investigations.

     Consumers sells gas to retail customers under tariffs approved by the MPSC.
These tariffs measure the gas delivered to customers based on the volume (i.e.
mcf) of gas delivered. However, Consumers purchases gas for resale on a Btu
basis. The Btu content of the gas available for purchase has increased and may
result in customers using less gas for the same heating requirement. Consumers
fully recovers what it spends to purchase the gas through the approved GCR.
However, since the customer is using less gas on a volumetric basis, the revenue
from the distribution charge (the non-gas cost portion of the customer bill)
would be reduced. This could affect adversely Consumers' earnings from its gas
utility. The amount of the earnings loss in future periods cannot be estimated
at this time.

     In September 2002, the FERC issued an order rejecting our filing to assess
certain rates for non-physical gas title tracking services we offered. In
December 2003, the FERC ruled that no refunds were at issue and we reversed a $4
million reserve related to this matter. In January 2004, three companies filed
with FERC for clarification or rehearing of FERC's December 2003 order. We
cannot predict the outcome of this filing.

     GAS ENVIRONMENTAL ESTIMATES: We expect to incur investigation and remedial
action costs at a number of sites, including 23 former manufactured gas plant
sites. We expect our remaining remedial action costs to be between $37 million
and $90 million. Any significant change in assumptions, such as remediation
techniques, nature and extent of contamination, and legal and regulatory
requirements, could change the remedial action costs for the sites. For
additional details, see Note 2, Uncertainties, "Gas Contingencies -- Gas
Environmental Matters."

     GAS COST RECOVERY: The MPSC is required by law to allow us to charge
customers for our actual cost of purchased natural gas. The GCR process is
designed to allow us to recover all of our gas costs; however, the MPSC reviews
these costs for prudency in an annual reconciliation proceeding. In January
2004, the MPSC staff and intervenors filed direct testimony in our 2002-2003 GCR
case proposing GCR recovery disallowances. In February 2004, the parties in the
case reached a tentative settlement agreement that would result in a GCR
disallowance of $11 million for the GCR period plus $1 million accrued interest
through February 2004. A reserve was recorded in December 2003. For additional
details, see Note 2, Uncertainties, "Gas Rate Matters -- Gas Cost Recovery."

     2003 GAS RATE CASE: In March 2003, we filed an application with the MPSC
for a $156 million annual increase in our gas delivery and transportation rates
that included a 13.5 percent return on equity. In September 2003, we filed an
update to our gas rate case that lowered the requested revenue increase from

                                      CE-25
<PAGE>

$156 million to $139 million and reduced the return on common equity from 13.5
percent to 12.75 percent. The MPSC authorized an interim gas rate increase of
$19 million annually. The interim increase is under bond and subject to refund
if the final rate relief is a lesser amount. The interim increase order includes
a $34 million reduction in book depreciation expense and related income taxes
effective only during the period that we receive the interim relief. The MPSC
order allowed us to increase our rates beginning December 19, 2003. As part of
the interim rate order, we agreed to restrict dividend payments to our parent
company, CMS Energy, to a maximum of $190 million annually during the period
that we receive the interim relief. On March 5, 2004, the ALJ issued a Proposal
for Decision recommending that the MPSC not rely upon the projected test year
data included in our filing and supported by the MPSC Staff and further
recommended that the application be dismissed. The MPSC is not bound by these
recommendations and will consider the issues anew after receipt of exceptions
and replies to the exception filed by the parties in response to the Proposal
for Decision.

     2001 GAS DEPRECIATION CASE: In December 2003, we filed an update to our gas
utility plant depreciation case originally filed in June 2001. This case is
independent of the 2003 gas rate case. The original filing was based on December
2000 plant balances and historical data. The December 2003 filing updates the
gas depreciation case to include December 2002 plant balances. The proposed
depreciation rates, if approved, will result in an annual increase of $12
million in depreciation expense.

OTHER OUTLOOK

     CODE OF CONDUCT: In December 2000, the MPSC issued a new code of conduct
that applies to utilities and alternative electric suppliers. The code of
conduct seeks to prevent financial support, information sharing, and
preferential treatment between a utility's regulated and non-regulated services.
The new code of conduct is broadly written and could affect our:

     - retail gas business energy related services,

     - retail electric business energy related services,

     - marketing of non-regulated services and equipment to Michigan customers,
       and

     - transfer pricing between our departments and affiliates.

     We appealed the MPSC orders related to the code of conduct and sought a
deferral of the orders until the appeal was complete. We also sought waivers
available under the code of conduct to continue utility activities that provide
approximately $50 million in annual electric and gas revenues. In October 2002,
the MPSC denied waivers for three programs including the appliance service plan
offered by us, which generated $34 million in gas revenue in 2003. In March
2004, the Michigan Court of Appeals upheld the MPSC's implementation of the code
of conduct without modification. We are in the process of filing an application
for leave to appeal with the Michigan Supreme Court, but we cannot predict
whether the Michigan Supreme Court will accept the case or the outcome of any
appeal.

     The Michigan House of Representatives is scheduled to review the proposed
legislation in 2004 that would allow us to remain in the appliance service
business. In the interim, the legislature passed a bill to extend to July 1,
2004, the deadline for exiting this business. The full impact of the new code of
conduct on our business will remain uncertain until the final judicial
resolution of our appeal or the Michigan legislature enacts clarifying
legislation.

     LITIGATION AND REGULATORY INVESTIGATIONS: CMS Energy is the subject of
various investigations as a result of round-trip trading transactions by CMS
MST, including investigations by the United States Department of Justice and the
SEC. Additionally, CMS Energy and Consumers are parties to various litigation
including a shareholder derivative lawsuit, a securities class action lawsuit,
and a class action lawsuit alleging ERISA violations. For additional details
regarding these investigations and litigation, see Note 2, Uncertainties.

                                      CE-26
<PAGE>

OTHER MATTERS

     2001 GAS RATE CASE: In June 2001, we filed an application with the MPSC for
a distribution service rate increase. In November 2002, the MPSC approved a $56
million annual distribution service rate increase, with an 11.4 percent
authorized return on equity.

NEW ACCOUNTING STANDARDS

     See Note 13, Implementation of New Accounting Standards, for discussion of
new standards.

     FASB INTERPRETATION NO. 46, CONSOLIDATION OF VARIABLE INTEREST
ENTITIES: FASB issued this interpretation in January 2003. The objective of the
Interpretation is to assist in determining when one party controls another
entity in circumstances where a controlling financial interest cannot be
properly identified based on voting interests. Entities with this characteristic
are considered variable interest entities. The Interpretation requires the party
with the controlling financial interest to consolidate the entity.

     On December 24, 2003, the FASB issued Revised FASB Interpretation No. 46.
For entities that have not previously adopted FASB Interpretation No. 46,
Revised FASB Interpretation No. 46 provides an implementation deferral until the
first quarter of 2004. Revised FASB Interpretation No. 46 is effective for the
first quarter of 2004 for all entities other than special purpose entities.
Special purpose entities must apply either FASB Interpretation No. 46 or Revised
FASB Interpretation No. 46 for the first reporting period that ends after
December 15, 2003.

     As of December 31, 2003, we have completed our analysis for and have
adopted Revised FASB Interpretation No. 46 for all entities other than the MCV
Partnership and FMLP. We continue to evaluate and gather information regarding
those entities. We will adopt the provisions of Revised FASB Interpretation No.
46 for the MCV Partnership and FMLP in the first quarter of 2004.

     If our completed analysis shows we have the controlling financial interest
in the MCV Partnership and FMLP, we would consolidate their assets, liabilities,
and activities, including $700 million of non-recourse debt, into our financial
statements. Financial covenants under our financing agreements could be impacted
negatively after such a consolidation. As a result, it may become necessary to
seek amendments to the relevant financing agreements to modify the terms of
certain of these covenants to remove the effect of this consolidation, or to
refinance the relevant debt. As of December 31, 2003, our investment in the MCV
Partnership was $419 million and our investment in the FMLP was $224 million.

     We also determined that we do not hold the controlling financial interest
in our trust preferred security structures. Accordingly, those entities have
been deconsolidated as of December 31, 2003. Company obligated Trust Preferred
Securities totaling $490 million that were previously included in mezzanine
equity, have been eliminated due to deconsolidation. As a result of the
deconsolidation, we have reflected $506 million of long-term debt -- related
parties and have reflected an investment in related parties of $16 million.

     We are not required to, and have not, restated prior periods for the impact
of this accounting change.

     STATEMENT OF POSITION, ACCOUNTING FOR CERTAIN COSTS AND ACTIVITIES RELATED
TO PROPERTY, PLANT, AND EQUIPMENT:  At its September 9, 2003 meeting, the
Accounting Standards Executive Committee, of the American Institute of Certified
Public Accountants voted to approve the Statement of Position, Accounting for
Certain Costs and Activities Related to Property, Plant, and Equipment. The
Statement of Position is expected to be presented for FASB clearance in 2004 and
would be applicable for fiscal years beginning after December 15, 2004. An asset
classified as property, plant, and equipment often comprises multiple parts and
costs. A component accounting policy determines the level at which those parts
are recorded. Capitalization of certain costs related to property, plant, and
equipment are included in the total cost. The Statement of Position could impact
our component and capitalization accounting for property, plant, and equipment.
We continue to evaluate the impact, if any, this Statement of Position will have
upon adoption.

                                      CE-27
<PAGE>

                      (This page intentionally left blank)

                                      CE-28
<PAGE>

                            CONSUMERS ENERGY COMPANY
                       CONSOLIDATED STATEMENTS OF INCOME

<Table>
<Caption>
                                                                 YEARS ENDED DECEMBER 31
                                                                --------------------------
                                                                 2003      2002      2001
                                                                 ----      ----      ----
                                                                       IN MILLIONS
<S>                                                             <C>       <C>       <C>
OPERATING REVENUE...........................................    $4,435    $4,169    $3,976
EARNINGS FROM EQUITY METHOD INVESTEES.......................        42        53        38
OPERATING EXPENSES
  Fuel for electric generation..............................       320       320       330
  Purchased power -- related parties........................       519       564       559
  Purchased and interchange power...........................       310       296       460
  Cost of gas sold..........................................     1,221       831       707
  Cost of gas sold -- related parties.......................        28       131       123
  Other.....................................................       739       660       625
                                                                ------    ------    ------
                                                                 3,137     2,802     2,804
  Maintenance...............................................       199       190       203
  Depreciation..............................................       316       300       309
  Amortization..............................................        61        48        30
  General taxes.............................................       181       193       187
                                                                ------    ------    ------
                                                                 3,894     3,533     3,533
                                                                ------    ------    ------
OPERATING INCOME (LOSS).....................................       583       689       481
OTHER INCOME (DEDUCTIONS)
  Dividends and interest from affiliates....................         2         3         6
  Accretion expense.........................................        (7)       (6)      (11)
  Other, net................................................        --        25         6
                                                                ------    ------    ------
                                                                    (5)       22         1
                                                                ------    ------    ------
INTEREST CHARGES
  Interest on long-term debt................................       196       153       151
  Interest on long-term debt -- related parties.............        45        --        --
  Other interest............................................        13        27        41
  Capitalized interest......................................        (9)      (12)       (6)
                                                                ------    ------    ------
                                                                   245       168       186
                                                                ------    ------    ------
INCOME BEFORE INCOME TAXES..................................       333       543       296
INCOME TAXES................................................       137       180        97
                                                                ------    ------    ------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
  PRINCIPLE.................................................       196       363       199
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING FOR DERIVATIVE
  INSTRUMENTS, NET OF $10 TAX IN 2002 (NOTE 11) AND $6 TAX
  BENEFIT IN 2001 (NOTE 4)..................................        --        18       (11)
                                                                ------    ------    ------
NET INCOME..................................................       196       381       188
PREFERRED STOCK DIVIDENDS...................................         2         2         2
PREFERRED SECURITIES DISTRIBUTIONS..........................        --        44        41
                                                                ------    ------    ------
NET INCOME AVAILABLE TO COMMON STOCKHOLDER..................    $  194    $  335    $  145
                                                                ======    ======    ======
</Table>

        The accompanying notes are an integral part of these statements.

                                      CE-29
<PAGE>

                            CONSUMERS ENERGY COMPANY

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                  YEARS ENDED DECEMBER 31
                                                                ----------------------------
                                                                 2003       2002       2001
                                                                 ----       ----       ----
                                                                        IN MILLIONS
<S>                                                             <C>         <C>        <C>
CASH FLOWS FROM OPERATING ACTIVITIES
  Net income................................................    $  196      $ 381      $ 188
     Adjustments to reconcile net income to net cash
      provided by operating activities
       Depreciation, depletion and amortization (includes
        nuclear decommissioning of $6, $6, and $6,
        respectively).......................................       377        348        339
       Deferred income taxes and investment tax credit......       195        277        136
       Capital lease and other amortization.................        28         15         20
       Gain on sale of METC and other assets................        (1)       (38)        --
       Loss on CMS Energy stock.............................        12         12         --
       Cumulative effect of change in accounting............        --        (18)        11
       Distributions from related parties in excess of (less
        than) earnings (net of dividends, $45, $15, and $8,
        respectively).......................................         3        (38)       (30)
       Pension contribution.................................      (501)       (47)       (49)
       Changes in assets and liabilities:
          Decrease (increase) in accounts receivable and
            accrued revenue.................................       (12)       (98)       149
          Increase (decrease) in accounts payable...........       (61)       (39)        53
          Decrease (increase) in inventories................      (256)        90       (307)
          Changes in other assets and liabilities...........        25        (85)         8
                                                                ------      -----      -----
            Net cash provided by operating activities.......         5        760        518
                                                                ------      -----      -----
CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures (excludes assets placed under capital
     lease).................................................      (486)      (559)      (745)
  Cost to retire property...................................       (72)       (66)      (118)
  Restricted cash on hand(a)................................        --        (14)        (4)
  Investments in Electric Restructuring Implementation
     Plan...................................................        (8)        (8)       (13)
  Investments in nuclear decommissioning trust funds........        (6)        (6)        (6)
  Associated company preferred stock redemption.............        --         --         50
  Proceeds from nuclear decommissioning trust funds.........        34         30         29
  Cash proceeds from sale of assets.........................        10        298         --
                                                                ------      -----      -----
     Net cash used in investing activities..................      (528)      (325)      (807)
                                                                ------      -----      -----
CASH FLOWS FROM FINANCING ACTIVITIES
  Proceeds from issuance of long term debt..................     1,603        601        355
  Retirement of long-term debt..............................      (788)      (574)      (401)
  Payment of common stock dividends.........................      (218)      (231)      (190)
  Preferred securities distributions........................        --        (44)       (41)
  Redemption of preferred securities........................        --        (30)        --
  Payment of capital lease obligations......................       (13)       (15)       (20)
  Contribution from (return of equity to) stockholder,
     net....................................................        --         50        (14)
  Payment of preferred stock dividends......................        (2)        (2)        (1)
  Increase (decrease) in notes payable, net.................      (257)        41         13
  Proceeds from preferred securities........................        --         --        121
  Proceeds from securitization bonds........................        --         --        459
                                                                ------      -----      -----
     Net cash provided by (used in) financing activities....       325       (204)       281
                                                                ------      -----      -----
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........      (198)       231         (8)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD..............       244         13         21
                                                                ------      -----      -----
CASH AND CASH EQUIVALENTS, END OF PERIOD(A).................    $   46      $ 244      $  13
                                                                ======      =====      =====
</Table>

                                      CE-30
<PAGE>

<Table>
<Caption>
                                                                  YEARS ENDED DECEMBER 31
                                                                ----------------------------
                                                                 2003       2002       2001
                                                                 ----       ----       ----
                                                                        IN MILLIONS
<S>                                                             <C>         <C>        <C>
OTHER CASH FLOW ACTIVITIES AND NON-CASH INVESTING AND
  FINANCING ACTIVITIES WERE:
CASH TRANSACTIONS
  Interest paid (net of amounts capitalized)................    $  227      $ 147      $ 169
  Income taxes paid (net of refunds, $91, $205, and $53,
     respectively)..........................................       (56)       (78)         3
  OPEB cash contribution....................................        71         73         47
NON-CASH TRANSACTIONS
  Nuclear fuel placed under capital leases..................    $   --      $  --      $  13
  Other assets placed under capital lease...................        19         62         37
</Table>

- -------------------------
(a)  Cash and Cash Equivalents decreased $18 million for 2002 and $4 million for
     2001 due to reflecting restricted cash as an investing activity rather than
     classifying as a cash equivalent.

        The accompanying notes are an integral part of these statements.

                                      CE-31
<PAGE>

                            CONSUMERS ENERGY COMPANY
                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                   DECEMBER 31
                                                                   -----------
                                                                 2003       2002
                                                                 ----       ----
                                                                   IN MILLIONS
<S>                                                             <C>        <C>
ASSETS
PLANT AND PROPERTY (AT COST)
  Electric..................................................    $ 7,600    $ 7,523
  Gas.......................................................      2,875      2,719
  Other.....................................................         15         23
                                                                -------    -------
                                                                 10,490     10,265
  Less accumulated depreciation, depletion, and amortization
     (Note 12)..............................................      4,417      4,993
                                                                -------    -------
                                                                  6,073      5,272
  Construction work-in-progress.............................        375        548
                                                                -------    -------
                                                                  6,448      5,820
                                                                -------    -------
INVESTMENTS
  Stock of affiliates.......................................         20         22
  First Midland Limited Partnership.........................        224        255
  Midland Cogeneration Venture Limited Partnership..........        419        388
  Other.....................................................         18          2
                                                                -------    -------
                                                                    681        667
                                                                -------    -------
CURRENT ASSETS
  Cash and cash equivalents at cost, which approximates
     market.................................................         46        244
  Restricted cash...........................................         18         18
  Accounts receivable, notes receivable and accrued revenue,
     less allowances of $8 in 2003 and $5 in 2002...........        257        236
  Accounts receivable -- related parties....................          4         13
  Inventories at average cost
     Gas in underground storage.............................        739        486
     Materials and supplies.................................         70         71
     Generating plant fuel stock............................         41         37
  Deferred property taxes...................................        143        142
  Regulatory assets -- postretirement benefits..............         19         19
  Other.....................................................         80         38
                                                                -------    -------
                                                                  1,417      1,304
                                                                -------    -------
NON-CURRENT ASSETS
  Regulatory Assets
     Securitized costs......................................        648        689
     Postretirement benefits................................        162        185
     Abandoned Midland project..............................         10         11
     Other..................................................        266        168
  Nuclear decommissioning trust funds.......................        575        536
  Prepaid pension costs.....................................        364         --
  Other.....................................................        174        218
                                                                -------    -------
                                                                  2,199      1,807
                                                                -------    -------
TOTAL ASSETS................................................    $10,745    $ 9,598
                                                                =======    =======
</Table>

                                      CE-32
<PAGE>

<Table>
<Caption>
                                                                   DECEMBER 31
                                                                -----------------
                                                                 2003       2002
                                                                 ----       ----
                                                                   IN MILLIONS
<S>                                                             <C>        <C>
STOCKHOLDER'S INVESTMENT AND LIABILITIES
CAPITALIZATION
  Common stockholder's equity
     Common stock, authorized 125.0 shares; outstanding 84.1
      shares for all periods................................    $   841    $  841
     Paid-in capital........................................        682       682
     Accumulated other comprehensive income (loss)..........         17      (179)
     Retained earnings since December 31, 1992..............        521       545
                                                                -------    ------
                                                                  2,061     1,889
  Preferred stock (Note 3)..................................         44        44
  Company-obligated mandatorily redeemable Trust Preferred
     Securities of subsidiaries (Note 3)....................         --       490
  Long-term debt............................................      3,583     2,442
  Long-term debt -- related parties (Note 3)................        506        --
  Non-current portion of capital leases.....................         58       116
                                                                -------    ------
                                                                  6,252     4,981
                                                                -------    ------
CURRENT LIABILITIES
  Current portion of long-term debt and capital leases......         38       318
  Notes payable.............................................         --       457
  Note payable -- related parties...........................        200        --
  Accounts payable..........................................        200       252
  Accrued taxes.............................................        209       214
  Accounts payable -- related parties.......................         75        84
  Current portion of purchase power contracts...............         27        26
  Deferred income taxes.....................................         33        25
  Other.....................................................        185       200
                                                                -------    ------
                                                                    967     1,576
                                                                -------    ------
NON-CURRENT LIABILITIES
  Deferred income taxes.....................................      1,233       949
  Regulatory liabilities for cost of removal (Note 12)......        983       907
  Postretirement benefits...................................        190       563
  Regulatory liabilities for income taxes, net..............        312       297
  Asset retirement obligations..............................        358        --
  Other regulatory liabilities..............................        172         4
  Power purchase agreement -- MCV Partnership...............         --        27
  Deferred investment tax credit............................         85        91
  Other.....................................................        193       203
                                                                -------    ------
                                                                  3,526     3,041
                                                                -------    ------
  Commitments and Contingencies (Notes 1, 2, 5, 7, 8, and
     11)
TOTAL STOCKHOLDER'S INVESTMENT AND LIABILITIES..............    $10,745    $9,598
                                                                =======    ======
</Table>

        The accompanying notes are an integral part of these statements.

                                      CE-33
<PAGE>

                            CONSUMERS ENERGY COMPANY
             CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDER'S EQUITY

<Table>
<Caption>
                                                                 YEARS ENDED DECEMBER 31
                                                                --------------------------
                                                                 2003      2002      2001
                                                                 ----      ----      ----
                                                                       IN MILLIONS
<S>                                                             <C>       <C>       <C>
COMMON STOCK
  At beginning and end of period (a)........................    $  841    $  841    $  841
OTHER PAID-IN CAPITAL
  At beginning of period....................................       682       632       646
  Stockholder's contribution................................        --       150       150
  Return of stockholder's contribution......................        --      (100)     (164)
                                                                ------    ------    ------
  At end of period..........................................       682       682       632
                                                                ------    ------    ------
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
  Minimum Pension Liability
     At beginning of period.................................      (185)       --        --
     Minimum pension liability adjustments (b)..............       185      (185)       --
                                                                ------    ------    ------
       At end of period.....................................        --      (185)       --
                                                                ------    ------    ------
  Investments
     At beginning of period.................................         1        16        33
     Unrealized gain (loss) on investments (b)..............         8       (16)      (16)
     Reclassification adjustments included in net income
      (b)...................................................        --         1        (1)
                                                                ------    ------    ------
       At end of period.....................................         9         1        16
                                                                ------    ------    ------
  Derivative Instruments
     At beginning of period (c).............................         5       (12)       18
     Unrealized gain (loss) on derivative instruments (b)...        13        10       (30)
     Reclassification adjustments included in net income
      (b)...................................................       (10)        7        --
                                                                ------    ------    ------
       At end of period.....................................         8         5       (12)
                                                                ------    ------    ------
Total Accumulated Other Comprehensive Income (Loss).........        17      (179)        4
                                                                ------    ------    ------
RETAINED EARNINGS
  At beginning of period....................................       545       441       486
  Net income (b)............................................       196       381       188
  Cash dividends declared -- Common Stock...................      (218)     (231)     (190)
  Cash dividends declared -- Preferred Stock................        (2)       (2)       (2)
  Preferred securities distributions........................        --       (44)      (41)
                                                                ------    ------    ------
  At end of period..........................................       521       545       441
                                                                ------    ------    ------
TOTAL COMMON STOCKHOLDER'S EQUITY...........................    $2,061    $1,889    $1,918
                                                                ======    ======    ======
</Table>

- -------------------------
(a)  Number of shares of common stock outstanding was 84,108,789 for all periods
     presented.

                                      CE-34
<PAGE>

(b)  Disclosure of Comprehensive Income:
     Other comprehensive income (loss)

<Table>
<Caption>
                                                                2003    2002     2001
                                                                ----    ----     ----
                                                                     IN MILLIONS
<S>                                                             <C>     <C>      <C>
Minimum pension liability adjustments, net of tax (tax
  benefit) of $100, $(100), and $--, respectively...........    $185    $(185)     --
Investments
  Unrealized loss on investments, net of tax (tax benefit)
     of $4, $(9), and $(9), respectively....................       8      (16)    (16)
  Reclassification adjustments included in net income, net
     of tax (tax benefit) of $--, $1, and $(1),
     respectively...........................................      --        1      (1)
Derivative Instruments
  Unrealized gain (loss) on derivative instruments, net of
     tax (tax benefit) of $7, $6, and $(15), respectively...      13       10     (30)
  Reclassification adjustments included in net income, net
     of tax (tax benefit) of $(5), $4, and $--,
     respectively...........................................     (10)       7      --
Net income..................................................     196      381     188
                                                                ----    -----    ----
Total Comprehensive Income..................................    $392    $ 198    $141
                                                                ====    =====    ====
</Table>

(c)  Cumulative effect of change in accounting principle, as of 1/1/01 and
     7/1/01, net of tax of $9 (Note 4).

        The accompanying notes are an integral part of these statements.
                                      CE-35
<PAGE>

                            CONSUMERS ENERGY COMPANY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1: CORPORATE STRUCTURE AND ACCOUNTING POLICIES

     CORPORATE STRUCTURE: Consumers is a subsidiary of CMS Energy, a holding
company. We are an electric and gas utility company that provides service to
customers in Michigan's Lower Peninsula. Our customers include a mix of
residential, commercial, and diversified industrial customers. The largest
customer segment is the automotive industry.

     PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
Consumers, and all other entities in which we have a controlling financial
interest, in accordance with Revised FASB Interpretation No. 46. Intercompany
transactions and balances have been eliminated. We use the equity method of
accounting for investments in companies and partnerships that are not
consolidated where we have significant influence over operations and financial
policies, but not a controlling financial interest.

     USE OF ESTIMATES: We prepare our financial statements in conformity with
accounting principles generally accepted in the United States. We are required
to make estimates using assumptions that may affect the reported amounts and
disclosures. Actual results could differ from those estimates.

     We are required to record estimated liabilities in the financial statements
when it is probable that a loss will be incurred in the future as a result of a
current event, and when the amount can be reasonably estimated. We have used
this accounting principle to record estimated liabilities as discussed in Note
2, Uncertainties.

     REVENUE RECOGNITION POLICY: Revenues from deliveries of electricity and
natural gas, and the storage of natural gas are recognized when services are
provided. Sales taxes are recorded as liabilities and are not included in
revenues.

     CASH EQUIVALENTS AND RESTRICTED CASH: All highly liquid investments with an
original maturity of three months or less are considered cash equivalents. At
December 31, 2003, our restricted cash on hand was $18 million. Restricted cash
primarily consists of cash dedicated for repayment of securitization bonds. It
is classified as a current asset as the payments on the related securitization
bonds occur within one year.

     COAL INVENTORY: We use the weighted average cost method for valuing coal
inventory.

     FINANCIAL INSTRUMENTS: We account for investments in debt and equity
securities in accordance with SFAS No. 115. Debt and equity securities can be
classified into one of three categories: held-to-maturity, trading, or
available-for-sale. Our investments in equity securities, including our
investment in CMS Energy Common Stock, are classified as available-for-sale.
They are reported at fair value, with any unrealized gains or losses resulting
from changes in fair value reported in equity as part of accumulated other
comprehensive income and are excluded from earnings unless such changes in fair
value are determined to be other than temporary. Unrealized gains or losses from
changes in the fair value of our nuclear decommissioning investments are
reported as regulatory liabilities. The fair value of these investments is
determined from quoted market prices. For additional details regarding financial
instruments, see Note 4, Financial and Derivative Instruments, "Financial
Instruments."

     GAS INVENTORY: We use the weighted average cost method for valuing working
gas and recoverable cushion gas in underground storage facilities.

     IMPAIRMENT OF INVESTMENTS AND LONG-LIVED ASSETS: We evaluate the potential
impairment of our investments in projects and other long-lived assets, other
than goodwill, based on various analyses, including the projection of
undiscounted cash flows, whenever events or changes in circumstances indicate
that the carrying amount of the assets may not be recoverable. If the carrying
amount of the investment or asset exceeds the amount of the expected future
undiscounted cash flows, an impairment loss is recognized, and the investment or
asset is written down to its estimated fair value.

     MAINTENANCE AND DEPRECIATION: We charge property repairs and minor property
replacements to maintenance expense. We also charge planned major maintenance
activities to operating expense unless the cost
                                      CE-36
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

represents the acquisition of additional components or the replacement of an
existing component. We capitalize the cost of plant additions and replacements.
We depreciate utility property on straight-line and units-of-production rates
approved by the MPSC. The composite depreciation rates for our properties are:

<Table>
<Caption>
                                                                     YEARS ENDED
                                                                     DECEMBER 31
                                                                ---------------------
                                                                2003    2002    2001
                                                                ----    ----    ----
<S>                                                             <C>     <C>     <C>
Electric utility property...................................    3.1%    3.1%     3.1%
Gas utility property........................................    4.6%    4.5%     4.4%
Other property..............................................    8.1%    7.2%    11.2%
</Table>

     NUCLEAR FUEL COST: We amortize nuclear fuel cost to fuel expense based on
the quantity of heat produced for electric generation. For nuclear fuel used
after April 6, 1983, we charge disposal costs to nuclear fuel expense, recover
these costs through electric rates, and remit them to the DOE quarterly. We
elected to defer payment for disposal of spent nuclear fuel burned before April
7, 1983. As of December 31, 2003, we have recorded a liability to the DOE for
$139 million, including interest, which is payable upon the first delivery of
spent nuclear fuel to the DOE. The amount of this liability, excluding a portion
of interest, was recovered through electric rates. For additional details on
disposal of spent nuclear fuel, see Note 2, Uncertainties, "Other Electric
Uncertainties -- Nuclear Matters."

     NUCLEAR PLANT DECOMMISSIONING: Our site-specific decommissioning cost
estimates for Big Rock and Palisades assume that each plant site will eventually
be restored to conform to the adjacent landscape and all contaminated equipment
will be disassembled and disposed of in a licensed burial facility.

     Trust Funds: MPSC orders, received in March 1999 for Big Rock and December
1999 for Palisades, provided for fully funding the decommissioning trust funds
for both sites. The December 1999 order set the annual decommissioning surcharge
for Palisades at $6 million. In 2003, we collected $6 million from our electric
customers for the decommissioning of our Palisades nuclear plant. Amounts
collected from electric retail customers and deposited in trusts, including
trust earnings, are credited to a regulatory liability.

     In December 2000, we stopped depositing funds in the Big Rock trust fund
based on its funding status at that time. However, the current level of funds
provided by the trust may not be adequate to fully fund the decommissioning of
Big Rock. This is due in part to the DOE's failure to accept spent nuclear fuel
and lower returns on the trust fund. We are attempting to recover our additional
costs for storing spent nuclear fuel through litigation, as discussed in Note 2,
Uncertainties, "Other Electric Uncertainties -- Nuclear Matters." To the extent
the funds are not sufficient, we would seek additional relief from the MPSC. We
can make no assurance that the MPSC would grant this request.

     In March 2001, we filed with the MPSC a "Report on the Adequacy of the
Existing Provision for Nuclear Plant Decommissioning" for each plant reflecting
decommissioning cost estimates of $349 million for Big Rock, excluding spent
nuclear fuel storage costs, and $739 million for Palisades, in 2000 dollars. We
are required to file the next such reports with the MPSC by March 31, 2004 for
Big Rock and Palisades and are in the process of preparing updated cost
estimates.

                                      CE-37
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Big Rock: In 1997, Big Rock closed permanently and plant decommissioning
began. We estimate that the Big Rock site will be returned to a natural state by
the end of 2012 if the DOE begins removing the spent nuclear fuel by 2010. The
following table shows our Big Rock decommissioning activities:

<Table>
<Caption>
                                                                  YEAR-TO-DATE       ACCUMULATIVE
                                                                DECEMBER 31, 2003    TOTAL-TO-DATE
                                                                -----------------    -------------
                                                                           IN MILLIONS
<S>                                                             <C>                  <C>
Decommissioning expenditures................................           $45               $263
Withdrawals from trust funds................................            34                243
</Table>

     These activities had no material impact on net income. At December 31,
2003, we have an investment in nuclear decommissioning trust funds of $88
million for Big Rock. In addition, at December 31, 2003, we have charged $7
million to our FERC jurisdictional depreciation reserve for the decommissioning
of Big Rock.

     Palisades: In December 2000, the NRC extended the Palisades operating
license to March 2011 and the impact of this extension was included as part of
our March 2001 filing with the MPSC.

     At December 31, 2003, we have an investment in the MPSC nuclear
decommissioning trust funds of $477 million for Palisades. In addition, at
December 31, 2003, we have a FERC decommissioning trust fund with a balance of
$10 million. For additional details on decommissioning costs accounted for as
asset retirement obligations, see Note 12, Asset Retirement Obligations.

     PROPERTY, PLANT, AND EQUIPMENT: We record property, plant, and equipment at
original cost when placed into service. When regulated assets are retired, or
otherwise disposed of in the ordinary course of business, the original cost is
charged to accumulated depreciation and cost of removal, less salvage is
recorded as a regulatory liability. For additional details, see Note 12, Asset
Retirement Obligation. An allowance for funds used during construction is
capitalized on regulated construction projects. With respect to the retirement
or disposal of non-regulated assets, the resulting gains or losses are
recognized in income.

                                      CE-38
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Property, plant, and equipment at December 31, 2003 and 2002, was as
follows:

<Table>
<Caption>
                                                                      YEARS ENDED DECEMBER 31
                                                                ------------------------------------
                                                                   ESTIMATED
                                                                  DEPRECIABLE
                                                                LIFE IN YEARS(E)     2003      2002
                                                                ----------------     ----      ----
                                                                            IN MILLIONS
<S>                                                             <C>                 <C>       <C>
Electric:
  Generation................................................         13-75          $3,332    $3,489
  Distribution..............................................         12-85           3,799     3,619
  Other.....................................................          5-50             388       300
  Capital leases(a).........................................                            81       115
Gas:
  Underground storage facilities(b).........................         30-75             232       217
  Transmission..............................................         15-75             342       310
  Distribution..............................................         35-75           1,976     1,899
  Other.....................................................          5-48             300       237
  Capital leases(a).........................................                            25        56
Other:
  Non-utility property......................................          7-71              15        23
  Construction work-in-progress(c)..........................                           375       548
Less accumulated depreciation, depletion, and
  amortization..............................................                         4,417     4,993
                                                                                    ------    ------
Net property, plant, and equipment(d).......................                        $6,448    $5,820
                                                                                    ======    ======
</Table>

- -------------------------
(a)  Capital leases presented in this table are gross amounts. Amortization of
     capital leases was $38 million in 2003 and $96 million in 2002.

(b)  Includes unrecoverable base natural gas in underground storage of $23
     million at December 31, 2003 and $23 million at December 31, 2002, which is
     not subject to depreciation.

(c)  Included in construction costs at December 31, 2002 was $54 million,
     relating to the capital lease of our main headquarters. We purchased the
     main headquarters in November 2003.

(d)  Included in net property, plant and equipment are intangible assets
     primarily related to software development costs, consents, and rights of
     way. The estimated amortization life for software development costs is
     seven years and other intangible amortization lives range from 50 to 75
     years. Intangible assets at December 31, 2003 and 2002, were as follows:

<Table>
<Caption>
                                                                YEARS ENDED
                                                                DECEMBER 31
                                                                ------------
                                                                2003    2002
                                                                ----    ----
                                                                IN MILLIONS
<S>                                                             <C>     <C>
Intangible assets at cost...................................    $336    $304
Less accumulated amortization...............................     184     167
                                                                ----    ----
Net intangible assets.......................................    $152    $137
                                                                ====    ====
</Table>

                                      CE-39
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     (e)  The following table illustrates the depreciable life for electric and
          gas structures and improvements.

<Table>
<Caption>
                                        ESTIMATED                                             ESTIMATED
                                       DEPRECIABLE                                           DEPRECIABLE
ELECTRIC                              LIFE IN YEARS   GAS                                   LIFE IN YEARS
- --------                              -------------   ---                                   -------------
<S>                                   <C>             <C>                                   <C>
Generation:
  Coal............................      39-43         Underground storage facilities           45
  Nuclear.........................       25           Transmission                             60
  Hydroelectric...................      55-71         Distribution                             60
  Other...........................       32           Other                                   42-48
Distribution......................      50-60
Other.............................      40-42
</Table>

     RECLASSIFICATIONS: Certain prior year amounts have been reclassified for
comparative purposes. These reclassifications did not affect consolidated net
income for the years presented.

     RELATED PARTY TRANSACTIONS: We received income from related parties as
follows:

<Table>
<Caption>
                    TYPE OF INCOME                             RELATED PARTY         2003    2002    2001
                    --------------                             -------------         ----    ----    ----
                                                                                         IN MILLIONS
<S>                                                        <C>                       <C>     <C>     <C>
Gas sales, storage, transportation and other
  services.............................................    MCV Partnership           $17     $27     $27
Dividend income........................................    Consumers' affiliated
                                                           Trust Preferred
                                                           Securities companies        2      --      --
Dividend income........................................    CMS Energy parent
                                                           company                    --       3       6
</Table>

     We sell, store, and transport natural gas, as well as provide various other
services to the MCV Partnership. For additional details on transactions with the
MCV Partnership and the FMLP, see Note 2, Uncertainties, "Other Electric
Uncertainties -- The Midland Cogeneration Venture," and Note 11, Summarized
Financial Information of Significant Related Energy Supplier.

     We issued Trust Preferred Securities through several Consumers' affiliated
companies. As of December 31, 2003, we deconsolidated the trusts that hold the
mandatorily redeemable Trust Preferred Securities. As a result of the
deconsolidation, we now record on the Consolidated Statements of Income interest
on long-term debt -- related parties to the trusts holding the Trust Preferred
Securities. For additional information on Consumers' affiliated Trust Preferred
Securities companies, see Note 3, Financings and Capitalization,
"Company-Obligated Mandatorily Redeemable Preferred Securities of Subsidiaries"
and Note 13, Implementation of New Accounting Standards.

     We own 2.4 million shares of CMS Energy Common Stock with a fair value of
$20 million at December 31, 2003. For additional details on our investment in
CMS Energy Common Stock, see Note 4, Financial and Derivative Instruments.

                                      CE-40
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     We recorded expense from related parties as follows:

<Table>
<Caption>
                TYPE OF COST                            RELATED PARTY            2003    2002    2001
                ------------                            -------------            ----    ----    ----
                                                                                     IN MILLIONS
<S>                                             <C>                              <C>     <C>     <C>
Electric generating capacity and energy.....    MCV Partnership                  $455    $497    $488
Electric generating capacity and energy.....    Affiliates of Enterprises          64      67      71
Interest expense on long-term debt..........    Consumers' affiliated Trust
                                                Preferred Securities
                                                companies                          45      --      --
Gas purchases...............................    CMS MST                            27     127     120
Overhead expense............................    CMS Energy parent company           8      18      11
Gas transportation..........................    CMS Bay Area Pipeline, L.L.C        4       4       4
Gas transportation..........................    Panhandle/Trunkline                 1      22      21
</Table>

     We pay overhead costs to CMS Energy based on accepted industry allocation
methodologies, such as the Massachusetts Formula. We base our other related
party transactions on regulated prices, market prices, or competitive bidding.

     TRADE RECEIVABLES: We record our accounts receivable at fair value.
Accounts deemed uncollectable are charged to operating expense.

     UNAMORTIZED DEBT PREMIUM, DISCOUNT, AND EXPENSE: We amortize premiums,
discounts, and expenses incurred in connection with the issuance of outstanding
long-term debt over the terms of the issues. For the regulated portions of our
businesses, if debt is refinanced, we amortize any unamortized premiums,
discounts, and expenses over the term of the new debt.

     UTILITY REGULATION: We account for the effects of regulation based on the
regulated utility accounting standard SFAS No. 71. As a result, the actions of
regulators affect when we recognize revenues, expenses, assets, and liabilities.

     In 1999, we received MPSC electric restructuring orders, which, among other
things, identified the terms and timing for implementing electric restructuring
in Michigan. Consistent with these orders and EITF No. 97-4, we discontinued the
application of SFAS No. 71 for the energy supply portion of our business because
we expected to implement ROA at competitive market based rates for our electric
customers.

     Since 1999, there have been significant legislative and regulatory changes
in Michigan that has resulted in:

     - electric supply customers of utilities remaining on cost-based rates, and

     - utilities being provided the opportunity to recover Stranded Costs
       associated with electric restructuring, from customers who choose an
       alternative electric supplier.

     During 2002, we re-evaluated the criteria used to determine if an entity or
a segment of an entity meets the requirements to apply regulated utility
accounting, and determined that the energy supply portion of our business could
meet the criteria if certain regulatory events occurred. In December 2002, we
received a MPSC Stranded Cost order that allowed us to re-apply regulatory
accounting standard SFAS No. 71 to the energy supply portion of our business.
Re-application of SFAS No. 71 had no effect on the prior discontinuation
accounting, but allowed us to apply regulatory accounting treatment to the
energy supply portion of our business beginning in the fourth quarter of 2002,
including regulatory accounting treatment of costs required to be recognized in
accordance with SFAS No. 143. For additional details, see Note 12, Asset
Retirement Obligations.

     SFAS No. 144 imposes strict criteria for retention of regulatory-created
assets by requiring that such assets be probable of future recovery at each
balance sheet date. Management believes these assets are probable of future
recovery.

                                      CE-41
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following regulatory assets and liabilities, which include both current
and non-current amounts, are reflected in the Consolidated Balance Sheets. We
expect to recover these costs through rates over periods of up to 14 years. We
recognized an OPEB transition obligation in accordance with SFAS No. 106 and
established a regulatory asset for this amount that we expect to recover in
rates over the next nine years.

<Table>
<Caption>
                                                                  DECEMBER 31
                                                                ----------------
                                                                 2003      2002
                                                                 ----      ----
                                                                  IN MILLIONS
<S>                                                             <C>       <C>
Securitized costs (Note 2)..................................    $  648    $  689
Postretirement benefits (Note 7)............................       181       204
Electric Restructuring Implementation Plan (Note 2).........        91        83
Manufactured gas plant sites (Note 2).......................        67        69
Abandoned Midland project...................................        10        11
Unamortized debt............................................        51        14
Asset retirement obligation (Note 12).......................        49        --
Other.......................................................         8         2
                                                                ------    ------
Total regulatory assets.....................................    $1,105    $1,072
                                                                ======    ======
Cost of removal (Note 12)...................................    $  983    $  907
Income taxes (Note 5).......................................       312       297
Asset retirement obligation (Note 12).......................       168        --
Other.......................................................         4         4
                                                                ------    ------
Total regulatory liabilities................................    $1,467    $1,208
                                                                ======    ======
</Table>

     In October 2000, we received an MPSC order authorizing us to securitize
certain regulatory assets up to $469 million, net of tax, see Note 2,
Uncertainties, "Electric Restructuring Matters-Securitization." Accordingly, in
December 2000, we established a regulatory asset for securitized costs of $709
million, before tax, that had previously been recorded in other regulatory asset
accounts. To prepare for the financing of the securitized assets and the
subsequent retirement of debt with Securitization proceeds, issuance fees were
capitalized as a part of Securitization costs. These issuance costs are
amortized each month for up to fourteen years. The components of the unamortized
securitized costs are illustrated below.

<Table>
<Caption>
                                                                DECEMBER 31
                                                                ------------
                                                                2003    2002
                                                                ----    ----
                                                                IN MILLIONS
<S>                                                             <C>     <C>
Unamortized nuclear costs...................................    $405    $405
Postretirement benefits.....................................      84      84
Income taxes................................................     203     203
Uranium enrichment facility.................................      16      16
Other.......................................................      12      12
Accumulated Securitization cost amortization................     (72)    (31)
                                                                ----    ----
Total unamortized securitized costs.........................    $648    $689
                                                                ====    ====
</Table>

                                      CE-42
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2: UNCERTAINTIES

     Several business trends or uncertainties may affect our financial results
and condition. These trends or uncertainties have, or we expect could have, a
material impact on revenues or income from continuing electric and gas
operations. Such trends and uncertainties include:

     Environmental

     - increased capital expenditures and operating expenses for Clean Air Act
       compliance, and

     - potential environmental liabilities arising from various environmental
       laws and regulations, including potential liability or expenses relating
       to the Michigan Natural Resources and Environmental Protection Acts,
       Superfund, and at former manufactured gas plant facilities.

     Restructuring

     - response of the MPSC and Michigan legislature to electric industry
       restructuring issues,

     - ability to meet peak electric demand requirements at a reasonable cost,
       without market disruption,

     - ability to recover any of our net Stranded Costs under the regulatory
       policies being followed by the MPSC,

     - recovery of electric restructuring implementation costs,

     - effects of lost electric supply load to alternative electric suppliers,
       and

     - status as an electric transmission customer, instead of an electric
       transmission owner-operator.

     Regulatory

     - effects of conclusions about the causes of the August 14, 2003 blackout,
       including exposure to liability, increased regulatory requirements, and
       new legislation,

     - effects of potential performance standards payments,

     - successful implementation of initiatives to reduce exposure to purchased
       power price increases,

     - responses from regulators regarding the storage and ultimate disposal of
       spent nuclear fuel,

     - potential adverse appliance service plan ruling or related legislation,

     - inadequate regulatory response to applications for requested rate
       increases, and

     - response to increases in gas costs, including adverse regulatory response
       and reduced gas use by customers.

     Other

     - pending litigation regarding PURPA qualifying facilities, and

     - pending litigation and government investigations.

     SEC AND OTHER INVESTIGATIONS: As a result of round-trip trading
transactions by CMS MST, CMS Energy's Board of Directors established a Special
Committee to investigate matters surrounding the transactions and retained
outside counsel to assist in the investigation. The Special Committee completed
its investigation and reported its findings to the Board of Directors in October
2002. The Special Committee concluded, based on an extensive investigation, that
the round-trip trades were undertaken to raise CMS MST's profile as an energy
marketer with the goal of enhancing its ability to promote its services to new
customers. The Special Committee found no effort to manipulate the price of CMS
Energy Common Stock or affect energy prices. The Special Committee also made
recommendations designed to prevent any recurrence of this practice. Previously,
CMS
                                      CE-43
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Energy terminated its speculative trading business and revised its risk
management policy. The Board of Directors adopted, and CMS Energy has
implemented the recommendations of the Special Committee.

     CMS Energy is cooperating with other investigations concerning round-trip
trading, including an investigation by the SEC regarding round-trip trades and
CMS Energy's financial statements, accounting policies and controls, and an
investigation by the United States Department of Justice. CMS Energy is unable
to predict the outcome of these matters, and what effect, if any, these
investigations will have on its business.

     SECURITIES CLASS ACTION LAWSUITS: Beginning on May 17, 2002, a number of
securities class action complaints were filed against CMS Energy, Consumers, and
certain officers and directors of CMS Energy and its affiliates. The complaints
were filed as purported class actions in the United States District Court for
the Eastern District of Michigan, by shareholders who allege that they purchased
CMS Energy's securities during a purported class period. The cases were
consolidated into a single lawsuit and an amended and consolidated class action
complaint was filed on May 1, 2003. The consolidated complaint contains a
purported class period beginning on May 1, 2000 and running through March 31,
2003. It generally seeks unspecified damages based on allegations that the
defendants violated United States securities laws and regulations by making
allegedly false and misleading statements about CMS Energy's business and
financial condition, particularly with respect to revenues and expenses recorded
in connection with round-trip trading by CMS MST. CMS Energy, Consumers, and
their affiliates will defend themselves vigorously but cannot predict the
outcome of this litigation.

     ERISA LAWSUITS: CMS Energy is a named defendant, along with Consumers, CMS
MST and certain named and unnamed officers and directors, in two lawsuits
brought as purported class actions on behalf of participants and beneficiaries
of the CMS Employees' Savings and Incentive Plan (the "Plan"). The two cases,
filed in July 2002 in United States District Court for the Eastern District of
Michigan, were consolidated by the trial judge and an amended consolidated
complaint was filed. Plaintiffs allege breaches of fiduciary duties under ERISA
and seek restitution on behalf of the Plan with respect to a decline in value of
the shares of CMS Energy Common Stock held in the Plan. Plaintiffs also seek
other equitable relief and legal fees. CMS Energy and Consumers will defend
themselves vigorously but cannot predict the outcome of this litigation.

ELECTRIC CONTINGENCIES

     ELECTRIC ENVIRONMENTAL MATTERS: Our operations are subject to environmental
laws and regulations. Costs to operate our facilities in compliance with these
laws and regulations generally have been recovered in customer rates.

     Clean Air: In 1998, the EPA issued regulations requiring the state of
Michigan to further limit nitrogen oxide emissions at our coal-fired electric
plants. The Michigan Department of Environmental Quality finalized its rules to
comply with the EPA regulations in December 2002. It submitted these rules to
the EPA for approval in the first quarter of 2003. The EPA has yet to approve
the Michigan rules. If the EPA does not approve the Michigan rules, similar
federal regulations will take effect.

     The EPA and the state regulations require us to make significant capital
expenditures estimated to be $771 million. As of December 31, 2003, we have
incurred $446 million in capital expenditures to comply with the EPA regulations
and anticipate that the remaining $325 million of capital expenditures will be
incurred between 2004 and 2009. These expenditures include installing catalytic
reduction technology on some of our coal-fired electric plants. Based on the
Customer Choice Act, beginning January 2004, an annual return of and on these
types of capital expenditures, to the extent they are above depreciation levels,
is expected to be recoverable from customers, subject to a MPSC prudency
hearing.

     The EPA has alleged that some utilities have incorrectly classified plant
modifications as "routine maintenance" rather than seek modification permits
from the EPA. We have received and responded to information requests from the
EPA on this subject. We believe that we have properly interpreted the
requirements

                                      CE-44
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

of "routine maintenance." If our interpretation is found to be incorrect, we may
be required to install additional pollution controls at some or all of our
coal-fired electric plants.

     In addition to modifying the coal-fired electric plants, we expect to
purchase nitrogen oxide emissions credits for years 2004 through 2008. The cost
of these credits is estimated to average $8 million per year and is accounted
for as inventory. The credit inventory is expensed as the coal-fired electric
plants generate electricity. The price for nitrogen oxide emissions credits is
volatile and could change substantially.

     Future clean air regulations requiring emission controls for sulfur
dioxide, nitrogen oxides, mercury, and nickel may require additional capital
expenditures. Total expenditures will depend upon the final makeup of the new
regulations.

     Water: The EPA has proposed changes to the rules that govern generating
plant cooling water intake systems. The proposed rules will require significant
reduction in fish killed by operating equipment. The proposed rules are
scheduled to become final in the first quarter of 2004 and some of our
facilities would be required to comply by 2006. We are studying the proposed
rules to determine the most cost-effective solutions for compliance.

     Cleanup and Solid Waste: Under the Michigan Natural Resources and
Environmental Protection Act, we expect that we will ultimately incur
investigation and remedial action costs at a number of sites. We believe that
these costs will be recoverable in rates under current ratemaking policies.

     We are a potentially responsible party at several contaminated sites
administered under Superfund. Superfund liability is joint and several, meaning
that many other creditworthy parties with substantial assets are potentially
responsible with respect to the individual sites. Based on past experience, we
estimate that our share of the total liability for the known Superfund sites
will be between $1 million and $9 million. As of December 31, 2003, we have
recorded a liability for the minimum amount of our estimated Superfund
liability.

     In October 1998, during routine maintenance activities, we identified PCB
as a component in certain paint, grout, and sealant materials at the Ludington
Pumped Storage facility. We removed and replaced part of the PCB material. We
have proposed a plan to deal with the remaining materials and are awaiting a
response from the EPA.

     LITIGATION: In October 2003, a group of eight PURPA qualifying facilities
selling power to us filed a lawsuit in Ingham County Circuit Court. The lawsuit
alleges that we incorrectly calculated the energy charge payments made pursuant
to power purchase agreements with qualifying facilities. More specifically, the
lawsuit alleges that we should be basing the energy charge calculation on the
cost of more expensive eastern coal, rather than on the cost of the coal
actually burned by us for use in our coal-fired generating plants. We believe we
have been performing the calculation in the manner prescribed by the power
purchase agreements, and have filed a request with the MPSC (as a supplement to
the PSCR plan) that asks the MPSC to review this issue and to confirm that our
method of performing the calculation is correct. We filed a motion to dismiss
the lawsuit in the Ingham County Circuit Court due to the pending request at the
MPSC in regard to the PSCR plan case. In February 2004, the judge ruled on the
motion and deferred to the primary jurisdiction of the MPSC. This ruling
effectively suspends the lawsuit until the MPSC rules. Although only eight
qualifying facilities have raised the issue, the same energy charge methodology
is used in the PPA with the MCV Partnership and in approximately 20 additional
power purchase agreements with us, representing a total of 1,670 MW of electric
capacity. We cannot predict the outcome of this matter.

                                      CE-45
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ELECTRIC RESTRUCTURING MATTERS

     ELECTRIC RESTRUCTURING LEGISLATION: In June 2000, the Michigan legislature
passed electric utility restructuring legislation known as the Customer Choice
Act. This act:

     - allows all customers to choose their electric generation supplier
       effective January 1, 2002,

     - provides a one-time five percent residential electric rate reduction,

     - froze all electric rates through December 31, 2003, and established a
       rate cap for residential customers through at least December 31, 2005,
       and a rate cap for small commercial and industrial customers through at
       least December 31, 2004,

     - allows deferred recovery of an annual return of and on capital
       expenditures in excess of depreciation levels incurred during and before
       the rate freeze-cap period,

     - allows for the use of Securitization bonds to refinance qualified costs,

     - allows recovery of net Stranded Costs and implementation costs incurred
       as a result of the passage of the act,

     - requires Michigan utilities to join a FERC-approved RTO or sell their
       interest in transmission facilities to an independent transmission owner,

     - requires Consumers, Detroit Edison, and AEP to jointly expand their
       available transmission capability by at least 2,000 MW, and

     - establishes a market power supply test that, if not met, may require
       transferring control of generation resources in excess of that required
       to serve retail sales requirements.

     The following summarizes our status under the last three provisions of the
Customer Choice Act. First, we chose to sell our interest in our transmission
facilities to an independent transmission owner in order to comply with the
Customer Choice Act; for additional details regarding the sale of the
transmission facility, see "Transmission Sale" within this section. Second, in
July 2002, the MPSC issued an order approving our plan to achieve the increased
transmission capacity required under the Customer Choice Act. The MPSC found
that once the planned projects were completed and verification was submitted, a
utility was in technical compliance. We have completed the transmission capacity
projects identified in the plan and have submitted verification of this fact to
the MPSC. We believe we are in full compliance. Lastly, in September 2003, the
MPSC issued an order finding that we are in compliance with the market power
supply test set forth in the Customer Choice Act.

     ELECTRIC ROA PLAN: In 1998, we submitted a plan for electric ROA to the
MPSC. In March 1999, the MPSC issued orders generally supporting the plan. The
Customer Choice Act states that the MPSC orders issued before June 2000 are in
compliance with this act and enforceable by the MPSC. Those MPSC orders:

     - allow electric customers to choose their supplier,

     - authorize recovery of net Stranded Costs from ROA customers and
       implementation costs from all customer classes, and

     - confirm any voluntary commitments of electric utilities.

     The MPSC approved revised tariffs that establish the rates, terms, and
conditions under which retail customers are permitted to choose an electric
supplier. These revised tariffs allow ROA customers, upon as little as 30 days
notice to us, to return to our generation service at current tariff rates. If
any class of customers' (residential, commercial, or industrial) ROA load
reaches ten percent of our total load for that class of customers, then
returning ROA customers for that class must give 60 days notice to return to our
generation service at current tariff rates. However, we may not have capacity
available to serve returning ROA customers that is

                                      CE-46
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

sufficient or reasonably priced. As a result, we may be forced to purchase
electricity on the spot market at higher prices than we can recover from our
customers during the rate cap periods.

     We cannot predict the total amount of electric supply load that may be lost
to competitor suppliers. As of March 2004, alternative electric suppliers are
providing 735 MW of load. This amount represents nine percent of the total
distribution load and an increase of 42 percent compared to March 2003.

     We cannot predict whether the Stranded Cost recovery method adopted by the
MPSC will be applied in a manner that will fully offset any associated margin
loss from ROA. In February 2004, the MPSC issued an order on Detroit Edison's
request for rate relief for costs associated with customers leaving under
electric customer choice. The MPSC order allows Detroit Edison to charge a
transition surcharge of approximately 0.4 cent per kWh to ROA customers and
eliminates securitization offsets of 0.7 cents per kWh for primary service
customers and 0.9 cents per kWh for secondary service customers. We are seeking
similar recovery of Stranded Costs due to ROA customers leaving our system and
are encouraged by this ruling.

     ELECTRIC RESTRUCTURING PROCEEDINGS: Below is a discussion of our electric
restructuring proceedings. They are:

     - Securitization,

     - Stranded Costs,

     - implementation costs, and

     - transmission.

     Securitization: The Customer Choice Act allows for the use of
Securitization bonds to refinance certain qualified costs. Since Securitization
involves issuing bonds secured by a revenue stream from rates collected directly
from customers to service the bonds, Securitization bonds typically have a
higher credit rating than conventional utility corporate financing. In 2000 and
2001, the MPSC issued orders authorizing us to issue Securitization bonds. We
issued our first Securitization bonds in late 2001. Securitization resulted in:

     - lower interest costs, and

     - longer amortization periods for the securitized assets.

     We will recover the repayment of principal, interest, and other expenses
relating to the bond issuance through a Securitization charge and a tax charge
that began in December 2001. These charges are subject to an annual true up
until one year prior to the last scheduled bond maturity date, and no more than
quarterly thereafter. The December 2003 true up modified the total
Securitization and related tax charges from 1.746 mills per kWh to 1.718 mills
per kWh. There will be no impact on customer bills from Securitization for most
of our electric customers until the Customer Choice Act cap period expires, and
an electric rate case is processed. Securitization charge collections, $50
million for the twelve months ended December 31, 2003, and $52 million for the
twelve months ended December 31, 2002, are remitted to a trustee. Securitization
charge collections are restricted to the repayment of the principal and interest
on the Securitization bonds and payment of the ongoing expenses of Consumers
Funding. Consumers Funding is legally separate from Consumers. The assets and
income of Consumers Funding, including the securitized property, are not
available to creditors of Consumers or CMS Energy.

     In March 2003, we filed an application with the MPSC seeking approval to
issue additional Securitization bonds. In June 2003, the MPSC issued a financing
order authorizing the issuance of Securitization bonds in the amount of $554
million. This amount relates to Clean Air Act expenditures and associated return
on those expenditures through December 31, 2002; ROA implementation costs, and
previously authorized return on those expenditures through December 31, 2000;
and other up front qualified costs related to issuance of the Securitization
bonds. The MPSC rejected the portion of the application related to pension
costs. The MPSC based

                                      CE-47
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

its decision on the reasoning that a rebounding economy and stock market could
potentially reverse recent Pension Plan losses. Also, the MPSC rejected
Palisades expenditures previously not securitized as eligible securitized costs;
therefore, these costs will be included in a future electric rate case
proceeding with the MPSC and as a component of the 2002 net Stranded Cost
calculation. In July 2003, we filed for rehearing and clarification on a number
of features in the financing order.

     In December 2003, the MPSC issued its order on rehearing, which rejected
our requests for clarification and modification to the dividend payment
restriction, failed to rule directly on the accounting clarifications requested,
and remanded the proceeding to the ALJ for additional proceedings to address
rate design. We filed testimony regarding the remanded proceeding in February
2004. The financing order will become effective after acceptance by us and
resolution of any appeals.

     Stranded Costs: The Customer Choice Act allows electric utilities to
recover their net Stranded Costs, without defining the term. The Act directs the
MPSC to establish a method of calculating net Stranded Costs and of conducting
related true-up adjustments. In December 2001, the MPSC Staff recommended a
methodology, which calculated net Stranded Costs as the shortfall between:

     - the revenue required to cover the costs associated with fixed generation
       assets and capacity payments associated with purchase power agreements,
       and

     - the revenues received from customers under existing rates available to
       cover the revenue requirement.

     We are authorized by the MPSC to use deferred accounting to recognize the
future recovery of costs determined to be stranded. According to the MPSC, net
Stranded Costs are to be recovered from ROA customers through a Stranded Cost
transition charge. However, the MPSC has not yet allowed such a transition
charge and we have not recorded regulatory assets to recognize the future
recovery of such costs.

     In 2002 and 2001, the MPSC issued orders finding that we experienced zero
net Stranded Costs from 1999 to 2001. The MPSC also declined to resolve numerous
issues regarding the net Stranded Cost methodology in a way that would allow a
reliable prediction of the level of Stranded Costs for future years. We are
currently in the process of appealing these orders with the Michigan Court of
Appeals and the Michigan Supreme Court.

     In March 2003, we filed an application with the MPSC seeking approval of
net Stranded Costs incurred in 2002, and for approval of a net Stranded Cost
recovery charge. Our net Stranded Costs incurred in 2002 are estimated to be $38
million with the issuance of Securitization bonds that include Clean Air Act
investments, or $85 million without the issuance of Securitization bonds that
include Clean Air Act investments. The MPSC scheduled hearings for our 2002
Stranded Cost application to take place during the second quarter of 2004.

     Once a final financing order on Securitization is reached, we will know the
amount of our request for net Stranded Cost recovery for 2002. We cannot predict
how the MPSC will rule on our request for the recoverability of Stranded Costs.

     Implementation Costs: Since 1997, we have incurred significant electric
utility restructuring implementation costs. The Customer Choice Act allows
electric utilities to recover their implementation costs. The following table
outlines the applications filed by us with the MPSC and the status of recovery
for these costs.

<Table>
<Caption>
           YEAR FILED                YEAR INCURRED       REQUESTED       PENDING       ALLOWED       DISALLOWED
           ----------                -------------       ---------       -------       -------       ----------
                                                                              IN MILLIONS
<S>                                  <C>                 <C>             <C>           <C>           <C>
1999.............................     1997 & 1998           $20           $  --            $15             $5
2000.............................            1999            30              --             25              5
2001.............................            2000            25              --             20              5
2002.............................            2001             8              --              8             --
2003.............................            2002             2               2        Pending        Pending
</Table>

                                      CE-48
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The MPSC disallowed certain costs, determining that these amounts did not
represent costs incremental to costs already reflected in electric rates. In the
order received for the year 2001, the MPSC also reserved the right to reevaluate
the implementation costs depending upon the progress and success of the ROA
program, and ruled that due to the rate freeze imposed by the Customer Choice
Act, it was premature to establish a cost recovery method for the allowable
implementation costs. In addition to the amounts shown above, we incurred and
deferred as a regulatory asset, as of December 31, 2003, $2 million of
additional implementation costs and $19 million for the cost of money associated
with total implementation costs. We believe the implementation costs and
associated cost of money are fully recoverable in accordance with the Customer
Choice Act. Cash recovery from customers is expected to begin after the rate cap
period expires. The rate cap expired for large commercial and industrial
customers on December 31, 2003. We have asked to include implementation costs
through December 31, 2000 in the pending Securitization case. If approved, the
sale of Securitization bonds will allow for the recovery of a significant
portion of these costs. We cannot predict the amount the MPSC will approve as
allowable costs.

     Also, we are pursuing authorization at the FERC for MISO to reimburse us
for $8 million in certain electric utility restructuring implementation costs
related to our former participation in the development of the Alliance RTO, a
portion of which has been expensed. In May 2003, the FERC issued an order
denying MISO's request for authorization to reimburse us. In June 2003, we filed
a joint petition with MISO for rehearing with the FERC, which the FERC denied in
September 2003. We appealed the FERC ruling at the United States Court of
Appeals for the District of Columbia and are pursuing other potential means of
recovery at the FERC. In conjunction with our appeal of the September order
denying recovery, MISO agreed to file a request with the FERC seeking authority
to reimburse METC. As part of the contract for the sale of our former
transmission system, should the FERC approve the new MISO filing, METC is
contractually obligated to flow-through to us the full amount of any Alliance
RTO start-up costs that it is authorized to recover by FERC. We cannot predict
the outcome of the appeal process, the MISO request, or the ultimate amount, if
any, FERC will allow us to collect for implementation costs.

     Transmission Rates: Our application of JOATT transmission rates to
customers during past periods is under FERC review. The rates included in these
tariffs were applied to certain transmission transactions affecting both Detroit
Edison's and our transmission systems between 1997 and 2002. We believe our
reserve is sufficient to satisfy our refund obligation to any of our former
transmission customers under our former JOATT.

     TRANSMISSION SALE: In May 2002, we sold our electric transmission system
for $290 million to MTH, a non-affiliated limited partnership whose general
partner is a subsidiary of Trans-Elect, Inc. The pretax gain was $31 million
($26 million, net of tax). We are currently in arbitration with MTH regarding
property tax items used in establishing the selling price of our electric
transmission system. We cannot predict whether remaining open items will impact
materially the recorded gain on the sale.

     As a result of the sale, after-tax earnings have decreased due to a loss of
revenue from wholesale and ROA customers who will buy services directly from
MTH.

     METC has completed the capital program to expand the transmission system's
capability to import electricity into Michigan, as required by the Customer
Choice Act. We will continue to maintain the system until May 1, 2007 under a
contract with METC.

     Under an agreement with MTH, transmission rates charged to us are fixed by
contract at current levels through December 31, 2005, and are subject to FERC
ratemaking thereafter. However, we are subject to certain additional MISO
surcharges, which are estimated to be $15 million in 2004.

ELECTRIC RATE MATTERS

     AUGUST 14, 2003 BLACKOUT: On August 14, 2003, the electric transmission
grid serving parts of the Midwest and the Northeast experienced a significant
disturbance that impacted electric service to millions of homes and
                                      CE-49
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

businesses. Approximately 100,000 of our 1.7 million electric customers were
without power for approximately 24 hours as a result of the disturbance. We
incurred $1 million of immediate expense as a result of the blackout. We
continue to cooperate with investigations of the blackout by several federal and
state agencies. We cannot predict the outcome of these investigations.

     In November 2003, the MPSC released its report on the blackout. The MPSC
report found no evidence to suggest that the events in Michigan or actions taken
by the Michigan utilities or transmission operators were factors contributing to
the cause of the blackout. Also in November 2003, the United States and Canadian
power system outage task force preliminarily reported that the primary cause of
the blackout was due to transmission line contact with trees in areas outside of
Consumers' operating territory. In December 2003, the MPSC issued an order
requiring Michigan investor-owned utilities to file reports by April 1, 2004, on
the status of the transmission and distribution lines used to serve their
customers, including details on vegetation trimming practices in calendar year
2003. Consumers intends to comply with the MPSC's request.

     In February 2004, the Board of Trustees of NERC approved recommendations to
improve electric transmission reliability. The key recommendations are as
follows:

     - strengthen the NERC compliance enforcement program,

     - evaluate vegetation management procedures, and

     - improve technology to prevent or mitigate future blackouts.

     These recommendations require transmission operators, which Consumers is
not, to submit annual reports on vegetation management beginning March 2005 and
improve technology over various milestones throughout 2004. These
recommendations could result in increased transmission costs payable by
transmission customers in the future. The financial impacts of these
recommendations are not currently quantifiable.

     PERFORMANCE STANDARDS: Electric distribution performance standards
developed by the MPSC were in proposal status during 2002 and 2003. The
performance standards were placed into Michigan law in January 2004 and became
effective on February 9, 2004. They relate to restoration after an outage,
safety, and customer relations. During 2002 and 2003, Consumers monitored and
reported to the MPSC its performance relative to the performance standards.
Year-end results for both 2002 and 2003 resulted in compliance with the
acceptable level of performance as established by the approved standards.

     Financial incentives and penalties are contained within the performance
standards. An incentive is possible if all of the established performance
standards have been exceeded for a calendar year. However, the value of such
incentive cannot be determined at this point as the performance standards do not
contain an approved incentive mechanism. Financial penalties in the form of
customer credits are also possible. These customer credits are based on duration
and repetition of outages. We cannot predict the likely effects of the financial
incentive or penalties, if any, on us.

     POWER SUPPLY COSTS: We were required to provide backup service to ROA
customers on a best efforts basis. In October 2003, we provided notice to the
MPSC that we would terminate the provision of backup service in accordance with
the Customer Choice Act, effective January 1, 2004.

     To reduce the risk of high electric prices during peak demand periods and
to achieve our reserve margin target, we employ a strategy of purchasing
electric call option and capacity and energy contracts for the physical delivery
of electricity primarily in the summer months and to a lesser degree in the
winter months. As of December 31, 2003, we purchased capacity and energy
contracts partially covering the estimated reserve margin requirements for 2004
through 2007. As a result, we have recognized an asset of $20 million for
unexpired capacity and energy contracts. Currently, we have a reserve margin of
5 percent, or supply resources equal to 105 percent of projected summer peak
load for summer 2004. We are in the process of securing the additional capacity
needed to meet our summer 2004 reserve margin target of 11 percent (111 percent
of projected summer

                                      CE-50
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

peak load). The total premium costs of electricity call option and capacity and
energy contracts for 2003 were approximately $10 million.

     As a result of meeting the transmission capability expansion requirements
and the market power test, as discussed in this note, we have met the
requirements under the Customer Choice Act to return to the PSCR process. The
PSCR process provides for the reconciliation of actual power supply costs with
power supply revenues. This process assures recovery of all reasonable and
prudent power supply costs actually incurred by us. In September 2003, we
submitted a PSCR filing to the MPSC that reinstates the PSCR process for
customers whose rates are no longer frozen or capped as of January 1, 2004. The
proposed PSCR charge allows us to recover a portion of our increased power
supply costs from large commercial and industrial customers, and subject to the
overall rate cap, from other customers. We estimate the recovery of increased
power supply costs from large commercial and industrial customers to be
approximately $30 million in 2004. As allowed under current regulation, we
self-implemented the proposed PSCR charge on January 1, 2004. The revenues
received from the PSCR charge are also subject to subsequent reconciliation at
the end of the year after actual costs have been reviewed for reasonableness and
prudence. We cannot predict the outcome of this filing.

OTHER ELECTRIC UNCERTAINTIES

     THE MIDLAND COGENERATION VENTURE: The MCV Partnership, which leases and
operates the MCV Facility, contracted to sell electricity to Consumers for a
35-year period beginning in 1990 and to supply electricity and steam to Dow. We
hold, through two wholly owned subsidiaries, the following assets related to the
MCV Partnership and MCV Facility:

     - CMS Midland owns a 49 percent general partnership interest in the MCV
       Partnership, and

     - CMS Holdings holds, through FMLP, a 35 percent lessor interest in the MCV
       Facility.

     Our consolidated retained earnings include undistributed earnings from the
MCV Partnership, which at December 31, 2003 are $245 million and at December 31,
2002 are $226 million.

Summarized Statements of Income for CMS Midland and CMS Holdings

<Table>
<Caption>
                                                                    YEARS ENDED
                                                                    DECEMBER 31
                                                                --------------------
                                                                2003    2002    2001
                                                                ----    ----    ----
                                                                    IN MILLIONS
<S>                                                             <C>     <C>     <C>
Earnings from equity method investees.......................    $42     $52     $38
Operating expenses, taxes and other.........................     22      18      13
                                                                ---     ---     ---
Income before cumulative effect of accounting change........    $20     $34     $25
Cumulative effect of change in method of accounting for
  derivatives, net of $10 million tax expense in 2002 (Note
  11).......................................................     --      18      --
                                                                ---     ---     ---
Net income..................................................    $20     $52     $25
                                                                ===     ===     ===
</Table>

     Power Supply Purchases from the MCV Partnership: Our annual obligation to
purchase capacity from the MCV Partnership is 1,240 MW through the term of the
PPA ending in 2025. The PPA requires us to pay, based on the MCV Facility's
availability, a levelized average capacity charge of 3.77 cents per kWh and a
fixed energy charge. We also pay a variable energy charge based on our average
cost of coal consumed for all kWh delivered. Effective January 1999, we reached
a settlement agreement with the MCV Partnership that capped payments made on the
basis of availability that may be billed by the MCV Partnership at a maximum
98.5 percent availability level.

                                      CE-51
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Since January 1993, the MPSC has permitted us to recover capacity charges
averaging 3.62 cents per kWh for 915 MW, plus fixed and variable energy charges.
Since January 1996, the MPSC has also permitted us to recover capacity charges
for the remaining 325 MW of contract capacity with an initial average charge of
2.86 cents per kWh increasing periodically to an eventual 3.62 cents per kWh by
2004 and thereafter. However, due to the frozen retail rates required by the
Customer Choice Act, the capacity charge for the 325 MW was frozen at 3.17 cents
per kWh until December 31, 2003. Recovery of both the 915 MW and 325 MW portions
of the PPA are subject to certain limitations discussed below.

     In 1992, we recognized a loss and established a liability for the present
value of the estimated future underrecoveries of power supply costs under the
PPA based on MPSC cost-recovery orders. The remaining liability associated with
the loss totaled $27 million at December 31, 2003, $53 million at December 31,
2002, and $77 million at December 31, 2001. We expect the PPA liability to be
depleted in late 2004.

     We estimate that 51 percent of the actual cash underrecoveries for 2004
will be charged to the PPA liability, with the remaining portion charged to
operating expense as a result of our 49 percent ownership in the MCV
Partnership. We will expense all cash underrecoveries directly to income once
the PPA liability is depleted. If the MCV Facility's generating availability
remains at the maximum 98.5 percent level, our cash underrecoveries associated
with the PPA could be as follows:

<Table>
<Caption>
                                                                2004    2005    2006    2007
                                                                ----    ----    ----    ----
                                                                        IN MILLIONS
<S>                                                             <C>     <C>     <C>     <C>
Estimated cash underrecoveries at 98.5%.....................    $56     $56     $55     $39
Amount to be charged to operating expense...................     29      56      55      39
Amount to be charged to PPA liability.......................     27      --      --      --
</Table>

     Beginning January 1, 2004, the rate freeze for large industrial customers
was no longer in effect and we returned to the PSCR process. Under the PSCR
process, we will recover from our customers the capacity and fixed energy
charges based on availability, up to an availability cap of 88.7 percent as
established in previous MPSC orders.

     Effects on Our Ownership Interest in the MCV Partnership and MCV Facility:
As a result of returning to the PSCR process, we returned to dispatching the MCV
Facility on a fixed load basis, as permitted by the MPSC, in order to maximize
recovery of our capacity payments. This fixed load dispatch increases the MCV
Facility's output and electricity production costs, such as natural gas. As the
spread between the MCV Facility's variable electricity production costs and its
energy payment revenue widens, the MCV's Partnership's financial performance and
our equity interest in the MCV Partnership may be affected negatively.

     Under the PPA, variable energy payments to the MCV Partnership are based on
the cost of coal burned at our coal plants and operation and maintenance
expenses. However, the MCV Partnership's costs of producing electricity are tied
to the cost of natural gas. Because natural gas prices have increased
substantially in recent years, while the price the MCV Partnership can charge us
for energy has not, the MCV Partnership's financial performance has been
impacted negatively.

     Until September 2007, the PPA and settlement require us to pay capacity and
fixed energy charges based on the MCV Facility's actual availability up to the
98.5 percent cap. After September 2007, we expect to exercise the regulatory out
provision in the PPA, limiting our capacity and fixed energy payments to the MCV
Partnership to the amount collected from our customers. The MPSC's future
actions on the capacity and fixed energy payments recoverable from customers
subsequent to September 2007 may affect negatively the earnings of the MCV
Partnership and the value of our equity interest in the MCV Partnership.

                                      CE-52
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     In February 2004, we filed a resource conservation plan with the MPSC that
is intended to help conserve natural gas and thereby improve our equity
investment in the MCV Partnership. This plan seeks approval to:

     - dispatch the MCV Facility on an economic basis depending on natural gas
       market prices without increased costs to electric customers,

     - give Consumers a priority right to buy excess natural gas as a result of
       the reduced dispatch of the MCV Facility, and

     - fund $5 million annually for renewable energy sources such as wind power
       projects.

     The resource conservation plan will reduce the MCV Facility's annual
natural gas consumption by an estimated 30 to 40 billion cubic feet. This
decrease in the quantity of high-priced natural gas consumed by the MCV Facility
will benefit Consumers' ownership interest in the MCV Partnership. The amount of
PPA capacity and fixed energy payments recovered from retail electric customers
would remain capped at 88.7 percent. Therefore, customers will not be charged
for any increased power supply costs, if they occur. Consumers and the MCV
Partnership have reached an agreement that the MCV Partnership will reimburse
Consumers for any incremental power costs incurred to replace the reduction in
power dispatched from the MCV Facility. We requested that the MPSC provide
interim approval while it conducts a full review of the plan. The MPSC has
scheduled a prehearing conference with respect to the MCV resource conservation
plan for April 2004. We cannot predict if or when the MPSC will approve our
request.

     The two most significant variables in the analysis of the MCV Partnership's
future financial performance are the forward price of natural gas for the next
22 years and the MPSC's decision in 2007 or beyond on our recovery of capacity
payments. Natural gas prices have been historically volatile. Presently, there
is no consensus in the marketplace on the price or range of prices of natural
gas in the short term or beyond the next five years. Therefore, we cannot
predict the impact of these issues on our future earnings, cash flows, or on the
value of our equity interest in the MCV Partnership.

     NUCLEAR MATTERS: Big Rock: Significant progress continues to be made in the
decommissioning of Big Rock. We submitted the License Termination Plan to the
NRC staff for review in April 2003. System dismantlement and building demolition
are on schedule to return the 560-acre site to a natural setting for
unrestricted use in early 2006. The NRC and Michigan Department of Environmental
Quality continue to find that all decommissioning activities at Big Rock are
being performed in accordance with applicable regulatory and license
requirements.

     Seven transportable dry casks have been loaded with spent nuclear fuel and
an eighth cask has been loaded with high-level radioactive waste material. These
dry casks will remain onsite until the DOE moves the material to a national
spent nuclear fuel repository.

     Palisades: In July 2003, the NRC completed its mid-cycle plant performance
assessment of Palisades. The mid-cycle assessment for Palisades covered the
period from January 1, 2003 through the end of July 2003. The NRC determined
that Palisades was operated in a manner that preserved public health and safety
and fully met all cornerstone objectives. Based on the plant's performance, only
regularly scheduled inspections are planned through September 2004.

     The amount of spent nuclear fuel exceeds Palisades' temporary onsite
storage pool capacity. We are using dry casks for temporary onsite storage. As
of December 31, 2003, we have loaded 18 dry casks with spent nuclear fuel and we
will need to load additional dry casks by the fall of 2004 in order to continue
operation. Palisades currently has three empty dry casks onsite, with storage
pad capacity for up to seven additional loaded dry casks. We anticipate that
transportable dry casks, along with more storage pad capacity, will be available
by fall 2004.

                                      CE-53
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     DOE Litigation: In 1997, a U.S. Court of Appeals decision confirmed that
the DOE was to begin accepting deliveries of spent nuclear fuel for disposal by
January 1998. Subsequent U.S. Court of Appeals litigation, in which we and other
utilities participated, has not been successful in producing more specific
relief for the DOE's failure to accept the spent nuclear fuel.

     There are two court decisions that support the right of utilities to pursue
damage claims in the United States Court of Claims against the DOE for failure
to take delivery of spent nuclear fuel. A number of utilities have initiated
litigation in the United States Court of Claims; we filed our complaint in
December 2002. If our litigation against the DOE is successful, we anticipate
future recoveries from the DOE. The recoveries will be used to pay the cost of
spent nuclear fuel storage until the DOE takes possession as required by law. We
can make no assurance that the litigation against the DOE will be successful.

     In July 2002, Congress approved and the President signed a bill designating
the site at Yucca Mountain, Nevada, for the development of a repository for the
disposal of high-level radioactive waste and spent nuclear fuel. The next step
will be for the DOE to submit an application to the NRC for a license to begin
construction of the repository. The application and review process is estimated
to take several years.

     Spent nuclear fuel complaint: In March 2003, the Michigan Environmental
Council, the Public Interest Research Group in Michigan, and the Michigan
Consumer Federation filed a complaint with the MPSC, which was served on us by
the MPSC in April 2003. The complaint asks the MPSC to initiate a generic
investigation and contested case to review all facts and issues concerning costs
associated with spent nuclear fuel storage and disposal. The complaint seeks a
variety of relief with respect to Consumers, Detroit Edison, Indiana & Michigan
Electric Company, Wisconsin Electric Power Company, and Wisconsin Public Service
Corporation. The complaint states that amounts collected from customers for
spent nuclear storage and disposal should be placed in an independent trust. The
complaint also asks the MPSC to take additional actions. In May 2003, Consumers
and other named utilities each filed motions to dismiss the complaint. We are
unable to predict the outcome of this matter.

     Insurance: We maintain nuclear insurance coverage on our nuclear plants. At
Palisades, we maintain nuclear property insurance from NEIL, totaling $2.750
billion and insurance that would partially cover the cost of replacement power
during certain prolonged accidental outages. Because NEIL is a mutual insurance
company, we could be subject to assessments of up to $26 million in any policy
year if insured losses in excess of NEIL's maximum policyholders surplus occur
at our, or any other member's, nuclear facility. NEIL's policies include
coverage for acts of terrorism.

     At Palisades, we maintain nuclear liability insurance for third-party
bodily injury and off-site property damage resulting from a nuclear hazard for
up to approximately $10.862 billion, the maximum insurance liability limits
established by the Price-Anderson Act. The United States Congress enacted the
Price-Anderson Act to provide financial liability protection for those parties
who may be liable for a nuclear accident or incident. Part of the Price-Anderson
Act's financial protection is a mandatory industry-wide program where owners of
nuclear generating facilities could be assessed if a nuclear incident occurs at
any nuclear generating facility. The maximum assessment against us could be $101
million per occurrence, limited to maximum annual installment payments of $10
million.

     We also maintain insurance under a program that covers tort claims for
bodily injury to nuclear workers caused by nuclear hazards. The policy contains
a $300 million nuclear industry aggregate limit. Under a previous insurance
program providing coverage for claims brought by nuclear workers, we remain
responsible for a maximum assessment of up to $6 million.

     Big Rock remains insured for nuclear liability by a combination of
insurance and a NRC indemnity totaling $544 million and a nuclear property
insurance policy from NEIL.

     Insurance policy terms, limits, and conditions are subject to change during
the year as we renew our policies.

                                      CE-54
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     COMMITMENTS FOR FUTURE PURCHASES: We enter into a number of unconditional
purchase obligations that represent normal business operating contracts. These
contracts are used to assure an adequate supply of goods and services necessary
for the operation of our business and to minimize exposure to market price
fluctuations. We believe that these future costs are prudent and reasonably
assured of recovery in future rates.

     Coal Supply and Transportation: We have entered into coal supply contracts
with various suppliers for our coal-fired generating stations. Under the terms
of these agreements, we are obligated to take physical delivery of the coal and
make payment based upon the contract terms. Our coal supply contracts expire
from 2004 to 2005, and total an estimated $177 million. Our coal transportation
contracts expire from 2004 to 2007, and total an estimated $139 million.
Long-term coal supply contracts account for approximately 60 to 90 percent of
our annual coal requirements. In 2003, coal purchases totaled $265 million of
which $207 million (78 percent of the tonnage requirement) was under long-term
contract. We supplement our long-term contracts with spot-market purchases.

     Power Supply, Capacity, and Transmission: As of December 31, 2003, we had
future unrecognized commitments to purchase power transmission services under
fixed price forward contracts for 2004 and 2005 totaling $8 million. We also had
commitments to purchase capacity and energy under long-term power purchase
agreements with various generating plants including the MCV Facility. These
contracts require monthly capacity payments based on the plants' availability or
deliverability. These payments for 2004 through 2030 total an estimated $16.016
billion, undiscounted, which includes $11.381 billion related to the MCV
Facility. This amount may vary depending upon plant availability and fuel costs.
If a plant was not available to deliver electricity to us, then we would not be
obligated to make the capacity payment until the plant could deliver.

GAS CONTINGENCIES

     GAS ENVIRONMENTAL MATTERS: We expect to have investigation and remedial
costs at a number of sites under the Michigan Natural Resources and
Environmental Protection Act, a Michigan statute that covers environmental
activities including remediation. These sites include 23 former manufactured gas
plant facilities. We operated the facilities on these sites for some part of
their operating lives. For some of these sites, we have no current ownership or
may own only a portion of the original site. We have completed initial
investigations at the 23 sites. We will continue to implement remediation plans
for sites where we have received MDEQ remediation plan approval. We will also
work toward resolving environmental issues at sites as studies are completed.

     We have estimated our costs for investigation and remedial action at all 23
sites using the Gas Research Institute-Manufactured Gas Plant Probabilistic Cost
Model. We expect our remaining costs to be between $37 million and $90 million.
The range reflects multiple alternatives with various assumptions for resolving
the environmental issues at each site. The estimates are based on discounted
2003 costs using a discount rate of three percent. The discount rate represents
a ten-year average of U.S. Treasury bond rates reduced for increases in the
consumer price index. We expect to fund most of these costs through insurance
proceeds and through MPSC approved rates charged to our customers. As of
December 31, 2003, we have recorded a liability of $44 million, net of $38
million of expenditures incurred to date, and a regulatory asset of $67 million.
Any significant change in assumptions, such as an increase in the number of
sites, different remediation techniques, nature and extent of contamination, and
legal and regulatory requirements, could affect our estimate of remedial action
costs.

     In its November 2002 gas distribution rate order, the MPSC authorized us to
continue to recover approximately $1 million of manufactured gas plant
facilities environmental clean-up costs annually. This amount will continue to
be offset by $2 million to reflect amounts recovered from all other sources. We
defer and amortize, over a period of 10 years, manufactured gas plant facilities
environmental clean-up costs above the amount currently included in rates.
Additional amortization of the expense in our rates cannot begin until after a
prudency review in a gas rate case.

                                      CE-55
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

GAS RATE MATTERS

     GAS COST RECOVERY: The MPSC is required by law to allow us to charge
customers for our actual cost of purchased natural gas. The GCR process is
designed to allow us to recover all of our gas costs; however, the MPSC reviews
these costs for prudency in an annual reconciliation proceeding. In June 2003,
we filed a reconciliation of GCR costs and revenues for the 12-months ended
March 2003. We proposed to recover from our customers approximately $6 million
of under-recovered gas costs using a roll-in methodology. The roll-in
methodology incorporates the GCR under-recovery in the next GCR plan year. The
approach was approved by the MPSC in a November 2002 order.

     In January 2004, intervenors filed their positions in our 2003 GCR case.
Their positions were that not all of our gas purchasing decisions were prudent
during April 2002 through March 2003 and they proposed disallowances. In
February 2004, the parties in the case reached a tentative settlement agreement
that would result in a GCR disallowance of $11 million for the GCR period.
Interest on the disallowed amount from April 1, 2003 through February 2004, at
the Consumers' authorized rate of return, adds $1 million to the cost of the
settlement. We believe this settlement agreement will be executed by the parties
in the case in the near future and approved by the MPSC. A reserve was recorded
in December 2003.

     In July 2003, the MPSC approved a settlement agreement authorizing us to
increase our gas cost recovery for the remainder of the current GCR plan year
(August 2003 through March 2004) and to apply a quarterly ceiling price
adjustment, based on a formula that tracks changes in NYMEX natural gas prices.
The terms of the settlement allow a GCR ceiling price of $6.11 per mcf. Our GCR
is $5.36 per mcf for March 2004 bills.

     2003 GAS RATE CASE: In March 2003, we filed an application with the MPSC
for a $156 million annual increase in our gas delivery and transportation rates
that included a 13.5 percent return on equity. In September 2003, we filed an
update to our gas rate case that lowered the requested revenue increase from
$156 million to $139 million and reduced the return on common equity from 13.5
percent to 12.75 percent. The MPSC authorized an interim gas rate increase of
$19 million annually. The interim increase is under bond and subject to refund
if the final rate relief is a lesser amount. The interim increase order includes
a $34 million reduction in book depreciation expense and related income taxes
effective only during the period that we receive the interim relief. The MPSC
order allowed us to increase our rates beginning December 19, 2003. As part of
the interim order, we agreed to restrict dividend payments to our parent
company, CMS Energy, to a maximum of $190 million annually during the period
that we receive the interim relief. On March 5, 2004, the ALJ issued a Proposal
for Decision recommending that the MPSC not rely upon the projected test year
data included in our filing and supported by the MPSC Staff and further
recommended that the application be dismissed. The MPSC is not bound by these
recommendations and will consider the issues anew after receipt of exceptions
and replies to the exception filed by the parties in response to the Proposal
for Decision.

     2001 GAS DEPRECIATION CASE: In December 2003, we filed an update to our gas
utility plant depreciation case originally filed in June 2001. This case is
independent of the 2003 gas rate case. The original filing was based on December
2000 plant balances and historical data. The December 2003 filing updates the
gas depreciation case to include December 2002 plant balances. The proposed
depreciation rates, if approved, will result in an annual increase of $12
million in depreciation expense.

OTHER GAS UNCERTAINTIES

     COMMITMENTS FOR GAS SUPPLIES: We enter into contracts to purchase gas and
gas transportation from various suppliers for our natural gas business. These
contracts have expiration dates that range from 2004 to 2007. Our 2003 gas
purchases totaled 248 bcf at a cost of $1.379 billion. At the end of 2003, we
estimate our gas purchases for 2004 to be 235 bcf, of which 22 percent is
covered by existing fixed price contracts and 37 percent is covered by indexed
price contracts that are subject to price variations. The remaining 2004 gas
purchases will be made at market prices at the time of purchase.

                                      CE-56
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

OTHER UNCERTAINTIES

     In addition to the matters disclosed in this note, we are parties to
certain lawsuits and administrative proceedings before various courts and
governmental agencies arising from the ordinary course of business. These
lawsuits and proceedings may involve personal injury, property damage,
contractual matters, environmental issues, federal and state taxes, rates,
licensing, and other matters.

     We have accrued estimated losses for certain contingencies discussed in
this note. Resolution of these contingencies is not expected to have a material
adverse impact on our financial position, liquidity, or results of operations.

3: FINANCINGS AND CAPITALIZATION

LONG-TERM DEBT:

Long-term debt as of December 31 follows:

<Table>
<Caption>
                                                      INTEREST RATE (%)    MATURITY      2003      2002
                                                      -----------------    --------      ----      ----
                                                                                          IN MILLIONS
<S>                                                   <C>                  <C>          <C>       <C>
  First mortgage bonds............................           4.250           2008       $  250    $   --
                                                             4.800           2009          200        --
                                                             4.000           2010          250        --
                                                             5.375           2013          375        --
                                                             6.000           2014          200        --
                                                             7.375           2023          208       208
                                                                                        ------    ------
                                                                                         1,483       208
                                                                                        ------    ------
  Senior notes....................................           6.000           2005          300       300
                                                             6.250           2006          332       332
                                                             6.375           2008          159       159
                                                             6.200           2008           --       250
                                                             6.875           2018          180       180
                                                             6.500(a)        2018          141       141
                                                             6.500(b)        2028          142       142
                                                                                        ------    ------
                                                                                         1,254     1,504
                                                                                        ------    ------
  Securitization bonds............................           5.097(c)      2005-2015       426       453
  Long-term bank debt.............................        Variable         2006-2009       200       328
  Nuclear fuel disposal liability.................                            (d)          139       138
  Pollution control revenue bonds.................         Various         2010-2018       126       126
  Other...........................................                                           4         8
                                                                                        ------    ------
                                                                                           895     1,053
                                                                                        ------    ------
Principal amount outstanding......................                                       3,632     2,765
  Current amounts.................................                                         (28)     (305)
  Net unamortized discount........................                                         (21)      (18)
                                                                                        ------    ------
Total Long-term debt..............................                                      $3,583    $2,442
                                                                                        ======    ======
</Table>

- -------------------------
(a)  2018 maturity is subject to successful remarketing after June 15, 2005.

(b)  Callable at par.

(c)  Represents the weighted average interest rate at December 31, 2003.

(d)  Maturity date uncertain.

                                      CE-57
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

LONG-TERM DEBT -- RELATED PARTIES:

     Long-term debt -- related parties as of December 31, 2003 follows:

<Table>
<Caption>
                DEBENTURE AND RELATED PARTY                     INTEREST RATE    MATURITY    2003
                ---------------------------                     -------------    --------    ----
                                                                           IN MILLIONS
<S>                                                             <C>              <C>         <C>
Subordinated deferrable interest notes, Consumers Power
  Company Financing I.......................................        8.36%          2015      $ 73
Subordinated deferrable interest notes, Consumers Energy
  Company Financing II......................................        8.20%          2027       124
Subordinated debentures, Consumers Energy Company Financing
  III.......................................................        9.25%          2029       180
Subordinated debentures, Consumers Energy Company Financing
  IV........................................................        9.00%          2031       129
                                                                                             ----
Total amount outstanding....................................                                 $506
                                                                                             ====
</Table>

     NOTES PAYABLE -- RELATED PARTIES: Consumers issued a $200 million unsecured
promissory note to CMS Energy on December 30, 2003. The proceeds were used to
pay a portion of Consumers' Pension Plan contribution of $329 million in
December 2003. This note matures on December 29, 2004 and is payable on three
business days' notice by CMS Energy.

     DEBT ISSUANCES: The following is a summary of our long-term debt issuances
during 2003:

<Table>
<Caption>
       FACILITY             PRINCIPAL                                                       USE OF
         TYPE             (IN MILLIONS)    ISSUE RATE     ISSUE DATE      MATURITY DATE    PROCEEDS    COLLATERAL
       --------           -------------    ----------     ----------      -------------    --------    ----------
<S>                       <C>              <C>           <C>              <C>              <C>         <C>
Term loan.............        $  140       LIBOR +        March 2003       March 2009        GCP          FMB(f)
                                           475 bps
Term loan.............           150       LIBOR +        March 2003       March 2006        GCP          FMB(f)
                                           450 bps                        (paid off)(b)
FMB(a)................           375        5.375%        April 2003       April 2013        (c)           --
FMB(a)................           250        4.250%        April 2003       April 2008        (c)           --
FMB(a)................           250        4.000%         May 2003         May 2010         (d)           --
FMB(a)................           200        4.800%        August 2003     February 2009      (b)           --
FMB(a)................           200        6.000%        August 2003     February 2014      (b)           --
Term loan.............            60       LIBOR +       November 2003    November 2006      (e)          FMB(f)
                                           135 bps
                          -------------
Total.................        $1,625
                          =============
</Table>

- -------------------------
(bps -- basis points), (GCP -- General corporate purposes)

(a)  We filed a registration statement with the SEC in December 2003 to permit
     holders of these FMBs to exchange their bonds for FMBs that are registered
     under the Securities Act of 1933. The exchange offer was completed on
     February 13, 2004.

(b)  We used the net proceeds to pay off a $150 million term loan, to pay off a
     $50 million balance on a term loan that was due to mature in July 2004, and
     for general corporate purposes.

(c)  We used the net proceeds to fund the maturity of a $250 million bond, to
     fund a $32 million option call payment, and for general corporate purposes.

(d)  We used the net proceeds to prepay a portion of a term loan that was due to
     mature in July 2004.

(e)  We used the net proceeds to purchase the headquarters building and pay off
     the capital lease.

(f)  Refer to "Regulatory Authorization for Financings" within this note for
     details about our remaining FERC debt authorization.

                                      CE-58
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     DEBT MATURITIES: The aggregate annual maturities for long-term debt for the
next five years are:

<Table>
<Caption>
                                                                            DECEMBER 31
                                                                ------------------------------------
                                                                            PAYMENTS DUE
                                                                ------------------------------------
                                                                2004    2005    2006    2007    2008
                                                                ----    ----    ----    ----    ----
                                                                            IN MILLIONS
<S>                                                             <C>     <C>     <C>     <C>     <C>
Long-term debt..............................................    $28     $328    $422    $31     $441
</Table>

     PREFERRED STOCK: The following table describes our Preferred Stock
outstanding:

<Table>
<Caption>
                                                                                   DECEMBER 31
                                                                       ------------------------------------
                                                          OPTIONAL       NUMBER OF SHARES
                                                         REDEMPTION    --------------------
                                               SERIES      PRICE         2003        2002      2003    2002
                                               ------    ----------      ----        ----      ----    ----
                                                                                               IN MILLIONS
<S>                                            <C>       <C>           <C>         <C>         <C>     <C>
Preferred Stock
  Cumulative, $100 par value, authorized
     7,500,000 shares, with no mandatory
     redemption............................    $4.16      $103.25        68,451      68,451    $ 7     $ 7
                                                4.50       110.00       373,148     373,148     37      37
                                                                                               ---     ---
Total Preferred Stock......................                                                    $44     $44
                                                                                               ===     ===
</Table>

     REGULATORY AUTHORIZATION FOR FINANCINGS: At December 31, 2003, we had
remaining FERC authorization to issue or guarantee up to $500 million of
short-term securities and up to $700 million of short-term first mortgage bonds
as collateral for such short-term securities.

     At December 31, 2003, we had remaining FERC authorization to issue up to
$740 million of long-term securities for refinancing or refunding purposes, $560
million of long-term securities for general corporate purposes, and $2 billion
of long-term first mortgage bonds to be issued solely as collateral for other
long-term securities.

     With the granting of authorization, FERC waived its competitive
bid/negotiated placement requirements applicable to the long-term securities
authorization. The authorizations expire on June 30, 2004.

     SHORT-TERM FINANCINGS: We have a $400 million revolving credit facility
with banks. The facility is secured with first mortgage bonds. The interest rate
of the facility is LIBOR plus 175 basis points. This facility expires in March
2004 with two annual extensions at our option, which would extend the maturity
to March 2006. At December 31, 2003, $390 million is available for general
corporate purposes, working capital, and letters of credit.

     At December 31, 2002, $457 million of bank notes were outstanding at a
weighted average interest rate of 4.50 percent.

     FIRST MORTGAGE BONDS: We secure our first mortgage bonds by a mortgage and
lien on substantially all of our property. Our ability to issue and sell
securities is restricted by certain provisions in the first mortgage bond
indenture, our articles of incorporation, and the need for regulatory approvals
under federal law.

     POLLUTION CONTROL REVENUE BONDS: In January 2004, we amended the PCRB
indentures to add an auction rate interest mode and switched to that mode for
the two floating rate bonds. Under the auction rate mode, the bonds' interest
rate will be reset every 35 days. While in the auction rate mode, no letter of
credit liquidity facility is required and investors do not have a put right.

     COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES OF
SUBSIDIARIES: We formed various statutory wholly owned business trusts for the
sole purpose of issuing preferred securities and lending the gross

                                      CE-59
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

proceeds to ourselves. The sole assets of the trusts are debentures with terms
similar to those of the preferred security. Summarized information for
mandatorily redeemable preferred securities is as follows:

<Table>
<Caption>
                                                                   AMOUNT
                                                               OUTSTANDING(A)                   EARLIEST
               TRUST AND SECURITIES                            ---------------                  OPTIONAL
                   DECEMBER 31                        RATE     2003       2002    MATURITY    REDEMPTION(B)
               --------------------                   ----     ----       ----    --------    -------------
                                                                 IN MILLIONS
<S>                                                   <C>      <C>        <C>     <C>         <C>
Consumers Power Company Financing I, Trust
  Originated Preferred Securities.................    8.36%    $ --       $ 70      2015          2000
Consumers Energy Company Financing II, Trust
  Originated Preferred Securities.................    8.20%      --        120      2027          2002
Consumers Energy Company Financing III, Trust
  Originated Preferred Securities.................    9.25%      --        175      2029          2004
Consumers Energy Company Financing IV, Trust
  Preferred Securities............................    9.00%      --        125      2031          2006
                                                               -----      ----
Total amount outstanding..........................             $ --       $490
                                                               =====      ====
</Table>

- -------------------------
(a)  We determined that we do not hold the controlling financial interest in our
     trust preferred security structures. Accordingly, those entities have been
     deconsolidated as of December 31, 2003. Company obligated Trust Preferred
     Securities totaling $490 million that were previously included in mezzanine
     equity, have been eliminated due to deconsolidation and are reflected in
     Long-term debt -- related parties. For additional details, refer to
     "Long-Term Debt -- Related Parties" within this Note and Note 13,
     Implementation of New Accounting Standards.

(b)  The trusts must redeem the securities at a liquidation value of $25 per
     share, which is equivalent to the carrying cost plus accrued but unpaid
     distributions, when the securities are paid at maturity or upon any earlier
     redemption. Prior to an early redemption date, the securities could be
     redeemed at market value.

     Each trust receives payments on the debenture it holds. Those receipts are
used to make cash distributions on the preferred securities the trust has
issued.

     The securities allow us the right to defer interest payments on the
debentures, and, as a consequence, the trusts will defer dividend payments on
the preferred securities. Should we exercise this right, we cannot declare or
pay dividends on, or redeem, purchase or acquire, any of our capital stock
during the deferral period until all deferred dividends are paid in full.

     In the event of default, holders of the preferred securities will be
entitled to exercise and enforce the trusts' creditor rights against us, which
may include acceleration of the principal amount due on the debentures. We have
issued certain guarantees with respect to payments on the preferred securities.
These guarantees, when taken together with our obligations under the debentures,
related indenture and trust documents, provide full and unconditional guarantees
for the trusts' obligations under the preferred securities.

     SALE OF ACCOUNTS RECEIVABLE: Under a revolving accounts receivable sales
program, we currently sell certain accounts receivable to a wholly owned,
consolidated, bankruptcy remote special purpose entity. In turn, the special
purpose entity may sell an undivided interest in up to $325 million of the
receivables. The amounts sold were $297 million at December 31, 2003 and $325
million at December 31, 2002. The Consolidated Balance Sheets exclude these
amounts from accounts receivable. We continue to service the receivables sold.
The purchaser of the receivables has no recourse against our other assets for
failure of a debtor to pay when due and the purchaser has no right to any
receivables not sold. No gain or loss has been recorded on the receivables sold
and we retain no interest in the receivables sold.

                                      CE-60
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Certain cash flows received from and paid to us under our accounts
receivable sales program are shown below:

<Table>
<Caption>
                                                                  YEARS ENDED
                                                                  DECEMBER 31
                                                                ----------------
                                                                 2003      2002
                                                                 ----      ----
                                                                  IN MILLIONS
<S>                                                             <C>       <C>
Proceeds from sales (remittance of collections) under the
  program...................................................    $  (28)   $   (9)
Collections reinvested under the program....................     4,361     4,080
</Table>

     DIVIDEND RESTRICTIONS: Under the provisions of our articles of
incorporation, at December 31, 2003, we had $373 million of unrestricted
retained earnings available to pay common dividends. However, covenants in our
debt facilities cap common stock dividend payments at $300 million in a calendar
year. Through December 31, 2003, we made the following common stock dividend
payments:

<Table>
<Caption>
                                                                IN MILLIONS
                                                                -----------
<S>                                                             <C>
January.....................................................       $ 78
May.........................................................         31
June........................................................         53
November....................................................         56
                                                                   ----
Total common stock dividends paid to CMS Energy.............       $218
                                                                   ====
</Table>

     As of December 18, 2003, we are also under an annual dividend cap of $190
million imposed by the MPSC during the current interim gas rate relief period.
Because all of the $218 million of common stock dividends to CMS Energy were
paid prior to December 18, 2003, we were not out of compliance with this new
restriction for 2003. In February 2004, we paid a $78 million common stock
dividend.

     For additional details on the potential cap on common dividends payable
included in the MPSC Securitization order, see Note 2, Uncertainties, "Electric
Restructuring Matters -- Securitization." Also, for additional details on the
cap on common dividends payable during the current interim gas rate relief
period, see Note 2, Uncertainties, "Gas Rate Matters -- 2003 Gas Rate Case."

     FASB INTERPRETATION NO. 45, GUARANTOR'S ACCOUNTING AND DISCLOSURE
REQUIREMENT FOR GUARANTEES, INCLUDING INDIRECT GUARANTEES OF INDEBTEDNESS OF
OTHERS: This interpretation became effective January 2003. It describes the
disclosure to be made by a guarantor about its obligations under certain
guarantees that it has issued. At the beginning of a guarantee, it requires a
guarantor to recognize a liability for the fair value of the obligation
undertaken in issuing the guarantee. The initial recognition and measurement
provision of this interpretation does not apply to some guarantee contracts,
such as warranties, derivatives, or guarantees between either parent and
subsidiaries or corporations under common control, although disclosure of these
guarantees is required. For contracts that are within the recognition and
measurement provision of this interpretation, the provisions were to be applied
to guarantees issued or modified after December 31, 2002.

                                      CE-61
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following tables describe our guarantees at December 31, 2003:

<Table>
<Caption>
                                                             EXPIRATION     MAXIMUM      CARRYING      RECOURSE
           GUARANTEE DESCRIPTION               ISSUE DATE       DATE       OBLIGATION     AMOUNT     PROVISION(a)
           ---------------------               ----------    ----------    ----------    --------    ------------
                                                                                        IN MILLIONS
<S>                                            <C>           <C>           <C>           <C>         <C>
Standby letters of credit..................     Various       Various         $ 10        $  --         $  --
Surety bonds...............................     Various       Various            8           --            --
Nuclear insurance retrospective premiums...     Various       Various          133           --            --
</Table>

- -------------------------
(a)  Recourse provision indicates the approximate recovery from third parties
     including assets held as collateral.

<Table>
<Caption>
                                                                        EVENTS THAT WOULD
    GUARANTEE DESCRIPTION             HOW GUARANTEE AROSE              REQUIRE PERFORMANCE
    ---------------------             -------------------              -------------------
<S>                              <C>                              <C>
Standby letters of credit        Normal operations of coal        Noncompliance with
                                 power plants                     environmental regulations
                                 Self-insurance requirement       Nonperformance
Surety bonds                     Normal operating activity,       Nonperformance
                                 permits and license
Nuclear insurance                Normal operations of nuclear     Call by NEIL and Price
  retrospective premiums         plants                           Anderson Act for nuclear
                                                                  incident
</Table>

4: FINANCIAL AND DERIVATIVE INSTRUMENTS

     FINANCIAL INSTRUMENTS: The carrying amounts of cash, short-term
investments, and current liabilities approximate their fair values because of
their short-term nature. We estimate the fair values of long-term investments
based on quoted market prices or, in the absence of specific market prices, on
quoted market prices of similar investments or other valuation techniques. The
carrying amount of all long-term financial instruments, except as shown below,
approximate fair value. For additional details, see Note 1, Corporate Structure
and Accounting Policies.

<Table>
<Caption>
                                                                       DECEMBER 31
                                            -----------------------------------------------------------------
                                                         2003                               2002
                                            -------------------------------    ------------------------------
                                                       FAIR     UNREALIZED                FAIR     UNREALIZED
                                             COST     VALUE     GAIN (LOSS)     COST     VALUE        GAIN
                                             ----     -----     -----------     ----     -----     ----------
                                                                       IN MILLIONS
<S>                                         <C>       <C>       <C>            <C>       <C>       <C>
Long-term debt(a).......................    $3,583    $3,666       $(83)       $2,442    $2,404       $38
Long-term debt-related parties(b).......       506       518        (12)           --        --        --
Trust Preferred Securities(b)...........        --        --         --           490       447        43
Available for sale securities:
Common stock of CMS Energy(c)...........        10        20         10            22        22        --
SERP....................................        17        21          4            18        19         1
Nuclear decommissioning
  investments(d)........................       442       575        133           458       536        78
</Table>

- -------------------------
(a)  Settlement of long-term debt is generally not expected until maturity.

(b)  We determined that we do not hold the controlling financial interest in our
     trust preferred security structures. Accordingly, those entities have been
     deconsolidated as of December 31, 2003. Company obligated Trust Preferred
     Securities totaling $490 million that were previously included in mezzanine
     equity, have been eliminated due to deconsolidation and are reflected in
     Long-term debt -- related parties on the Consolidated Balance Sheets. For
     additional details, see Note 3, Financings and Capitalization, "Long-Term
     Debt -- Related Parties" and Note 13, Implementation of New Accounting
     Standards.

                                      CE-62
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(c)  We recognized a $12 million loss on this investment in 2002 and an
     additional $12 million loss in the first quarter of 2003 because the loss
     was other than temporary, as the fair value was below the cost basis for
     more than six months. As of December 31, 2003, we held 2.4 million shares
     of CMS Energy Common Stock.

(d)  On January 1, 2003, we adopted SFAS No. 143 and began classifying our
     unrealized gains and losses on nuclear decommissioning investments as
     regulatory liabilities. We previously classified the unrealized gains and
     losses on these investments in accumulated depreciation.

     DERIVATIVE INSTRUMENTS: We are exposed to market risks including, but not
limited to, changes in interest rates, commodity prices, and equity security
prices. We manage these risks using established policies and procedures, under
the direction of both an executive oversight committee consisting of senior
management representatives and a risk committee consisting of business-unit
managers. We may use various contracts to manage these risks including swaps,
options, and forward contracts.

     We intend that any gains or losses on these contracts will be offset by an
opposite movement in the value of the item at risk. We enter into all risk
management contracts for purposes other than trading. These contracts contain
credit risk if the counterparties, including financial institutions and energy
marketers, fail to perform under the agreements. We minimize such risk by
performing financial credit reviews using, among other things, publicly
available credit ratings of such counterparties.

     Contracts used to manage interest rate and commodity price risk may be
considered derivative instruments that are subject to derivative and hedge
accounting pursuant to SFAS No. 133. If a contract is accounted for as a
derivative instrument, it is recorded in the financial statements as an asset or
a liability, at the fair value of the contract. The recorded fair value of the
contract is then adjusted quarterly to reflect any change in the market value of
the contract, a practice known as marking the contract to market. The accounting
for changes in the fair value of a derivative (that is, gains or losses) are
reported either in earnings or accumulated other comprehensive income depending
on whether the derivative qualifies for special hedge accounting treatment.

     For derivative instruments to qualify for hedge accounting under SFAS No.
133, the hedging relationship must be formally documented at inception and be
highly effective in achieving offsetting cash flows or offsetting changes in
fair value attributable to the risk being hedged. If hedging a forecasted
transaction, the forecasted transaction must be probable. If a derivative
instrument, used as a cash flow hedge, is terminated early because it is
probable that a forecasted transaction will not occur, any gain or loss as of
such date is immediately recognized in earnings. If a derivative instrument,
used as a cash flow hedge, is terminated early for other economic reasons, any
gain or loss as of the termination date is deferred and recorded when the
forecasted transaction affects earnings. We use a combination of quoted market
prices and mathematical valuation models to determine fair value of those
contracts requiring derivative accounting. The ineffective portion, if any, of
all hedges is recognized in earnings.

     The majority of our contracts are not subject to derivative accounting
because they qualify for the normal purchases and sales exception of SFAS No.
133 or are not derivatives because there is not an active market for the
commodity. Derivative accounting is required for certain contracts used to limit
our exposure to electricity and gas commodity price risk and interest rate risk.

                                      CE-63
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table reflects the fair value of all contracts requiring
derivative accounting:

<Table>
<Caption>
                                                                            DECEMBER 31
                                                   -------------------------------------------------------------
                                                               2003                             2002
                                                   -----------------------------    ----------------------------
                                                            FAIR     UNREALIZED             FAIR     UNREALIZED
                                                   COST     VALUE    GAIN (LOSS)    COST    VALUE    GAIN (LOSS)
                                                   ----     -----    -----------    ----    -----    -----------
                                                                            IN MILLIONS
<S>                                                <C>      <C>      <C>            <C>     <C>      <C>
Electric -- related contracts..................    $ --     $ --        $  --        $8      $ 1         $(7)
Gas contracts..................................       3        2           (1)       --        1           1
Interest rate risk contracts...................      --       --           --        --       (1)         (1)
Derivative contracts associated with Consumers'
  equity investment in the MCV Partnership.....      --       15           15        --       13          13
</Table>

     The fair value of all derivative contracts, except the fair value of
derivative contracts associated with our equity investment in the MCV
Partnership, is included in either Other Assets or Other Liabilities on the
Consolidated Balance Sheets. The fair value of derivative contracts associated
with our equity investment in the MCV Partnership is included in Investments --
Midland Cogeneration Venture Limited Partnership on the Consolidated Balance
Sheets. Effective April 1, 2002, the MCV Partnership changed its accounting for
derivatives. For additional details see Note 11, Summarized Financial
Information of Significant Related Energy Supplier.

     Cumulative Effect of Change in Accounting Principle: On January 1, 2001,
upon initial adoption of the derivatives standard, we recorded a $21 million,
net of tax, cumulative effect transition adjustment as an unrealized gain
increasing accumulated other comprehensive income. In June and December 2001,
the FASB issued guidance that resolved the accounting for certain utility
industry contracts. As a result, we recorded a $3 million, net of tax,
cumulative effect adjustment as an unrealized loss, decreasing accumulated other
comprehensive income, and on December 31, 2001, recorded an $11 million, net of
tax, cumulative effect adjustment as a decrease to earnings. These adjustments
relate to the difference between the fair value and the recorded book value of
certain electric call option contracts.

     ELECTRIC CONTRACTS: Our electric business uses purchased electric call
option contracts to meet, in part, our regulatory obligation to serve. This
obligation requires us to provide a physical supply of electricity to customers,
to manage electric costs and to ensure a reliable source of capacity during peak
demand periods.

     Certain of our electric capacity and energy contracts are not accounted for
as derivatives due to the lack of an active energy market in the state of
Michigan, as defined by SFAS No. 133, and the transportation costs that would be
incurred to deliver the power under the contracts to the closest active energy
market at the Cinergy hub in Ohio. If a market develops in the future, we may be
required to account for these contracts as derivatives. The mark-to-market
impact on earnings related to these contracts, particularly related to the PPA,
could be material to the financial statements.

     Our electric business also uses gas option and swap contracts to protect
against price risk due to the fluctuations in the market price of gas used as
fuel for generation of electricity. These contracts are financial contracts that
are used to offset increases in the price of potential gas purchases. These
contracts do not qualify for hedge accounting. Therefore, we record any change
in the fair value of these contracts directly in earnings as part of power
supply costs.

     For the year ended December 31, 2003, the unrealized gain in accumulated
other comprehensive income related to our proportionate share of the effects of
derivative accounting related to our equity investment in the MCV Partnership is
$10 million, net of tax. We expect to reclassify this gain, if this value
remains, as an increase to earnings from equity method investees during the next
12 months.

                                      CE-64
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     GAS CONTRACTS: Our gas utility business uses fixed price gas supply
contracts, fixed price weather-based gas supply call options, fixed price gas
supply call and put options, and other types of contracts, to meet our
regulatory obligation to provide gas to our customers at a reasonable and
prudent cost. Unrealized gains and losses associated with these options are
reported directly in earnings as part of other income, and then directly offset
in earnings and recorded on the balance sheet as a regulatory asset or
liability.

     INTEREST RATE RISK CONTRACTS: We use interest rate swaps to hedge the risk
associated with forecasted interest payments on variable-rate debt. These
interest rate swaps are designated as cash flow hedges. As such, we record any
change in the fair value of these contracts in accumulated other comprehensive
income unless the swaps are sold. As of December 31, 2003, we did not have any
interest rate swaps outstanding. As of December 31, 2002, we had entered into a
swap to fix the interest rate on $75 million of variable-rate debt. This swap
expired in June 2003. We were able to apply the shortcut method to all interest
rate hedges; therefore, there was no ineffectiveness associated with these
hedges.

5: INCOME TAXES

     We file a consolidated federal income tax return with CMS Energy. Income
taxes are generally allocated based on each company's separate taxable income.
We had tax related receivables from CMS Energy of $46 million in 2003 and $44
million in 2002.

     The Job Creation and Worker Assistance Act of 2002 provided corporate
taxpayers a 5-year carryback of tax losses incurred in 2001 and 2002. As a
result of this legislation, CMS Energy was able to carry back consolidated 2001
and 2002 tax losses to tax years 1996 through 1999 to obtain refunds of prior
years tax payments totaling $250 million. The tax loss carryback, however,
resulted in a reduction in AMT credit carryforwards that previously had been
recorded by CMS Energy as deferred tax assets in the amount of $47 million. This
non-cash reduction in AMT credit carryforwards was reflected in the 2002 tax
provision of CMS Energy and allocated to each of its consolidated subsidiaries
under the CMS Energy tax sharing agreement. Consumers' allocable share, $25
million, was reflected in 2002 as a dividend paid by us to CMS Energy.

     We practice deferred tax accounting for temporary differences in accordance
with SFAS No. 109. We use ITC to reduce current income taxes payable, and defer
and amortize ITC over the life of the related property. AMT paid generally
becomes a tax credit that we can carry forward indefinitely to reduce regular
tax liabilities in future periods when regular taxes paid exceed the tax
calculated for AMT. At December 31, 2003, we had AMT credit carryforwards in the
amount of $11 million that do not expire, and tax loss carryforwards in the
amount of $71 million that expire in 2021 and 2022.

     The significant components of income tax expense (benefit) consisted of:

<Table>
<Caption>
                                                                    YEARS ENDED
                                                                    DECEMBER 31
                                                                --------------------
                                                                2003    2002    2001
                                                                ----    ----    ----
                                                                    IN MILLIONS
<S>                                                             <C>     <C>     <C>
Current federal income taxes................................    $(58)   $(97)   $(39)
Deferred income taxes.......................................     201     283     143
Deferred ITC, net...........................................      (6)     (6)     (7)
                                                                ----    ----    ----
Income tax expense..........................................    $137    $180    $ 97
                                                                ====    ====    ====
</Table>

                                      CE-65
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The principal components of our deferred tax assets (liabilities)
recognized in the balance sheet are as follows:

<Table>
<Caption>
                                                                   DECEMBER 31
                                                                ------------------
                                                                 2003       2002
                                                                 ----       ----
                                                                   IN MILLIONS
<S>                                                             <C>        <C>
Property....................................................    $  (826)   $  (789)
Unconsolidated investments..................................       (226)      (223)
Securitization costs........................................       (186)      (192)
Prepaid pension.............................................       (134)        --
Gas inventories.............................................       (100)       (74)
Postretirement benefits.....................................        (70)       (72)
Employee benefit obligations................................        114        208
SFAS No. 109 regulatory liability...........................        120        115
Nuclear decommissioning.....................................         59         55
Tax loss carryforwards......................................         25         15
AMT credit carryforwards....................................         11          7
Other, net..................................................        (53)       (24)
                                                                -------    -------
Net deferred tax liabilities................................    $(1,266)   $  (974)
                                                                =======    =======
Deferred tax liabilities....................................    $(1,967)   $(1,528)
Deferred tax assets.........................................        701        554
                                                                -------    -------
Net deferred tax liabilities................................    $(1,266)   $  (974)
                                                                =======    =======
</Table>

     The actual income tax expense differs from the amount computed by applying
the statutory federal tax rate of 35 percent to income before income taxes as
follows:

<Table>
<Caption>
                                                                        YEARS ENDED
                                                                        DECEMBER 31
                                                                  ------------------------
                                                                  2003      2002      2001
                                                                  ----      ----      ----
                                                                        IN MILLIONS
<S>                                                               <C>       <C>       <C>
Income before cumulative effect of change in accounting
  principle.................................................      $196      $363      $199
Income taxes................................................       137       180        97
Preferred securities distributions (Note 3).................        --       (44)      (41)
                                                                  ----      ----      ----
Pretax income...............................................       333       499       255
Statutory federal income tax rate...........................       x35%      x35%      x35%
                                                                  ----      ----      ----
Expected income tax expense.................................       117       174        89
Increase (decrease) in taxes from:
  Property differences not previously deferred..............        16        14        17
  Reserve for tax credits previously claimed................         8        --        --
  Loss on investment in CMS Energy Common Stock.............         4         4        --
  Sale of METC..............................................        --        (5)       --
  ITC amortization/adjustments..............................        (6)       (6)       (7)
  Affiliated companies' dividends...........................        --        (1)       (2)
  Other, net................................................        (2)       --        --
                                                                  ----      ----      ----
Actual income tax expense...................................      $137      $180      $ 97
                                                                  ====      ====      ====
Effective tax rate..........................................      41.1%     36.0%     38.0%
                                                                  ====      ====      ====
</Table>

                                      CE-66
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

6: EXECUTIVE INCENTIVE COMPENSATION

     We provide a Performance Incentive Stock Plan to key management employees
based on their contributions to the successful management of the company. The
Plan includes the following type of awards for common stock:

     - restricted shares of common stock,

     - stock options, and

     - stock appreciation rights.

     Restricted shares of CMS Energy Common Stock are outstanding shares with
full voting and dividend rights. These awards vest over five years at the rate
of 25 percent per year after two years. Some restricted shares are subject to
achievement of specified levels of total shareholder return and are subject to
forfeiture if employment terminates before vesting. Restricted shares vest fully
if control of CMS Energy changes.

     Stock options give the holder the right to purchase common stock at a given
price over an extended period of time. Stock appreciation rights give the holder
the right to receive common stock appreciation, which is defined as the excess
of the market price of the stock at the date of exercise over the grant date
price. CMS Energy stock options and stock appreciation rights are valued at
market price when granted. All options and rights may be exercised upon grant
and they expire up to ten years and one month from the date of grant.

     Our Performance Incentive Stock Plan was amended in January 1999. It uses
the following formula to grant awards:

     - up to five percent of CMS Energy Common Stock outstanding at January 1
       each year less:

      - the number of shares of restricted common stock awarded, and

      - Common Stock subject to options granted under the plan during the
        immediately preceding four calendar years.

     - the number of shares of restricted CMS Energy Common Stock awarded under
       this plan cannot exceed 20 percent of the aggregate number of shares
       reserved for award, and

     - forfeiture of shares previously awarded will increase the number of
       shares available to be awarded under the plan.

     Awards of up to 2,240,247 shares of CMS Energy Common Stock may be issued
as of December 31, 2003.

                                      CE-67
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following table summarizes the restricted stock and stock options
granted to our key employees under the Performance Incentive Stock Plan:

<Table>
<Caption>
                                                             RESTRICTED
                                                               STOCK                  OPTIONS
                                                             ----------    -----------------------------
                                                               NUMBER       NUMBER      WEIGHTED AVERAGE
CMS ENERGY COMMON STOCK                                      OF SHARES     OF SHARES     EXERCISE PRICE
- -----------------------                                      ---------     ---------    ----------------
<S>                                                          <C>           <C>          <C>
Outstanding at January 1, 2001...........................     259,377        842,119         $30.75
Granted..................................................      71,930        294,150         $30.04
Exercised or Issued......................................     (34,704)       (35,317)        $19.34
Forfeited or Expired.....................................     (56,938)            --             --
Outstanding at December 31, 2001.........................     239,665      1,100,952         $30.93
Granted..................................................     163,890        490,600         $14.32
Exercised or Issued......................................     (26,663)        (6,083)        $17.13
Forfeited or Expired.....................................     (56,172)       (65,080)        $32.03
Outstanding at December 31, 2002.........................     320,720      1,520,389         $25.58
Granted..................................................     434,011      1,105,490         $ 6.35
Exercised or Issued......................................     (22,812)            --             --
Forfeited or Expired.....................................     (69,372)       (31,667)        $26.25
Outstanding at December 31, 2003.........................     662,547      2,594,212         $17.37
</Table>

     At December 31, 2003, 70,567 of the 662,547 shares of CMS Energy restricted
common stock outstanding are subject to performance objectives. Compensation
expense for restricted stock was $4 million in 2003, less than $1 million in
2002, and $3 million in 2001.

     The following table summarizes our stock options outstanding at December
31, 2003:

<Table>
<Caption>
                                                   NUMBER OF SHARES
                                                   OUTSTANDING AND     WEIGHTED AVERAGE    WEIGHTED AVERAGE
           RANGE OF EXERCISE PRICES                  EXERCISABLE        REMAINING LIFE      EXERCISE PRICE
           ------------------------                ----------------    ----------------    ----------------
<S>                                                <C>                 <C>                 <C>
CMS Energy Common Stock:
 $6.35 --  $6.35...............................       1,105,490           9.70 years            $ 6.35
 $8.12 -- $31.04...............................       1,074,441           6.96 years            $20.36
$34.80 -- $43.38...............................         414,281           4.89 years            $39.05
                                                      ---------           ----------            ------
 $6.35 -- $43.38...............................       2,594,212           7.80 years            $17.37
                                                      =========           ==========            ======
</Table>

     In December 2002, we adopted the fair value based method of accounting for
stock-based employee compensation, under SFAS No. 123, as amended by SFAS No.
148. We elected to adopt the prospective method recognition provisions of this
Statement, which applies the recognition provisions to all awards granted,
modified, or settled after the beginning of the fiscal year that the recognition
provisions are first applied.

     The following table summarizes the weighted average fair value of stock
options granted:

<Table>
<Caption>
                     OPTIONS GRANT DATE                         2003       2002(a)       2001
                     ------------------                         ----       -------       ----
<S>                                                             <C>      <C>             <C>
Fair value at grant date....................................    $3.04    $3.79, $1.40    $6.37
</Table>

- -------------------------
(a)  For 2002, there were two stock option grants.

                                      CE-68
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The stock options fair value is estimated using the Black-Scholes model, a
mathematical formula used to value options traded on securities exchanges. The
following assumptions were used in the Black-Scholes model:

<Table>
<Caption>
                                                                     YEARS ENDED DECEMBER 31
                                                                ---------------------------------
                                                                2003         2002(a)        2001
                                                                ----         -------        ----
<S>                                                             <C>      <C>                <C>
CMS Energy Common Stock Options
  Risk-free interest rate...................................     3.23%    4.02%, 3.28%       4.80%
  Expected stock price volatility...........................    53.10%   31.64%, 39.67%     29.48%
  Expected dividend rate....................................       --     $.365, $.1825     $.365
  Expected option life (years)..............................      4.7          4.5            4.6
</Table>

- -------------------------
(a)  For 2002, there were two stock option grants.

     We recorded $3 million as stock-based employee compensation cost for 2003,
and $1 million for 2002. If stock-based compensation costs had been determined
under SFAS No. 123 for the year ended December 31, 2001, consolidated net income
and pro forma net income would have been as follows:

<Table>
<Caption>
                                                                YEAR ENDED
                                                                DECEMBER 31
                                                                -----------
                                                                   2001
                                                                   ----
                                                                IN MILLIONS
<S>                                                             <C>
Net income, as reported.....................................       $188
Add: Stock-based employee compensation expense included in
  reported net income, net of related taxes.................         --
Deduct: Total stock-based employee compensation expense
  determined under fair value based method for all awards,
  net of related taxes......................................         (1)
                                                                   ----
Pro forma net income........................................       $187
                                                                   ====
</Table>

7: RETIREMENT BENEFITS

     We provide retirement benefits to our employees under a number of different
plans, including:

     - non-contributory, defined benefit Pension Plan,

     - a cash balance pension plan for certain employees hired after June 30,
       2003,

     - benefits to certain management employees under SERP,

     - health care and life insurance benefits under OPEB,

     - benefits to a select group of management under EISP, and

     - a defined contribution 401(k) plan.

     Pension Plan: The Pension Plan includes funds for our employees and our
non-utility affiliates, including Panhandle. The Pension Plan's assets are not
distinguishable by company.

     In June 2003, CMS Energy sold Panhandle to Southern Union Panhandle Corp.
No portion of the Pension Plan assets were transferred with the sale and
Panhandle employees are no longer eligible to accrue additional benefits. The
Pension Plan retained pension payment obligations for Panhandle employees that
were vested under the Pension Plan.

                                      CE-69
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The sale of Panhandle resulted in a significant change in the makeup of the
Pension Plan. A remeasurement of the obligation was required at the date of
sale. The remeasurement further resulted in the following:

     - an increase in OPEB expense of $4 million for 2003, and

     - an additional charge to accumulated other comprehensive income of $31
       million ($20 million after-tax) because of the increase in the additional
       minimum pension liability. Due to large contributions, the additional
       minimum pension liability was eliminated as of December 31, 2003.

     In 2003, a substantial number of retiring employees elected a lump sum
payment instead of receiving pension benefits as an annuity over time. Lump sum
payments constitute a settlement under SFAS No. 88. A settlement loss must be
recognized when the cost of all settlements paid during the year exceeds the sum
of the service and interest costs for that year. We recorded a settlement loss
of $48 million ($31 million after-tax) in December 2003.

     SERP: SERP benefits are paid from a trust established in 1988. SERP is not
a qualified plan under the Internal Revenue Code; SERP trust earnings are
taxable and trust assets are included in consolidated assets. Trust assets were
$22 million at December 31, 2003, and $19 million at December 31, 2002. The
assets are classified as other non-current assets. The Accumulated Benefit
Obligation for SERP was $19 million at December 31, 2003 and $17 million at
December 31, 2002.

     OPEB: Retiree health care costs at December 31, 2003 are based on the
assumption that costs would increase 8.5 percent in 2003. The rate of increase
is expected to be 7.5 percent for 2004. The rate of increase is expected to slow
to an estimated 5.5 percent by 2010 and thereafter.

     The health care cost trend rate assumption significantly affects the
estimated costs recorded. A one-percentage point change in the assumed health
care cost trend assumption would have the following effects:

<Table>
<Caption>
                                                                ONE PERCENTAGE    ONE PERCENTAGE
                                                                POINT INCREASE    POINT DECREASE
                                                                --------------    --------------
                                                                          IN MILLIONS
<S>                                                             <C>               <C>
Effect on total service and interest cost component.........         $ 13             $ (11)
Effect on postretirement benefit obligation.................         $136             $(119)
</Table>

     We adopted SFAS No. 106, effective as of the beginning of 1992. We recorded
a liability of $466 million for the accumulated transition obligation and a
corresponding regulatory asset for anticipated recovery in utility rates. For
additional details, see Note 1, Corporate Structure and Accounting Policies,
"Utility Regulation." The MPSC authorized recovery of the electric utility
portion of these costs in 1994 over 18 years and the gas utility portion in 1996
over 16 years.

     EISP: We implemented an EISP in 2002 to provide flexibility in separation
of employment by officers, a select group of management, or other highly
compensated employees. Terms of the plan may include payment of a lump sum,
payment of monthly benefits for life, payment of premium for continuation of
health care, or any other legally permissible term deemed to be in our best
interest to offer. As of December 31, 2003, the Accumulated Benefit Obligation
of the EISP was $3 million. Consumers' portion of the EISP was $300,000.

     The measurement date for all plans is December 31.

                                      CE-70
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Assumptions: The following table recaps the weighted-average assumptions
used in our retirement benefits plans to determine the benefit obligation and
net periodic benefit cost:

<Table>
<Caption>
                                                      PENSION & SERP                  OPEB
                                                  -----------------------    -----------------------
                                                               YEARS ENDED DECEMBER 31
                                                  --------------------------------------------------
                                                  2003     2002     2001     2003     2002     2001
                                                  ----     ----     ----     ----     ----     ----
<S>                                               <C>      <C>      <C>      <C>      <C>      <C>
Discount rate.................................    6.25%    6.75%    7.25%    6.25%    6.75%    7.25%
Expected long-term rate of return on plan
  assets(a)...................................    8.75%    8.75%    9.75%
  Union.......................................                               8.75%    8.75%    9.75%
  Non-Union...................................                               6.00%    6.00%    6.00%
Rate of compensation increase:
  Pension.....................................    3.25%    3.50%    5.25%
  SERP........................................    5.50%    5.50%    5.50%
</Table>

- -------------------------
(a) We determine our long-term rate of return by considering historical market
    returns, the current and future economic environment, the capital market
    principals of risk and return, and the expertise of individuals and firms
    with financial market knowledge. We use the asset allocation of the
    portfolio to forecast the future expected total return of the portfolio. The
    goal is to determine a long-term rate of return that can be incorporated
    into the planning of future cash flow requirements in conjunction with the
    change in the liability. The use of forecasted returns for various classes
    of assets used to construct an expected return model is reviewed
    periodically for reasonability and appropriateness.

     Costs: The following table recaps the costs incurred in our retirement
benefits plans:

<Table>
<Caption>
                                                             PENSION & SERP                OPEB
                                                          ---------------------    --------------------
                                                                     YEARS ENDED DECEMBER 31
                                                          ---------------------------------------------
                                                          2003    2002     2001    2003    2002    2001
                                                          ----    ----     ----    ----    ----    ----
                                                                           IN MILLIONS
<S>                                                       <C>     <C>      <C>     <C>     <C>     <C>
Service cost..........................................    $ 39    $  40    $ 37    $ 17    $ 16    $ 13
Interest expense......................................      75       86      84      61      63      57
Expected return on plan assets........................     (80)    (103)    (99)    (39)    (40)    (40)
Amortization of unrecognized transition (asset).......      --       --      (5)     --      --      --
Plan amendments.......................................      --        4      --      --      --      --
Settlement charge.....................................      48       --      --      --      --      --
Amortization of:
  Net loss............................................       9       --      --      18       8      --
  Prior service cost..................................       7        8       8      (6)     (1)     (1)
                                                          ----    -----    ----    ----    ----    ----
Net periodic pension and postretirement benefit
  cost................................................    $ 98    $  35    $ 25    $ 51    $ 46    $ 29
                                                          ====    =====    ====    ====    ====    ====
</Table>

     Plan Assets: The following table recaps the categories of plan assets in
our retirement benefits plans:

<Table>
<Caption>
                                                                  PENSION             OPEB
                                                                ------------      ------------
                                                                   YEARS ENDED DECEMBER 31
                                                                ------------------------------
                                                                2003    2002      2003    2002
                                                                ----    ----      ----    ----
<S>                                                             <C>     <C>       <C>     <C>
Asset Category:
  Fixed Income..............................................    52%     32%(b)    51%     55%
  Equity Securities.........................................    44%     60%       48%     44%
     CMS Energy Common Stock(a).............................     4%      8%        1%      1%
</Table>

- -------------------------
(a)  At December 31, 2003, there were 4,970,000 shares of CMS Energy Common
     Stock in the Pension Plan assets with a fair value of $42 million, and
     414,000 shares in the OPEB plan assets, with a fair value of
                                      CE-71
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     $4 million. At December 31, 2002, there were 5,099,000 shares of CMS Energy
     Common Stock in the Pension Plan assets with a fair value of $48 million,
     and 284,000 shares in the OPEB plan assets, with a fair value of $3
     million.

(b)  At February 29, 2004, the Pension Plan assets were 66 percent equity and 34
     percent fixed income. We plan to contribute $71 million to our OPEB plan in
     2004. We estimate a contribution of $23 million to our Pension Plan in
     2004.

     We have established a target asset allocation for our Pension Plan assets
of 65 percent equity and 35 percent fixed income investments to maximize the
long-term return on plan assets, while maintaining a prudent level of risk. The
level of acceptable risk is a function of the liabilities of the plan. Equity
investments are diversified mostly across the Standard & Poor's 500 Index, with
a lesser allocation to the Standard & Poor's Mid Cap and Small Cap Indexes and a
Foreign Equity Index Fund. Fixed income investments are diversified across
investment grade instruments of both government and corporate issuers. Annual
liability measurements, quarterly portfolio reviews, and periodic
asset/liability studies are used to evaluate the need for adjustments to the
portfolio allocation.

     We have established union and non-union VEBA trusts to fund our future
retiree health and life insurance benefits. These trusts are funded through the
rate making process for Consumers, and through direct contributions from the
non-utility subsidiaries. The equity portions of the union and non-union health
care VEBA trusts are invested in an Standard & Poor's 500 Index fund. The fixed
income portion of the union health care VEBA trust is invested in domestic
investment grade taxable instruments. The fixed income portion of the non-union
health care VEBA trust is invested in a diversified mix of domestic tax-exempt
securities. The investment selections of each VEBA are influenced by the tax
consequences, as well as the objective of generating asset returns that will
meet the medical and life insurance costs of retirees.

                                      CE-72
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     Reconciliations: The following table reconciles the funding of our
retirement benefit plans with our retirement benefit plans liability:

<Table>
<Caption>
                                                                   YEARS ENDED DECEMBER 31
                                                      --------------------------------------------------
                                                        PENSION PLAN          SERP             OPEB
                                                      ----------------    ------------    --------------
                                                       2003      2002     2003    2002    2003     2002
                                                       ----      ----     ----    ----    ----     ----
                                                                         IN MILLIONS
<S>                                                   <C>       <C>       <C>     <C>     <C>      <C>
Benefit obligation January 1......................    $1,256    $1,195    $ 21    $ 19    $ 890    $ 876
Service cost......................................        38        40       1       1       17       16
Interest cost.....................................        74        84       1       2       61       63
Plan amendment....................................       (19)        3      --      --      (44)     (57)
Actuarial loss....................................        55        72      --      --       76       31
Benefits paid.....................................      (215)     (138)     (1)     (1)     (40)     (39)
                                                      ------    ------    ----    ----    -----    -----
Benefit obligation December 31(a).................     1,189     1,256      22      21      960      890
                                                      ------    ------    ----    ----    -----    -----
Plan assets at fair value at January 1............       607       845      --      --      465      475
Actual return on plan assets......................       115      (164)     --      --       68      (44)
Company contribution..............................       560        64      --      --       71       73
Actual benefits paid..............................      (215)     (138)     --      --      (40)     (39)
                                                      ------    ------    ----    ----    -----    -----
Plan assets at fair value at December 31..........     1,067       607      --      --      564      465
                                                      ------    ------    ----    ----    -----    -----
Benefit obligation in excess of plan assets.......      (122)     (649)    (22)    (21)    (396)    (425)
Unrecognized net loss from experience different
  than assumed....................................       501       573       3       3      312      282
Unrecognized prior service cost (benefit).........        29        60      --      --     (107)     (70)
Panhandle adjustment..............................        --        (7)     --      --       --       --
                                                      ------    ------    ----    ----    -----    -----
Net Balance Sheet Asset (Liability)...............       408       (23)    (19)    (18)    (191)    (213)
Additional minimum liability adjustment(b)........        --      (426)     --      --       --       --
                                                      ------    ------    ----    ----    -----    -----
Total Net Balance Sheet Asset (Liability)(c)......    $  408    $ (449)   $(19)   $(18)   $(191)   $(213)
                                                      ======    ======    ====    ====    =====    =====
</Table>

- -------------------------
(a)  The Medicare Prescription Drug, Improvement and Modernization Act of 2003
     was signed into law in December 2003. This Act establishes a prescription
     drug benefit under Medicare (Medicare Part D), and a federal subsidy to
     sponsors of retiree health care benefit plans that provide a benefit that
     is actuarially equivalent to Medicare Part D. Accounting guidance for the
     subsidy is not yet available, therefore, we have decided to defer
     recognizing the effects of the Act in our 2003 financial statements, as
     permitted by FASB Staff Position No. 106-1. When accounting guidance is
     issued, our retiree health benefit obligation may be adjusted.

(b)  The Pension Plan's Accumulated Benefit Obligation of $1.055 billion
     exceeded the value of the Pension Plan assets and net balance sheet
     liability at December 31, 2002. As a result, we recorded an additional
     minimum liability, including an intangible asset of $40 million, and $285
     million of accumulated other comprehensive income. In August 2003, we made
     our planned contribution of $172 million to the Pension Plan. In December
     2003, we made an additional contribution of $329 million to the Pension
     Plan that eliminated the additional minimum liability. The Accumulated
     Benefit Obligation for the Pension Plan was $1.019 billion at December 31,
     2003.

(c)  As of December 31, 2003, we have recorded a prepaid pension asset of $384
     million, $20 million of which is in other current assets on our
     consolidated balance sheets.

                                      CE-73
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

8: LEASES

     We lease various assets, including vehicles, railcars, construction
equipment, furniture, and buildings. We have both full-service and net leases. A
net lease requires us to pay for taxes, maintenance, operating costs, and
insurance. Most of our leases contain options at the end of the initial lease
term to:

     - purchase the asset at the then fair value of the asset, or

     - renew the lease at the then fair rental value.

     Minimum annual rental commitments under our non-cancelable leases at
December 31, 2003, were:

<Table>
<Caption>
                                                                CAPITAL LEASES    OPERATING LEASES
                                                                --------------    ----------------
                                                                           IN MILLIONS
<S>                                                             <C>               <C>
2004........................................................         $13                $ 9
2005........................................................          12                  8
2006........................................................          12                  7
2007........................................................          11                  6
2008........................................................           9                  5
2009 and thereafter.........................................          21                 29
                                                                     ---                ---
Total minimum lease payments................................          78                $64
                                                                                        ===
Less imputed interest.......................................          10
                                                                     ---
Present value of net minimum lease payments.................          68
Less current portion........................................          10
                                                                     ---
Non-current portion.........................................         $58
                                                                     ===
</Table>

     We are authorized by the MPSC to record both capital and operating lease
payments as operating expense and recover the total cost from our customers.
Operating lease charges were $13 million in 2003, $13 million in 2002, and $15
million in 2001.

     Capital lease expenses were $17 million in 2003, $20 million in 2002, and
$26 million in 2001. Included in the $26 million for 2001, is $7 million of
nuclear fuel lease expense. In November 2001, our nuclear fuel capital leasing
arrangement expired. At termination of the lease, we paid the lessor $48
million, which was the lessor's remaining investment at that time.

     In April 2001, we entered into a lease agreement for the construction of an
office building to be used as the main headquarters for CMS Energy in Jackson,
Michigan. In November 2003, we exercised our purchase option under the lease
agreement and bought the office building with proceeds from a $60 million term
loan.

9: JOINTLY OWNED REGULATED UTILITY FACILITIES

     We are required to provide only our share of financing for the jointly
owned utility facilities. The direct expenses of the jointly owned plants are
included in operating expenses. Operation, maintenance, and other expenses of
these jointly owned utility facilities are shared in proportion to each
participant's undivided

                                      CE-74
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

ownership interest. The following table indicates the extent of our investment
in jointly owned regulated utility facilities:

<Table>
<Caption>
                                                                        DECEMBER 31
                                                                ----------------------------
                                                                    NET         ACCUMULATED
                                                                 INVESTMENT     DEPRECIATION
                                                                ------------    ------------
                                                                2003    2002    2003    2002
                                                                ----    ----    ----    ----
                                                                        IN MILLIONS
<S>                                                             <C>     <C>     <C>     <C>
Campbell Unit 3 -- 93.3 percent.............................    $299    $298    $328    $313
Ludington -- 51 percent.....................................      84      83      87      85
Distribution -- various.....................................      74      77      32      31
</Table>

10: REPORTABLE SEGMENTS

     Our reportable segments are strategic business units organized and managed
by the nature of the products and services each provides. We evaluate
performance based upon the net income available to the common stockholder of
each segment. We operate principally in two segments: electric utility and gas
utility.

     The electric utility segment consists of regulated activities associated
with the generation and distribution of electricity in the state of Michigan.
The gas utility segment consists of regulated activities associated with the
transportation, storage, and distribution of natural gas in the state of
Michigan.

     Accounting policies of the segments are the same as we describe in the
summary of significant accounting policies. Our financial statements reflect the
assets, liabilities, revenues, and expenses directly related to the electric and
gas segment where it is appropriate. We allocate accounts between the electric
and gas segments where common accounts are attributable to both segments. The
allocations are based on certain measures of business activities, such as
revenue, labor dollars, customers, other operation and maintenance and
construction expense, leased property, taxes or functional surveys. For example,
customer receivables are allocated based on revenue. Pension provisions are
allocated based on labor dollars.

     The following tables show our financial information by reportable segment.
We account for inter-segment sales and transfers at current market prices and
eliminate them in consolidated net income available to common stockholder by
segment. The "Other" segment includes our consolidated special purpose entity
for the sale of trade receivables.

<Table>
<Caption>
                                                                  YEARS ENDED DECEMBER 31
                                                                ---------------------------
                                                                 2003       2002      2001
                                                                 ----       ----      ----
                                                                        IN MILLIONS
<S>                                                             <C>        <C>       <C>
Operating Revenues
  Electric..................................................    $ 2,590    $2,648    $2,633
  Gas.......................................................      1,845     1,519     1,338
  Other.....................................................         --         2         5
                                                                -------    ------    ------
                                                                $ 4,435    $4,169    $3,976
                                                                =======    ======    ======
Earnings from Equity Method Investees
  Other (a).................................................    $    42    $   53    $   38
                                                                =======    ======    ======
Depreciation, Depletion and Amortization
  Electric..................................................    $   247       228    $  219
  Gas.......................................................        128       118       118
  Other.....................................................          2         2         2
                                                                -------    ------    ------
                                                                $   377    $  348    $  339
                                                                =======    ======    ======
</Table>

                                      CE-75
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<Table>
<Caption>
                                                                  YEARS ENDED DECEMBER 31
                                                                ---------------------------
                                                                 2003       2002      2001
                                                                 ----       ----      ----
                                                                        IN MILLIONS
<S>                                                             <C>        <C>       <C>
Interest Charges
  Electric..................................................    $   166    $  144    $  153
  Gas.......................................................         52        47        50
  Other.....................................................         30        21        21
                                                                -------    ------    ------
  Subtotal..................................................        248       212       224
  Eliminations..............................................         (3)      (44)      (38)
                                                                -------    ------    ------
                                                                $   245    $  168    $  186
                                                                =======    ======    ======
Income Taxes
  Electric..................................................    $    90    $  138    $   69
  Gas.......................................................         35        33        25
  Other (b).................................................         12         9         3
                                                                -------    ------    ------
                                                                $   137    $  180    $   97
                                                                =======    ======    ======
Net Income Available to Common Stockholder
  Electric..................................................    $   167    $  264    $  109
  Gas.......................................................         38        46        21
  Other.....................................................        (11)       25        15
                                                                -------    ------    ------
                                                                $   194    $  335    $  145
                                                                =======    ======    ======
Investments in Equity Method Investees
  Electric..................................................    $     2    $    2    $    2
  Other (c).................................................        659       643       553
                                                                -------    ------    ------
                                                                $   661    $  645    $  555
                                                                =======    ======    ======
Total Assets
  Electric (d)..............................................    $ 6,831    $6,058    $5,784
  Gas (d)...................................................      2,983     2,586     2,734
  Other.....................................................        931     1,398     1,142
                                                                -------    ------    ------
  Subtotal..................................................     10,745    10,042     9,660
  Eliminations..............................................         --      (444)     (469)
                                                                -------    ------    ------
                                                                $10,745    $9,598    $9,191
                                                                =======    ======    ======
Capital Expenditures (e)
  Electric..................................................    $   310    $  437    $  623
  Gas.......................................................        135       181       145
                                                                -------    ------    ------
                                                                $   445    $  618    $  768
                                                                =======    ======    ======
</Table>

- -------------------------
(a)  2002 excludes $28 million benefit and 2001 excludes $17 million expense due
     to the change in accounting for derivative instruments.

(b)  2002 excludes $10 million tax expense and 2001 excludes $6 million tax
     benefit due to the change in accounting for derivative instruments.

(c)  As of December 31, 2003, the trusts that hold the mandatorily redeemable
     Trust Preferred Securities were deconsolidated. The trusts are now included
     on the Consolidated Balance Sheets as Investments -- Other.

(d)  Amounts include a portion of our other common assets attributable to both
     the electric and gas utility businesses.

                                      CE-76
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(e)  Amounts include electric restructuring implementation plan, capital leases
     for nuclear fuel, purchase of nuclear fuel, and other assets. Amounts also
     include a portion of capital expenditures for plant and equipment
     attributable to both the electric and gas utility businesses.

11: SUMMARIZED FINANCIAL INFORMATION OF SIGNIFICANT RELATED ENERGY SUPPLIER

     Under the PPA with the MCV Partnership discussed in Note 2, Uncertainties,
our 2003 obligation to purchase electric capacity from the MCV Partnership
provided 15 percent of our owned and contracted electric generating capacity.
Summarized financial information of the MCV Partnership follows:

STATEMENTS OF INCOME

<Table>
<Caption>
                                                                YEARS ENDED DECEMBER 31
                                                                ------------------------
                                                                2003      2002      2001
                                                                ----      ----      ----
                                                                      IN MILLIONS
<S>                                                             <C>       <C>       <C>
Operating revenue(a)........................................    $584      $597      $611
Operating expenses..........................................     416       409       453
                                                                ----      ----      ----
Operating income............................................     168       188       158
Other expense, net..........................................     108       114       110
                                                                ----      ----      ----
Income before cumulative effect of accounting change........      60        74        48
Cumulative effect of change in method of accounting for
  derivative options contracts(b)...........................      --        58        --
                                                                ----      ----      ----
Net Income..................................................    $ 60      $132      $ 48
                                                                ====      ====      ====
</Table>

                                      CE-77
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

BALANCE SHEETS

<Table>
<Caption>
                               DECEMBER 31
                             ----------------
                              2003      2002
                              ----      ----
                               IN MILLIONS
<S>                          <C>       <C>
Assets
  Current assets(c)......    $  389    $  358
  Plant, net.............     1,494     1,550
  Other assets...........       187       190
                             ------    ------
                             $2,070    $2,098
                             ======    ======
</Table>

<Table>
<Caption>
                               DECEMBER 31
                             ----------------
                              2003      2002
                              ----      ----
                               IN MILLIONS
<S>                          <C>       <C>
Liabilities and Equity
  Current liabilities....    $  250    $  209
  Non-current
     liabilities(d)......     1,021     1,155
  Partners' equity(e)....       799       734
                             ------    ------
                             $2,070    $2,098
                             ======    ======
</Table>

- -------------------------
(a)  Revenue from Consumers totaled $514 million in 2003, $557 million in 2002,
     and $550 million in 2001.

(b)  On April 1, 2002, the MCV Partnership implemented a new accounting standard
     for derivatives. As a result, the MCV Partnership began accounting for
     several natural gas contracts containing an option component at fair value.
     The MCV Partnership recorded a $58 million cumulative effect adjustment for
     the change in accounting principle as an increase to earnings. CMS
     Midland's 49 percent ownership share was $28 million ($18 million
     after-tax), which is reflected as a change in accounting principle on our
     Consolidated Statements of Income.

(c)  Receivables from Consumers totaled $40 million for December 31, 2003 and
     $44 million for December 31, 2002.

(d)  FMLP is the sole beneficiary of a trust that is the lessor in a long-term
     direct finance lease with the MCV Partnership. CMS Holdings holds a 46.4
     percent ownership interest in FMLP. The MCV Partnership's lease
     obligations, assets, and operating revenues secure FMLP's debt. The
     following table summarizes obligation and payment information regarding the
     direct finance lease.

<Table>
<Caption>
                                                                                      DECEMBER 31
                                                                                      ------------
                                                                                      2003    2002
                                                                                      ----    ----
                                                                                      IN MILLIONS
<S>                      <C>                                                          <C>     <C>
Balance Sheet:
  MCV Partnership:       Lease obligation.........................................    $894    $975
  FMLP:                  Non-recourse debt........................................     431     449
                         Lease payment to service non-recourse debt (including
                         interest)................................................     158     370
  CMS Holdings:          Share of interest portion of lease payment...............      37      34
                         Share of principle portion of lease payment..............      36      65
</Table>

<Table>
<Caption>
                                                                                       YEARS ENDED
                                                                                       DECEMBER 31
                                                                                   --------------------
                                                                                   2003    2002    2001
                                                                                   ----    ----    ----
                                                                                       IN MILLIONS
<S>                      <C>                                                       <C>     <C>     <C>
Income Statement:
  FMLP:                  Earnings..............................................    $32     $38     $30
</Table>

- -------------------------
(e) CMS Midland's recorded investment in the MCV Partnership includes
    capitalized interest, which we are expensing over the life of our investment
    in the MCV Partnership. The financing agreements prohibit the MCV
    Partnership from distributing any cash to its owners until it meets certain
    financial test requirements. We do not anticipate receiving a cash
    distribution in the near future.

                                      CE-78
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

12: ASSET RETIREMENT OBLIGATIONS

     SFAS NO. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS: This standard
became effective January 2003. It requires companies to record the fair value of
the cost to remove assets at the end of their useful life, if there is a legal
obligation to do so. We have legal obligations to remove some of our assets,
including our nuclear plants, at the end of their useful lives.

     Before adopting this standard, we classified the removal cost of assets
included in the scope of SFAS No. 143 as part of the reserve for accumulated
depreciation. For these assets, the removal cost of $448 million that was
classified as part of the reserve at December 31, 2002, was reclassified in
January 2003, in part, as:

     - $364 million ARO liability,

     - $134 million regulatory liability,

     - $42 million regulatory asset, and

     - $7 million net increase to property, plant, and equipment as prescribed
       by SFAS No. 143.

     We are reflecting a regulatory asset and liability as required by SFAS No.
71 for regulated entities instead of a cumulative effect of a change in
accounting principle. Accretion of $1 million related to the Big Rock and
Palisades' profit component included in the estimated cost of removal was
expensed for 2003.

     The fair value of ARO liabilities has been calculated using an expected
present value technique. This technique reflects assumptions, such as costs,
inflation, and profit margin that third parties would consider to assume the
settlement of the obligation. Fair value, to the extent possible, should include
a market risk premium for unforeseeable circumstances. No market risk premium
was included in our ARO fair value estimate since a reasonable estimate could
not be made. If a five percent market risk premium were assumed, our ARO
liability would be $381 million.

     If a reasonable estimate of fair value cannot be made in the period the
asset retirement obligation is incurred, such as assets with indeterminate
lives, the liability is to be recognized when a reasonable estimate of fair
value can be made. Generally, transmission and distribution assets have
indeterminate lives. Retirement cash flows cannot be determined. There is a low
probability of a retirement date, so no liability has been recorded for these
assets. No liability has been recorded for assets that have insignificant
cumulative disposal costs, such as substation batteries. The measurement of the
ARO liabilities for Palisades and Big Rock are based on decommissioning studies
that are based largely on third-party cost estimates.

                                      CE-79
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     The following tables describe our assets that have legal obligations to be
removed at the end of their useful life.

<Table>
<Caption>
                                            IN SERVICE                                               TRUST
            ARO DESCRIPTION                    DATE                LONG LIVED ASSETS                 FUND
            ---------------                 ----------             -----------------                 -----
                                                                                                  IN MILLIONS
<S>                                         <C>           <C>                                     <C>
December 31, 2003
  Palisades -- decommission plant
     site...............................        1972      Palisades nuclear plant                    $487
  Big Rock -- decommission plant site...        1962      Big Rock nuclear plant                       88
  JHCampbell intake/discharge water
     line...............................        1980      Plant intake/discharge water line
  Closure of coal ash disposal areas....     Various      Generating plants coal ash areas
  Closure of wells at gas storage
     fields.............................     Various      Gas storage fields
  Indoor gas services equipment
     relocations........................     Various      Gas meters located inside structures
</Table>

<Table>
<Caption>
                                    PRO FORMA              ARO LIABILITY                                         ARO
                                  ARO LIABILITY    -----------------------------                 CASH FLOW    LIABILITY
       ARO DESCRIPTION               1/1/02        1/1/03    INCURRED    SETTLED    ACCRETION    REVISIONS    12/31/03
       ---------------            -------------    ------    --------    -------    ---------    ---------    ---------
                                                                       IN MILLIONS
<S>                               <C>              <C>       <C>         <C>        <C>          <C>          <C>
December 31, 2003
  Palisades -- decommission...        $232          $249       $--        $ --         $19          $--         $268
  Big Rock -- decommission....          94            61        --         (39)         13           --           35
  JHCampbell intake line......          --            --        --          --          --           --           --
  Coal ash disposal areas.....          46            51        --          (4)          5           --           52
  Wells at gas storage
     fields...................           2             2        --          --          --           --            2
  Indoor gas services
     relocations..............           1             1        --          --          --           --            1
                                      ----          ----       ---        ----         ---          ---         ----
       Total..................        $375          $364       $--        $(43)        $37          $--         $358
                                      ====          ====       ===        ====         ===          ===         ====
</Table>

     Reclassification of Non-Legal Cost of Removal: Beginning in December 2003,
the SEC requires the quantification and reclassification of the estimated cost
of removal obligations arising from other than legal obligations. These
obligations have been accrued through depreciation charges. We estimate that we
had $983 million in 2003 and $907 million in 2002 of previously accrued asset
removal costs related to our regulated operations, for other than legal
obligations. These obligations, which were previously classified as a component
of accumulated depreciation were reclassified as regulatory liabilities in the
accompanying consolidated balance sheets.

13: IMPLEMENTATION OF NEW ACCOUNTING STANDARDS

     SFAS NO. 149, AMENDMENT OF STATEMENT 133 ON DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES: Amends and clarifies financial accounting and reporting for
derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities under SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. This statement is effective for
contracts entered into or modified after June 30, 2003. Implementation of this
statement has not impacted our Consolidated Financial Statements.

     SFAS NO. 150, ACCOUNTING FOR CERTAIN FINANCIAL INSTRUMENTS WITH
CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY: Establishes standards for how we
classify and measure certain financial instruments with characteristics of both
liabilities and equity. The statement requires us to classify financial
instruments within its scope as liabilities rather than mezzanine equity, the
area between liabilities and equity. SFAS No. 150 became effective July 1, 2003.

     We have four Trust Preferred Securities outstanding as of December 31, 2003
that are issued by our affiliated trusts. Each trust holds a subordinated
debenture from the parent company. The terms of the debentures are identical to
those of the trust-preferred securities, except that the debenture has an
explicit maturity date. The

                                      CE-80
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

trust documents, in turn, require that the trust be liquidated upon the
repayment of the debenture. The preferred securities are redeemable upon the
liquidation of the subsidiary; therefore, they are considered equity in the
financial statements of the subsidiary.

     At their October 29, 2003 Board meeting, the FASB deferred the
implementation of the portion of SFAS No. 150 relating to mandatorily redeemable
noncontrolling interests in subsidiaries when the noncontrolling interests are
classified as equity in the financial statements of the subsidiary. Our Trust
Preferred Securities are included in the deferral action.

     Upon adoption of FASB Interpretation No. 46, we determined that our trusts
that issue Trust Preferred Securities should be deconsolidated and reported as
long-term debt -- related parties. Refer to further discussion under "Accounting
Standards Not Yet Effective -- FASB Interpretation No. 46, Consolidation of
Variable Interest Entities."

     EITF ISSUE NO. 01-08, DETERMINING WHETHER AN ARRANGEMENT CONTAINS A
LEASE: In May 2003, the EITF reached consensus in EITF Issue No. 01-08 requiring
both parties to a transaction, such as power purchase agreements, to determine
whether a service contract or similar arrangement is or includes a lease within
the scope of SFAS No. 13, Accounting for Leases. The consensus is to be applied
prospectively to arrangements agreed to, modified, or acquired in business
combinations in fiscal periods beginning July 1, 2003.

     Prospective accounting under EITF Issue No. 01-08, could affect the timing
and classification of revenue and expense recognition. Certain product sales and
service revenue and expenses may be required to be reported as rental or leasing
income and/or expenses. Transactions deemed to be capital lease arrangements
would be included on our balance sheet. The adoption of EITF Issue No. 01-08 has
not impacted our results of operations, cash flows, or financial position.

     EITF ISSUE NO. 03-04, ACCOUNTING FOR CASH BALANCE PENSION PLANS: In May
2003, the EITF reached consensus in EITF Issue No. 03-04 to specifically address
the accounting for certain cash balance pension plans. EITF Issue No. 03-04
concluded that certain cash balance plans be accounted for as defined benefit
plans under SFAS No. 87, Employers' Accounting for Pensions. The EITF
requirements must be applied as of our next plan measurement date after
issuance, which is December 31, 2003. In 2003, we started a cash balance pension
plan that covers employees hired after June 30, 2003. We account for this plan
as a defined benefit plan under SFAS No. 87 and comply with EITF Issue No.
03-04. For further information, see Note 7, Retirement Benefits.

ACCOUNTING STANDARDS NOT YET EFFECTIVE

     FASB INTERPRETATION NO. 46, CONSOLIDATION OF VARIABLE INTEREST
ENTITIES: FASB issued this interpretation in January 2003. The objective of the
Interpretation is to assist in determining when one party controls another
entity in circumstances where a controlling financial interest cannot be
properly identified based on voting interests. Entities with this characteristic
are considered variable interest entities. The Interpretation requires the party
with the controlling financial interest to consolidate the entity.

     On December 24, 2003, the FASB issued Revised FASB Interpretation No. 46.
For entities that have not previously adopted FASB Interpretation No. 46,
Revised FASB Interpretation No. 46 provides an implementation deferral, until
the first quarter of 2004. Revised FASB Interpretation No. 46 is effective for
the first quarter of 2004 for all entities other than special purpose entities.
Special-purpose entities must apply either FASB Interpretation No. 46 or Revised
FASB Interpretation No. 46 for the first reporting period that ends after
December 15, 2003.

     As of December 31, 2003, we have completed our analysis for and have
adopted Revised FASB Interpretation No. 46 for all entities other than the MCV
Partnership and FMLP. We continue to evaluate and gather information regarding
those entities. We will adopt the provisions of Revised FASB Interpretation No.
46 for the MCV Partnership and FMLP in the first quarter of 2004.

                                      CE-81
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

     If our completed analysis shows we have the controlling financial interest
in the MCV Partnership and FMLP, we would consolidate their assets, liabilities,
and activities, including $700 million of non-recourse debt, into our financial
statements. Financial covenants under our financing agreements could be impacted
negatively after such a consolidation. As a result, it may become necessary to
seek amendments to the relevant financing agreements to modify the terms of
certain of these covenants to remove the effect of this consolidation, or to
refinance the relevant debt. As of December 31, 2003, our investment in the MCV
Partnership was $419 million and our investment in the FMLP was $224 million.

     We also determined that we do not hold the controlling financial interest
in our trust preferred security structures. Accordingly, those entities have
been deconsolidated as of December 31, 2003. Company obligated Trust Preferred
Securities totaling $490 million that were previously included in mezzanine
equity, have been eliminated due to deconsolidation. As a result of the
deconsolidation, we have reflected $506 million of long-term debt -- related
parties and have reflected an investment in related parties of $16 million.

     We are not required to, and have not, restated prior periods for the impact
of this accounting change.

     STATEMENT OF POSITION, ACCOUNTING FOR CERTAIN COSTS AND ACTIVITIES RELATED
TO PROPERTY, PLANT, AND EQUIPMENT: At its September 9, 2003 meeting, the
Accounting Standards Executive Committee, of the American Institute of Certified
Public Accountants voted to approve the Statement of Position, Accounting for
Certain Costs and Activities Related to Property, Plant, and Equipment. The
Statement of Position is expected to be presented for FASB clearance in 2004 and
would be applicable for fiscal years beginning after December 15, 2004. An asset
classified as property, plant, and equipment asset often comprises multiple
parts and costs. A component accounting policy determines the level at which
those parts are recorded. Capitalization of certain costs related to property,
plant, and equipment are included in the total cost. The Statement of Position
could impact our component and capitalization accounting for property, plant,
and equipment. We continue to evaluate the impact, if any, this Statement of
Position will have upon adoption.

14: QUARTERLY FINANCIAL AND COMMON STOCK INFORMATION (UNAUDITED)

<Table>
<Caption>
                                                                                  2003
                                                               ------------------------------------------
                      QUARTERS ENDED                           MARCH 31    JUNE 30    SEPT. 30    DEC. 31
                      --------------                           --------    -------    --------    -------
                                                                              IN MILLIONS
<S>                                                            <C>         <C>        <C>         <C>
Operating revenue..........................................     $1,442      $902        $879      $1,212
Earnings from equity method investees......................         16        18          (3)         11
Operating income...........................................        233       139         115          96
Income (loss) before cumulative effect of change in
  accounting principle (a).................................        110        52          44         (10)
Net income (loss) (a)......................................        110        52          44         (10)
Preferred stock dividends..................................         --         1          --           1
Preferred securities distributions (a).....................         11        11          11         (33)
Net income available to common stockholder.................         99        40          33          22
</Table>

- -------------------------
(a)  As of December 31, 2003, we deconsolidated the trusts that hold the
     mandatorily redeemable Trust Preferred Securities. As a result of the
     deconsolidation, we now record on the Consolidated Statements of Income
     interest on long-term debt -- related parties to the trusts holding the
     Trust Preferred Securities.

                                      CE-82
<PAGE>
                            CONSUMERS ENERGY COMPANY

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<Table>
<Caption>
                                                                                  2002
                                                               ------------------------------------------
                      QUARTERS ENDED                           MARCH 31    JUNE 30    SEPT. 30    DEC. 31
                      --------------                           --------    -------    --------    -------
                                                                              IN MILLIONS
<S>                                                            <C>         <C>        <C>         <C>
Operating revenue (b)......................................     $1,226      $883        $911      $1,149
Earnings from equity method investees......................         10        18           8          17
Operating income (b).......................................        188       152         168         181
Income before cumulative effect of change in accounting
  principle (b)............................................         92       107          84          80
Cumulative effect of change in accounting for derivative
  instruments, net of $10 tax expense in 2002 (b)..........         --        17           1          --
Net income.................................................         92       124          85          80
Preferred stock dividends..................................         --        --          --           2
Preferred securities distributions.........................         11        11          11          11
Net income available to common stockholder.................         81       113          74          67
</Table>

- -------------------------
(b)  We reclassified $28 million ($18 million after taxes) reducing June and
     September 2002 operating amounts to reflect the MCV Partnership's change in
     accounting for derivative instruments as a separate item. For additional
     details see Note 11, Summarized Financial Information of Significant
     Related Energy Supplier.

                                      CE-83
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

The Board of Directors and Stockholder
Consumers Energy Company

     We have audited the accompanying consolidated balance sheets of Consumers
Energy Company (a Michigan corporation and wholly-owned subsidiary of CMS Energy
Corporation) and subsidiaries as of December 31, 2003 and 2002, and the related
consolidated statements of income, common stockholder's equity and cash flows
for each of the three years in the period ended December 31, 2003. Our audits
also included the financial statement schedule listed in the Index at Item
15(a)(2). These financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits. The financial statements
of Midland Cogeneration Venture Limited Partnership (a limited partnership in
which Consumers Energy Company and subsidiaries has a 49% interest), have been
audited by other auditors (the other auditors for 2001 for Midland Cogeneration
Venture Limited Partnership have ceased operations) whose reports have been
furnished to us; insofar as our opinion on the consolidated financial statements
relates to the amounts included for Midland Cogeneration Venture Limited
Partnership, it is based solely on their reports.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits and the reports of other
auditors provide a reasonable basis for our opinion.

     In our opinion, based on our audits and the reports of other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Consumers Energy
Company and subsidiaries at December 31, 2003 and 2002, and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2003 in conformity with accounting principles
generally accepted in the United States. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.

     As discussed in Notes 12 and 13 to the consolidated financial statements,
in 2003, the Company adopted the provisions of Statement of Financial Accounting
Standards (SFAS) No. 143, "Accounting for Asset Retirement Obligations" and of
Financial Accounting Standards Board Interpretation No. 46, "Consolidation of
Variable Interest Entities". As discussed in Notes 6 and 11 to the consolidated
financial statements, in 2002, the Company adopted the provisions SFAS No. 148,
"Accounting for Stock-Based Compensation" and Midland Cogeneration Venture
Limited Partnership adopted the provisions of SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended and interpreted.

                                          /s/ ERNST & YOUNG LLP

Detroit, Michigan
February 27, 2004

                                      CE-84
<PAGE>

                         REPORT OF INDEPENDENT AUDITORS

To the Partners and the Management Committee of
Midland Cogeneration Venture Limited Partnership:

     In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of operations, partners' equity and cash flows
present fairly, in all material respects, the financial position of the Midland
Cogeneration Limited Partnership (a Michigan limited partnership) and its
subsidiaries (MCV) at December 31, 2003 and 2002, and the results of their
operations and their cash flows for the each of the two years ended December 31,
2003 and 2002 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of
MCV's management; our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States of
America, which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion. The financial statements of
MCV for the year ended December 31, 2001, were audited by other independent
accountants who have ceased operations. Those independent accountants expressed
an unqualified opinion on those financial statements in their report dated
January 18, 2002.

     As explained in Note 2 to the financial statements, effective April 1,
2002, Midland Cogeneration Venture Limited Partnership changed its method of
accounting for derivative and hedging activities in accordance with Derivative
Implementation Group ("DIG") Issue C-16.

                                          /s/ PricewaterhouseCoopers LLP

Detroit, Michigan
February 18, 2004

                                      CE-85
<PAGE>

                 THIS REPORT IS A COPY OF THE PREVIOUSLY ISSUED
              ARTHUR ANDERSEN REPORT AND THIS REPORT HAS NOT BEEN
                        REISSUED BY ARTHUR ANDERSEN LLP

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners and the Management Committee of the
Midland Cogeneration Venture Limited Partnership:

     We have audited the accompanying consolidated balance sheets of the MIDLAND
COGENERATION VENTURE LIMITED PARTNERSHIP (a Michigan limited partnership) and
subsidiaries (MCV) as of December 31, 2001 and 2000, and the related
consolidated statements of operations, partners' equity and cash flows for each
of the three years in the period ended December 31, 2001. These financial
statements are the responsibility of MCV's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of the Midland
Cogeneration Venture Limited Partnership and subsidiaries as of December 31,
2001 and 2000, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December 31, 2001, in
conformity with accounting principles generally accepted in the United States.

     As explained in Note 2 to the financial statements, effective January 1,
2001, Midland Cogeneration Venture Limited Partnership changed its method of
accounting related to derivatives and hedging activities.

/s/Arthur Andersen LLP

Detroit, Michigan,
January 18, 2002

                                      CE-86
<PAGE>

             ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                    ON ACCOUNTING AND FINANCIAL DISCLOSURE.

CMS ENERGY

     In April 2002, CMS Energy's Board of Directors, upon the recommendation of
the Audit Committee of the Board, voted to discontinue using Arthur Andersen LLP
to audit CMS Energy's financial statements for the year ending December 31,
2002. CMS Energy had previously retained Arthur Andersen LLP to review its
financial statements for the quarter ended March 31, 2002. In May 2002, CMS
Energy's Board of Directors engaged Ernst & Young LLP to audit its financial
statements for the year ending December 31, 2002. Ernst & Young LLP audited
2000, 2001, and 2002. As a result, CMS Energy restated its 2000 and 2001
financial statements. The restated 2001 financial statements are contained
herein.

CONSUMERS

     In April 2002, Consumers' Board of Directors, upon the recommendation of
the Audit Committee of the Board, voted to discontinue using Arthur Andersen LLP
to audit Consumers' financial statements for the year ending December 31, 2002.
Consumers had previously retained Arthur Andersen LLP to review its financial
statements for the quarter ended March 31, 2002. In May 2002, Consumers' Board
of Directors engaged Ernst & Young LLP to audit its financial statements for the
year ending December 31, 2002. Ernst & Young LLP audited 2000, 2001, and 2002.
As a result, Consumers restated its 2000 and 2001 financial statements. The
restated 2001 financial statements are contained herein.

                       ITEM 9A. CONTROLS AND PROCEDURES.

CMS ENERGY

     Disclosure Controls and Procedures: CMS Energy's management, with the
participation of its CEO and CFO, has evaluated the effectiveness of its
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of the end of the period covered by
this report. Based on such evaluation, CMS Energy's CEO and CFO have concluded
that, as of the end of such period, its disclosure controls and procedures are
effective.

     Internal Control Over Financial Reporting: There have not been any changes
in CMS Energy's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last
fiscal quarter that have materially affected, or are reasonably likely to
materially affect, its internal control over financial reporting.

CONSUMERS

     Disclosure Controls and Procedures: Consumers' management, with the
participation of its CEO and CFO, has evaluated the effectiveness of its
disclosure controls and procedures (as such term is defined in Rules 13a-15(e)
and 15d-15(e) under the Exchange Act) as of the end of the period covered by
this report. Based on such evaluation, Consumers' CEO and CFO have concluded
that, as of the end of such period, its disclosure controls and procedures are
effective.

     Internal Control Over Financial Reporting: There have not been any changes
in Consumers' internal control over financial reporting (as such term is defined
in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the last fiscal
quarter that have materially affected, or are reasonably likely to materially
affect, its internal control over financial reporting.

                                       CO-1
<PAGE>

                                    PART III

                   ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.

CMS ENERGY

     Information that is required in Item 10 regarding directors and executive
officers is included in CMS Energy's definitive proxy statement, which is
incorporated by reference herein.

CONSUMERS

     Information that is required in Item 10 regarding Consumers' directors and
executive officers is included in CMS Energy's definitive proxy statement, which
is incorporated by reference herein.

                        ITEM 11. EXECUTIVE COMPENSATION.

CMS ENERGY

     Information that is required in Item 11 regarding executive compensation is
included in CMS Energy's definitive proxy statement, which is incorporated by
reference herein.

CONSUMERS

     Information that is required in Item 11 regarding executive compensation of
Consumers' executive officers is included in CMS Energy's definitive proxy
statement, which is incorporated by reference herein.

          ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                    MANAGEMENT RELATED STOCKHOLDER MATTERS.

CMS ENERGY

     Information that is required in Item 12 regarding securities authorized for
issuance under equity compensation plans and security ownership of certain
beneficial owners and management is included in CMS Energy's definitive proxy
statement, which is incorporated by reference herein.

CONSUMERS

     Information that is required in Item 12 regarding securities authorized for
issuance under equity compensation plans and security ownership of certain
beneficial owners and management of Consumers is included in CMS Energy's
definitive proxy statement, which is incorporated by reference herein.

            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

CMS ENERGY

     Information that is required in Item 13 regarding certain relationships and
related transactions is included in CMS Energy's definitive proxy statement,
which is incorporated by reference herein.

CONSUMERS

     Information that is required in Item 13 regarding certain relationships and
related transactions regarding Consumers is included in CMS Energy's definitive
proxy statement, which is incorporated by reference herein.

                                       CO-2
<PAGE>

                ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

CMS ENERGY

     Information that is required in Item 14 regarding principal accountant fees
and services is included in CMS Energy's definitive proxy statement, which is
incorporated by reference herein.

CONSUMERS

     Information that is required in Item 14 regarding Consumers' principal
accountant fees and services is included in CMS Energy's definitive proxy
statement, which is incorporated by reference herein.

                                    PART IV

             ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                              REPORTS ON FORM 8-K.

(a)(1)      Financial Statements and Reports of Independent Public Accountants
            for CMS Energy and Consumers are included in each company's ITEM 8.
            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA and are incorporated by
            reference herein.

(a)(2)      Financial Statement Schedules and Reports of Independent Public
            Accountants for CMS Energy and Consumers are included after the
            Exhibits to the Index to Financial Statement Schedules and are
            incorporated by reference herein.

(a)(3)      Exhibits for CMS Energy and Consumers are listed after Item 15(c)
            below and are incorporated by reference herein.

(b)         Reports on Form 8-K

CMS ENERGY

     During the fourth quarter of 2003, CMS Energy filed or furnished the
following Current Reports on Form 8-K:

     - 8-K filed on October 17, 2003 covering matters pursuant to Item 5, Other
       Events;

     - 8-K filed on October 24, 2003 covering matters pursuant to Item 5, Other
       Events;

     - 8-K furnished on November 12, 2003 covering matters pursuant to Item 12,
       Results of Operations and Financial Condition (including a Summary of
       Consolidated Earnings, Summarized Comparative Balance Sheets, Summarized
       Statements of Cash Flows, and a Summary of Consolidated Earnings);

     - 8-K filed on November 26, 2003 covering matters pursuant to Item 5, Other
       Events;

     - 8-K filed on December 5, 2003 covering matters pursuant to Item 5, Other
       Events; and

     - 8-K filed on December 19, 2003 covering matters pursuant to Item 5, Other
       Events.

CONSUMERS

     During the fourth quarter of 2003, Consumers filed or furnished the
following Current Reports on Form 8-K:

     - 8-K filed on October 24, 2003 covering matters pursuant to Item 5, Other
       Events;

     - 8-K furnished on November 12, 2003 covering matters pursuant to Item 12,
       Results of Operations and Financial Condition (including a Summary of
       Consolidated Earnings, Summarized Comparative Balance Sheets, Summarized
       Statements of Cash Flows, and a Summary of Consolidated Earnings);

     - 8-K filed on November 26, 2003 covering matters pursuant to Item 5, Other
       Events;

                                       CO-3
<PAGE>

     - 8-K filed on December 5, 2003 covering matters pursuant to Item 5, Other
       Events; and

     - 8-K filed on December 19, 2003 covering matters pursuant to Item 5, Other
       Events.

(c)         Exhibits, including those incorporated by reference (see also
            Exhibit volume).

                                       CO-4
<PAGE>

                      CMS ENERGY'S AND CONSUMERS' EXHIBITS

<Table>
<Caption>
                 PREVIOUSLY FILED
            --------------------------
            WITH FILE      AS EXHIBIT
EXHIBITS      NUMBER         NUMBER             DESCRIPTION
- --------    ---------      ----------           -----------
<S>         <C>           <C>           <C>     <C>
(3)(a)      333-51932     (3)(a)        --      Restated Articles of Incorporation of CMS Energy (Form
                                                S-3 filed December 15, 2000)
(3)(b)      333-45556     (3)(b)        --      By-Laws of CMS Energy (Form S-3 filed September 11, 2000)
(3)(c)      1-5611        3(c)          --      Restated Articles of Incorporation dated May 26, 2000, of
                                                Consumers (2000 Form 10-K)
(3)(d)      1-5611        (3)(d)        --      By-Laws of Consumers (1st qtr. 2003 Form 10-Q)
(4)(a)      2-65973       (b)(1)-4      --      Indenture dated as of September 1, 1945, between
                                                Consumers and Chemical Bank (successor to Manufacturers
                                                Hanover Trust Company), as Trustee, including therein
                                                indentures supplemental thereto through the Forty-third
                                                Supplemental Indenture dated as of May 1, 1979
                                        --      Indentures Supplemental thereto:
            33-41126      (4)(c)        --      68th dated as of 06/15/93
            1-5611        (4)           --      69th dated as of 09/15/93 (Form 8-K dated Sep. 21, 1993)
            1-5611        (4)(a)        --      70th dated as of 02/01/98 (1997 Form 10-K)
            1-5611        (4)(a)        --      71st dated as of 03/06/98 (1997 Form 10-K)
            333-58943     (4)(d)        --      73rd dated as of 06/15/98 (Form S-4 dated July 13, 1998)
            1-5611        (4)(b)        --      74th dated as of 10/29/98 (3rd qtr. 1998 Form 10-Q)
            1-5611        (4)(b)        --      75th dated as of 10/1/99 (1999 Form 10-K)
            1-5611        (4)(d)        --      77th dated as of 10/1/99 (1999 Form 10-K)
            1-5611        4(b)          --      79th dated as of 9/26/01 (3rd qtr. 2001 10-Q)
            1-5611        4(a)(i)       --      80th dated as of 3/22/02 (2001 Form 10-K)
            1-5611        (4)(a)        --      87th dated as of 3/26/03 (1st qtr. 2003 Form 10-Q)
            1-5611        (4)(d)        --      90th dated as of 3/30/03 (1st qtr. 2003 Form 10-Q)
            1-5611        (4)(a)        --      91st dated as of 5/23/03 (3rd qtr. 2003 Form 10-Q)
            1-5611        (4)(b)        --      92nd dated as of 8/26/03 (3rd qtr. 2003 Form 10-Q)
            1-5611        (4)(c)        --      93rd dated as of 9/17/03 (3rd qtr. 2003 Form 10-Q)
            333-111220    (4)(a)(i)     --      94th dated as of 11/7/03 (Consumers Form S-4 dated
                                                December 16, 2003)
(4)(b)      1-5611        (4)(b)        --      Indenture dated as of January 1, 1996 between Consumers
                                                and The Bank of New York, as Trustee (1995 Form 10-K)
                                        --      Indentures Supplemental thereto:
            1-5611        (4)(b)        --      1st dated as of 01/18/96 (1995 Form 10-K)
            1-5611        (4)(a)        --      2nd dated as of 09/04/97 (3rd qtr. 1997 Form 10-Q)
            1-9513        (4)(a)        --      3rd 11/04/99 (3rd qtr. 1999 Form 10-Q)
(4)(c)      1-5611        (4)(c)        --      Indenture dated as of February 1, 1998 between Consumers
                                                and JPMorgan Chase (formerly "The Chase Manhattan Bank"),
                                                as Trustee (1997 Form 10-K)
            1-5611        (4)(a)        --      1st dated as of 05/01/98 (1st Qtr. 1998 Form 10-Q)
            333-58943     (4)(b)        --      2nd dated as of 06/15/98
            1-5611        (4)(a)        --      3rd 10/29/98 (3rd qtr. 1998 Form 10-Q)
4(d)        1-5611        (4)(e)        --      $140 million Term Loan Agreement dated March 26, 2003
                                                between Consumers Energy Company and the Bank/Agent, as
                                                defined therein (1st qtr. 2003 Form 10-Q)
(4)(e)      33-47629      (4)(a)        --      Indenture dated as of September 15, 1992 between CMS
                                                Energy and NBD Bank, as Trustee (Form S-3 filed May 1,
                                                1992)
                                        --      Indentures Supplemental thereto:
            333-37241     (4)(a)        --      4th dated as of 09/26/97 (Form S-3 filed October 6, 1997)
</Table>

                                       CO-5
<PAGE>

<Table>
<Caption>
                 PREVIOUSLY FILED
            --------------------------
            WITH FILE      AS EXHIBIT
EXHIBITS      NUMBER         NUMBER             DESCRIPTION
- --------    ---------      ----------           -----------
<S>         <C>           <C>           <C>     <C>
            1-9513        (4)(d)        --      6th dated as of 01/13/98 (1997 Form 10-K)
            1-9513        (4)(d)(i)     --      7th dated as of 01/25/99 (1998 Form 10-K)
            333-48276     (4)           --      10th dated as of 10/12/00 (Form S-3 filed October 19,
                                                2000)
            333-58686     (4)           --      11th dated as of 03/29/01 (Form S-8 filed April 11, 2001)
            333-51932     (4)(a)        --      12th dated as of 07/02/01 (Form POS AM filed August 8,
                                                2001)
4(e)(i)                                 --      13th dated as of 07/16/03
4(e)(ii)                                --      14th dated as of 07/17/03
(4)(f)      1-9513        (4)(b)        --      Indenture between CMS Energy and JPMorgan Chase (formerly
                                                "The Chase Manhattan Bank"), as Trustee, dated as of
                                                January 15, 1994 (Form 8-K dated March 29, 1994)
                                        --      Indentures Supplemental thereto:
            1-9513        (4b)          --      1st dated as of 01/20/94 (Form 8-K dated March 29, 1994)
            1-9513        (4)           --      2nd dated as of 03/19/96 (1st qtr. 1996 Form 10-Q)
            1-9513        (4)(a)(iv)    --      3rd dated as of 03/17/97 (Form 8-K dated May 1, 1997)
            333-36115     (4)(d)        --      4th dated as of 09/17/97 (Form S-3 filed September 22,
                                                1997)
            333-63229     (4)(c)        --      5th dated as of 08/26/98 (Form S-4 filed September 10,
                                                1998)
            1-9513        (4)           --      6th dated as of 11/9/00 (3rd qtr. 2000 Form 10-Q)
            333-74958     (4)(a)(viii)  --      Form of Seventh Indenture (Form S-3 filed December 12,
                                                2001)
(4)(g)      1-9513        (4a)          --      Indenture dated as of June 1, 1997, between CMS Energy
                                                and The Bank of New York, as trustee (Form 8-K filed July
                                                1, 1997) Indentures Supplemental thereto:
            1-9513        (4)(b)        --      1st dated as of 06/20/97 (Form 8-K filed July 1, 1997)
            333-45556     (4)(e)        --      4th dated as of 08/22/00 (Form S-3 filed September 11,
                                                2000)
(4)(h)                                  --      $185 million Credit Agreement, as amended, dated May 22,
                                                2003 among CMS Energy and the Financial Institutions,
                                                Documentation Agent and Administrative Agent, as defined
                                                therein
(4)(i)                                  --      Certificate of Designation of 4.50% Cumulative
                                                Convertible Preferred Stock dated as of December 2, 2003
(4)(j)                                  --      Registration Rights Agreement dated as of July 16, 2003
                                                between CMS Energy and the Initial Purchasers, all as
                                                defined therein
(4)(k)                                  --      Registration Rights Agreement dated as of July 17, 2003
                                                between CMS Energy and the Initial Purchasers, all as
                                                defined therein
(4)(l)                                  --      Registration Rights Agreement dated as of December 5,
                                                2003 between CMS Energy and the Initial Purchasers, all
                                                as defined therein
(4)(m)                                  --      $190 million Fourth Amended and Restated Credit Agreement
                                                dated as of December 8, 2003 among CMS Energy, CMS
                                                Enterprises, the Banks, and the Administrative Agent and
                                                Collection Agent, all defined therein
(4)(n)      1-9513        4.9           --      Pledge and Security Agreement dated as of July 12, 2002
                                                among CMS Energy, Grantors and the Collateral Agent, all
                                                as defined therein (Form 8-K filed July 30, 2002)
(4)(o)                                  --      Third Amended and Restated Pledge and Security Agreement
                                                dated as of December 8, 2003 among CMS Energy and the
                                                Collateral Agent, as defined therein
(4)(p)                                  --      Amended and Restated Guaranty dated as of December 8,
                                                2003 by the Guarantor in favor of the Lenders, all as
                                                defined therein
(10)(a)     1-9513        (10)(b)       --      Form of Employment Agreement entered into by CMS Energy's
                                                and Consumers' executive officers (1999 Form 10-K)
</Table>

                                       CO-6
<PAGE>

<Table>
<Caption>
                 PREVIOUSLY FILED
            --------------------------
            WITH FILE      AS EXHIBIT
EXHIBITS      NUMBER         NUMBER             DESCRIPTION
- --------    ---------      ----------           -----------
<S>         <C>           <C>           <C>     <C>
(10)(b)     1-9513        (10)(a)       --      Acknowledgement of Resignation between Tamela W. Pallas
                                                and CMS Energy Corporation (3rd qtr. 2002 Form 10-Q)
(10)(c)     1-5611        (10)(g)       --      Consumers' Executive Stock Option and Stock Appreciation
                                                Rights Plan effective December 1, 1989 (1990 Form 10-K)
(10)(d)     1-9513        (10)(b)       --      Employment, Separation and General Release Agreement
                                                between William T. McCormick and CMS Energy Corporation
                                                (3rd qtr. 2002 Form 10-Q)
(10)(e)     1-9513        (10)(d)       --      CMS Energy's Performance Incentive Stock Plan effective
                                                February 3, 1988, as amended December 3, 1999 (1999 Form
                                                10-K)
(10)(f)     1-9513        (10)(c)       --      Employment, Separation and General Release Agreement
                                                between Alan M. Wright and CMS Energy Corporation (3rd
                                                qtr. 2002 Form 10-Q)
(10)(g)                                 --      CMS Energy's Salaried Employees Merit Program for 2003
                                                effective January 1, 2003
(10)(h)     1-9513        (10)(m)       --      CMS Deferred Salary Savings Plan effective January 1,
                                                1994 (1993 Form 10-K)
(10)(i)                                 --      Annual Officer Incentive Compensation Plan for CMS Energy
                                                Corporation and its Subsidiaries effective January 1,
                                                2003
(10)(j)     1-9513        (10)(h)       --      Supplemental Executive Retirement Plan for Employees of
                                                CMS Energy/Consumers Energy Company effective January 1,
                                                1982, as amended December 3, 1999 (1999 Form 10-K)
(10)(k)     33-37977      4.1           --      Senior Trust Indenture, Leasehold Mortgage and Security
                                                Agreement dated as of June 1, 1990 between The
                                                Connecticut National Bank and United States Trust Company
                                                of New York (MCV Partnership)
                                                Indenture Supplemental thereto:
            33-37977      4.2           --      Supplement No. 1 dated as of June 1, 1990 (MCV
                                                Partnership)
(10)(l)     1-9513        (28)(b)       --      Collateral Trust Indenture dated as of June 1, 1990 among
                                                Midland Funding Corporation I, MCV Partnership and United
                                                States Trust Company of New York, Trustee (3rd qtr. 1990
                                                Form 10-Q) Indenture Supplemental thereto:
            33-37977      4.4           --      Supplement No. 1 dated as of June 1, 1990 (MCV
                                                Partnership)
(10)(m)     1-9513        (10)(v)       --      Amended and Restated Investor Partner Tax Indemnification
                                                Agreement dated as of June 1, 1990 among Investor
                                                Partners, CMS Midland as Indemnitor and CMS Energy as
                                                Guarantor (1990 Form 10-K)
(10)(n)     1-9513        (19)(d)*      --      Environmental Agreement dated as of June 1, 1990 made by
                                                CMS Energy to The Connecticut National Bank and Others
                                                (1990 Form 10-K)
(10)(o)     1-9513        (10)(z)*      --      Indemnity Agreement dated as of June 1, 1990 made by CMS
                                                Energy to Midland Cogeneration Venture Limited
                                                Partnership (1990 Form 10-K)
(10)(p)     1-9513        (10)(aa)*     --      Environmental Agreement dated as of June 1, 1990 made by
                                                CMS Energy to United States Trust Company of New York,
                                                Meridian Trust Company, each Subordinated Collateral
                                                Trust Trustee and Holders from time to time of Senior
                                                Bonds and Subordinated Bonds and Participants from time
                                                to time in Senior Bonds and Subordinated Bonds (1990 Form
                                                10-K)
</Table>

                                       CO-7
<PAGE>

<Table>
<Caption>
                 PREVIOUSLY FILED
            --------------------------
            WITH FILE      AS EXHIBIT
EXHIBITS      NUMBER         NUMBER             DESCRIPTION
- --------    ---------      ----------           -----------
<S>         <C>           <C>           <C>     <C>
(10)(q)     33-37977      10.4          --      Amended and Restated Participation Agreement dated as of
                                                June 1, 1990 among MCV Partnership, Owner Participant,
                                                The Connecticut National Bank, United States Trust
                                                Company, Meridian Trust Company, Midland Funding
                                                Corporation I, Midland Funding Corporation II, MEC
                                                Development Corporation and Institutional Senior Bond
                                                Purchasers (MCV Partnership)
(10)(r)     33-3797       10.4          --      Power Purchase Agreement dated as of July 17, 1986
                                                between MCV Partnership and Consumers (MCV Partnership)
                                                Amendments thereto:
            33-37977      10.5          --      Amendment No. 1 dated September 10, 1987 (MCV
                                                Partnership)
            33-37977      10.6          --      Amendment No. 2 dated March 18, 1988 (MCV Partnership)
            33-37977      10.7          --      Amendment No. 3 dated August 28, 1989 (MCV Partnership)
            33-37977      10.8          --      Amendment No. 4A dated May 25, 1989 (MCV Partnership)
(10)(s)     1-5611        (10)(y)       --      Unwind Agreement dated as of December 10, 1991 by and
                                                among CMS Energy, Midland Group, Ltd., Consumers, CMS
                                                Midland, Inc., MEC Development Corp. and CMS Midland
                                                Holdings Company (1991 Form 10-K)
(10)(t)     1-5611        (10)(z)       --      Stipulated AGE Release Amount Payment Agreement dated as
                                                of June 1, 1990, among CMS Energy, Consumers and The Dow
                                                Chemical Company (1991 Form 10-K)
(10)(u)     1-5611        (10)(aa)*     --      Parent Guaranty dated as of June 14, 1990 from CMS Energy
                                                to MCV, each of the Owner Trustees, the Indenture
                                                Trustees, the Owner Participants and the Initial
                                                Purchasers of Senior Bonds in the MCV Sale Leaseback
                                                transaction, and MEC Development (1991 Form 10-K)
(10)(v)     1-8157        10.41         --      Contract for Firm Transportation of Natural Gas between
                                                Consumers Power Company and Trunkline Gas Company, dated
                                                November 1, 1989, and Amendment, dated November 1, 1989
                                                (1989 Form 10-K of PanEnergy Corp.)
(10)(w)     1-8157        10.41         --      Contract for Firm Transportation of Natural Gas between
                                                Consumers Power Company and Trunkline Gas Company, dated
                                                November 1, 1989 (1991 Form 10-K of PanEnergy Corp.)
(10)(x)     1-2921        10.03         --      Contract for Firm Transportation of Natural Gas between
                                                Consumers Power Company and Trunkline Gas Company, dated
                                                September 1, 1993 (1993 Form 10-K)
(10)(y)                                 --      Purchase Agreement dated July 9, 2003 between CMS Energy
                                                and the Initial Purchasers, as defined therein
(10)(z)                                 --      Purchase Agreement dated July 9, 2003 between CMS Energy
                                                and the Initial Purchasers, as defined therein
(10)(aa)                                --      Purchase Agreement dated December 1, 2003 between CMS
                                                Energy and the Initial Purchasers, as defined therein
(10)(bb)    1-5611        10            --      First Amended and Restated Employment Agreement between
                                                Kenneth Whipple and CMS Energy Corporation effective as
                                                of September 1, 2003 (8-K dated October 24, 2003)
(10)(cc)                                --      Annual Management Incentive Compensation Plan for CMS
                                                Energy Corporation and its Subsidiaries effective January
                                                1, 2003
(10)(dd)                                --      Annual Employee Incentive Compensation Plan for CMS
                                                Energy Corporation and its Subsidiaries effective January
                                                1, 2003
(12)(a)                                 --      Statement regarding computation of CMS Energy's Ratio of
                                                Earnings to Fixed Charges
</Table>

                                       CO-8
<PAGE>

<Table>
<Caption>
                 PREVIOUSLY FILED
            --------------------------
            WITH FILE      AS EXHIBIT
EXHIBITS      NUMBER         NUMBER             DESCRIPTION
- --------    ---------      ----------           -----------
<S>         <C>           <C>           <C>     <C>
(12)(b)                                 --      Statement regarding computation of Consumers' Ratio of
                                                Earnings to Fixed Charges and Preferred Securities
                                                Dividends and Distributions
(16)        1-5611        16.1          --      Letter from Arthur Andersen LLP to the Securities and
                                                Exchange Commission dated April 29, 2002 regarding change
                                                in certifying accountant (Form 8-K filed April 29, 2002)
(21)        1-9513                      --      Subsidiaries of CMS Energy (Form U-3A-2 filed February
                                                27, 2004)
(23)(a)                                 --      Consent of Ernst & Young LLP for CMS Energy
(23)(b)                                 --      Consent of PricewaterhouseCoopers LLP for CMS Energy re:
                                                MCV
(23)(c)                                 --      Consent of Pricewaterhouse for CMS Energy re: Jorf Lasfar
(23)(d)                                 --      Consent of Ernst & Young LLP for Consumers
(23)(e)                                         Consent of PricewaterhouseCoopers LLP for Consumers re:
                                                MCV
(24)(a)                                 --      Power of Attorney for CMS Energy
(24)(b)                                 --      Power of Attorney for Consumers
(31)(a)                                 --      CMS Energy's certification of the CEO pursuant to Section
                                                302 of the Sarbanes-Oxley Act of 2002
(31)(b)                                 --      CMS Energy's certification of the CFO pursuant to Section
                                                302 of the Sarbanes-Oxley Act of 2002
(31)(c)                                 --      Consumers' certification of the CEO pursuant to Section
                                                302 of the Sarbanes-Oxley Act of 2002
(31)(d)                                 --      Consumers' certification of the CFO pursuant to Section
                                                302 of the Sarbanes-Oxley Act of 2002
(32)(a)                                 --      CMS Energy's certifications pursuant to Section 906 of
                                                the Sarbanes-Oxley Act of 2002
(32)(b)                                 --      Consumers' certifications pursuant to Section 906 of the
                                                Sarbanes-Oxley Act of 2002
(99)(a)                                 --      Financial Statements for Midland Cogeneration Venture
                                                Limited Partnership for the years ended December 31,
                                                2001, 2002, and 2003
(99)(b)                                 --      Financial Statements for Jorf Lasfar for the years ended
                                                December 31, 2001, 2002, and 2003
(99)(c)                                 --      Representation regarding Emirates CMS Power Company
                                                financial statements for the years ended December 31,
                                                2001, 2002 and 2003
(99)(d)                                 --      Representation regarding SCP Investments (1) PTY. LTD.
                                                financial statements for the years ended June 30, 2002,
                                                2003 and 2004
</Table>

- -------------------------
* Obligations of only CMS Holdings and CMS Midland, second tier subsidiaries of
  Consumers, and of CMS Energy but not of Consumers.

     Exhibits listed above that have heretofore been filed with the Securities
and Exchange Commission pursuant to various acts administered by the Commission,
and which were designated as noted above, are hereby incorporated herein by
reference and made a part hereof with the same effect as if filed herewith.

                                       CO-9
<PAGE>

                     INDEX TO FINANCIAL STATEMENT SCHEDULES

<Table>
<Caption>
                                                                 PAGE
                                                                 ----
<S>                                                             <C>
Schedule II
  Valuation and Qualifying Accounts and Reserves 2003, 2002
     and 2001:
     CMS Energy Corporation.................................      CO-11
     Consumers Energy Company...............................      CO-12
Report of Independent Auditors
     CMS Energy Corporation.................................    CMS-120
     Consumers Energy Company...............................      CE-84
</Table>

     Schedules other than those listed above are omitted because they are either
not required, not applicable or the required information is shown in the
financial statements or notes thereto.

     Columns omitted from schedules filed have been omitted because the
information is not applicable.

                                      CO-10
<PAGE>


                                CMS ENERGY CORPORATION

         SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<Table>
<Caption>
                                                                            CHARGED/
                                                BALANCE AT                  ACCRUED                    BALANCE
                                                BEGINNING      CHARGED      TO OTHER                   AT END
                DESCRIPTION                     OF PERIOD     TO EXPENSE    ACCOUNTS    DEDUCTIONS    OF PERIOD
                -----------                     ----------    ----------    --------    ----------    ---------
                                                                         (IN MILLIONS)
<S>                                             <C>           <C>           <C>         <C>           <C>
Accumulated provision for uncollectible
  accounts:
  2003......................................       $23           $28          $ 4          $15           $40
  2002......................................       $23           $22           (3)         $19           $23
  2001......................................       $16           $22           (1)         $14           $23
</Table>

                                      CO-11
<PAGE>

                            CONSUMERS ENERGY COMPANY

         SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                  YEARS ENDED DECEMBER 31, 2003, 2002 AND 2001

<Table>
<Caption>
                                                                            CHARGED/
                                                BALANCE AT                  ACCRUED                    BALANCE
                                                BEGINNING      CHARGED      TO OTHER                   AT END
                DESCRIPTION                     OF PERIOD     TO EXPENSE    ACCOUNTS    DEDUCTIONS    OF PERIOD
                -----------                     ----------    ----------    --------    ----------    ---------
                                                                         (IN MILLIONS)
<S>                                             <C>           <C>           <C>         <C>           <C>
Accumulated provision for uncollectible
  accounts:
  2003......................................        $5           $16           --          $13           $8
  2002......................................        $4           $17           --          $16           $5
  2001......................................        $3           $13           --          $12           $4
</Table>

                                      CO-12
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, CMS Energy Corporation has duly caused this Annual Report
to be signed on its behalf by the undersigned, thereunto duly authorized, on the
11th day of March 2004.

                                          CMS ENERGY CORPORATION

                                          By        /s/ KENNETH WHIPPLE
                                            ------------------------------------
                                                      Kenneth Whipple
                                                 Chairman of the Board and
                                                  Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of CMS
Energy Corporation and in the capacities and on the 11th day of March 2004.

<Table>
<Caption>
                              SIGNATURE                                          TITLE
                              ---------                                          -----
<S>      <C>                                                   <C>

   (i)   Principal executive officer:

                         /s/ KENNETH WHIPPLE                           Chairman of the Board and
         ---------------------------------------------------            Chief Executive Officer
                           Kenneth Whipple


  (ii)   Principal financial officer:

                         /s/ THOMAS J. WEBB                           Executive Vice President and
         ---------------------------------------------------            Chief Financial Officer
                           Thomas J. Webb


 (iii)   Controller or principal accounting officer:

                         /s/ GLENN P. BARBA                          Vice President, Controller and
         ---------------------------------------------------            Chief Accounting Officer
                           Glenn P. Barba

  (iv)   A majority of the Directors including those named
         above:

                       /s/ JAMES J. DUDERSTADT                                  Director
         ---------------------------------------------------
                         James J. Duderstadt


                      /s/ KATHLEEN R. FLAHERTY                                  Director
         ---------------------------------------------------
                        Kathleen R. Flaherty


                         /s/ EARL D. HOLTON                                     Director
         ---------------------------------------------------
                           Earl D. Holton


                          /s/ DAVID W. JOOS                                     Director
         ---------------------------------------------------
                            David W. Joos


                       /s/ MICHAEL T. MONAHAN                                   Director
         ---------------------------------------------------
                         Michael T. Monahan


                     /s/ JOSEPH F. PAQUETTE, JR.                                Director
         ---------------------------------------------------
                       Joseph F. Paquette, Jr.
</Table>

                                      CO-13
<PAGE>

<Table>
<Caption>
                              SIGNATURE                                          TITLE
                              ---------                                          -----

<S>      <C>                                                   <C>

                        /s/ WILLIAM U. PARFET                                   Director
         ---------------------------------------------------
                          William U. Parfet


                         /s/ PERCY A. PIERRE                                    Director
         ---------------------------------------------------
                           Percy A. Pierre


                      /s/ S. KINNIE SMITH, JR.                                  Director
         ---------------------------------------------------
                        S. Kinnie Smith, Jr.


                         /s/ KENNETH L. WAY                                     Director
         ---------------------------------------------------
                           Kenneth L. Way


                         /s/ KENNETH WHIPPLE                                    Director
         ---------------------------------------------------
                           Kenneth Whipple


                        /s/ JOHN B. YASINSKY                                    Director
         ---------------------------------------------------
                          John B. Yasinsky


   By:                   /s/ THOMAS J. WEBB
         ---------------------------------------------------
                  Thomas J. Webb, Attorney-in-Fact
</Table>

                                      CO-14
<PAGE>

                                   SIGNATURES

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Consumers Energy Company has duly caused this Annual
Report to be signed on its behalf by the undersigned, thereunto duly authorized,
on the 11th day of March 2004.

                                          CONSUMERS ENERGY COMPANY

                                          By        /s/ KENNETH WHIPPLE
                                            ------------------------------------
                                                      Kenneth Whipple
                                                 Chairman of the Board and
                                                  Chief Executive Officer

     Pursuant to the requirements of the Securities Exchange Act of 1934, this
Annual Report has been signed below by the following persons on behalf of
Consumers Energy Company and in the capacities and on the 11th day of March
2004.

<Table>
<Caption>
                              SIGNATURE                                          TITLE
                              ---------                                          -----
<S>      <C>                                                   <C>

   (i)   Principal executive officer:

                         /s/ KENNETH WHIPPLE                           Chairman of the Board and
         ---------------------------------------------------            Chief Executive Officer
                           Kenneth Whipple


  (ii)   Principal financial officer:

                         /s/ THOMAS J. WEBB                           Executive Vice President and
         ---------------------------------------------------            Chief Financial Officer
                           Thomas J. Webb


 (iii)   Controller or principal accounting officer:

                         /s/ GLENN P. BARBA                          Vice President, Controller and
         ---------------------------------------------------            Chief Accounting Officer
                           Glenn P. Barba

  (iv)   A majority of the Directors including those named
         above:

                       /s/ JAMES J. DUDERSTADT                                  Director
         ---------------------------------------------------
                         James J. Duderstadt


                      /s/ KATHLEEN R. FLAHERTY                                  Director
         ---------------------------------------------------
                        Kathleen R. Flaherty


                         /s/ EARL D. HOLTON                                     Director
         ---------------------------------------------------
                           Earl D. Holton


                          /s/ DAVID W. JOOS                                     Director
         ---------------------------------------------------
                            David W. Joos


                       /s/ MICHAEL T. MONAHAN                                   Director
         ---------------------------------------------------
                         Michael T. Monahan


                     /s/ JOSEPH F. PAQUETTE, JR.                                Director
         ---------------------------------------------------
                       Joseph F. Paquette, Jr.
</Table>

                                      CO-15
<PAGE>

<Table>
<Caption>
                              SIGNATURE                                          TITLE
                              ---------                                          -----

<S>      <C>                                                   <C>

                        /s/ WILLIAM U. PARFET                                   Director
         ---------------------------------------------------
                          William U. Parfet


                         /s/ PERCY A. PIERRE                                    Director
         ---------------------------------------------------
                           Percy A. Pierre


                      /s/ S. KINNIE SMITH, JR.                                  Director
         ---------------------------------------------------
                        S. Kinnie Smith, Jr.


                         /s/ KENNETH L. WAY                                     Director
         ---------------------------------------------------
                           Kenneth L. Way


                         /s/ KENNETH WHIPPLE                                    Director
         ---------------------------------------------------
                           Kenneth Whipple


                        /s/ JOHN B. YASINSKY                                    Director
         ---------------------------------------------------
                          John B. Yasinsky


   By:                   /s/ THOMAS J. WEBB
         ---------------------------------------------------
                  Thomas J. Webb, Attorney-in-Fact
</Table>

                                      CO-16
<PAGE>

                      CMS ENERGY'S AND CONSUMERS' EXHIBITS

<Table>
<Caption>
EXHIBITS          DESCRIPTION
- --------          -----------
<S>       <C>     <C>
                  Indenture dated as of September 15, 1992 between CMS Energy
                  and NBD Bank, as Trustee
          --      Indentures Supplemental thereto:
4(e)(i)   --      13th dated as of 07/16/03
4(e)(ii)  --      14th dated as of 07/17/03
(4)(h)    --      $185 million Credit Agreement, as amended, dated May 22,
                  2003 among CMS Energy and the Financial Institutions,
                  Documentation Agent and Administrative Agent, as defined
                  therein
(4)(i)    --      Certificate of Designation of 4.50% Cumulative Convertible
                  Preferred Stock dated as of December 2, 2003
(4)(j)    --      Registration Rights Agreement dated as of July 16, 2003
                  between CMS Energy and the Initial Purchasers, all as
                  defined therein
(4)(k)    --      Registration Rights Agreement dated as of July 17, 2003
                  between CMS Energy and the Initial Purchasers, all as
                  defined therein
(4)(l)    --      Registration Rights Agreement dated as of December 5, 2003
                  between CMS Energy and the Initial Purchasers, all as
                  defined therein
(4)(m)    --      $190 million Fourth Amended and Restated Credit Agreement
                  dated as of December 8, 2003 among CMS Energy, CMS
                  Enterprises, the Banks, and the Administrative Agent and
                  Collection Agent, all defined therein
(4)(o)    --      Third Amended and Restated Pledge and Security Agreement
                  dated as of December 8, 2003 among CMS Energy and the
                  Collateral Agent, as defined therein
(4)(p)    --      Amended and Restated Guaranty dated as of December 8, 2003
                  by the Guarantor in favor of the Lenders, all as defined
                  therein
(10)(g)   --      CMS Energy's Salaried Employees Merit Program for 2003
                  effective January 1, 2003
(10)(i)   --      Annual Officer Incentive Compensation Plan for CMS Energy
                  and its Subsidiaries effective January 1, 2003
(10)(y)   --      Purchase Agreement dated July 9, 2003 between CMS Energy and
                  the Initial Purchasers, as defined therein
(10)(z)   --      Purchase Agreement dated July 9, 2003 between CMS Energy and
                  the Initial Purchasers, as defined therein
(10)(aa)  --      Purchase Agreement dated December 1, 2003 between CMS Energy
                  and the Initial Purchasers, as defined therein
(10)(cc)  --      Annual Management Incentive Compensation Plan for CMS Energy
                  Corporation and its Subsidiaries effective January 1, 2003
(10)(dd)  --      Annual Employee Incentive Compensation Plan for CMS Energy
                  Corporation and its Subsidiaries effective January 1, 2003
(12)(a)   --      Statement regarding computation of CMS Energy's Ratio of
                  Earnings to Fixed Charges
(12)(b)   --      Statement regarding computation of Consumers' Ratio of
                  Earnings to Fixed Charges and Preferred Securities Dividends
                  and Distributions
(23)(a)   --      Consent of Ernst & Young LLP for CMS Energy
(23)(b)   --      Consent of PricewaterhouseCoopers LLP
(23)(c)   --      Consent of Pricewaterhouse for CMS Energy re: Jorf Lasfar
(23)(d)   --      Consent of Ernst & Young LLP for Consumers
(23)(e)   --      Consent of PricewaterhouseCoopers LLP for Consumers re: MCV
(24)(a)   --      Power of Attorney for CMS Energy
(24)(b)   --      Power of Attorney for Consumers
(31)(a)   --      CMS Energy's certification of the CEO pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002
(31)(b)   --      CMS Energy's certification of the CFO pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002
(31)(c)   --      Consumers' certification of the CEO pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002
</Table>
<PAGE>

<Table>
<Caption>
EXHIBITS          DESCRIPTION
- --------          -----------
<S>       <C>     <C>
(31)(d)   --      Consumers' certification of the CFO pursuant to Section 302
                  of the Sarbanes-Oxley Act of 2002
(32)(a)   --      CMS Energy's certifications pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
(32)(b)   --      Consumers' certifications pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002
(99)(a)   --      Financial Statements for Midland Cogeneration Venture
                  Limited Partnership for the years ended December 31, 2001,
                  2002, and 2003
(99)(b)   --      Financial Statements for Jorf Lasfar for the years ended
                  December 31, 2001, 2002, and 2003
(99)(c)   --      Representation regarding Emirates CMS Power Company
                  financial statements for the years ended December 31, 2001,
                  2002 and 2003
(99)(d)   --      Representation regarding SCP Investments(1) PTY. LTD.
                  financial statements for the years ended June 30, 2002, 2003
                  and 2004
</Table>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(E)(I)
<SEQUENCE>3
<FILENAME>k82154aexv4wxeyxiy.txt
<DESCRIPTION>INDENTURES SUPPLEMENTAL-13TH DATED 07/16/03
<TEXT>
<PAGE>

                                                                 EXHIBIT 4(e)(i)

                        THIRTEENTH SUPPLEMENTAL INDENTURE
                            DATED AS OF JULY 16, 2003

                              ____________________

         This Thirteenth Supplemental Indenture, dated as of the 16th day of
July, 2003 between CMS Energy Corporation, a corporation duly organized and
existing under the laws of the State of Michigan (hereinafter called the
"Issuer") and having its principal office at One Energy Plaza, Jackson, Michigan
49201, and Bank One Trust Company, N.A., a national banking association
(hereinafter called the "Trustee") and having its Corporate Trust Office at 1
BankOne Plaza, Mail Code ILI-0823, Chicago, IL 60670.

                                   WITNESSETH:

         WHEREAS, the Issuer and the Trustee (successor to NBD Bank, National
Association) entered into an Indenture, dated as of September 15, 1992 (the
"Original Indenture"), pursuant to which one or more series of debt securities
of the Issuer (the "Securities") may be issued from time to time; and

         WHEREAS, Section 2.3 of the Original Indenture permits the terms of any
series of Securities to be established in an indenture supplemental to the
Original Indenture; and

         WHEREAS, Section 8.1(e) of the Original Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Trustee without
the consent of any Holders (as defined in the Original Indenture) of the
Securities to establish the form and terms of the Securities of any series; and

         WHEREAS, the Issuer has requested the Trustee to join with it in the
execution and delivery of this Thirteenth Supplemental Indenture in order to
supplement and amend the Original Indenture by, among other things, establishing
the form and terms of a series of Securities to be known as the Issuer's "3.375%
Convertible Senior Notes due 2023" (the "2023 Notes"), providing for the
issuance of the 2023 Notes and amending and adding certain provisions thereof
for the benefit of the Holders of the 2023 Notes; and

         WHEREAS, the Issuer and the Trustee desire to enter into this
Thirteenth Supplemental Indenture for the purposes set forth in Sections 2.3 and
8.1(e) of the Original Indenture as referred to above; and

         WHEREAS, the Issuer has furnished the Trustee with a copy of the
resolutions of its Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of this Thirteenth Supplemental Indenture;
and

                                       1
<PAGE>

         WHEREAS, all things necessary to make this Thirteenth Supplemental
Indenture a valid agreement of the Issuer and the Trustee and a valid supplement
to the Original Indenture have been done;

         NOW, THEREFORE, for and in consideration of the premises and the
purchase of the 2023 Notes to be issued hereunder by holders thereof, the Issuer
and the Trustee mutually covenant and agree, for the equal and proportionate
benefit of the respective holders from time to time of the 2023 Notes, as
follows:

                                    ARTICLE I

                        STANDARD PROVISIONS; DEFINITIONS

         SECTION 1.01. Standard Provisions. The Original Indenture together with
this Thirteenth Supplemental Indenture and all previous indentures supplemental
thereto entered into pursuant to the applicable terms thereof are hereinafter
sometimes collectively referred to as the "Indenture." All capitalized terms
which are used herein and not otherwise defined herein are defined in the
Indenture and are used herein with the same meanings as in the Indenture.

         SECTION 1.02. Definitions.

         (a)      The following terms have the meanings set forth in the
Sections hereof set forth below:

<TABLE>
<CAPTION>
                Term                                          Section
- -------------------------------------                      --------------
<S>                                                        <C>
Additional Amounts                                         2.04
Application Period                                         7.06
Asset Sale                                                 7.06
Company                                                    2.03
Conversion Date                                            6.02
Conversion Rate                                            6.01
Depositary                                                 Article IX
Distributed Assets or Securities                           6.06(c)
DTC                                                        2.03
Events of Default                                          8.01
ex date                                                    1.01(b); 2.04
Excess Proceeds                                            7.06
Fundamental Change Purchase Date                           3.01
Fundamental Change Purchase Notice                         3.03
Fundamental Change Purchase Price                          3.01
Global Note                                                Article IX
Indenture                                                  1.01; 2.04
Interest Payment Date                                      2.03
Issue                                                      7.04(a)
Issuer                                                     Preamble; 2.03
Issuer Notice                                              5.01
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
                Term                                          Section
- -------------------------------------                      --------------
<S>                                                        <C>
Issuer Notice Date                                         5.01
Lien                                                       7.02(a)
Maturity                                                   2.03
Maximum Conversion Rate                                    6.06(h)
Original Indenture                                         Recitals
Original Issue Date                                        2.03
Place of Payment                                           2.03
Purchase Date                                              2.04; 4.01(a)
Purchase Notice                                            4.01(a)(i)
Purchase Price                                             2.04
Record Date                                                2.03
Redemption Price                                           2.04
Restricted Payment                                         7.05(a)
Rule 144A                                                  2.03
Securities                                                 Recitals
Securities Act                                             2.03
Trading Exception                                          2.04
Trustee                                                    Preamble; 2.04
2023 Notes                                                 Recitals; 2.04
</TABLE>

         (b)      Section 1.1 of the Original Indenture is amended to insert the
new definitions applicable to the 2023 Notes, in the appropriate alphabetical
sequence, as follows:

         "Amortization Expense" means, for any period, amounts recognized during
such period as amortization of capital leases, depletion, nuclear fuel, goodwill
and assets classified as intangible assets in accordance with generally accepted
accounting principles.

         "Average Life" means, as of the date of determination, with respect to
any Indebtedness, the quotient obtained by dividing (i) the sum of the products
of (x) the number of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness and (y) the amount
of such principal payment by (ii) the sum of all such principal payments.

         "Capital Lease Obligation" of a Person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; the stated maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty; and
such obligation shall be deemed secured by a Lien on any property or assets to
which such lease relates.

         "Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) corporate stock,

                                       3
<PAGE>

including any Preferred Stock or Letter Stock; provided that Hybrid Preferred
Securities shall not be considered Capital Stock for purposes of this
definition.

         "CMS Electric and Gas" means CMS Electric and Gas Company, a Michigan
corporation and wholly-owned subsidiary of Enterprises.

         "CMS Gas Transmission" means CMS Gas Transmission Company (formerly
known as CMS Gas Transmission and Storage Company), a Michigan corporation and
wholly-owned subsidiary of Enterprises.

         "CMS Generation" means CMS Generation Co., a Michigan corporation and
wholly-owned subsidiary of Enterprises.

         "CMS MST" means CMS Marketing, Services and Trading Company, a Michigan
corporation and wholly-owned subsidiary of Enterprises.

         "Common Equity" of any Person means capital stock of such Person that
is generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management or policies of such Person.

         "Consolidated Assets" means, at any date of determination, the
aggregate assets of the Issuer and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles.

         "Consolidated Coverage Ratio" with respect to any period means the
ratio of (i) the aggregate amount of Operating Cash Flow for such period to (ii)
the aggregate amount of Consolidated Interest Expense for such period.

         "Consolidated Current Liabilities" means, for any period, the aggregate
amount of liabilities of the Issuer and its Consolidated Subsidiaries which may
properly be classified as current liabilities (including taxes accrued as
estimated), after (i) eliminating all inter-company items between the Issuer and
any Consolidated Subsidiary and (ii) deducting all current maturities of
long-term Indebtedness, all as determined in accordance with generally accepted
accounting principles.

         "Consolidated Indebtedness" means, at any date of determination, the
aggregate Indebtedness of the Issuer and its Consolidated Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that Consolidated Indebtedness shall not include
any subordinated debt owned by any Hybrid Preferred Securities Subsidiary.

         "Consolidated Interest Expense" means, for any period, the total
interest expense in respect of Consolidated Indebtedness of the Issuer and its
Consolidated Subsidiaries, including, without duplication, (i) interest expense
attributable to capital leases, (ii) amortization of debt

                                       4
<PAGE>

discount, (iii) capitalized interest, (iv) cash and noncash interest payments,
(v) commissions, discounts and other fees and charges owed with respect to
letters of credit and bankers' acceptance financing, (vi) net costs under
Interest Rate Protection Agreements (including amortization of discount) and
(vii) interest expense in respect of obligations of other Persons deemed to be
Indebtedness of the Issuer or any Consolidated Subsidiaries under clause (v) or
(vi) of the definition of Indebtedness, provided, however, that Consolidated
Interest Expense shall exclude (A) any costs otherwise included in interest
expense recognized on early retirement of debt and (B) any interest expense in
respect of any Indebtedness of any Subsidiary of Consumers, CMS Generation, CMS
Electric and Gas, CMS Gas Transmission, CMS MST or any other Designated
Enterprises Subsidiary, provided that such Indebtedness is without recourse to
any assets of the Issuer, Consumers, Enterprises, CMS Generation, CMS Electric
and Gas, CMS Gas Transmission, CMS MST or any other Designated Enterprises
Subsidiary.

         "Consolidated Net Income" means, for any period, the net income of the
Issuer and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles; provided, however,
that there shall not be included in such Consolidated Net Income:

         (i)      any net income of any Person if such Person is not a
         Subsidiary, except that (A) the Issuer's equity in the net income of
         any such Person for such period shall be included in such Consolidated
         Net Income up to the aggregate amount of cash actually distributed by
         such Person during such period to the Issuer or a Consolidated
         Subsidiary as a dividend or other distribution and (B) the Issuer's
         equity in a net loss of any such Person for such period shall be
         included in determining such Consolidated Net Income;

         (ii)     any net income of any Person acquired by the Issuer or a
         Subsidiary in a pooling of interests transaction for any period prior
         to the date of such acquisition;

         (iii)    any gain or loss realized upon the sale or other disposition
         of any property, plant or equipment of the Issuer or its Consolidated
         Subsidiaries which is not sold or otherwise disposed of in the ordinary
         course of business and any gain or loss realized upon the sale or other
         disposition of any Capital Stock of any Person; and

         (iv)     any net income of any Subsidiary of Consumers, CMS Generation,
         CMS Electric and Gas, CMS Gas Transmission, CMS MST or any other
         Designated Enterprises Subsidiary whose interest expense is excluded
         from Consolidated Interest Expense, provided, however, that for
         purposes of this subsection (iv), any cash, dividends or distributions
         of any such Subsidiary to the Issuer shall be included in calculating
         Consolidated Net Income.

         "Consolidated Net Tangible Assets" means, for any period, the total
amount of assets (less accumulated depreciation or amortization, allowances for
doubtful receivables, other applicable reserves and other properly deductible
items) as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Issuer and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with generally accepted

                                       5
<PAGE>

accounting principles, and after giving effect to purchase accounting and after
deducting therefrom, to the extent otherwise included, the amounts of: (i)
Consolidated Current Liabilities; (ii) minority interests in Consolidated
Subsidiaries held by Persons other than the Issuer or a Restricted Subsidiary;
(iii) excess of cost over fair value of assets of businesses acquired, as
determined in good faith by the Board of Directors as evidenced by Board of
Directors resolutions; (iv) any revaluation or other write-up in value of assets
subsequent to December 31, 1996, as a result of a change in the method of
valuation in accordance with generally accepted accounting principles; (v)
unamortized debt discount and expenses and other unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights, licenses,
organization or developmental expenses and other intangible items; (vi) treasury
stock; and (vii) any cash set apart and held in a sinking or other analogous
fund established for the purpose of redemption or other retirement of Capital
Stock to the extent such obligation is not reflected in Consolidated Current
Liabilities.

         "Consolidated Net Worth" of any Person means the total of the amounts
shown on the consolidated balance sheet of such Person and its consolidated
subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles, as of any date selected by such Person not more
than 90 days prior to the taking of any action for the purpose of which the
determination is being made (and adjusted for any material events since such
date), as (i) the par or stated value of all outstanding Capital Stock plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
amounts attributable to Redeemable Stock and (C) any amounts attributable to
Exchangeable Stock.

         "Consolidated Subsidiary" means any Subsidiary whose accounts are or
are required to be consolidated with the accounts of the Issuer in accordance
with generally accepted accounting principles.

         "Consumers" means Consumers Energy Company, a Michigan corporation, all
of whose common stock is on the date hereof owned by the Issuer.

         "Continuing Director" means a director who either was a member of the
Board of Directors on July 10, 2003 or who becomes a member of the Board of
Directors subsequent to that date and whose appointment, election or nomination
for election by the Issuer's shareholders is duly approved by a majority of the
Continuing Directors on the Board of Directors at the time of such approval,
either by a specific vote or by approval of the proxy statement issued by the
Issuer on behalf of the Board of Directors in which such individual is named as
nominee for director.

         "Conversion Agent" means the office or agency designated by the Issuer
where 2023 Notes may be presented for conversion. Initially, the Conversion
Agent shall be the Trustee.

         "Conversion Price" means $1,000 divided by the Conversion Rate.

                                       6
<PAGE>

         "Designated Enterprises Subsidiary" means any wholly-owned subsidiary
of Enterprises formed after the date of this Thirteenth Supplemental Indenture
which is designated a Designated Enterprises Subsidiary by the Board of
Directors.

         "Enterprises" means CMS Enterprises Company, a Michigan corporation and
wholly-owned subsidiary of the Issuer.

         "Equity Interests" means any capital stock, partnership, joint venture,
member or limited liability or unlimited liability company interest, beneficial
interest in a trust or similar entity or other equity interest or investment of
whatever nature.

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

         "Exchangeable Stock" means any Capital Stock of a corporation that is
exchangeable or convertible into another security (other than Capital Stock of
such corporation that is neither Exchangeable Stock or Redeemable Stock).

         "Fair Market Value" means the amount which a willing buyer would pay a
willing seller in an arm's length transaction.

         A "Fundamental Change" shall be deemed to have occurred at such time
after the original issuance of the 2023 Notes as any of the following occurs:
(i) the Common Stock or other common stock into which the 2023 Notes are
convertible is neither listed for trading on a United States national securities
exchange nor approved for trading on the Nasdaq National Market or another
established automated over-the-counter trading market in the United States; (ii)
a "person" or "group" within the meaning of Section 13(d) of the Exchange Act,
other than the Issuer, any Subsidiary of the Issuer or any employee benefit plan
of the Issuer or any such Subsidiary, files a Schedule TO (or any other
schedule, form or report under the Exchange Act) disclosing that such person or
group has become the direct or indirect ultimate "beneficial owner" (as such
term is used in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person or group shall be deemed to have "beneficial ownership" of all shares
that such person or group has the right to acquire whether such right is
exercisable immediately or only after the passage of time) of Common Equity of
the Issuer representing more than 50% of the voting power of the Issuer's Common
Equity; (iii) consummation of any share exchange, consolidation or merger of the
Issuer pursuant to which the Common Stock will be converted into cash,
securities or other property or any sale, lease or other transfer (in one
transaction or a series of transactions) of all or substantially all of the
consolidated assets of the Issuer and its Subsidiaries, taken as a whole, to any
Person (other than the Issuer or one or more of the Issuer's Subsidiaries);
provided, however, that a transaction where the holders of the Issuer's Common
Equity immediately prior to such transaction own, directly or indirectly, more
than 50% of the aggregate voting power of all classes of Common Equity of the
continuing or surviving corporation or transferee immediately after such event
shall not be a Fundamental Change; or (iv) Continuing Directors cease to
constitute at least a majority of the Board of Directors; provided, however,
that a Fundamental Change shall not be deemed to have occurred in respect of any
of the foregoing if either (A) the Last Reported Sale Price per share of Common
Stock for

                                       7
<PAGE>

any five Trading Days within the period of 10 consecutive Trading Days ending
immediately before the later of the Fundamental Change or the public
announcement thereof shall equal or exceed 105% of the Conversion Price of the
2023 Notes in effect immediately before the Fundamental Change or the public
announcement thereof or (B) at least 90% of the consideration (excluding cash
payments for fractional shares) in the transaction or transactions constituting
the Fundamental Change consists of shares of capital stock traded on a national
securities exchange or quoted on the Nasdaq National Market (or which shall be
so traded or quoted when issued or exchanged in connection with such Fundamental
Change) (such securities being referred to as "Publicly Traded Securities") and
as a result of such transaction or transactions the 2023 Notes become
convertible into such Publicly Traded Securities (excluding cash payments for
fractional shares).

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

         (i)      such Hybrid Preferred Securities Subsidiary lends
         substantially all of the proceeds from the issuance of such preferred
         securities to the Issuer or Consumers in exchange for subordinated debt
         issued by the Issuer or Consumers, respectively;

         (ii)     such preferred securities contain terms providing for the
         deferral of distributions corresponding to provisions providing for the
         deferral of interest payments on such subordinated debt; and

         (iii)    the Issuer or Consumers (as the case may be) makes periodic
         interest payments on such subordinated debt, which interest payments
         are in turn used by the Hybrid Preferred Securities Subsidiary to make
         corresponding payments to the holders of the Hybrid Preferred
         Securities.

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

         "Indebtedness" of any Person means, without duplication:

         (i)      the principal of and premium (if any) in respect of (A)
         indebtedness of such Person for money borrowed and (B) indebtedness
         evidenced by notes, debentures, bonds or other similar instruments for
         the payment of which such Person is responsible or liable;

         (ii)     all Capital Lease Obligations of such Person;

                                       8
<PAGE>

         (iii)    all obligations of such Person issued or assumed as the
         deferred purchase price of property, all conditional sale obligations
         and all obligations under any title retention agreement (but excluding
         trade accounts payable arising in the ordinary course of business);

         (iv)     all obligations of such Person for the reimbursement of any
         obligor on any letter of credit, bankers' acceptance or similar credit
         transaction (other than obligations with respect to letters of credit
         securing obligations (other than obligations described in clauses (i)
         through (iii) above) entered into in the ordinary course of business of
         such Person to the extent such letters of credit are not drawn upon or,
         if and to the extent drawn upon, such drawing is reimbursed no later
         than the third Business Day following receipt by such Person of a
         demand for reimbursement following payment on the letter of credit);

         (v)      all obligations of the type referred to in clauses (i) through
         (iv) above of other Persons and all dividends of other Persons for the
         payment of which, in either case, such Person is responsible or liable
         as obligor, guarantor or otherwise; and

         (vi)     all obligations of the type referred to in clauses (i) through
         (v) above of other Persons secured by any Lien on any property or asset
         of such Person (whether or not such obligation is assumed by such
         Person), the amount of such obligation being deemed to be the lesser of
         the value of such property or assets or the amount of the obligation so
         secured.

         "Initial Purchasers" has the meaning ascribed to such term in the
Purchase Agreement.

         "Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Issuer or any Subsidiary against
fluctuations in interest rates.

         "Last Reported Sale Price" of Common Stock on any date means the
closing sale price per share (or, if no closing sale price is reported, the
average of the bid and ask prices or, if more than one in either case, the
average of the average bid and the average ask prices) on that date as reported
in composite transactions for the principal U.S. securities exchange on which
Common Stock is traded or, if the Common Stock is not listed on a U.S. national
or regional securities exchange, as reported by the Nasdaq National Market. If
the Common Stock is not listed for trading on a U.S. national or regional
securities exchange and not reported by the Nasdaq National Market on the
relevant date, the Last Reported Sale Price shall be the last quoted bid price
for Common Stock in the over-the-counter market on the relevant date as reported
by the National Quotation Bureau or similar organization. If the Common Stock is
not so quoted, the Last Reported Sale Price will be the average of the mid-point
of the last bid and ask prices for the Common Stock on the relevant date from
each of at least three nationally recognized independent investment banking
firms selected by the Issuer for this purpose.

                                       9
<PAGE>

         "Letter Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
intended to reflect the separate performance of certain of the businesses or
operations conducted by such corporation or any of its subsidiaries.

         "Market Price" means the average of the Last Reported Sale Prices of
Common Stock for the 20 Trading Day period ending on the applicable date of
determination (if the applicable date of determination is a Trading Day or, if
not, then on the last Trading Day prior to such applicable date of
determination), appropriately adjusted to take into account the occurrence,
during the period commencing on the first of the Trading Days during such 20
Trading Day period and ending on the applicable date of determination, of any
event that would result in an adjustment of the Conversion Rate under this
Thirteenth Supplemental Indenture.

         "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
aggregate proceeds of such Asset Sale including the fair market value (as
determined by the Board of Directors and net of any associated debt and of any
consideration other than Capital Stock received in return) of property other
than cash, received by the Issuer, net of (i) brokerage commissions and other
fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Issuer and
its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Issuer or any Restricted Subsidiary of the Issuer as a reserve
against any liabilities associated with such Asset Sale including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification
obligations associated with such Asset Sale, all as determined in conformity
with generally accepted accounting principles and (b) with respect to any
issuance or sale or contribution in respect of Capital Stock, the aggregate
proceeds of such issuance, sale or contribution, including the fair market value
(as determined by the Board of Directors and net of any associated debt and of
any consideration other than Capital Stock received in return) of property other
than cash, received by the Issuer, net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees incurred in connection with such issuance or sale and
net of taxes paid or payable as a result thereof, provided, however, that if
such fair market value as determined by the Board of Directors of property other
than cash is greater than $25 million, the value thereof shall be based upon an
opinion from an independent nationally recognized firm experienced in the
appraisal or similar review of similar types of transactions.

         "Non-Convertible Capital Stock" means, with respect to any corporation,
any non-convertible Capital Stock of such corporation and any Capital Stock of
such corporation convertible solely into non-convertible Capital Stock other
than Preferred Stock of such corporation; provided, however, that
Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.

                                       10
<PAGE>

         "Operating Cash Flow" means, for any period, with respect to the Issuer
and its Consolidated Subsidiaries, the aggregate amount of Consolidated Net
Income after adding thereto Consolidated Interest Expense (adjusted to include
costs recognized on early retirement of debt), income taxes, depreciation
expense, Amortization Expense and any noncash amortization of debt issuance
costs, any nonrecurring, noncash charges to earnings and any negative accretion
recognition.

         "Other Rating Agency" means any one of Fitch, Inc. or Moody's Investors
Service, Inc., and any successor to any of these organizations which is a
nationally recognized statistical rating organization.

         "Paying Agent" means any Person authorized by the Issuer to pay the
principal of (and premium, if any) or interest on any of the 2023 Notes on
behalf of the Issuer. Initially, the Paying Agent shall be the Trustee.

         "Predecessor 2023 Note" of any particular 2023 Note means every
previous 2023 Note evidencing all or a portion of the same debt as that
evidenced by such particular 2023 Note; and, for the purposes of the definition,
any 2023 Note authenticated and delivered under Section 2.9 of the Indenture in
exchange for or in lieu of a mutilated, destroyed, lost or stolen 2023 Note
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen 2023 Note.

         "Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation; provided that Hybrid Preferred Securities shall not be considered
Preferred Stock for purposes of this definition.

         "Publicly Traded Securities" has the meaning provided in the definition
of Fundamental Change.

         "Purchase Agreement" means that certain Purchase Agreement dated July
9, 2003 among the Issuer and the Initial Purchasers which provides for the sale
by the Issuer to the Initial Purchasers of the 2023 Notes.

         "Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed prior to the first anniversary of the
Stated Maturity of the outstanding 2023 Notes or is redeemable at the option of
the holder thereof at any time prior to the first anniversary of the Stated
Maturity of the outstanding 2023 Notes.

         "Registrable Securities" has the meaning ascribed to such term in the
Registration Rights Agreement.

         "Registration Default" has the meaning ascribed to such term in the
Registration Rights Agreement.

                                       11
<PAGE>

         "Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of July 16, 2003, by and among the Issuer and the Initial
Purchasers.

         "Regulation S" means Regulation S under the Securities Act.

         "Restricted Subsidiary" means any Subsidiary (other than Consumers and
its Subsidiaries) of the Issuer which, as of the date of the Issuer's most
recent quarterly consolidated balance sheet, constituted at least 10% of the
total Consolidated Assets of the Issuer and its Consolidated Subsidiaries and
any other Subsidiary which from time to time is designated a Restricted
Subsidiary by the Board of Directors; provided that no Subsidiary may be
designated a Restricted Subsidiary if, immediately after giving effect thereto,
an Event of Default or event that, with the lapse of time or giving of notice or
both, would constitute an Event of Default would exist or the Issuer and its
Restricted Subsidiaries could not incur at least one dollar of additional
Indebtedness under Section 7.04 hereof, and (i) any such Subsidiary so
designated as a Restricted Subsidiary must be organized under the laws of the
United States or any State thereof, (ii) more than 80% of the Voting Stock of
such Subsidiary must be owned of record and beneficially by the Issuer or a
Restricted Subsidiary and (iii) such Restricted Subsidiary must be a
Consolidated Subsidiary.

         "Spin-off Market Price" per share of Common Stock of the Issuer or the
Equity Interests in a Subsidiary or other business unit of the Issuer on any day
means the average of the daily Last Reported Sale Price for the 10 consecutive
Trading Days commencing on and including the fifth Trading Day after the ex date
with respect to the issuance or distribution requiring such computations. As
used herein, the term "ex date," when used with respect to any issuance or
distribution, shall mean the first date on which the security trades regular way
on the New York Stock Exchange or such other national regional exchange or
market in which the security trades without the right to receive such issuance
or distribution.

         "Standard & Poor's" means Standard & Poor's Ratings Group, a division
of The McGraw-Hill Companies, Inc., and any successor thereto which is a
nationally recognized statistical rating organization, or if such entity shall
cease to rate the 2023 Notes or shall cease to exist and there shall be no such
successor thereto, any other nationally recognized statistical rating
organization selected by the Issuer which is acceptable to the Trustee.

         "Subordinated Indebtedness" means any Indebtedness of the Issuer
(whether outstanding on the date of this Thirteenth Supplemental Indenture or
thereafter incurred) which is contractually subordinated or junior in right of
payment to the 2023 Notes.

         "Support Obligations" means, for any Person, without duplication, any
financial obligation, contingent or otherwise, of such Person guaranteeing or
otherwise supporting any debt or other obligation of any other Person in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person, direct or indirect, (i) to purchase or pay (or
advance or supply funds for the purchase or payment of) such debt or to purchase
(or to advance or supply funds for the purchase of) any security for the payment
of such debt, (ii) to purchase property, securities or services for the purpose
of assuring the owner of such debt of the

                                       12
<PAGE>

payment of such debt, (iii) to maintain working capital, equity capital,
available cash or other financial statement condition of the primary obligor so
as to enable the primary obligor to pay such debt, (iv) to provide equity
capital under or in respect of equity subscription arrangements (to the extent
that such obligation to provide equity capital does not otherwise constitute
debt) or (v) to perform, or arrange for the performance of, any non-monetary
obligations or non-funded debt payment obligations of the primary obligor.

         "Tax Sharing Agreement" means the Amended and Restated Agreement for
the Allocation of Income Tax Liabilities and Benefits, dated January 1, 1994, as
amended or supplemented from time to time, by and among Issuer, each of the
members of the Consolidated Group (as defined therein), and each of the
corporations that become members of the Consolidated Group.

         "Trading Day" means (i) if the applicable security is listed, admitted
for trading or quoted on the New York Stock Exchange, the Nasdaq National Market
or another national security exchange, a day on which the New York Stock
Exchange, the Nasdaq National Market or another national security exchange is
open for business or (ii) if the applicable security is not so listed, admitted
for trading or quoted, any day other than a Saturday or Sunday or a day on which
banking institutions in the State of New York are authorized or obligated by
law, regulation or executive order to close.

         "Trading Price" of the 2023 Notes on any date of determination means
the average of the secondary market bid quotations per $1,000 principal amount
of 2023 Notes obtained by the Trustee for $5,000,000 principal amount of 2023
Notes at approximately 3:30 p.m., New York City time, on such determination date
from three independent nationally recognized securities dealers the Issuer
selects, provided that if three such bids cannot reasonably be obtained by the
Trustee, but two such bids are obtained, then the average of the two bids shall
be used, and if only one such bid can reasonably be obtained by the Trustee,
this one bid shall be used. If the Trustee cannot reasonably obtain at least one
bid for $5,000,000 principal amount of the 2023 Notes from a nationally
recognized securities dealer, then the Trading Price will be deemed to be less
than 95% of the product of the sale price of Common Stock and the then
applicable Conversion Rate.

         "Voting Stock" means securities of any class or classes the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for
corporate directors (or persons performing similar functions).

                                   ARTICLE II

                 DESIGNATION AND TERMS OF THE 2023 NOTES; FORMS

         SECTION 2.01. Establishment of Series.

         (a)      There is hereby created a series of Securities to be known and
designated as the "3.375% Convertible Senior Notes due 2023" to be issued in an
initial aggregate principal

                                       13
<PAGE>

amount of $150,000,000 (except that such amount shall be increased to an amount
up to $200,000,000 to the extent of any exercise by the Initial Purchasers of
their option to purchase additional 2023 Notes). Additional Securities, without
limitation as to amount, having substantially the same terms as the 2023 Notes
(except a different issue date, issue price and bearing interest from the last
Interest Payment Date to which interest has been paid or duly provided for on
the 2023 Notes, and, if no interest has been paid, from July 16, 2003), may also
be issued by the Issuer pursuant to the Indenture without the consent of the
existing Holders of the 2023 Notes. Such additional Securities shall be part of
the same series as the 2023 Notes. The Stated Maturity of the 2023 Notes is July
15, 2023; the principal amount of the 2023 Notes shall be payable on such date
unless the 2023 Notes are earlier redeemed, purchased or converted in accordance
with the terms of the Indenture.

         (b)      The 2023 Notes will bear interest from the Original Issue
Date, or from the most recent date to which interest has been paid or duly
provided for, at the rate of 3.375% per annum stated therein until the principal
thereof is paid or made available for payment. Interest will be payable
semiannually on each Interest Payment Date and at Maturity, as provided in the
form of the 2023 Note in Section 2.03 hereof.

         (c)      The Record Date referred to in Section 2.3(f)(4) of the
Indenture for the payment of the interest on any 2023 Note payable on any
Interest Payment Date (other than at Maturity) shall be the 1st day of the
calendar month in which such Interest Payment Date occurs (whether or not a
Business Day) except that the Record Date for interest payable at Maturity shall
be the date of Maturity.

         (d)      The payment of the principal of, premium (if any) and interest
on the 2023 Notes shall not be secured by a security interest in any property.

         (e)      The 2023 Notes shall be purchased by the Issuer at the option
of the Holders thereof as provided in Article III, Article IV and Article V
hereof.

         (f)      The 2023 Notes shall be convertible in accordance with the
terms of this Thirteenth Supplemental Indenture.

         (g)      The 2023 Notes will not be subordinated to the payment of
Senior Debt.

         (h)      The Issuer will not pay any additional amounts on the 2023
Notes held by a Person who is not a U.S. person (as defined in Regulation S) in
respect of any tax, assessment or government charge withheld or deducted.

         (i)      The events specified in Events of Default with respect to the
2023 Notes shall include the events specified in Article VIII of this Thirteenth
Supplemental Indenture. In addition to the covenants set forth in Article III of
the Original Indenture, the Holders of the 2023 Notes shall have the benefit of
the covenants of the Issuer set forth in this Thirteenth Supplemental Indenture.

                                       14
<PAGE>

         SECTION 2.02. Forms Generally. The 2023 Notes and Trustee's
certificates of authentication shall be in substantially the form set forth in
this Article II, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by the Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such 2023 Notes, as evidenced by their execution thereof.

         The definitive 2023 Notes shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such 2023 Notes, as evidenced by their execution
thereof.

         SECTION 2.03. Form of Face of 2023 Note.

         THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND 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.

         Unless this Global 2023 Note is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to CMS Energy Corporation or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of a nominee of
DTC or in such other name as is requested by an authorized representative of DTC
(and any payment is made to such nominee of DTC or to such other entity as is
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 has an interest herein.

                             CMS ENERGY CORPORATION
                    3.375% CONVERTIBLE SENIOR NOTES DUE 2023

No. 1                                                               $150,000,000
CUSIP No.: 125896AS9
ISIN No.: US12589AS91

         CMS Energy Corporation, a corporation duly organized and existing under
the laws of the State of Michigan (herein called the "Issuer" or "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to CEDE & Co., or
registered assigns, the principal sum of One Hundred Fifty Million Dollars on
July 15, 2023 ("Maturity") and to pay interest thereon from July 16, 2003 (the
"Original Issue Date") or from the most recent Interest Payment Date to which
interest has been

                                       15
<PAGE>

paid or duly provided for, semi-annually in arrears on January 15 and July 15,
in each year, commencing on January 15, 2004 (each an "Interest Payment Date")
to the Persons in whose names the 2023 Notes are registered at the close of
business on January 1 and July 1 (each a "Record Date"), and at Maturity, at the
rate of 3.375% per annum, until the principal hereof is paid or made available
for payment. The amount of interest payable on any Interest Payment Date shall
be computed on the basis of a 360-day year of twelve 30-day months. The interest
so payable, and punctually paid or duly provided for, on any Interest Payment
Date will, as provided in such Indenture, be paid to the Person in whose name
this 2023 Note (or one or more Predecessor 2023 Notes) is registered at the
close of business on the Record Date for such interest, which shall be the 1st
day of the calendar month in which such Interest Payment Date occurs (whether or
not a Business Day) except that the Record Date for interest payable at Maturity
shall be the date of Maturity. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Record
Date and may either be paid to the Person in whose name this 2023 Note (or one
or more Predecessor 2023 Notes) is registered at the close of business on a
subsequent Record Date (which shall be not less than five Business Days prior to
the date of payment of such defaulted interest) for the payment of such
defaulted interest to be fixed by the Trustee, notice whereof shall be given to
Holders of 2023 Notes not less than 15 days preceding such subsequent Record
Date.

         This 2023 Note is convertible and is subject to redemption at the
option of the Issuer and to purchase by the Issuer at the option of the Holder
as specified on the reverse of this 2023 Note.

         Payment of the principal of (and premium, if any) and interest, if any,
on this 2023 Note will be made at the office or agency of the Issuer maintained
for that purpose in New York, New York (the "Place of Payment"), 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; provided, however, that at the
option of the Issuer payment of interest (other than interest payable at
Maturity) may be made by check mailed to the address of the Person entitled
thereto as such address shall appear in the Security Register or by wire
transfer to an account designated by such Person not later than ten days prior
to the date of such payment.

         Reference is hereby made to the further provisions of this 2023 Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND THE COMMON STOCK ISSUABLE
UPON CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS

                                       16
<PAGE>

SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY AND THE
COMMON STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A")) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (IV) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (V) TO CMS ENERGY CORPORATION
OR (VI) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (I) THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO IN CLAUSE (A) ABOVE.

         THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE IN
HEDGING TRANSACTIONS INVOLVING THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

         THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR
RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE
LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO
ANY SUCH AMENDMENT OR SUPPLEMENT.

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS
OF, A REGISTRATION RIGHTS AGREEMENT, DATED AS OF JULY 16, 2003 ENTERED INTO BY
THE COMPANY FOR THE BENEFIT OF CERTAIN HOLDERS OF SECURITIES FROM TIME TO TIME.

         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this 2023
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

                                       17
<PAGE>

         IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal.

Dated:

                                        CMS ENERGY CORPORATION

                                        By____________________________
                                        Its:

                                        By____________________________
                                        Its:

         SECTION 2.04. Form of Reverse of 2023 Note.

         This 3.375% Convertible Senior Note due 2023 is one of a duly
authorized issue of securities of the Issuer (herein called the "2023 Notes"),
issued and to be issued under an Indenture, dated as of September 15, 1992, as
supplemented by certain supplemental indentures, including the Thirteenth
Supplemental Indenture, dated as of July 16, 2003 (herein collectively referred
to as the "Indenture"), between the Issuer and Bank One Trust Company, N.A., a
national banking association (successor to NBD Bank, National Association), as
Trustee (herein called the "Trustee", which term includes any successor trustee
under the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Issuer, the Trustee, and the
Holders of the 2023 Notes and of the terms upon which the 2023 Notes are, and
are to be, authenticated and delivered. This 2023 Note is one of the series
designated on the face hereof, issued in an initial aggregate principal amount
of $150,000,000 (except that such amount shall be increased to an amount up to
$200,000,000 to the extent of any exercise by the Initial Purchasers of their
option to purchase additional 2023 Notes). Additional Securities, without
limitation as to amount, having substantially the same terms as the 2023 Notes
(except a different issue date, issue price and bearing interest from the last
Interest Payment Date to which interest has been paid or duly provided for on
the 2023 Notes, and, if no interest has been paid, from July 16, 2003), may also
be issued by the Issuer pursuant to the Indenture without the consent of the
existing Holders of the 2023 Notes. Such additional Securities shall be part of
the same series as the 2023 Notes.

         Holders of 2023 Notes at the close of business on a Record Date will
receive payment of interest, payable on the corresponding Interest Payment Date
notwithstanding the conversion of such 2023 Notes at any time after the close of
business on such Record Date. 2023 Notes surrendered for conversion by a Holder
during the period from the close of business on any Record Date to the opening
of business on the immediately following Interest Payment Date must be
accompanied by payment of an amount equal to the interest that the Holder is to
receive

                                       18
<PAGE>

on the 2023 Notes; provided, however, that no such payment need be made if (1)
the Issuer has specified a redemption date that is after a Record Date and on or
prior to the immediately following Interest Payment Date, (2) the Issuer has
specified a Purchase Date following a Fundamental Change that is during such
period or (3) any overdue interest exists at the time of conversion with respect
to such 2023 Notes to the extent of such overdue interest. The Holders of the
2023 Notes and any Common Stock issuable upon conversion thereof will continue
to be entitled to receive Additional Amounts in accordance with the Registration
Rights Agreement.

         If the principal hereof or any portion of such principal is not paid
when due (whether upon acceleration, upon the date set for payment of the
Redemption Price, upon the date set for payment of a Purchase Price or
Fundamental Change Purchase Price or upon the Stated Maturity of this 2023 Note)
or if interest due hereon or any portion of such interest is not paid when due
in accordance with the terms of this 2023 Note, then in each such case the
overdue amount shall bear interest at the rate of 3.375% per annum, compounded
semiannually (to the extent that the payment of such interest shall be legally
enforceable), which interest shall accrue from the date such overdue amount was
due to the date payment of such amount, including interest thereon, has been
made or duly provided for, all such interest shall be payable on demand.

         The interest rate borne by the Registrable Securities will be increased
by 0.25% per annum upon the occurrence of a Registration Default, which rate
will increase by an additional 0.25% per annum if such Registration Default has
not been cured within 90 days after the occurrence thereof and will continue to
increase by 0.25% at the beginning of each subsequent 90-day period until all
Registration Defaults have been cured ("Additional Amounts"); provided, that the
aggregate amount of any such increase in the interest rate on the Registrable
Securities shall in no event exceed 0.50% per annum. All accrued Additional
Amounts shall be paid to Holders of Registrable Securities in the same manner
and at the same time as regular payments of interest on the Registrable
Securities. Following the cure of all Registration Defaults, the accrual of
Additional Amounts shall cease and the interest rate on the Registrable
Securities will revert to 3.375% per annum.

         In the event of redemption of this 2023 Note in part only, a new 2023
Note for the unredeemed portion hereof will be issued in the name of the Holder
hereof upon the cancellation hereof. No sinking fund is provided for the 2023
Notes. The 2023 Notes are redeemable for cash or check in whole, or in part, at
any time on or after July 15, 2008 at the option of the Issuer at a redemption
price ("Redemption Price") equal to 100% of the principal amount of the 2023
Notes to be redeemed plus any accrued and unpaid interest (including Additional
Amounts, if any) to the redemption date. Notice of redemption at the option of
the Issuer shall be mailed at least 30 days but not more than 60 days before a
redemption date to the Trustee, the Paying Agent and each Holder of 2023 Notes
to be redeemed at the Holder's registered address. If money sufficient to pay
the Redemption Price of all 2023 Notes (or portions thereof) to be redeemed on
the redemption date is deposited with the Paying Agent prior to or on the
redemption date, on and after the redemption date interest (including Additional
Amounts, if any), if any, shall cease to accrue on such 2023 Notes or portions
thereof. 2023 Notes in denominations larger than $1,000 principal amount may be
redeemed in part but only in integral multiples of $1,000 principal amount.

                                       19
<PAGE>

         Subject to the terms and conditions of the Indenture, a Holder shall
have the option to require the Issuer to purchase the 2023 Notes held by such
Holder on July 15, 2008, July 15, 2013 and July 15, 2018 (each, a "Purchase
Date") at a purchase price (the "Purchase Price") equal to 100% of the principal
amount of the 2023 Notes to be purchased plus any accrued and unpaid interest
(including Additional Amounts, if any) to but excluding such Purchase Date, upon
delivery of a Purchase Notice containing the information set forth in the
Indenture, from the opening of business on the date that is 20 Business Days
prior to such Purchase Date until the close of business on the fifth Business
Day prior to such Purchase Date and upon delivery of the 2023 Notes to the
Paying Agent by the Holder as set forth in the Indenture. The Issuer will pay
the Purchase Price in cash or by check. 2023 Notes in denominations larger than
$1,000 principal amount may be purchased in part, but only in integral multiples
of $1,000 principal amount.

         If a Fundamental Change shall occur at any time prior to July 15, 2008,
each Holder shall have the right, at such Holder's option and subject to the
terms and conditions of the Indenture, to require the Issuer to purchase any or
all of such Holder's 2023 Notes or any portion of the principal amount thereof
that is equal to $1,000 or an integral multiple of $1,000 on the day that is no
earlier than 60 days nor later than 90 days after the date of the Issuer Notice
of the occurrence of the Fundamental Change (subject to extension to comply with
applicable law) for a Fundamental Change Purchase Price equal to 100% of the
principal amount of 2023 Notes purchased plus accrued and unpaid interest
(including Additional Amounts, if any) to the Fundamental Change Purchase Date,
which Fundamental Change Purchase Price shall be paid by the Issuer in cash or
by check, as set forth in the Indenture.

         Holders have the right to withdraw any Purchase Notice or Fundamental
Change Purchase Notice, as the case may be, by delivery to the Paying Agent of a
written notice of withdrawal in accordance with the provisions of the Indenture.

         If cash sufficient to pay a Fundamental Change Purchase Price or
Purchase Price, as the case may be, of all 2023 Notes or portions thereof to be
purchased as of the Purchase Date or the Fundamental Change Purchase Date, as
the case may be, is on deposit with the Paying Agent on the Business Day
following the Purchase Date or the Fundamental Change Purchase Date, as the case
may be, interest (including Additional Amounts, if any) shall cease to accrue on
such 2023 Notes (or portions thereof) on and after such date, and the Holder
thereof shall have no other rights as such (other than the right to receive the
Purchase Price or Fundamental Change Purchase Price, as the case may be, upon
surrender of such Note).

         Subject to the procedures set forth in the Indenture, a Holder may
convert 2023 Notes into Common Stock on or before the close of business on July
15, 2023 during the periods and upon satisfaction of at least one of the
conditions set forth below:

         (a)      in any calendar quarter (and only during such calendar
         quarter) if the Last Reported Sale Price for Common Stock for at least
         20 Trading Days during the period of 30 consecutive Trading Days ending
         on the last Trading Day of the previous calendar quarter is greater
         than or equal to 120% of the Conversion Price per share of Common Stock
         on such last Trading Day;

                                       20
<PAGE>

         (b)      prior to Maturity during the five Business Days immediately
         following any ten consecutive Trading Day period in which the Trading
         Price per $1,000 principal amount of 2023 Notes (as determined
         following a request by a Holder of the 2023 Notes in accordance with
         the procedures described in the Indenture) for each day of that period
         was less than 95% of the product of the sale price of Common Stock and
         the then applicable Conversion Rate (the "Trading Exception");
         provided, however, that a Holder may not convert its 2023 Notes if the
         average closing sale price of Common Stock for such ten consecutive
         Trading Day period is between the then current Conversion Price and
         120% of the then applicable Conversion Price; in connection with any
         conversion upon satisfaction of such Trading Price condition, the
         Trustee shall have no obligation to determine the Trading Price unless
         the Issuer has requested such determination; and the Issuer shall have
         no obligation to make such request unless the Holder provides
         reasonable evidence that the Trading Price would be less than 95% of
         the product of the sale price of Common Stock and the then applicable
         Conversion Rate; at which time, the Issuer shall instruct the Trustee
         to determine the Trading Price beginning on the next Trading Day and on
         each successive Trading Day until the Trading Price is greater than or
         equal to 95% of the product of the sale price of Common Stock and the
         then applicable Conversion Rate;

         (c)      in the event that the Issuer calls the 2023 Notes for
         redemption, at any time prior to the close of business on the second
         Business Day immediately preceding the redemption date;

         (d)      the Issuer becomes a party to a consolidation, merger or
         binding share exchange pursuant to which the Common Stock would be
         converted into cash or property (other than securities), in which case
         a Holder may surrender 2023 Notes for conversion at any time from and
         after the date which is 15 days prior to the anticipated effective date
         for the transaction until 15 days after the actual effective date of
         such transaction; or

         (e)      the Issuer elects to (i) distribute to all holders of Common
         Stock assets, debt securities or rights to purchase securities of the
         Issuer, which distribution has a per share value as determined by the
         Board of Directors exceeding 15% of the Last Reported Sale Price of a
         share of Common Stock on the Trading Day immediately preceding the
         declaration date for such distribution, or (ii) distribute to all
         holders of Common Stock rights entitling them to purchase, for a period
         expiring within 60 days after the date of such distribution, shares of
         Common Stock at less than the Last Reported Sale Price of Common Stock
         on the Trading Day immediately preceding the declaration date of the
         distribution. In the case of the foregoing clauses (i) and (ii), the
         Issuer must notify the Holders at least 20 Business Days immediately
         prior to the ex date for such distribution. Once the Issuer has given
         such notice, Holders may surrender their 2023 Notes for conversion at
         any time thereafter until the earlier of the close of business on the
         Business Day immediately prior to the ex date or the Issuer's
         announcement that such distribution will not take place; provided,
         however, that a Holder may not exercise this right to convert if the
         Holder may participate in the distribution without conversion. As used
         herein, the term "ex date," when used with respect to any issuance or
         distribution, shall

                                       21
<PAGE>

         mean the first date on which the Common Stock trades regular way on
         such exchange or in such market without the right to receive such
         issuance or distribution.

         If the Issuer engages in certain reclassifications of its Common Stock
or is a party to a consolidation, merger, binding share exchange or transfer of
all or substantially all of its assets pursuant to which Common Stock is
converted into cash, securities or other property, then, at the effective time
of the transaction, the right to convert a 2023 Note into Common Stock will be
changed into a right to convert a 2023 Note into the kind and amount of cash,
securities or other property which the Holder would have received if the Holder
had converted its 2023 Notes immediately prior to the transaction. If the Issuer
engages in any transaction described in the preceding sentence, the Conversion
Rate will not be adjusted. If the transaction also constitutes a Fundamental
Change, a Holder can require the Issuer to purchase all or a portion of its 2023
Notes as described in the Indenture.

         2023 Notes in respect of which a Holder has delivered a notice of
exercise of the option to require the Issuer to purchase such 2023 Notes
pursuant to Article VII or Article XIII of the Indenture may be converted only
if the notice of exercise is withdrawn in accordance with the terms of the
Indenture.

         The initial Conversion Rate is 93.7137 shares of Common Stock per
$1,000 principal amount, subject to adjustment in certain events described in
the Indenture. The Issuer shall deliver cash or a check in lieu of any
fractional share of Common Stock.

         Holders of 2023 Notes at the close of business on a Record Date will
receive payment of interest, payable on the corresponding Interest Payment Date
notwithstanding the conversion of such 2023 Notes at any time after the close of
business on such Record Date. 2023 Notes surrendered for conversion by a Holder
during the period from the close of business on any Record Date to the opening
of business on the immediately following Interest Payment Date must be
accompanied by payment of an amount equal to the interest that the Holder is to
receive on the 2023 Notes; provided, however, that no such payment need be made
if (1) the Issuer has specified a redemption date that is after a Record Date
and on or prior to the immediately following Interest Payment Date, (2) the
Issuer has specified a Purchase Date following a Fundamental Change that is
during such period or (3) any overdue interest exists at the time of conversion
with respect to such 2023 Notes to the extent of such overdue interest. The
Holders of the 2023 Notes and any Common Stock issuable upon conversion thereof
will continue to be entitled to receive Additional Amounts in accordance with
the Registration Rights Agreement.

         To convert the 2023 Notes a Holder must (i) complete and manually sign
the irrevocable conversion notice on the back of the 2023 Notes (or complete and
manually sign a facsimile of such notice) and deliver such notice to the
Conversion Agent at the office maintained by the Conversion Agent for such
purpose, (ii) surrender the 2023 Notes to the Conversion Agent, (iii) furnish
appropriate endorsements and transfer documents if required by the Conversion
Agent, the Issuer or the Trustee and (iv) pay any transfer or similar tax, if
required.

         A Holder may convert a portion of the 2023 Notes only if the principal
amount of such portion is $1,000 or a multiple of $1,000. No payment or
adjustment shall be made for dividends

                                       22
<PAGE>

on the Common Stock except as provided in the Indenture. On conversion of the
2023 Notes, that portion of accrued and unpaid interest attributable to the
period from the Original Issue Date to the Conversion Date shall be deemed
canceled, extinguished or forfeited rather than paid in full to the Holder
thereof through the delivery of the Common Stock (together with any cash payment
in lieu of fractional shares) in exchange for the portion of the 2023 Notes
being converted pursuant to the terms hereof; and the Fair Market Value of such
shares of Common Stock (together with any such cash payment in lieu of
fractional shares) shall be treated as issued, to the extent thereof, first in
exchange for interest accrued and unpaid through the Conversion Date, and the
balance, if any, of such Fair Market Value of such Common Stock (and any such
cash payment) shall be treated as issued in exchange for the principal amount of
the 2023 Notes being converted pursuant to the provisions hereof.
Notwithstanding the conversion of any 2023 Notes, the Holders of the 2023 Notes
and any Common Stock issuable upon conversion thereof will continue to be
entitled to receive Additional Amounts in accordance with the Registration
Rights Agreement.

         If an Event of Default with respect to this 2023 Note shall occur and
be continuing, the principal of this 2023 Note may be declared due and payable
in the manner and with the effect provided in the Indenture.

         In any case where any Interest Payment Date, redemption date,
repurchase date, Stated Maturity or Maturity of any 2023 Note shall not be a
Business Day at any Place of Payment, then (notwithstanding any other provision
of the Indenture or this 2023 Note) payment of interest or principal (and
premium, if any) need not be made at such Place of Payment on such date, but may
be made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment Date, repurchase date
or at the Stated Maturity or Maturity; provided that no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date,
redemption date, repurchase date, Stated Maturity or Maturity, as the case may
be, to such Business Day.

         The Trustee and the Paying Agent shall return to the Issuer upon
written request any money or property held by them for the payment of any amount
with respect to the 2023 Notes that remains unclaimed for two years, provided,
however, that the Trustee or such Paying Agent, before being required to make
any such return, shall at the expense of the Issuer cause to be published once
in a newspaper of general circulation in The City of New York or mail to each
such Holder notice that such money or property remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication or mailing, any unclaimed money or property then remaining
shall be returned to the Issuer. After return to the Issuer, Holders entitled to
the money or property must look to the Issuer for payment as general creditors
unless an applicable abandoned property law designates another Person.

         The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this 2023 Note or (ii) certain restrictive covenants and
Events of Default with respect to this 2023 Note, in each case upon compliance
with certain conditions set forth therein.

                                       23
<PAGE>

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of all outstanding 2023 Notes under the
Indenture at any time by the Issuer and the Trustee with the consent of the
Holders of not less than a majority in principal amount of Securities of all
series then outstanding and affected (voting as one class).

         The Indenture permits the Holders of not less than a majority in
principal amount of Securities of all series at the time outstanding with
respect to which a default shall have occurred and be continuing (voting as one
class) to waive on behalf of the Holders of all outstanding Securities of such
series any past default by the Issuer, provided that no such waiver may be made
with respect to a default in the payment of the principal of or the interest on
any Security of such series or the default by the Issuer in respect of certain
covenants or provisions of the Indenture, the modification or amendment of which
must be consented to by the Holder of each outstanding Security of each series
affected.

         As set forth in, and subject to, the provisions of the Indenture, no
Holder of any 2023 Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default, the Holders of not less than 25% in principal amount of the outstanding
Securities of each affected series (voting as one class) shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in principal amount of the outstanding Securities of each affected
series (voting as one class) a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days; provided,
however, that such limitations do not apply to a suit instituted by the Holder
hereof for the enforcement of payment of the principal of (and premium, if any)
or any interest on this 2023 Note on or after the respective due dates expressed
herein.

         No reference herein to the Indenture and no provision of this 2023 Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this 2023 Note at the times, place and rate, and in the coin or currency,
herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this 2023 Note is registrable in the Security
Register, upon surrender of this 2023 Note for registration of transfer at the
office or agency of the Issuer in any place where the principal of and any
premium and interest on this 2023 Note are payable, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Security Registrar duly executed by, the Holder hereof or his
attorney duly authorized in writing, and thereupon one or more new 2023 Notes of
this series and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

         The 2023 Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain

                                       24
<PAGE>

limitations therein set forth, 2023 Notes are exchangeable for a like aggregate
principal amount of 2023 Notes and of like tenor of a different authorized
denomination, as requested by the Holder surrendering the same.

         No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         In the event of any redemption or purchase in part, the Issuer shall
not be required to (i) issue, exchange or register the transfer of this 2023
Note for a period of 15 days next preceding the mailing of the notice of
redemption of 2023 Notes or (ii) exchange or register the transfer of any 2023
Note or any portion thereof selected, called or being called for redemption,
except in the case of any 2023 Note to be redeemed in part, the portion thereof
not so to be redeemed.

         Prior to due presentment of this 2023 Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this 2023 Note is registered as the owner hereof
for all purposes, whether or not this 2023 Note be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.

         The Issuer will be responsible for making all calculations called for
under the 2023 Notes. These calculations include, but are not limited to,
determination of the market prices for the Common Stock, accrued interest
payable on the 2023 Notes and Conversion Price of the 2023 Notes. The Issuer
will make these calculations in good faith and, absent manifest error, these
calculations will be final and binding on the Holders. The Issuer will provide
to each of the Trustee and the Conversion Agent a schedule of its calculations,
and each of the Trustee and the Conversion Agent is entitled to rely upon the
accuracy of such calculations without independent verification. The Trustee will
forward the Issuer's calculations to any Holder upon the request of such Holder.

         All terms used in this 2023 Note without definition which are defined
in the Indenture shall have the meanings assigned to them in the Indenture.

                            FORM OF CONVERSION NOTICE

To: CMS Energy Corporation

         The undersigned registered holder of this 2023 Note hereby exercises
the option to convert this 2023 Note, or portion hereof (which is $1,000
principal amount or an integral multiple thereof) designated below, for shares
of Common Stock of CMS Energy Corporation in accordance with the terms of the
Indenture referred to in this 2023 Note, and directs that the shares, if any,
issuable and deliverable upon such conversion, together with any check for cash
deliverable upon such conversion, and any 2023 Notes representing any
unconverted principal amount hereof, be issued and delivered to the registered
holder hereof unless a different name has been indicated below. If shares or any
portion of this 2023 Note not converted are to be

                                       25
<PAGE>

issued in the name of a Person other than the undersigned, the undersigned shall
pay all transfer taxes payable with respect thereto.

         This notice shall be deemed to be an irrevocable exercise of the option
to convert this 2023 Note.

Dated:

                                                 _______________________________
                                                 _______________________________
                                                           Signature(s)

                          Signature(s) must be guaranteed by a commercial bank
                          or trust company or a member firm of a major stock
                          exchange if shares of Common Stock are to be issued,
                          or 2023 Notes to be delivered, other than to or in the
                          name of the registered holder.

                                                 _______________________________
                                                        Signature Guarantee

Fill in for registration
of shares if to be
delivered, and 2023 Notes
if to be issued other
than to and in the name
of registered holder:
__________________________                     Principal amount to be purchased
(Name)                                         (if less than all):
__________________________
(Street Address)                               $______,000
__________________________
(City, state and zip code)                     Social Security or other taxpayer
                                               number
Please print name and address

         SECTION 2.05. Form of Trustee's Certificate of Authentication. The
Trustee's certificates of authentication shall be in substantially the following
form:

         This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.

                                             BANK ONE TRUST COMPANY, N.A.,
                                             as Trustee

                                             By__________________________
                                               Authorized Officer

                                       26
<PAGE>

                                   ARTICLE III

                       PURCHASE UPON A FUNDAMENTAL CHANGE

     SECTION 3.01. Purchase at the Option of the Holder Upon a Fundamental
Change. If a Fundamental Change shall occur at any time prior to July 15, 2008,
each Holder shall have the right, at such Holder's option, to require the Issuer
to purchase any or all of such Holder's 2023 Notes for cash or a check on the
date that is no earlier than 60 days nor later than 90 days after the date of
the Issuer Notice of the occurrence of such Fundamental Change (subject to
extension to comply with applicable law, as provided in Section 5.04) (the
"Fundamental Change Purchase Date"). The 2023 Notes shall be repurchased in
integral multiples of $1,000 of the principal amount. The Issuer shall purchase
such 2023 Notes at a price (the "Fundamental Change Purchase Price") equal to
100% of the principal amount of the Notes to be purchased plus accrued and
unpaid interest, including Additional Amounts, if any, to the Fundamental Change
Purchase Date. No 2023 Notes may be purchased at the option of the Holders upon
a Fundamental Change if there has occurred and is continuing an Event of Default
(other than an Event of Default that is cured by the payment of the Fundamental
Change Purchase Price of the 2023 Notes).

         SECTION 3.02. Notice of Fundamental Change. The Issuer, or at its
request (which must be received by the Paying Agent at least three Business Days
(or such lesser period as agreed to by the Paying Agent) prior to the date the
Paying Agent is requested to give such notice as described below), the Paying
Agent, in the name of and at the expense of the Issuer, shall mail to all
Holders and the Trustee and the Paying Agent an Issuer Notice of the occurrence
of a Fundamental Change and of the purchase right arising as a result thereof,
including the information required by Section 5.01 hereof, on or before the 30th
day after the occurrence of such Fundamental Change.

         SECTION 3.03. Exercise of Option. For a 2023 Note to be so purchased at
the option of the Holder, the Paying Agent must receive such 2023 Note duly
endorsed for transfer, together with a written notice of purchase in the form
attached hereto as Exhibit A (a "Fundamental Change Purchase Notice") and the
form entitled "Form of Fundamental Change Purchase Notice" on the reverse
thereof duly completed, on or before the 30th day prior to the occurrence of
such Fundamental Change, subject to extension to comply with applicable law. The
Fundamental Change Purchase Notice shall state:

         (a)      if certificated, the certificate numbers of the 2023 Notes
         which the Holder shall deliver to be purchased, or, if not
         certificated, the Fundamental Change Purchase Notice must comply with
         appropriate Depositary procedures;

         (b)      the portion of the principal amount of the 2023 Notes which
         the Holder shall deliver to be purchased, which portion must be $1,000
         in principal amount or an integral multiple thereof; and

                                       27
<PAGE>

         (c)      that such 2023 Notes shall be purchased as of the Fundamental
         Change Purchase Date pursuant to the terms and conditions specified in
         the 2023 Notes and in this Thirteenth Supplemental Indenture.

         SECTION 3.04. Procedures. The Issuer shall purchase from a Holder,
pursuant to this Article III, 2023 Notes if the principal amount of such 2023
Notes is $1,000 or a multiple of $1,000 if so requested by such Holder.

         Any purchase by the Issuer contemplated pursuant to the provisions of
this Article III shall be consummated by the delivery of the Fundamental Change
Purchase Price to be received by the Holder promptly following the later of the
Fundamental Change Purchase Date or the time of book-entry transfer or delivery
of the 2023 Notes.

         Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Fundamental Change Purchase Notice contemplated by
Section 3.03 hereof shall have the right at any time prior to the close of
business on the Business Day prior to the Fundamental Change Purchase Date to
withdraw such Fundamental Change Purchase Notice (in whole or in part) by
delivery of a written notice of withdrawal to the Paying Agent in accordance
with Section 5.02 hereof.

         The Paying Agent shall promptly notify the Issuer of the receipt by it
of any Fundamental Change Purchase Notice or written notice of withdrawal
thereof.

         On or before 10:00 a.m. (New York City time) on the Fundamental Change
Purchase Date, the Issuer shall deposit with the Paying Agent (or if the Issuer
or an Affiliate of the Issuer is acting as the Paying Agent, shall segregate and
hold in trust) money sufficient to pay the aggregate Fundamental Change Purchase
Price of the 2023 Notes to be purchased pursuant to this Article III. Payment by
the Paying Agent of the Fundamental Change Purchase Price for such 2023 Notes
shall be made promptly following the later of the Fundamental Change Purchase
Date or the time of book-entry transfer or delivery of such 2023 Notes. If the
Paying Agent holds, in accordance with the terms of the Indenture, money
sufficient to pay the Fundamental Change Purchase Price of such 2023 Notes on
the Business Day following the Fundamental Change Purchase Date, then, on and
after such date, such 2023 Notes shall cease to be outstanding and interest
(including Additional Amounts, if any) on such 2023 Notes shall cease to accrue,
whether or not book-entry transfer of such 2023 Notes is made or such 2023 Notes
are delivered to the Paying Agent, and all other rights of the Holder shall
terminate (other than the right to receive the Fundamental Change Purchase Price
upon delivery or transfer of the 2023 Notes). Nothing herein shall preclude any
withholding tax required by law.

         The Issuer shall require each Paying Agent (other than the Trustee) to
agree in writing that the Paying Agent shall hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of the
Fundamental Change Purchase Price and shall notify the Trustee of any default by
the Issuer in making any such payment. If the Issuer or an Affiliate of the
Issuer acts as Paying Agent, it shall segregate the money held by it as Paying
Agent and hold it as a separate trust fund. The Issuer at any time may require a
Paying Agent to deliver all money held by it to the Trustee and to account for
any funds disbursed by the Paying Agent.

                                       28
<PAGE>

Upon doing so, the Paying Agent shall have no further liability for the cash
delivered to the Trustee.

         All questions as to the validity, eligibility (including time of
receipt) and acceptance of any 2023 Notes for redemption shall be determined by
the Issuer, whose determination shall be final and binding.

                                   ARTICLE IV

                                OPTIONAL PURCHASE

         SECTION 4.01 Purchase of 2023 Notes by the Issuer at the Option of the
Holder.

         (a)      On each of July 15, 2008, July 15, 2013 and July 15, 2018
         (each, a "Purchase Date"), Holders shall have the option to require the
         Issuer to purchase any 2023 Notes at the Purchase Price specified in
         the 2023 Notes, upon:

                  (i)      delivery to the Paying Agent by the Holder of a
                  written notice of purchase in the form attached hereto as
                  Exhibit B (a "Purchase Notice") at any time from the opening
                  of business on the date that is 20 Business Days prior to a
                  Purchase Date until the close of business on the fifth
                  Business Day prior to such Purchase Date, stating:

                           (A)      if certificated, the certificate numbers of
                           the 2023 Notes which the Holder will deliver to be
                           purchased, or, if not certificated, the Purchase
                           Notice must comply with appropriate Depositary
                           procedures;

                           (B)      the portion of the principal amount of the
                           2023 Notes which the Holder will deliver to be
                           purchased, which portion must be $1,000 in principal
                           amount or an integral multiple thereof; and

                           (C)      that such 2023 Notes shall be purchased as
                           of the Purchase Date pursuant to the terms and
                           conditions specified in the 2023 Notes and in this
                           Thirteenth Supplemental Indenture; and

                  (ii)     delivery or book-entry transfer of such 2023 Notes to
                  the Paying Agent prior to, on or after the Purchase Date
                  (together with all necessary endorsements) at the offices of
                  the Paying Agent, such delivery or transfer being a condition
                  to receipt by the Holder of the Purchase Price therefor;
                  provided, however, that such Purchase Price shall be so paid
                  pursuant to this Section 4.01 only if the 2023 Notes so
                  delivered or transferred to the Paying Agent shall conform in
                  all respects to the description thereof in the related
                  Purchase Notice.

         (b)      The Issuer shall purchase from a Holder, pursuant to the terms
         of this Section 4.01, 2023 Notes if the principal amount of such 2023
         Notes is $1,000 or a multiple of $1,000 if so requested by such Holder.

                                       29
<PAGE>

         (c)      Any purchase by the Issuer contemplated pursuant to the
         provisions of this Section 4.01 shall be consummated by the delivery of
         the Purchase Price to be received by the Holder promptly following the
         later of the Purchase Date or the time of book-entry transfer or
         delivery of the 2023 Notes.

         (d)      Notwithstanding anything herein to the contrary, any Holder
         delivering to the Paying Agent the Purchase Notice contemplated by this
         Section 4.01 shall have the right at any time prior to the close of
         business on the Business Day prior to the Purchase Date to withdraw
         such Purchase Notice (in whole or in part) by delivery of a written
         notice of withdrawal to the Paying Agent in accordance with Section
         5.02 hereof.

         (e)      The Paying Agent shall promptly notify the Issuer of the
         receipt by it of any Purchase Notice or written notice of withdrawal
         thereof.

         (f)      On or before 10:00 a.m. (New York City time) on the Purchase
         Date, the Issuer shall deposit with the Paying Agent (or if the Issuer
         or an Affiliate of the Issuer is acting as the Paying Agent, shall
         segregate and hold in trust) money sufficient to pay the aggregate
         Purchase Price of the 2023 Notes to be purchased pursuant to this
         Section 4.01. Payment by the Paying Agent of the Purchase Price for
         such Notes shall be made promptly following the later of the Purchase
         Date or the time of book-entry transfer or delivery of such 2023 Notes.
         If the Paying Agent holds, in accordance with the terms of the
         Indenture, money sufficient to pay the Purchase Price of such 2023
         Notes on the Business Day following the Purchase Date, then, on and
         after such date, such 2023 Notes shall cease to be outstanding and
         interest (including Additional Amounts, if any) on such 2023 Notes
         shall cease to accrue, whether or not book-entry transfer of such 2023
         Notes is made or such 2023 Notes are delivered to the Paying Agent, and
         all other rights of the Holder shall terminate (other than the right to
         receive the Purchase Price upon delivery or transfer of the 2023
         Notes).

         (g)      The Issuer shall require each Paying Agent (other than the
         Trustee) to agree in writing that the Paying Agent shall hold in trust
         for the benefit of Holders or the Trustee all money held by the Paying
         Agent for the payment of the Purchase Price and shall notify the
         Trustee of any default by the Issuer in making any such payment. If the
         Issuer or an Affiliate of the Issuer acts as Paying Agent, it shall
         segregate the money held by it as Paying Agent and hold it as a
         separate trust fund. The Issuer at any time may require a Paying Agent
         to deliver all money held by it to the Trustee and to account for any
         funds disbursed by the Paying Agent. Upon doing so, the Paying Agent
         shall have no further liability for the cash delivered to the Trustee.

                                    ARTICLE V

          CONDITIONS AND PROCEDURES FOR PURCHASES AT OPTION OF HOLDERS

         SECTION 5.01. Notice of Purchase Date or Fundamental Change. The Issuer
shall send notices (each, an "Issuer Notice") to the Holders (and to beneficial
owners as required by applicable law) at their addresses shown in the Security
Register maintained by the Security

                                       30
<PAGE>

Registrar, and delivered to the Trustee and Paying Agent, not less than 20
Business Days prior to each Purchase Date, or on or before the 30th day after
the occurrence of the Fundamental Change, as the case may be (each such date of
delivery, an "Issuer Notice Date"). Each Issuer Notice shall include a form of
Purchase Notice or Fundamental Change Purchase Notice to be completed by a
Holder and shall state:

         (a)      the applicable Purchase Price or Fundamental Change Purchase
         Price, excluding accrued and unpaid interest, Conversion Rate at the
         time of such notice (and any adjustments to the Conversion Rate) and,
         to the extent known at the time of such notice, the amount of interest
         (including Additional Amounts, if any), if any, that will be payable
         with respect to the 2023 Notes on the applicable Purchase Date or
         Fundamental Change Purchase Date;

         (b)      if the notice relates to a Fundamental Change, the events
         causing the Fundamental Change and the date of the Fundamental Change;

         (c)      the Purchase Date or Fundamental Change Purchase Date;

         (d)      the last date on which a Holder may exercise its purchase
         right;

         (e)      the name and address of the Paying Agent and the Conversion
         Agent;

         (f)      that 2023 Notes must be surrendered to the Paying Agent to
         collect payment of the Purchase Price or Fundamental Change Purchase
         Price;

         (g)      that 2023 Notes as to which a Purchase Notice or Fundamental
         Change Purchase Notice has been given may be converted only if the
         applicable Purchase Notice or Fundamental Change Purchase Notice has
         been withdrawn in accordance with the terms of this Thirteenth
         Supplemental Indenture;

         (h)      that the Purchase Price or Fundamental Change Purchase Price
         for any 2023 Notes as to which a Purchase Notice or a Fundamental
         Change Purchase Notice, as applicable, has been given and not withdrawn
         shall be paid by the Paying Agent promptly following the later of the
         Purchase Date or Fundamental Change Purchase Date, as applicable, or
         the time of book-entry transfer or delivery of such 2023 Notes;

         (i)      the procedures the Holder must follow under Article III or
         Article IV hereof, as applicable, and Article V hereof;

         (j)      briefly, the conversion rights of the 2023 Notes;

         (k)      that, unless the Issuer defaults in making payment of such
         Purchase Price or Fundamental Change Purchase Price on 2023 Notes
         covered by any Purchase Notice or Fundamental Change Purchase Notice,
         as applicable, interest (including Additional Amounts, if any) will
         cease to accrue on and after the Purchase Date or Fundamental Change
         Purchase Date, as applicable;

                                       31
<PAGE>

         (l)      the CUSIP or ISIN number of the 2023 Notes; and

         (m)      the procedures for withdrawing a Purchase Notice or
         Fundamental Change Purchase Notice.

         In connection with providing such Issuer Notice, the Issuer will issue
a press release and publish a notice containing the information in such Issuer
Notice in a newspaper of general circulation in The City of New York or publish
such information on the Issuer's then existing Web site or through such other
public medium as the Issuer may use at the time.

         At the Issuer's request, made at least five Business Days prior to the
date upon which such notice is to be mailed, and at the Issuer's expense, the
Paying Agent shall give the Issuer Notice in the Issuer's name; provided,
however, that, in all cases, the text of the Issuer Notice shall be prepared by
the Issuer.

         SECTION 5.02. Effect of Purchase Notice or Fundamental Change Purchase
Notice; Effect of Event of Default. Upon receipt by the Issuer of the Purchase
Notice or Fundamental Change Purchase Notice specified in Section 4.01 or
Section 3.03 hereof, as applicable, the Holder of the 2023 Notes in respect of
which such Purchase Notice or Fundamental Change Purchase Notice, as the case
may be, was given shall (unless such Purchase Notice or Fundamental Change
Purchase Notice is withdrawn as specified in the following two paragraphs)
thereafter be entitled to receive solely the Purchase Price or Fundamental
Change Purchase Price with respect to such 2023 Notes. Such Purchase Price or
Fundamental Change Purchase Price shall be paid by the Paying Agent to such
Holder promptly following the later of (x) the Purchase Date or the Fundamental
Change Purchase Date, as the case may be, with respect to such 2023 Notes
(provided the conditions in Section 4.01 or Section 3.03 hereof, as applicable,
have been satisfied) and (y) the time of delivery or book-entry transfer of such
2023 Notes to the Paying Agent by the Holder thereof in the manner required by
Section 4.01 or Section 3.03 hereof, as applicable. 2023 Notes in respect of
which a Purchase Notice or Fundamental Change Purchase Notice, as the case may
be, has been given by the Holder thereof may not be converted for shares of
Common Stock on or after the date of the delivery of such Purchase Notice or
Fundamental Change Purchase Notice, as the case may be, unless such Purchase
Notice or Fundamental Change Purchase Notice, as the case may be, has first been
validly withdrawn as specified in the following two paragraphs.

         A Purchase Notice or Fundamental Change Purchase Notice, as the case
may be, may be withdrawn by means of a written notice of withdrawal delivered to
the office of the Paying Agent at any time prior to 5:00 p.m. New York City time
on the Business Day prior to the Purchase Date or the Fundamental Change
Purchase Date, as the case may be, to which it relates specifying:

         (a)      if certificated, the certificate number of the 2023 Notes in
         respect of which such notice of withdrawal is being submitted, or, if
         not certificated, the written notice of withdrawal must comply with
         appropriate Depositary procedures;

                                       32
<PAGE>

         (b)      the principal amount of the 2023 Notes with respect to which
         such notice of withdrawal is being submitted; and

         (c)      the principal amount, if any, of such 2023 Notes which remains
         subject to the original Purchase Notice or Fundamental Change Purchase
         Notice, as the case may be, and which has been or shall be delivered
         for purchase by the Issuer.

         There shall be no purchase of any 2023 Notes pursuant to Article III or
Article IV hereof if an Event of Default has occurred and is continuing (other
than a default that is cured by the payment of the Purchase Price or Fundamental
Change Purchase Price, as the case may be). The Paying Agent shall promptly
return to the respective Holders thereof any 2023 Notes (x) with respect to
which a Purchase Notice or Fundamental Change Purchase Notice, as the case may
be, has been withdrawn in compliance with this Thirteenth Supplemental
Indenture, or (y) held by it during the continuance of an Event of Default
(other than a default that is cured by the payment of the Purchase Price or
Fundamental Change Purchase Price, as the case may be) in which case, upon such
return, the Purchase Notice or Fundamental Change Purchase Notice with respect
thereto shall be deemed to have been withdrawn.

         SECTION 5.03. 2023 Notes Purchased in Part. Any 2023 Notes that are to
be purchased only in part shall be surrendered at the office of the Paying Agent
(with, if the Issuer or the Trustee so requires, due endorsement by, or a
written instrument of transfer in form satisfactory to the Issuer and the
Trustee duly executed by, the Holder thereof or such Holder's attorney duly
authorized in writing) and the Issuer shall execute and the Trustee or the
Authenticating Agent shall authenticate and deliver to the Holder of such 2023
Notes, without service charge, a new 2023 Note or 2023 Notes, of any authorized
denomination as requested by such Holder in aggregate principal amount equal to,
and in exchange for, the portion of the principal amount of the 2023 Notes so
surrendered which is not purchased or redeemed.

         SECTION 5.04. Covenant to Comply with Securities Laws Upon Purchase of
2023 Notes. In connection with any offer to purchase 2023 Notes under Article
III or Article IV hereof, the Issuer shall, to the extent applicable: (a) comply
with Rules 13e-4 and 14e-1 (and any successor provisions thereto) under the
Exchange Act, if applicable; (b) file the related Schedule TO (or any successor
schedule, form or report) under the Exchange Act, if applicable; and (c)
otherwise comply with all applicable federal and state securities laws so as to
permit the rights and obligations under Article III or Article IV hereof to be
exercised in the time and in the manner specified in Article III or Article IV
hereof.

         SECTION 5.05. Repayment to the Issuer. The Trustee and the Paying Agent
shall return to the Issuer any cash or property that remains unclaimed as
provided in the 2023 Notes, together with interest that the Trustee or Paying
Agent, as the case may be, has agreed to pay, if any, held by them for the
payment of a Purchase Price or Fundamental Change Purchase Price, as the case
may be; provided, however, that to the extent that the aggregate amount of cash
or property deposited by the Issuer pursuant to Section 4.01(f) or Section 3.04
hereof, as applicable, exceeds the aggregate Purchase Price or Fundamental
Change Purchase Price, as the case may be, of the 2023 Notes or portions thereof
which the Issuer is obligated to purchase as of the Purchase Date or Fundamental
Change Purchase Date, as the case may be, then promptly on and after the

                                       33
<PAGE>

Business Day following the Purchase Date or Fundamental Change Purchase Date, as
the case may be, the Trustee and the Paying Agent shall return any such excess
to the Issuer together with interest that the Trustee or Paying Agent, as the
case may be, has agreed to pay, if any.

         SECTION 5.06. Officers' Certificate. At least five Business Days before
the Issuer Notice Date, the Issuer shall deliver an Officers' Certificate to the
Trustee (provided, that, at the Issuer's option, the matters to be addressed in
such Officers' Certificate may be divided among two such certificates)
specifying:

         (a)      the manner of payment selected by the Issuer; and

         (b)      whether the Issuer desires the Trustee to give the Issuer
         Notice required by Section 5.01 hereof.

                                   ARTICLE VI

                            CONVERSION OF 2023 NOTES

         SECTION 6.01. Right to Convert. A Holder may convert its 2023 Notes for
Common Stock at any time during which the conditions stated in the 2023 Notes
are met. The number of shares of Common Stock issuable upon conversion of a 2023
Note per $1,000 principal amount (the "Conversion Rate") shall be that set forth
in the 2023 Notes, subject to adjustment as herein set forth. The initial
Conversion Rate is 93.7137 shares of Common Stock issuable upon conversion of a
2023 Note per $1,000 principal amount.

         A Holder may convert a portion of the principal amount of 2023 Notes if
the portion is $1,000 or a multiple of $1,000.

         SECTION 6.02. Conversion Procedures. To convert 2023 Notes, a Holder
must satisfy the requirements in this Section 6.02 and in the 2023 Notes. The
date on which the Holder satisfies all those requirements is the conversion date
(the "Conversion Date"). As soon as practicable, but in no event later than the
fifth Business Day following the Conversion Date, the Issuer shall deliver to
the Holder, through the Conversion Agent, a certificate for the number of full
shares of Common Stock issuable upon the conversion and cash or a check in lieu
of any fractional share determined pursuant to Section 6.03 hereof. The Person
in whose name the certificate is registered shall be treated as a stockholder of
record on and after the Conversion Date; provided, however, that no surrender of
2023 Notes on any date when the stock transfer books of the Issuer shall be
closed shall be effective to constitute the Person or Persons entitled to
receive the shares of Common Stock upon such conversion as the record holder or
holders of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person or Persons entitled to receive such shares of
Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; such conversion shall be at the Conversion Rate in effect on the date
that such 2023 Notes shall have been surrendered for conversion, as if the stock
transfer books of the Issuer had not been closed. Upon conversion of 2023 Notes,
such Person shall no longer be a Holder of such 2023 Notes.

                                       34
<PAGE>

         No payment or adjustment shall be made for dividends on or other
distributions with respect to any Common Stock except as provided in Section
6.06 hereof or as otherwise provided in this Indenture.

         On conversion of 2023 Notes, that portion of accrued interest with
respect to the converted 2023 Notes shall not be canceled, extinguished or
forfeited, but rather shall be deemed to be paid in full to the Holder thereof
through delivery of the Common Stock (together with the cash or check payment,
if any, in lieu of fractional shares) in exchange for the 2023 Notes being
converted pursuant to the provisions hereof, and the Fair Market Value of such
shares of Common Stock (together with any such cash or check payment in lieu of
fractional shares) shall be treated as issued, to the extent thereof, first in
exchange for interest accrued and unpaid through the Conversion Date, and the
balance, if any, of such Fair Market Value of such Common Stock (and any such
cash or check payment) shall be treated as issued in exchange for the principal
amount of the 2023 Notes being converted pursuant to the provisions hereof.
Notwithstanding conversion of any 2023 Notes, the Holders of the 2023 Notes and
any Common Stock issuable upon conversion thereof will continue to be entitled
to receive Additional Amounts in accordance with the Registration Rights
Agreement.

         If a Holder converts more than one 2023 Note at the same time, the
number of shares of Common Stock issuable upon the conversion shall be based on
the total principal amount of the 2023 Notes converted.

         Upon surrender of a 2023 Note that is converted in part, the Issuer
shall execute, and the Trustee or the Authenticating Agent shall authenticate
and deliver to the Holder, a new 2023 Note in an authorized denomination equal
in principal amount to the unconverted portion of the 2023 Note surrendered.

         If the last day on which 2023 Notes may be converted is a legal holiday
in a place where a Conversion Agent is located, the 2023 Notes may be
surrendered to that Conversion Agent on the next succeeding day that it is not a
legal holiday.

         SECTION 6.03. Cash or Check Payments in Lieu of Fractional Shares. The
Issuer shall not issue a fractional share of Common Stock upon conversion of
2023 Notes. Instead the Issuer shall deliver cash (or Issuer's check) for the
current market value of the fractional share. The current market value of a
fractional share shall be determined to the nearest 1/10,000th of a share by
multiplying the Last Reported Sale Price of a full share of Common Stock on the
Trading Day immediately preceding the Conversion Date by the fractional amount
and rounding the product to the nearest whole cent.

         SECTION 6.04. Taxes on Conversion. If a Holder converts 2023 Notes, the
Issuer shall pay any documentary, stamp or similar issue or transfer tax due on
the issue of shares of Common Stock upon the conversion. However, the Holder
shall pay any such tax which is due because the Holder requests the shares to be
issued in a name other than the Holder's name. The Conversion Agent may refuse
to deliver the certificates representing the Common Stock being issued in a name
other than the Holder's name until the Conversion Agent receives a sum

                                       35
<PAGE>

sufficient to pay any tax which shall be due because the shares are to be issued
in a name other than the Holder's name. Nothing herein shall preclude any
withholding tax required by law.

         SECTION 6.05. Covenants of the Issuer. The Issuer shall, prior to
issuance of any 2023 Notes hereunder, and from time to time as may be necessary,
reserve out of its authorized but unissued Common Stock a sufficient number of
shares of Common Stock to permit the conversion of the 2023 Notes.

         All shares of Common Stock delivered upon conversion of the 2023 Notes
shall be newly issued shares or treasury shares, shall be duly and validly
issued and fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim.

         The Issuer shall endeavor promptly to comply with all federal and state
securities laws regulating the order and delivery of shares of Common Stock upon
the conversion of 2023 Notes, if any, and shall cause to have listed or quoted
all such shares of Common Stock on each United States national securities
exchange or over-the-counter or other domestic market on which the Common Stock
is then listed or quoted.

         SECTION 6.06. Adjustments to Conversion Rate. The Conversion Rate shall
be adjusted from time to time, without duplication, as follows:

         (a)      In case the Issuer shall: (i) pay a dividend, or make a
         distribution, exclusively in shares of its capital stock, on the Common
         Stock; (ii) subdivide its outstanding Common Stock into a greater
         number of shares; (iii) combine its outstanding Common Stock into a
         smaller number of shares; or (iv) reclassify its Common Stock, the
         Conversion Rate in effect immediately prior to the record date or
         effective date, as the case may be, for the adjustment pursuant to this
         Section 6.06(a) as described below, shall be adjusted so that the
         Holder of any 2023 Notes thereafter surrendered for conversion shall be
         entitled to receive the number of shares of Common Stock of the Issuer
         which such Holder would have owned or have been entitled to receive
         after the happening of any of the events described above had such 2023
         Notes been converted immediately prior to such record date or effective
         date, as the case may be. An adjustment made pursuant to this Section
         6.06(a) shall become effective immediately after the applicable record
         date in the case of a dividend or distribution and shall become
         effective immediately after the applicable effective date in the case
         of subdivision, combination or reclassification of the Issuer's Common
         Stock. If any dividend or distribution of the type described in clause
         (i) above is not so paid or made, the Conversion Rate shall again be
         adjusted to the Conversion Rate which would then be in effect if such
         dividend or distribution had not been declared.

         (b)      In case the Issuer shall issue rights or warrants to all
         holders of the Common Stock entitling them (for a period expiring
         within 60 days after the date of issuance of such rights or warrants)
         to subscribe for or purchase Common Stock at a price per share less
         than the Market Price per share of Common Stock on the record date
         fixed for determination of shareholders entitled to receive such rights
         or warrants, the Conversion Rate in effect

                                       36
<PAGE>

         immediately after such record date shall be adjusted so that the same
         shall equal the Conversion Rate determined by multiplying the
         Conversion Rate in effect immediately after such record date by a
         fraction of which (i) the numerator shall be the number of shares of
         Common Stock outstanding on such record date plus the number of
         additional shares of Common Stock offered for subscription or purchase,
         and (ii) the denominator shall be the number of shares of Common Stock
         outstanding on such record date plus the number of shares which the
         aggregate offering price of the total number of shares so offered would
         purchase at the Market Price per share of Common Stock on the earlier
         of such record date or the Trading Day immediately preceding the ex
         date for such issuance of rights or warrants. Such adjustment shall be
         made successively whenever any such rights or warrants are issued, and
         shall become effective immediately after the opening of business on the
         day following the record date for the determination of shareholders
         entitled to receive such rights or warrants. To the extent that shares
         of Common Stock are not delivered after the expiration of such rights
         or warrants, the Conversion Rate shall be readjusted to the Conversion
         Rate which would then be in effect had the adjustments made upon the
         issuance of such rights or warrants been made on the basis of delivery
         of only the number of shares of Common Stock actually delivered. If
         such rights or warrants are not so issued, the Conversion Rate shall
         again be adjusted to be the Conversion Rate which would then be in
         effect if such record date for the determination of shareholders
         entitled to receive such rights or warrants had not been fixed. In
         determining whether any rights or warrants entitle the holders to
         subscribe for or purchase shares of Common Stock at less than such
         Market Price, and in determining the aggregate offering price of such
         shares of Common Stock, there shall be taken into account any
         consideration received by the Issuer for such rights or warrants, the
         value of such consideration, if other than cash, to be determined by
         the Board of Directors.

         (c)      In case the Issuer shall, by dividend or otherwise, distribute
         to all holders of Common Stock any assets, debt securities or rights or
         warrants to purchase any of its securities (excluding (i) any dividend,
         distribution or issuance covered by those referred to in Section
         6.06(a) or Section 6.06(b) hereof and (ii) any dividend or distribution
         paid exclusively in cash) (any of the foregoing hereinafter in this
         Section 6.06(c) called the "Distributed Assets or Securities") in an
         aggregate amount per share of Common Stock that, combined together with
         the aggregate amount of any other such distributions to all holders of
         its Common Stock made within the 12 months preceding the date of
         payment of such distribution, and in respect of which no adjustment
         pursuant to this Section 6.06(c) has been made, exceeds 15% of the
         Market Price on the Trading Day immediately preceding the declaration
         of such distribution, then the Conversion Rate shall be adjusted so
         that the same shall equal the Conversion Rate determined by multiplying
         the Conversion Rate in effect immediately prior to the close of
         business on the record date mentioned below by a fraction of which (A)
         the numerator shall be the Market Price per share of the Common Stock
         on the earlier of such record date or the Trading Day immediately
         preceding the ex date for such dividend or distribution, and (B) the
         denominator shall be (1) the Market Price per share of the Common Stock
         on the earlier of such record date or the Trading Day immediately
         preceding the ex date for such dividend or distribution less (2) the
         Fair Market Value on the earlier of such record date or the Trading Day
         immediately preceding the ex date for such dividend or distribution (as
         determined by the Board of Directors, whose determination shall be
         conclusive, and described in a certificate filed with the Trustee and
         the Paying Agent) of the Distributed

                                       37
<PAGE>

         Assets or Securities so distributed applicable to one share of Common
         Stock. Such adjustment shall become effective immediately after the
         record date for the determination of shareholders entitled to receive
         such distribution; provided, however, that, if (i) the Fair Market
         Value of the portion of the Distributed Assets or Securities so
         distributed applicable to one share of Common Stock is equal to or
         greater than the Market Price of the Common Stock on the record date
         for the determination of shareholders entitled to receive such
         distribution or (ii) the Market Price of the Common Stock on the record
         date for the determination of shareholders entitled to receive such
         distribution is greater than the Fair Market Value per share of such
         Distributed Assets or Securities by less than $1.00, then, in lieu of
         the foregoing adjustment, adequate provision shall be made so that each
         Holder shall have the right to receive upon conversion, in addition to
         the shares of Common Stock, the kind and amount of assets, debt
         securities, or rights or warrants comprising the Distributed Assets or
         Securities the Holder would have received had such Holder converted
         such 2023 Notes immediately prior to the record date for the
         determination of shareholders entitled to receive such distribution. In
         the event that such distribution is not so paid or made, the Conversion
         Rate shall again be adjusted to the Conversion Rate which would then be
         in effect if such distribution had not been declared.

         (d)      In case the Issuer shall make (i) any distributions, by
         dividend or otherwise, during any quarterly fiscal periods consisting
         exclusively of cash to all holders of outstanding shares of Common
         Stock in an aggregate amount that, together with (ii) other all-cash or
         all-check distributions made to all holders of outstanding shares of
         Common Stock during such quarterly fiscal period, and (iii) any cash
         and the Fair Market Value, as of the expiration of any tender or
         exchange offer (other than consideration payable in respect of any
         odd-lot tender offer) of consideration payable in respect of any tender
         or exchange offer by the Issuer or any of the Issuer's Subsidiaries for
         all or any portion of shares of Common Stock concluded during such
         quarterly fiscal period, exceed the product of $0 multiplied by the
         number of shares of Common Stock outstanding on the record date for
         such distribution, then, and in each such case, the Conversion Rate
         shall be adjusted so that the same shall equal the Conversion Rate
         determined by multiplying the Conversion Rate in effect immediately
         prior to the close of business on the record date fixed for the
         determination of holders of Common Stock entitled to receive such
         distribution by a fraction of which (A) the numerator shall be the
         Market Price per share of the Common Stock on the earlier of such
         record date or the Trading Day immediately preceding the ex date for
         such dividend or distribution and (B) the denominator shall be (1) the
         Market Price per share of Common Stock on the earlier of such record
         date or the Trading Day immediately preceding the ex date for such
         dividend or distribution plus (2) $0 less (3) an amount equal to the
         quotient of (x) the combined amount distributed or payable in the
         transactions described in clauses (i), (ii) and (iii) above during such
         quarterly fiscal period and (y) the number of shares of Common Stock
         outstanding on such record date, such adjustment to become effective
         immediately after the record date for the determination of shareholders
         entitled to receive such distribution.

         (e)      With respect to Section 6.06(c) hereof, in the event that the
         Issuer makes any distribution to all holders of Common Stock consisting
         of Equity Interests in a Subsidiary or other business unit of the
         Issuer, the Conversion Rate shall be adjusted so that the

                                       38
<PAGE>

         same shall equal the Conversion Rate determined by multiplying the
         Conversion Rate in effect immediately prior to the close of business on
         the record date fixed for the determination of holders of Common Stock
         entitled to receive such distribution by a fraction of which (i) the
         numerator shall be (x) the Spin-off Market Price per share of the
         Common Stock on such record date plus (y) the Spin-off Market Price per
         Equity Interest of the Subsidiary or other business unit of the Issuer
         on such record date and (ii) the denominator shall be the Spin-off
         Market Price per share of the Common Stock on such record date, such
         adjustment to become effective 10 Trading Days after the effective date
         of such distribution of Equity Interests in a Subsidiary or other
         business unit of the Issuer.

         (f)      Upon conversion of the 2023 Notes, the Holders shall receive,
         in addition to the Common Stock issuable upon such conversion, the
         rights issued under any future shareholder rights plan the Issuer
         implements (notwithstanding the occurrence of an event causing such
         rights to separate from the Common Stock at or prior to the time of
         conversion) unless, prior to conversion, the rights have expired,
         terminated or been redeemed or exchanged in accordance with such rights
         plan. If, and only if, the Holders of 2023 Notes receive rights under
         such shareholder rights plans as described in the preceding sentence
         upon conversion of their 2023 Notes, then no other adjustment pursuant
         to this Section 6.06 shall be made in connection with such shareholder
         rights plans.

         (g)      For purposes of this Section 6.06, the number of shares of
         Common Stock at any time outstanding shall not include shares held in
         the treasury of the Issuer but shall include shares issuable in respect
         of scrip certificates issued in lieu of fractions of shares of Common
         Stock. The Issuer shall not pay any dividend or make any distribution
         on shares of Common Stock held in the treasury of the Issuer.

         (h)      Notwithstanding the foregoing, in no event shall the
         Conversion Rate exceed the maximum conversion rate specified under this
         Section 6.06(h) (the "Maximum Conversion Rate") as a result of an
         adjustment pursuant to Section 6.06(c) and Section 6.06(d) hereof. The
         Maximum Conversion Rate shall initially be 138.6963 and shall be
         appropriately adjusted from time to time for any stock dividends on or
         subdivisions or combinations of the Common Stock. The Maximum
         Conversion Rate shall not apply to any adjustments made pursuant to any
         of the events in Section 6.06(a) or Section 6.06(b) hereof.

         SECTION 6.07. Calculation Methodology. No adjustment in the Conversion
Price need be made unless the adjustment would require an increase or decrease
of at least 1% in the Conversion Price then in effect, provided that any
adjustment that would otherwise be required to be made shall be carried forward
and taken into account in any subsequent adjustment. Except as stated in this
Article VI, the Conversion Rate will not be adjusted for the issuance of Common
Stock or any securities convertible into or exchangeable for Common Stock or
carrying the right to purchase any of the foregoing. Any adjustments that are
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under Article V and Section 6.06 hereof and this
Section 6.07 shall be made to the nearest cent or to the nearest 1/10,000th of a
share, as the case may be.

                                       39
<PAGE>

         SECTION 6.08. When No Adjustment Required. No adjustment to the
Conversion Rate need be made:

         (a)      upon the issuance of any shares of Common Stock pursuant to
         any present or future plan providing for the reinvestment of dividends
         or interest payable on securities of the Issuer and the investment of
         additional optional amounts in shares of Common Stock under any plan;

         (b)      upon the issuance of any shares of Common Stock or options or
         rights to purchase those shares pursuant to any present or future
         employee, director or consultant benefit plan or program of or assumed
         by the Issuer or any of its Subsidiaries;

         (c)      upon the issuance of any shares of Common Stock pursuant to
         any option, warrant, right, or exercisable, exchangeable or convertible
         security not described in clause (b) above and outstanding as of the
         date of this Thirteenth Supplemental Indenture;

         (d)      for a change in the par value or no par value of the Common
         Stock;

         (e)      for accrued and unpaid interest (including Additional Amounts,
         if any); or

         (f)      if Holders are to participate in a merger or consolidation on
         a basis and with notice that the Board of Directors determines to be
         fair and appropriate in light of the basis and notice on which holders
         of Common Stock participate in the transaction; provided that the basis
         on which the Holders are to participate in the transaction shall not be
         deemed to be fair if it would require the conversion of Securities at
         any time prior to the expiration of the conversion period specified for
         such Securities.

         To the extent the 2023 Notes become convertible into cash, assets, or
property (other than capital stock of the Issuer or securities to which Section
6.12 hereof applies), no adjustment shall be made thereafter as to the cash,
assets or property. Interest shall not accrue on such cash.

         SECTION 6.09. Notice of Adjustment. Whenever the Conversion Rate is
adjusted, the Issuer shall promptly mail to Holders a notice of the adjustment.
The Issuer shall file with the Trustee and the Conversion Agent such notice. The
certificate shall, absent manifest error, be conclusive evidence that the
adjustment is correct. Neither the Trustee nor any Conversion Agent shall be
under any duty or responsibility with respect to any such certificate except to
exhibit the same to any Holder desiring inspection thereof.

         SECTION 6.10. Voluntary Increase. The Issuer may make such increases in
the Conversion Rate, in addition to those required by Section 6.06 hereof, as
the Board of Directors considers to be advisable to avoid or diminish any income
tax to holders of Common Stock or rights to purchase Common Stock resulting from
any dividend or distribution of stock (or rights to acquire stock) or from any
event treated as such for income tax purposes. To the extent permitted by
applicable law, the Issuer may from time to time increase the Conversion Rate by
any amount, temporarily or otherwise, for any period of at least 20 days if the
increase is irrevocable during the period and the Board of Directors shall have
made a determination that

                                       40
<PAGE>

such increase would be in the best interests of the Issuer, which determination
shall be conclusive. Whenever the Conversion Rate is so increased, the Issuer
shall mail to Holders and file with the Trustee and the Conversion Agent a
notice of such increase. Neither the Trustee nor any Conversion Agent shall be
under any duty or responsibility with respect to any such notice except to
exhibit the same to any holder desiring inspection thereof. The Issuer shall
mail the notice at least 15 days before the date the increased Conversion Rate
takes effect. The notice shall state the increased Conversion Rate and the
period it shall be in effect.

         SECTION 6.11. Notice to Holders Prior to Certain Actions. In case:

         (a)      the Issuer shall declare a dividend (or any other
         distribution) on its Common Stock that would require an adjustment in
         the Conversion Rate pursuant to Section 6.06 hereof;

         (b)      the Issuer shall authorize the granting to all or
         substantially all the holders of its Common Stock of rights or warrants
         to subscribe for or purchase any share of any class or any other rights
         or warrants;

         (c)      of any reclassification or reorganization of the Common Stock
         of the Issuer (other than a subdivision or combination of its
         outstanding Common Stock, or a change in par value, or from par value
         to no par value, or from no par value to par value), or of any
         consolidation or merger to which the Issuer is a party and for which
         approval of any shareholders of the Issuer is required, or of the sale
         or transfer of all or substantially all of the assets of the Issuer; or

         (d)      of the voluntary or involuntary dissolution, liquidation or
         winding-up of the Issuer,

         the Issuer shall cause to be filed with the Trustee and to be mailed to
         each Holder at its address appearing on the Security Register, as
         promptly as possible but in any event at least 15 days prior to the
         applicable date hereinafter specified, a notice stating (x) the date on
         which a record is to be taken for the purpose of such dividend,
         distribution or rights or warrants, or, if a record is not to be taken,
         the date as of which the holders of Common Stock of record to be
         entitled to such dividend, distribution, or rights or warrants are to
         be determined or (y) the date on which such reclassification,
         reorganization, consolidation, merger, sale, transfer, dissolution,
         liquidation or winding-up is expected to become effective or occur, and
         the date as of which it is expected that holders of Common Stock of
         record shall be entitled to exchange their Common Stock for securities
         or other property deliverable upon such reclassification,
         reorganization, consolidation, merger, sale, transfer, dissolution,
         liquidation or winding-up. Failure to give such notice, or any defect
         therein, shall not affect the legality or validity of such dividend,
         distribution, reclassification, reorganization, consolidation, merger,
         sale, transfer, dissolution, liquidation or winding-up.

         SECTION 6.12. Effect of Reclassification, Consolidation, Merger,
Binding Share Exchange or Sale. If any of the following events occur, namely:
(a) any reclassification or

                                       41
<PAGE>

change of outstanding shares of Common Stock (other than a change in par value,
or from par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination); (b) any consolidation, merger,
combination or binding share exchange of the Issuer with another Person as a
result of which holders of Common Stock shall be entitled to receive stock,
securities or other property or assets (including cash) with respect to or in
exchange for such Common Stock; or (c) any sale or conveyance of the properties
and assets of the Issuer as, or substantially as, an entirety to any other
Person as a result of which holders of Common Stock shall be entitled to receive
stock, securities or other property or assets (including cash) with respect to
or in exchange for such Common Stock, then the Issuer or the successor or
purchasing Person, as the case may be, shall execute with the Trustee a
supplemental indenture to the Indenture, providing that each 2023 Note shall be
convertible into the kind and amount of shares of stock and other securities or
property or assets (including cash) receivable upon such reclassification,
change, consolidation, merger, combination, binding share exchange, sale or
conveyance by a holder of a number of shares of Common Stock issuable upon
conversion of such 2023 Note immediately prior to such reclassification, change,
consolidation, merger, combination, binding share exchange, sale or conveyance.
Such supplemental indenture shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 6.12.

         The Issuer shall cause notice of the execution of such supplemental
indenture to be mailed to each Holder, at its address appearing on the Security
Register, within 20 days after execution thereof. Failure to deliver such notice
shall not affect the legality or validity of such supplemental indenture.

         The above provisions of this Section 6.12 shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
binding share exchanges, sales and conveyances.

         If this Section 6.12 applies to any event or occurrence, Section 6.06
hereof shall not apply.

         SECTION 6.13. Responsibility of Trustee. The Trustee and any other
Conversion Agent shall not at any time be under any duty or responsibility to
any Holder to either calculate the Conversion Rate or determine whether any
facts exist which may require any adjustment of the Conversion Rate, or with
respect to the nature or extent or calculation of any such adjustment when made,
or with respect to the method employed, or herein or in any supplemental
indenture provided to be employed, in making the same and shall be protected in
relying upon an Officers' Certificate with respect to the same. The Trustee and
any other Conversion Agent shall not be accountable with respect to the validity
or value (or the kind or amount) of any shares of Common Stock, or of any
securities or property, which may at any time be issued or delivered upon the
conversion of any 2023 Notes and the Trustee and any other Conversion Agent make
no representations with respect thereto. Subject to the provisions of Article
Six of the Original Indenture, neither the Trustee nor any Conversion Agent
shall be responsible for any failure of the Issuer to issue, transfer or deliver
any shares of Common Stock or stock certificates or other securities or property
or cash upon the surrender of any 2023 Notes for the purpose of conversion or to
comply with any of the duties, responsibilities or covenants of the Issuer
contained in this

                                       42
<PAGE>

Section 6.13. Without limiting the generality of the foregoing, neither the
Trustee nor any Conversion Agent shall be under any responsibility to determine
the correctness of any provisions contained in any supplemental indenture
entered into pursuant to Article VI hereof relating either to the kind or amount
of shares of stock or securities or property (including cash) receivable by
Holders upon the conversion of their 2023 Notes after any event referred to in
such Section 6.12 or to any adjustment to be made with respect thereto, but,
subject to the provisions of Article Six of the Original Indenture, may accept
as conclusive evidence of the correctness of any such provisions, and shall be
protected in relying upon, the Officers' Certificate (which the Issuer shall be
obligated to file with the Trustee prior to the execution of any such
supplemental indenture) with respect thereto.

         SECTION 6.14. Simultaneous Adjustments. In the event that Section 6.06
hereof requires adjustments to the Conversion Rate under more than one of
Section 6.06(a), Section 6.06(b), Section 6.06(c) or Section 6.06(d) hereof, and
the Record Dates for the distributions giving rise to such adjustments shall
occur on the same date, then such adjustments shall be made by applying, first,
the provisions of Section 6.06(c) hereof, second, the provisions of Section
6.06(a) hereof and third, the provisions of Section 6.06(b) hereof; provided,
however, that nothing in this Section 6.14 shall be done to evade the principle
set forth in Section 6.06(h) hereof that the Maximum Conversion Rate shall not
apply to any adjustments made with respect to any of the events in Section
6.06(a) or Section 6.06(b) hereof.

         SECTION 6.15. Successive Adjustments. After an adjustment to the
Conversion Rate under Section 6.06 hereof, any subsequent event requiring an
adjustment under Section 6.06 shall cause an adjustment to the Conversion Rate
as so adjusted.

         SECTION 6.16. General Considerations. Whenever successive adjustments
to the Conversion Rate are called for pursuant to this Article VI, such
adjustments shall be made to the Market Price as may be necessary or appropriate
to effectuate the intent of this Article VI and to avoid unjust or inequitable
results as determined in good faith by the Board of Directors.

         SECTION 6.17. Issuer Determination Final. Any determination which the
Board of Directors must make pursuant to this Article VI shall be conclusive and
binding on the Holders.

         SECTION 6.18. Conversion Provisions. Pursuant to Section 2.3(f)(10) of
the Original Indenture, the obligation of the Issuer to permit the conversion of
the 2023 Notes into Common Stock and the terms and conditions upon which such
conversion shall be effected set forth in this Thirteenth Supplemental Indenture
are in addition to and in lieu of those provisions set forth in Article Thirteen
of the Original Indenture relative to such obligation.

                                       43
<PAGE>

                                   ARTICLE VII

                       ADDITIONAL COVENANTS OF THE ISSUER
                         WITH RESPECT TO THE 2023 NOTES

         SECTION 7.01. Existence. So long as any of the 2023 Notes are
outstanding, subject to Article 9 of the Original Indenture, the Issuer will do
or cause to be done all things necessary to preserve and keep in full force and
effect its corporate existence.

         SECTION 7.02. Limitation on Certain Liens. (a) So long as any of the
2023 Notes are outstanding, the Issuer shall not create, incur, assume or suffer
to exist any lien, mortgage, pledge, security interest, conditional sale, title
retention agreement or other charge or encumbrance of any kind, or any other
type of arrangement intended or having the effect of conferring upon a creditor
of the Issuer or any Subsidiary a preferential interest (hereinafter in this
Section 7.02 referred to as a "Lien") upon or with respect to any of its
property of any character, including without limitation any shares of Capital
Stock of Consumers or Enterprises, without making effective provision whereby
the 2023 Notes shall (so long as any such other creditor shall be so secured) be
equally and ratably secured (along with any other creditor similarly entitled to
be secured) by a direct Lien on all property subject to such Lien, provided,
however, that the foregoing restrictions shall not apply to:

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

         (ii)     pledges or deposits to secure (A) obligations under workmen's
         compensation laws or similar legislation, (B) statutory obligations of
         the Issuer or (C) Support Obligations;

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

         (iv)     purchase money Liens upon or in property acquired and held by
         the Issuer in the ordinary course of business to secure the purchase
         price of such property or to secure Indebtedness incurred solely for
         the purpose of financing the acquisition of any such property to be
         subject to such Liens, or Liens existing on any such property at the
         time of acquisition, or extensions, renewals or replacements of any of
         the foregoing for the same or a lesser amount, provided that no such
         Lien shall extend to or cover any property other than the property
         being acquired and no such extension, renewal or replacement shall
         extend to or cover property not theretofore subject to the Lien being
         extended, renewed or replaced, and provided, further, that the
         aggregate principal amount of the Indebtedness at any one time
         outstanding secured by Liens permitted by this clause (iv) shall not
         exceed $10,000,000; and

                                       44
<PAGE>

         (v)      Liens not otherwise permitted by clauses (i) through (iv) of
         this Section 7.02 securing Indebtedness of the Issuer; provided that on
         the date such Liens are created, and after giving effect to such
         Indebtedness, the aggregate principal amount at maturity of all of the
         secured Indebtedness of the Issuer at such date shall not exceed 5% of
         Consolidated Net Tangible Assets at such date.

         SECTION 7.03. Limitation on Consolidation, Merger, Sale or Conveyance.
So long as any of the 2023 Notes are outstanding and until the 2023 Notes are
rated BBB- or above (or an equivalent rating) by Standard & Poor's and one Other
Rating Agency (or, if Standard & Poor's shall change its rating system, an
equivalent of such rating then employed by such organization), at which time the
Issuer will be permanently released from the provisions of this Section 7.03,
and subject also to Article Nine of the Original Indenture, the Issuer shall not
consolidate with or merge into any other Person or sell, lease or convey the
property of the Issuer in the entirety or substantially as an entirety, unless
(a) immediately after giving effect to such transaction the Consolidated Net
Worth of the surviving entity is at least equal to the Consolidated Net Worth of
the Issuer immediately prior to the transaction and (b) after giving effect to
such transaction, the surviving entity would be entitled to incur at least one
dollar of additional Indebtedness (other than revolving Indebtedness to banks)
without violation of the limitations in Section 7.04 hereof.

         SECTION 7.04. Limitation on Consolidated Indebtedness.

         (a)      So long as any of the 2023 Notes are outstanding and until the
2023 Notes are rated BBB- or above (or an equivalent rating) by Standard &
Poor's and one Other Rating Agency (or, if Standard & Poor's shall change its
rating system, an equivalent of such rating then employed by such organization),
at which time the Issuer will be permanently released from the provisions of
this Section 7.04, the Issuer shall not, and shall not permit any Consolidated
Subsidiary of the Issuer to, issue, create, assume, guarantee, incur or
otherwise become liable for (collectively, "issue"), directly or indirectly, any
Indebtedness unless the Consolidated Coverage Ratio of the Issuer and its
Consolidated Subsidiaries for the four consecutive fiscal quarters immediately
preceding the issuance of such Indebtedness (as shown by a pro forma
consolidated income statement of the Issuer and its Consolidated Subsidiaries
for the four most recent fiscal quarters ending at least 30 days prior to the
issuance of such Indebtedness after giving effect to (i) the issuance of such
Indebtedness and (if applicable) the application of the net proceeds thereof to
refinance other Indebtedness as if such Indebtedness was issued at the beginning
of the period, (ii) the issuance and retirement of any other Indebtedness since
the first day of the period as if such Indebtedness was issued or retired at the
beginning of the period and (iii) the acquisition of any company or business
acquired by the Issuer or any Subsidiary since the first day of the period
(including giving effect to the pro forma historical earnings of such company or
business), including any acquisition which will be consummated contemporaneously
with the issuance of such Indebtedness, as if in each case such acquisition
occurred at the beginning of the period) exceeds a ratio of 1.6 to 1.0.

         (b)      Notwithstanding the foregoing paragraph, the Issuer or any
         Restricted Subsidiary may issue, directly or indirectly, the following
         Indebtedness:

                                       45
<PAGE>

                  (1)      Indebtedness of the Issuer to banks not to exceed
                  $1,000,000,000 in aggregate outstanding principal amount at
                  any time;

                  (2)      Indebtedness (other than Indebtedness described in
                  Section 7.04(b)(1) hereof) outstanding on the date of this
                  Thirteenth Supplemental Indenture, as set forth on Schedule
                  7.04(b)(2) attached hereto and made a part hereof, and
                  Indebtedness issued in exchange for, or the proceeds of which
                  are used to refund or refinance, any Indebtedness permitted by
                  this clause (2); provided, however, that (i) the principal
                  amount (or accreted value in the case of Indebtedness issued
                  at a discount) of the Indebtedness so issued shall not exceed
                  the principal amount (or accreted value in the case of
                  Indebtedness issued at a discount) of, premium, if any, and
                  accrued but unpaid interest on, the Indebtedness so exchanged,
                  refunded or refinanced and (ii) the Indebtedness so issued (A)
                  shall not mature prior to the stated maturity of the
                  Indebtedness so exchanged, refunded or refinanced, (B) shall
                  have an Average Life equal to or greater than the remaining
                  Average Life of the Indebtedness so exchanged, refunded or
                  refinanced and (C) if the Indebtedness to be exchanged,
                  refunded or refinanced is subordinated to the 2023 Notes, the
                  Indebtedness is subordinated to the 2023 Notes in right of
                  payment;

                  (3)      Indebtedness of the Issuer owed to and held by a
                  Subsidiary and Indebtedness of a Subsidiary owed to and held
                  by the Issuer; provided, however, that, in the case of
                  Indebtedness of the Issuer owed to and held by a Subsidiary,
                  (i) any subsequent issuance or transfer of any Capital Stock
                  that results in any such Subsidiary ceasing to be a Subsidiary
                  or (ii) any transfer of such Indebtedness (except to the
                  Issuer or a Subsidiary) shall be deemed for the purposes of
                  this Section 7.04(b) to constitute the issuance of such
                  Indebtedness by the Issuer;

                  (4)      Indebtedness of the Issuer issued in exchange for, or
                  the proceeds of which are used to refund or refinance,
                  Indebtedness of the Issuer issued in accordance with Section
                  7.04(a) hereof, provided that (i) the principal amount (or
                  accreted value in the case of Indebtedness issued at a
                  discount) of the Indebtedness so issued shall not exceed the
                  principal amount (or accreted value in the case of
                  Indebtedness issued at a discount) of, premium, if any, and
                  accrued but unpaid interest on, the Indebtedness so exchanged,
                  refunded or refinanced and (ii) the Indebtedness so issued (A)
                  shall not mature prior to the stated maturity of the
                  Indebtedness so exchanged, refunded or refinanced, (B) shall
                  have an Average Life equal to or greater than the remaining
                  Average Life of the Indebtedness so exchanged, refunded or
                  refinanced and (C) if the Indebtedness to be exchanged,
                  refunded or refinanced is subordinated to the 2023 Notes, the
                  Indebtedness so issued is subordinated to the 2023 Notes in
                  right of payment;

                  (5)      Indebtedness of a Restricted Subsidiary issued in
                  exchange for, or the proceeds of which are used to refund or
                  refinance, Indebtedness of a Restricted Subsidiary issued in
                  accordance with Section 7.04(a) hereof, provided that (i) the
                  principal amount (or accreted value in the case of
                  Indebtedness issued at a

                                       46
<PAGE>

                  discount) of the Indebtedness so issued shall not exceed the
                  principal amount (or accreted value in the case of
                  Indebtedness issued at a discount) of, premium, if any, and
                  accrued but unpaid interest on, the Indebtedness so exchanged,
                  refunded or refinanced and (ii) the Indebtedness so issued (A)
                  shall not mature prior to the stated maturity of the
                  Indebtedness so exchanged, refunded or refinanced and (B)
                  shall have an Average Life equal to or greater than the
                  remaining Average Life of the Indebtedness so exchanged,
                  refunded or refinanced.

                  (6)      Indebtedness of a Consolidated Subsidiary issued to
                  acquire, develop, improve, construct or to provide working
                  capital for a gas, oil or electric generation, exploration,
                  production, distribution, storage or transmission facility and
                  related assets, provided that such Indebtedness is without
                  recourse to any assets of the Issuer, Consumers, Enterprises,
                  CMS Generation, CMS Electric and Gas, CMS Gas Transmission,
                  CMS MST or any other Designated Enterprises Subsidiary;

                  (7)      Indebtedness of a Person existing at the time at
                  which such Person became a Subsidiary and not incurred in
                  connection with, or in contemplation of, such Person becoming
                  a Subsidiary. Such Indebtedness shall be deemed to be incurred
                  on the date the acquired Person becomes a Consolidated
                  Subsidiary;

                  (8)      Indebtedness issued by the Issuer not to exceed
                  $150,000,000 in aggregate principal amount at any time; and

                  (9)      Indebtedness of a Consolidated Subsidiary in respect
                  of rate reduction bonds issued to recover electric
                  restructuring transition costs of Consumers ,provided that
                  such Indebtedness is without recourse to the assets of
                  Consumers.

         SECTION 7.05. Limitation on Restricted Payments.

         (a)      So long as the 2023 Notes are outstanding and until the 2023
Notes are rated BBB- or above (or an equivalent rating) by Standard & Poor's and
one Other Rating Agency (or, if Standard & Poor's shall change its rating
system, an equivalent of such rating then employed by such organization), at
which time the Issuer will be permanently released from the provisions of this
Section 7.05, the Issuer shall not, and shall not permit any Restricted
Subsidiary of the Issuer, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on the Capital Stock of the Issuer to the
direct or indirect holders of its Capital Stock (except dividends or
distributions payable solely in its Non-Convertible Capital Stock or in options,
warrants or other rights to purchase such Non-Convertible Capital Stock and
except dividends or distributions payable to the Issuer or a Subsidiary), (ii)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Issuer or (iii) purchase, repurchase, redeem, defease or otherwise acquire
or retire for value, prior to scheduled maturity or scheduled repayment thereof,
any Subordinated Indebtedness (any such dividend, distribution, purchase,
redemption, repurchase, defeasing, other acquisition or retirement being herein
referred to as a "Restricted Payment") if at the time the Issuer or such
Subsidiary makes such Restricted Payment:

                                       47
<PAGE>

         (1)      an Event of Default, or an event that with the lapse of time
         or the giving of notice or both would constitute an Event of Default,
         shall have occurred and be continuing (or would result therefrom); or

         (2)      the aggregate amount of such Restricted Payment and all other
         Restricted Payments made since May 6, 1997 would exceed the sum of:

                  (A)      $100,000,000;

                  (B)      100% of Consolidated Net Income, accrued during the
                  period (treated as one accounting period) from May 6, 1997 to
                  the end of the most recent fiscal quarter ending at least 45
                  days prior to the date of such Restricted Payment (or, in case
                  such sum shall be a deficit, minus 100% of the deficit); and

                  (C)      the aggregate Net Cash Proceeds received by the
                  Issuer from the issue or sale of or contribution with respect
                  to its Capital Stock subsequent to May 6, 1997.

         For the purpose of determining the amount of any Restricted Payment not
in the form of cash, the amount shall be the fair value of such Restricted
Payment as determined in good faith by the Board of Directors, provided that if
the value of the non-cash portion of such Restricted Payment as determined by
the Board of Directors is in excess of $25 million, such value shall be based on
the opinion from a nationally recognized firm experienced in the appraisal of
similar types of transactions.

         (b)      The provisions of Section 7.05(a) hereof shall not prohibit:

                  (i)      any purchase or redemption of Capital Stock of the
                  Issuer made by exchange for, or out of the proceeds of the
                  substantially concurrent sale of, Capital Stock of the Issuer
                  (other than Redeemable Stock or Exchangeable Stock); provided,
                  however, that such purchase or redemption shall be excluded
                  from the calculation of the amount of Restricted Payments;

                  (ii)     dividends or other distributions paid in respect of
                  any class of the Issuer's Capital Stock issued in respect of
                  the acquisition of any business or assets by the Issuer or a
                  Restricted Subsidiary if the dividends or other distributions
                  with respect to such Capital Stock are payable solely from the
                  net earnings of such business or assets;

                  (iii)    dividends paid within 60 days after the date of
                  declaration thereof if at such date of declaration such
                  dividend would have complied with this Section 7.05; provided,
                  however, that at the time of payment of such dividend, no
                  Event of Default shall have occurred and be continuing (or
                  result therefrom), and

                                       48
<PAGE>

                  provided, further, however, that such dividends shall be
                  included (without duplication) in the calculation of the
                  amount of Restricted Payments; or

                  (iv)     payments pursuant to the Tax Sharing Agreement.

         SECTION 7.06. Limitation on Asset Sales. So long as any of the 2023
Notes are outstanding, the Issuer may not sell, transfer or otherwise dispose of
any property or assets of the Issuer, including Capital Stock of any
Consolidated Subsidiary, in one transaction or a series of transactions in an
amount which exceeds $50,000,000 (an "Asset Sale") unless the Issuer shall (i)
apply an amount equal to such excess Net Cash Proceeds to permanently repay
Indebtedness of a Consolidated Subsidiary or Indebtedness of the Issuer which is
pari passu with the 2023 Notes, (ii) invest an equal amount not so used in
clause (i) in property or assets of related business within 24 months after the
date of the Asset Sale (the "Application Period") or (iii) apply such excess Net
Cash Proceeds not so used in clause (i) or (ii) (the "Excess Proceeds") to make
an offer, within 30 days after the end of the Application Period, to purchase
from the Holders on a pro rata basis an aggregate principal amount of 2023 Notes
on the relevant purchase date equal to the Excess Proceeds on such date, at a
purchase price equal to 100% of the principal amount of the 2023 Notes on the
relevant purchase date and unpaid interest, if any, to the purchase date. The
Issuer shall only be required to make an offer to purchase 2023 Notes from
Holders pursuant to clause (iii) if the Excess Proceeds equal or exceed
$25,000,000 at any given time.

         The procedures to be followed by the Issuer in making an offer to
purchase 2023 Notes from the Holders with Excess Proceeds, and for the
acceptance of such offer by the Holders, shall be the same as those set forth in
Section 5.01 herein with respect to a Fundamental Change.

                                  ARTICLE VIII

                          ADDITIONAL EVENTS OF DEFAULT
                         WITH RESPECT TO THE 2023 NOTES

         SECTION 8.01. Definition. All of the events specified in clauses (a)
through (h) of Section 5.1 of the Original Indenture shall be Events of Default
with respect to the 2023 Notes.

         SECTION 8.02. Amendments to Section 5.1 of the Original Indenture.
Solely for the purpose of determining Events of Default with respect to the 2023
Notes, paragraphs Section 5.1(e), Section 5.1(f) and Section 5.1(h) of the
Original Indenture shall be amended such that each and every reference therein
to the Issuer shall be deemed to mean either the Issuer or Consumers.

         SECTION 8.03. Additional Events of Default. Solely for the purpose of
determining Events of Default with respect to the 2023 Notes, an Event of
Default shall also include the following:

(i)      default in the payment of any interest upon any 2023 Note, including
Additional Amounts, if any, when it becomes due and payable, and continuance of
such default for 30 days;

                                       49
<PAGE>

(ii)     default in the Issuer's obligation to redeem the 2023 Notes after
exercising its redemption option pursuant to Article XIII hereof;

(iii)    default in the Issuer's obligation to convert the 2023 Notes upon
exercise of a Holder's conversion right in accordance with the terms of the 2023
Notes and Article VI hereof; and

(iv)     default in the Issuer's obligation to purchase 2023 Notes upon the
occurrence of a Fundamental Change or the exercise by a Holder of its option to
require the Issuer to repurchase such Holder's 2023 Notes in accordance with the
terms of Article III or Article IV hereof, as applicable.

                                   ARTICLE IX

                                  GLOBAL NOTES

         The 2023 Notes will be issued initially in the form of Global Notes.
"Global Note" means a registered 2023 Note evidencing one or more 2023 Notes
issued to a depositary (the "Depositary") or its nominee, in accordance with
this Article IX and bearing the legend prescribed in this Article IX. One or
more Global Notes will represent all 2023 Notes. The Issuer shall execute and
the Trustee shall, in accordance with this Article IX and the Issuer Order with
respect to the 2023 Notes, authenticate and deliver one or more Global Notes in
temporary or permanent form that (i) shall represent and shall be denominated in
an aggregate amount equal to the aggregate principal amount of the 2023 Notes to
be represented by such Global Note or Global Notes, (ii) shall be registered in
the name of the Depositary for such Global Note or Global Notes or the nominee
of such Depositary, (iii) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions and (iv) shall bear a legend
substantially to the following effect: "Unless the Global 2023 Note is presented
by an authorized representative of the Depositary to the Issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of a nominee of the Depositary or in such other name as
is requested by an authorized representative of the Depositary (and any payment
is made to such nominee of the Depositary or to such other entity as is
requested by an authorized representative of the Depositary), any transfer,
pledge or other use hereof for value or otherwise by or to any Person is
wrongful inasmuch as the registered owner hereof has an interest herein."

         Notwithstanding Section 2.8 of the Original Indenture, unless and until
it is exchanged in whole or in part for 2023 Notes in definitive form, a Global
Note representing one or more 2023 Notes may not be transferred except as a
whole by the Depositary, to a nominee of such Depository or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such nominee to a successor Depositary for 2023 Notes or a
nominee of such successor Depositary.

         If at any time the Depositary for the 2023 Notes is unwilling or unable
to continue as Depositary for the 2023 Notes, the Issuer shall appoint a
successor Depositary with respect to the 2023 Notes. If a successor Depositary
for the 2023 Notes is not appointed by the Issuer by the earlier of (i) 90 days
from the date the Issuer receives notice to the effect that the Depositary is

                                       50
<PAGE>

unwilling or unable to act, or the Issuer determines that the Depositary is
unable to act or (ii) the effectiveness of the Depositary's resignation or
failure to fulfill its duties as Depositary, the Issuer will execute, and the
Trustee, upon receipt of a Issuer Order for the authentication and delivery of
definitive 2023 Notes, will authenticate and deliver 2023 Notes in definitive
form in an aggregate principal amount equal to the principal amount of the
Global Note or Global Notes representing such 2023 Notes in exchange for such
Global Note or Global Notes.

         The Issuer may at any time and in its sole discretion determine that
the 2023 Notes issued in the form of one or more Global Notes shall no longer be
represented by such Global Note or Global Notes. In such event the Issuer will
execute, and the Trustee, upon receipt of an Issuer Order for the authentication
and delivery of definitive 2023 Notes, will authenticate and deliver 2023 Notes
in definitive form in an aggregate principal amount equal to the principal
amount of the Global Note or Global Notes representing such 2023 Notes in
exchange for such Global Note or Global Notes.

         The Depositary for such 2023 Notes may surrender a Global Note or
Global Notes for such 2023 Notes in exchange in whole or in part for 2023 Notes
in definitive form on such terms as are acceptable to the Issuer and such
Depositary. Thereupon, the Issuer shall execute, and the Trustee shall
authenticate and deliver, without service charge:

         (i)      to each Person specified by such Depositary a new 2023 Note or
         2023 Notes, of any authorized denomination as requested by such Person
         in aggregate principal amount equal to and in exchange for such
         Person's beneficial interest in the Global Note; and

         (ii)     to such Depositary a new Global Note in a denomination equal
         to the difference, if any, between the principal amount of the
         surrendered Global Note and the aggregate principal amount of 2023
         Notes in definitive form delivered to Holders thereof.

         In any exchange provided for in this Article IX, the Issuer will
execute and the Trustee will authenticate and deliver 2023 Notes in definitive
registered form in authorized denominations.

         Upon the exchange of a Global Note for 2023 Notes in definitive form,
such Global Note shall be cancelled by the Trustee. 2023 Notes in definitive
form issued in exchange for a Global Note pursuant to this Article IX shall be
registered in such names and in such authorized denominations as the Depositary
for such Global Note, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Trustee or Security Registrar. The
Trustee shall deliver such 2023 Notes to the Persons in whose names such 2023
Notes are so registered.

                                       51
<PAGE>

                                    ARTICLE X

                                   DEFEASANCE

         All of the provisions of Article Ten of the Original Indenture shall be
applicable to the 2023 Notes. Upon satisfaction by the Issuer of the
requirements of Section 10.1(C) of the Indenture, in connection with any
covenant defeasance (as provided in Section 10.1(C) of the Indenture), the
Issuer shall be released from its obligations under Article Nine of the Original
Indenture and under Article VII and Article XIII of this Thirteenth Supplemental
Indenture with respect to the 2023 Notes.

                                   ARTICLE XI

                             SUPPLEMENTAL INDENTURES

         This Thirteenth Supplemental Indenture is a supplement to the Original
Indenture. As supplemented by this Thirteenth Supplemental Indenture, the
Original Indenture is in all respects ratified, approved and confirmed, and the
Original Indenture and this Thirteenth Supplemental Indenture shall together
constitute one and the same instrument.

                                   ARTICLE XII

                             MODIFICATION AND WAIVER

         In addition to those matters set forth in Section 8.2 of the Original
Indenture (including the terms and conditions of the 2023 Notes set forth
herein), with respect to the 2023 Notes, no amendment or supplemental indenture
to the Indenture shall, without the consent of the Holder of each 2023 Note
affected thereby:

(a)      reduce the Redemption Price, Purchase Price or Fundamental Change
Purchase Price of the 2023 Notes;

(b)      change the terms applicable to redemption or purchase of the 2023 Notes
in a manner adverse to the Holder; or

(c)      alter the manner of calculation or rate of Additional Amounts payable
on any 2023 Note or extend the time for payment of any such amount.

In addition, with respect to the 2023 Notes, notwithstanding Section 5.10 of the
Original Indenture, approval of the Holders of each outstanding 2023 Note shall
be required to:

(a)      waive any default by the Issuer in any payment of the Redemption Price,
Purchase Price or Fundamental Change Purchase Price with respect to any 2023
Notes; or

(b)      waive any default which constitutes a failure to convert any 2023 Note
in accordance with its terms and the terms of Article VI hereof.

                                       52
<PAGE>

The reference to "interest" in Section 5.10(i) of the Original Indenture shall
include Additional Amounts, if any.

                                  ARTICLE XIII

                      OPTIONAL REDEMPTION OF THE 2023 NOTES

         SECTION 13.01. Right to Redeem; Notice to Trustee, Paying Agent and
Holders. On or after July 15, 2008, the Issuer may, at its option, redeem the
2023 Notes in whole, or in part, at any time in accordance with the provisions
of the 2023 Notes. If the Issuer elects to redeem 2023 Notes pursuant to the
provisions of the 2023 Notes, it shall notify in writing the Trustee, the Paying
Agent and each Holder of 2023 Notes to be redeemed, as provided in Section 11.2
of the Indenture and Section 13.04 hereof.

         SECTION 13.02. Fewer Than All Outstanding 2023 Notes to Be Redeemed. If
fewer than all of the outstanding 2023 Notes are to be redeemed, the Trustee
shall select the 2023 Notes to be redeemed in principal amounts of $1,000 or
integral multiples thereof. In the case that the Trustee shall select the 2023
Notes to be redeemed, the Trustee may effectuate such selection by lot, pro
rata, or by any other method that the Trustee considers fair and appropriate.
The Trustee will make such selection promptly following receipt of the notice of
redemption from the Issuer provided pursuant to Section 13.04 hereof.

         SECTION 13.03. Selection of 2023 Notes to Be Redeemed. If any 2023
Notes selected for partial redemption are thereafter surrendered for conversion
in part before termination of the conversion right with respect to the portion
of the 2023 Notes so selected, the converted portion of such 2023 Notes shall be
deemed (so far as may be), solely for purposes of determining the aggregate
principal amount of 2023 Notes to be redeemed by the Issuer, to be the portion
selected for redemption. 2023 Notes which have been converted during a selection
of 2023 Notes to be redeemed may be treated by the Trustee as outstanding for
the purpose of such selection. Nothing in this Section 13.03 shall affect the
right of any Holder to convert any 2023 Notes pursuant to Article VI hereof
before the termination of the conversion right with respect thereto.

         SECTION 13.04. Notice of Redemption. In addition to those matters set
forth in Section 11.2 of the Indenture, a notice of redemption sent to Holders
of 2023 Notes shall state:

         (a)      the then current Conversion Rate;

         (b)      the name and address of the Paying Agent and the Conversion
Agent;

         (c)      that the 2023 Notes called for redemption may be converted at
any time before the close of business on the Business Day immediately preceding
the redemption date; and

         (d)      that Holders who wish to convert 2023 Notes must comply with
the procedures provided in the 2023 Notes.

                                       53
<PAGE>

         SECTION 13.05. Effect of Notice of Redemption. Once notice of
redemption is mailed, 2023 Notes called for redemption become due and payable on
the redemption date and at the Redemption Price, except for 2023 Notes that are
converted in accordance with the provisions of Article VI hereof and the
provisions of the 2023 Notes. Upon presentation and surrender to the Paying
Agent, 2023 Notes called for redemption shall be paid at the Redemption Price.

         SECTION 13.06. Deposit of Redemption Price. On or before 10:00 a.m.
(New York City time) on the redemption date, the Issuer shall deposit with the
Paying Agent (or if the Issuer or an Affiliate of the Issuer is acting as the
Paying Agent, shall segregate and hold in trust) an amount of money sufficient
to pay the aggregate Redemption Price of all the 2023 Notes to be redeemed on
that date other than the 2023 Notes or portions thereof called for redemption
which on or prior thereto have been delivered by the Issuer to the Security
Registrar for cancellation or have been converted. The Trustee and Paying Agent
shall, as promptly as practicable, return to the Issuer any money not required
for that purpose because of conversion of the 2023 Notes in accordance with the
provisions of Article VI hereof. If such money is then held by the Issuer or a
Subsidiary in trust and is not required for such purpose, it shall be discharged
from such trust.

                                   TESTIMONIUM

         This Thirteenth Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.

                                       54
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Thirteenth
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first written
above.


                                              CMS ENERGY CORPORATION

                                              /s/ Thomas J. Webb
                                              ----------------------------------
                                              Thomas J. Webb
                                              Executive Vice President and
                                              Chief Financial Officer

Attest:  /s/ Laura Mountcastle
         -----------------------


                                              BANK ONE TRUST COMPANY, N.A.,
                                              as Trustee

                                              /s/ Mietka Collins
                                              ----------------------------------
                                              Mietka Collins
                                              Account Representative

Attest:  /s/ Steven E. Charles
         -----------------------
<PAGE>

                               Schedule 7.04(b)(2)

                                - See Attached -

<PAGE>


                                    EXHIBIT A

                   FORM OF FUNDAMENTAL CHANGE PURCHASE NOTICE

To: CMS Energy Corporation

         The undersigned registered holder of this 2023 Note hereby acknowledges
receipt of a notice from CMS Energy Corporation (the "Company") as to the
occurrence of a Fundamental Change with respect to the Company and requests and
instructs the Company to repurchase this 2023 Note, or the portion hereof (which
is $1,000 principal amount or a integral multiple thereof) designated below, in
accordance with the terms of the Thirteenth Supplemental Indenture referred to
in this 2023 Note and directs that the check of the Company, in payment for this
2023 Note or the portion thereof and any 2023 Notes representing any
un-repurchased principal amount hereof, be issued and delivered to the
registered holder hereof unless a different name has been indicated below. If
any portion of this 2023 Note not repurchased is to be issued in the name of a
Person other than the undersigned, the undersigned shall pay all transfer taxes
payable with respect thereto.

Dated:

                                              __________________________________
                                                        Signature(s)
                                    Signature(s) must be guaranteed by a
                                    commercial bank or trust company or a member
                                    firm of a major stock exchange if 2023 Notes
                                    are to be delivered, other than to or in the
                                    name of the registered holder.

                                              __________________________________
                                                     Signature Guarantee

Fill in for registration of 2023 Notes if to be issued other than to and in the
name of registered holder:

______________________________
(Name)
______________________________
(Street Address)
______________________________
(City, state and zip code)
Please print name and address

                                    Principal amount to be purchased (if less
                                    than all): $______,000

                                    Social Security or  other taxpayer number

<PAGE>

                                    EXHIBIT B

                             FORM OF PURCHASE NOTICE

To: CMS Energy Corporation

         The undersigned registered holder of this 2023 Note hereby acknowledges
receipt of a notice from CMS Energy Corporation (the "Company") as to the
holder's option to require the Company to repurchase this 2023 Note and requests
and instructs the Company to repurchase this 2023 Note, or the portion hereof
(which is $1,000 principal amount or an integral multiple thereof) designated
below, in accordance with the terms of the Thirteenth Supplemental Indenture
referred to in this 2023 Note and directs that the check of the Company in
payment for this 2023 Note or the portion thereof and any 2023 Notes
representing any un-repurchased principal amount hereof, be issued and delivered
to the registered holder hereof unless a different name has been indicated
below. If any portion of this 2023 Note not repurchased is to be issued in the
name of a Person other than the undersigned, the undersigned shall pay all
transfer taxes payable with respect thereto.

Dated:

                                              __________________________________
                                                         Signature(s)
                                    Signature(s) must be guaranteed by a
                                    commercial bank or trust company or a member
                                    firm of a major stock exchange if 2023 Notes
                                    are to be delivered, other than to or in the
                                    name of the registered holder.

                                              __________________________________
                                                     Signature Guarantee

Fill in for registration of 2023 Notes if to be issued other than to and in the
name of registered holder:

___________________________________
(Name)
___________________________________
(Street Address)
___________________________________
(City, state and zip code)
Please print name and address

                                    Principal amount to be purchased (if less
                                    than all): $______,000

                                    Social Security or other taxpayer number

<PAGE>
                 CMS ENERGY INDEBTEDNESS SCHEDULE AS OF 7/16/03

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
       PRIMARY                    SECONDARY                                     FACILITY
       ENTITY                      ENTITY                                      DESCRIPTION                          LENDER (BANK)
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>                              <C>                                                     <C>
CMS Energy
           CMS Energy                                   $185MM Credit Agmt 5/22/03                              Bank One, NA
                       CMS Viron                                                              Letter of Credit
                       Jamaica Private Power Co                                               Letter of Credit
                       CMS Enterprises (Enporion)                                             Letter of Credit
                       Hydra-Co Ent. (Salt City)                                              Letter of Credit
                       CMS Generation (Shuweihat)                                             Letter of Credit
                       CMS Generation (Shuweihat)                                             Letter of Credit
                       CMS MS&T                                                               Letter of Credit
                       CMS MS&T                                                               Letter of Credit
                       CMS MS&T MI LLC                                                        Letter of Credit
                       Jorf Lasfar                                                            Letter of Credit
                       Jorf Lasfar                                                            Letter of Credit
                       Jorf Lasfar                                                            Letter of Credit
                       Jorf Lasfar                                                            Letter of Credit
                       CMS Viron                                                              Letter of Credit
                       Panhandle                                                              Letter of Credit
                       CMS Viron                                                              Letter of Credit
                       Jorf Lasfar Energy Co.                                                 Letter of Credit
                       Jorf Lasfar Energy Co.                                                 Letter of Credit
                       Grayling                                                               Letter of Credit

           CMS Energy                                   $409MM Second A & R Credit Agmt.                        Citicorp

           CMS Energy                                   Term Loan                                               CMS Methanol Co.

           CMS Energy                                   General Term Notes
                                                                                                      Series D
                                                                                                      Series E
                                                                                                      Series F
           CMS Energy                                   Sr. Unsecured Notes @ 7 5/8%

           CMS Energy                                   Convert. Sub. Debentures

           CMS Energy                                   Extend. Tenor Rate Adj. Sec.

           CMS Energy                                   Sr. Unsecured Notes @ 7.5%

           CMS Energy                                   Sr. Unsecured Notes @ 6.75%

           CMS Energy                                   Sr. Notes @ 8.9%

           CMS Energy                                   Sr. Notes @ 9.875%

           CMS Energy                                   Premium Equity Participating Security Units @ 7.25%

           CMS Energy                                   Sr. Notes @ 8.5%

           CMS Energy  St. Clair Undergrnd Stor.        Indemnity

           CMS Energy  CMS MS&T                         Guaranty

           CMS Energy  CMS Generation                   Guaranty

           CMS Energy  Emirates CMS Power Co.           Letter of Credit                                        Barclays Bank PLC UK

           CMS Energy  CMS Viron & CMS Enterprises      Indemnity

           CMS Energy  Genesee Power Station            Svc Fee Support Agreement                               US Bank

CMS ENTERPRISES

      CMS Enterprises  CMS GT                           Indemnity

      CMS Enterprises  CMS MS&T                         Guaranties

      CMS Enterprises  CMS MS&T                         Indemnity

      CMS Enterprises  CMS MS&T                         Indemnity

      CMS Enterprises  CMS MS&T                         Indemnity

      CMS Enterprises  CMS MS&T MI LLC                  Guaranty

      CMS Enterprises  CMS Viron, CMS MS&T              Indemnity

<CAPTION>
- ---------------------  -------------------------------------------------------------------
       PRIMARY           MAXIMUM       AMOUNT       ISSUE     EXPIRATION  LATEST AMEND
       ENTITY            AMOUNT     OUTSTANDING      DATE        DATE       DATE      #
- ---------------------  -------------------------------------------------------------------
<S>                    <C>          <C>           <C>         <C>         <C>
CMS Energy
           CMS Energy  185,000,000             0   5/23/2003   5/21/2004
                                         320,507  12/21/2001   9/24/2003  3/11/2002    1
                                       7,000,000  10/29/2001  12/31/2003
                                       1,919,470  10/26/2001   5/14/2004
                                       1,250,000   12/3/2001   5/14/2004  12/4/2002    1
                                       2,500,000   12/5/2001   5/14/2004
                                      70,300,000   12/5/2001   5/14/2004
                                       5,000,000  10/17/2001   12/1/2003   6/6/2002    3
                                       1,000,000   1/18/2002   5/14/2004
                                       1,200,000   1/18/2002   5/14/2004
                                       3,000,000   3/18/2002   5/14/2004  10/2/2002    1
                                      39,086,700   5/15/2002   5/14/2004  10/2/2002    1
                                      11,300,000   5/15/2002   5/14/2004  10/2/2002    1
                                      17,272,500   5/15/2002   5/14/2004  10/2/2002    1
                                         136,272   5/24/2002   7/24/2003
                                         350,000   3/16/2003  11/30/2003
                                         228,516   3/26/2003  11/30/2003
                                       4,800,000  11/15/2002   5/14/2004
                                       2,500,000  11/15/2002   5/14/2004
                                       2,026,689   3/11/2003    6/9/2004

           CMS Energy  409,000,000  5,000,000.00   3/30/2003   3/30/2006

           CMS Energy   14,000,000    14,000,000   1/28/2002  12/15/2004

           CMS Energy
                       200,000,000    65,772,000
                       400,000,000   183,055,000
                       300,000,000   296,726,000

           CMS Energy  180,000,000   175,815,000   9/26/1997  11/15/2004

           CMS Energy  172,500,000   172,500,000   6/20/1997   7/15/2027

           CMS Energy  180,000,000   180,000,000   1/13/1998   1/15/2005

           CMS Energy  480,000,000   408,845,000   1/25/1999   1/15/2009

           CMS Energy  300,000,000   287,025,000    2/3/1999   1/15/2004

           CMS Energy  269,000,000   260,475,000    7/2/2001   7/15/2008

           CMS Energy  500,000,000   467,558,000  10/10/2000  10/15/2007

           CMS Energy  220,000,000   220,000,000   8/22/2000   8/18/2004

           CMS Energy  350,000,000   300,375,000   3/29/2001   4/15/2011

           CMS Energy
                           200,000       200,000
                            54,000        54,000

           CMS Energy    1,000,000     1,000,000   11/1/2000

           CMS Energy   24,155,500    24,155,500    9/4/1997

           CMS Energy   17,500,000    17,500,000   4/27/1999   4/27/2004

           CMS Energy      305,220       305,220

           CMS Energy    3,000,000     3,000,000    3/1/1994        2021


CMS ENTERPRISES
      CMS Enterprises       20,000        20,000   9/20/1994   9/20/2002

      CMS Enterprises   30,100,000    30,100,000

      CMS Enterprises  168,484,895   168,484,895   4/28/1999    6/1/2009

      CMS Enterprises   78,581,671    78,581,671  12/14/1999  11/25/2011

      CMS Enterprises   26,315,263    26,315,263  11/15/2000   2/25/2011

      CMS Enterprises   10,000,000    10,000,000   8/22/2000              11/28/2000   1

      CMS Enterprises    9,992,448     9,992,448


<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
       PRIMARY                           ADDITIONAL
       ENTITY                            DESCRIPTION                                    BENEFICIARY
- ---------------------------------------------------------------------------------------------------------------
<S>                    <C>                                                   <C>
CMS Energy

           CMS Energy  Used to support Letters of Credit                     County of Los Angeles
                       SLT751236                                             Bank of Tokyo - Mitsubishi Trust Co.
                       SLT751239                                             TCF Leasing Inc.
                       SLT751227                                             Honeywell International
                       SLT751226                                             Barclays Bank PLC
                       SLT751237                                             Barclays Bank PLC
                       SLT751238                                             Constellation Power Source Inc
                       SLT751224                                             Midwest Independent System Operator
                       SLT751231                                             Midwest Independent System Operator
                       SLT751232                                             Deutsche Bank Trust Co. Americas
                       SLT751230                                             Deutsche Bank Trust Co. Americas
                       SLT751225                                             Deutsche Bank Trust Co. Americas
                       SLT751234                                             Deutsche Bank Trust Co. Americas
                       SLT751233                                             County of Los Angeles
                       00332014                                              Federal Insurance Co.
                       SLT751229                                             Seaboard Surety Co. & others
                       SLT751228                                             Deutsche Bank Trust
                       Collateral reserve .  LC#SLT751271                    Deutsche Bank Trust
                       Collateral reserve .  LC#SLT751270                    Consumers Energy
                       LC#00331042

           CMS Energy  Facilities A & B combined.

           CMS Energy

           CMS Energy

           CMS Energy

           CMS Energy  Issued for QUIPS *

           CMS Energy  X-TRAS *

           CMS Energy

           CMS Energy

           CMS Energy

           CMS Energy

           CMS Energy  PEPS

           CMS Energy

           CMS Energy  Surety & Operations bonds
                       Surety bond to state of Michigan                      Insurance company
                       Surety Bond to US EPA                                 Insurance company

           CMS Energy  7/1/99 Natural Gas Agreement                          MCV

           CMS Energy  Jorf Lasfar Capital Contribution Agmt.

           CMS Energy  Taweelah A2                                           Barclays Abu Dhabi

           CMS Energy  Surety Bond to outside party                          Insurance company

           CMS Energy  Tax exempt bond financing                             US Bank (Trustee)

CMS ENTERPRISES
      CMS Enterprise   Kalkaska 30 Project Underground Gas Storage Lease an  State of MI

      CMS Enterprises  $342.1MM reciprocal taken                             Various counterparties

      CMS Enterprises  Performance based Surety bond to Tennergy Corp.       St. Paul Insurance Co.

      CMS Enterprises  Performance based Surety bond to OH Schools Council   St. Paul Insurance Co.

      CMS Enterprises  Performance base surety bond to CCAC                  St. Paul Insurance Co.

      CMS Enterprises                                                        Detroit Edison

      CMS Enterprises  Surety bonds to outside parties                       Insurance companies
</TABLE>

                                       1
<PAGE>

                 CMS ENERGY INDEBTEDNESS SCHEDULE AS OF 7/16/03

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
       PRIMARY                    SECONDARY                                     FACILITY
       ENTITY                      ENTITY                                      DESCRIPTION                          LENDER (BANK)
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                    <C>                              <C>                                                         <C>
      CMS Enterprises  CMS Viron                        Indemnity

      CMS Enterprises  CMS Viron                        Indemnity

      CMS Enterprises  CMS Oil and Gas Co.              Indemnity

      CMS Enterprises  CMS Oil and Gas Co.              Indemnity

      CMS Enterprises  Terra Energy Ltd.                Indemnity

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CMS Viron                        Guaranty

      CMS Enterprises  CTM                              Guaranty

      CMS Enterprises  Western Australia Gas Trans. Co. Guaranty

      CMS Enterprises  CMS Ensenada S.A.                Guaranty

      CMS Enterprises  CMS Ensenada S.A.                Guaranty

      CMS Enterprises  CMS Ensenada S.A.                Guaranty

      CMS Enterprises  Jegrupadu O&M                    Guaranty

      CMS Enterprises  CMS Morocco Op Co                Guaranty

      CMS Enterprises  DIG                              Guaranty

<CAPTION>
- ------------------------------------------------------------------------------------------
       PRIMARY           MAXIMUM       AMOUNT       ISSUE     EXPIRATION  LATEST AMEND
       ENTITY            AMOUNT     OUTSTANDING      DATE        DATE       DATE      #
- ------------------------------------------------------------------------------------------
<S>                     <C>           <C>         <C>         <C>         <C>
      CMS Enterprises            -             -

      CMS Enterprises   17,311,248    17,311,248

      CMS Enterprises       75,000        75,000

      CMS Enterprises      300,000       300,000

      CMS Enterprises    9,649,954     9,649,954

      CMS Enterprises    4,300,000     4,300,000   3/24/2000

      CMS Enterprises   37,500,000    37,500,000   3/31/2000

      CMS Enterprises   34,020,044    34,020,044  12/14/2000

      CMS Enterprises    4,235,747     4,235,747  12/20/2001

      CMS Enterprises      430,023       430,023    7/1/2001

      CMS Enterprises    1,248,000     1,248,000    1/1/2002

      CMS Enterprises    6,720,000     6,720,000    4/1/2001

      CMS Enterprises    1,168,144     1,168,144    3/1/2001

      CMS Enterprises    3,780,000     3,780,000   6/25/1996  12/31/2006

      CMS Enterprises   20,000,000    20,000,000   10/9/2000  10/15/2002  10/19/2000   1

      CMS Enterprises      135,000       135,000    5/5/1997

      CMS Enterprises      800,000       800,000    5/7/1997        2009

      CMS Enterprises   11,697,519    11,697,519    5/7/1997        2009

      CMS Enterprises      750,000       750,000  12/23/1996

      CMS Enterprises   45,000,000    45,000,000

      CMS Enterprises      650,000       650,000    4/1/2002

<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
       PRIMARY                             ADDITIONAL
       ENTITY                              DESCRIPTION                                    BENEFICIARY
- -----------------------------------------------------------------------------------------------------------------
<S>                    <C>                                                   <C>
      CMS Enterprises  Covers York gty for Viron                             York International

      CMS Enterprises  Surety Bonds to outside parties                       Insurance companies

      CMS Enterprises  Surety Bonds to outside parties                       Insurance companies

      CMS Enterprises  Surety Bonds to outside parties                       Insurance companies

      CMS Enterprises  Appeal bonds to Michigan Court                        Insurance companies

      CMS Enterprises  Performance based energy savings contract             GE Capital Public Finance

      CMS Enterprises  Supports CMS Viron in MDW contract                    ABB Energy Capital

      CMS Enterprises  Performance based energy savings contract             University of Utah

      CMS Enterprises                                                        Trigen Development Corp

      CMS Enterprises                                                        BT Broad Street - Philadephia

      CMS Enterprises                                                        Opus Corporation (Lease)

      CMS Enterprises                                                        Opus Corporation (Lease)

      CMS Enterprises                                                        PPL Spectrum (Sacred Hearl Hospital)

      CMS Enterprises  CTM's Maintenance Agmt.                               Siemens

      CMS Enterprises                                                        Centrales Termicas Mendoza S.A.

      CMS Enterprises  La Plata gas transportation                           Transportadora de Gas Del Sur S.A.

      CMS Enterprises  Project Support & Guaranty Agmt.                      YPF

      CMS Enterprises  Project Support & Guaranty Agmt.                      OPIC

      CMS Enterprises  O&M Agreement                                         GVK Industries Ltd

      CMS Enterprises  Jorf Lasfar O&M                                       JLEC

      CMS Enterprises  Settlement Agmt:  Interconnection                     Detroit Edison
</TABLE>

                                       2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(E)(II)
<SEQUENCE>4
<FILENAME>k82154aexv4wxeyxiiy.txt
<DESCRIPTION>INDENTURES SUPPLEMENTAL-14TH DATED 07/17/03
<TEXT>
<PAGE>

                                                                EXHIBIT 4(e)(ii)

                        FOURTEENTH SUPPLEMENTAL INDENTURE
                            DATED AS OF JULY 17, 2003

         This Fourteenth Supplemental Indenture, dated as of the 17th day of
July, 2003 between CMS Energy Corporation, a corporation duly organized and
existing under the laws of the State of Michigan (hereinafter called the
"Issuer") and having its principal office at One Energy Plaza, Jackson, Michigan
49201, and Bank One Trust Company, N.A., a national banking association
(hereinafter called the "Trustee") and having its Corporate Trust Office at 1
BankOne Plaza, Mail Code ILI-0823, Chicago, IL 60670.

                                   WITNESSETH:

         WHEREAS, the Issuer and the Trustee (successor to NBD Bank, National
Association) entered into an Indenture, dated as of September 15, 1992 (the
"Original Indenture"), pursuant to which one or more series of debt securities
of the Issuer (the "Securities") may be issued from time to time; and

         WHEREAS, Section 2.3 of the Original Indenture permits the terms of any
series of Securities to be established in an indenture supplemental to the
Original Indenture; and

         WHEREAS, Section 8.1(e) of the Original Indenture provides that a
supplemental indenture may be entered into by the Issuer and the Trustee without
the consent of any Holders (as defined in the Original Indenture) of the
Securities to establish the form and terms of the Securities of any series; and

         WHEREAS, the Issuer has requested the Trustee to join with it in the
execution and delivery of this Fourteenth Supplemental Indenture in order to
supplement and amend the Original Indenture by, among other things, establishing
the form and terms of a series of Securities to be known as the Issuer's "7.75%
Senior Notes due 2010" (the "2010 Notes"), providing for the issuance of the
2010 Notes and amending and adding certain provisions thereof for the benefit of
the Holders of the 2010 Notes; and

         WHEREAS, the Issuer and the Trustee desire to enter into this
Fourteenth Supplemental Indenture for the purposes set forth in Sections 2.3 and
8.1(e) of the Original Indenture as referred to above; and

         WHEREAS, the Issuer has furnished the Trustee with a copy of the
resolutions of its Board of Directors certified by its Secretary or Assistant
Secretary authorizing the execution of this Fourteenth Supplemental Indenture;
and

         WHEREAS, all things necessary to make this Fourteenth Supplemental
Indenture a valid agreement of the Issuer and the Trustee and a valid supplement
to the Original Indenture have been done;

                                       1
<PAGE>

         NOW, THEREFORE, for and in consideration of the premises and the
purchase of the 2010 Notes to be issued hereunder by holders thereof, the Issuer
and the Trustee mutually covenant and agree, for the equal and proportionate
benefit of the respective holders from time to time of the 2010 Notes, as
follows:

                                    ARTICLE I
                        STANDARD PROVISIONS; DEFINITIONS

         SECTION 1.01. Standard Provisions. The Original Indenture together with
this Fourteenth Supplemental Indenture and all previous indentures supplemental
thereto entered into pursuant to the applicable terms thereof are hereinafter
sometimes collectively referred to as the "Indenture." All capitalized terms
which are used herein and not otherwise defined herein are defined in the
Indenture and are used herein with the same meanings as in the Indenture.

         SECTION 1.02. Definitions.

         (a)      The following terms have the meanings set forth in the
Sections hereof set forth below:

<TABLE>
<CAPTION>
             Term                      Section
- ---------------------------------   --------------
<S>                                 <C>
Additional Amounts                  2.04
Applicable Premium                  2.04
Application Period                  4.06
Asset Sale                          4.06
Change in Control Date              3.01
Change in Control Purchase Notice   3.01(b)
Change in Control Purchase Price    3.01
Company                             2.03
Depositary                          Article VI
DTC                                 2.03
Events of Default                   5.01
Excess Proceeds                     4.06
Global Note                         Article VI
Indenture                           1.01; 2.04
Interest Payment Date               2.03
issue                               4.04(a)
Issuer                              Preamble; 2.03
Lien                                4.02(a)
Maturity                            2.03
Original Indenture                  Recitals
Original Issue Date                 2.03
Place of Payment                    2.03
Purchase Date                       3.01(a)(iii)
Record Date                         2.03
Required Repurchase                 3.01
Required Repurchase Notice          3.01(a)
</TABLE>

                                       2
<PAGE>

<TABLE>
<CAPTION>
             Term                      Section
- ---------------------------------   --------------
<S>                                 <C>
Restricted Payment                  4.05(a)
Rule 144A                           2.03
Securities                          Recitals
Securities Act                      2.03
Treasury Rate                       2.04
Trustee                             Preamble; 2.04
2010 Notes                          Recitals; 2.04
</TABLE>

         (b)      Section 1.1 of the Original Indenture is amended to insert the
new definitions applicable to the 2010 Notes, in the appropriate alphabetical
sequence, as follows:

         "Amortization Expense" means, for any period, amounts recognized during
such period as amortization of capital leases, depletion, nuclear fuel, goodwill
and assets classified as intangible assets in accordance with generally accepted
accounting principles.

         "Average Life" means, as of the date of determination, with respect to
any Indebtedness, the quotient obtained by dividing (i) the sum of the products
of (x) the number of years from the date of determination to the dates of each
successive scheduled principal payment of such Indebtedness and (y) the amount
of such principal payment by (ii) the sum of all such principal payments.

         "Capital Lease Obligation" of a Person means any obligation that is
required to be classified and accounted for as a capital lease on the face of a
balance sheet of such Person prepared in accordance with generally accepted
accounting principles; the amount of such obligation shall be the capitalized
amount thereof, determined in accordance with generally accepted accounting
principles; the stated maturity thereof shall be the date of the last payment of
rent or any other amount due under such lease prior to the first date upon which
such lease may be terminated by the lessee without payment of a penalty; and
such obligation shall be deemed secured by a Lien on any property or assets to
which such lease relates.

         "Capital Stock" means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) corporate stock, including any Preferred Stock or Letter
Stock; provided that Hybrid Preferred Securities shall not be considered Capital
Stock for purposes of this definition.

         "Change in Control" means an event or series of events by which: (i)
the Issuer ceases to own beneficially, directly or indirectly, at least 80% of
the total voting power of all classes of Capital Stock then outstanding of
Consumers (whether arising from issuance of securities of the Issuer or
Consumers, any direct or indirect transfer of securities by the Issuer or
Consumers, any merger, consolidation, liquidation or dissolution of the Issuer
or Consumers or otherwise); (ii) any "person" or "group" (as such terms are used
in Sections 13(d) and 14(d) of the Exchange Act) becomes the

                                       3
<PAGE>

"beneficial owner" (as such term is used in Rules 13d-3 and 13d-5 under the
Exchange Act, except that a person or group shall be deemed to have "beneficial
ownership" of all shares that such person or group has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 35% of the Voting Stock of the
Issuer; or (iii) the Issuer consolidates with or merges into another corporation
or directly or indirectly conveys, transfers or leases all or substantially all
of its assets to any Person, or any corporation consolidates with or merges into
the Issuer, in either event pursuant to a transaction in which the outstanding
Voting Stock of the Issuer is changed into or exchanged for cash, securities, or
other property, other than any such transaction in which (A) the outstanding
Voting Stock of the Issuer is changed into or exchanged for Voting Stock of the
surviving corporation and (B) the holders of the Voting Stock of the Issuer
immediately prior to such transaction retain, directly or indirectly,
substantially proportionate ownership of the Voting Stock of the surviving
corporation immediately after such transaction.

         "CMS Electric and Gas" means CMS Electric and Gas Company, a Michigan
corporation and wholly-owned subsidiary of Enterprises.

         "CMS Gas Transmission" means CMS Gas Transmission Company (formerly
known as CMS Gas Transmission and Storage Company), a Michigan corporation and
wholly-owned subsidiary of Enterprises.

         "CMS Generation" means CMS Generation Co., a Michigan corporation and
wholly-owned subsidiary of Enterprises.

         "CMS MST" means CMS Marketing, Services and Trading Company, a Michigan
corporation and wholly-owned subsidiary of Enterprises.

         "Consolidated Assets" means, at any date of determination, the
aggregate assets of the Issuer and its Consolidated Subsidiaries determined on a
consolidated basis in accordance with generally accepted accounting principles.

         "Consolidated Coverage Ratio" with respect to any period means the
ratio of (i) the aggregate amount of Operating Cash Flow for such period to (ii)
the aggregate amount of Consolidated Interest Expense for such period.

         "Consolidated Current Liabilities" means, for any period, the aggregate
amount of liabilities of the Issuer and its Consolidated Subsidiaries which may
properly be classified as current liabilities (including taxes accrued as
estimated), after (i) eliminating all inter-company items between the Issuer and
any Consolidated Subsidiary and (ii) deducting all current maturities of
long-term Indebtedness, all as determined in accordance with generally accepted
accounting principles.

         "Consolidated Indebtedness" means, at any date of determination, the
aggregate Indebtedness of the Issuer and its Consolidated Subsidiaries
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that

                                       4
<PAGE>

Consolidated Indebtedness shall not include any subordinated debt owned by any
Hybrid Preferred Securities Subsidiary.

         "Consolidated Interest Expense" means, for any period, the total
interest expense in respect of Consolidated Indebtedness of the Issuer and its
Consolidated Subsidiaries, including, without duplication, (i) interest expense
attributable to capital leases, (ii) amortization of debt discount, (iii)
capitalized interest, (iv) cash and noncash interest payments, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs under Interest Rate Protection
Agreements (including amortization of discount) and (vii) interest expense in
respect of obligations of other Persons deemed to be Indebtedness of the Issuer
or any Consolidated Subsidiaries under clause (v) or (vi) of the definition of
Indebtedness, provided, however, that Consolidated Interest Expense shall
exclude (A) any costs otherwise included in interest expense recognized on early
retirement of debt and (B) any interest expense in respect of any Indebtedness
of any Subsidiary of Consumers, CMS Generation, CMS Electric and Gas, CMS Gas
Transmission, CMS MST or any other Designated Enterprises Subsidiary, provided
that such Indebtedness is without recourse to any assets of the Issuer,
Consumers, Enterprises, CMS Generation, CMS Electric and Gas, CMS Gas
Transmission, CMS MST or any other Designated Enterprises Subsidiary.

         "Consolidated Net Income" means, for any period, the net income of the
Issuer and its Consolidated Subsidiaries determined on a consolidated basis in
accordance with generally accepted accounting principles; provided, however,
that there shall not be included in such Consolidated Net Income:

         (i)      any net income of any Person if such Person is not a
Subsidiary, except that (A) the Issuer's equity in the net income of any such
Person for such period shall be included in such Consolidated Net Income up to
the aggregate amount of cash actually distributed by such Person during such
period to the Issuer or a Consolidated Subsidiary as a dividend or other
distribution and (B) the Issuer's equity in a net loss of any such Person for
such period shall be included in determining such Consolidated Net Income;

         (ii)     any net income of any Person acquired by the Issuer or a
Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition;

         (iii)    any gain or loss realized upon the sale or other disposition
of any property, plant or equipment of the Issuer or its Consolidated
Subsidiaries which is not sold or otherwise disposed of in the ordinary course
of business and any gain or loss realized upon the sale or other disposition of
any Capital Stock of any Person; and

         (iv)     any net income of any Subsidiary of Consumers, CMS Generation,
CMS Electric and Gas, CMS Gas Transmission, CMS MST or any other Designated
Enterprises Subsidiary whose interest expense is excluded from Consolidated
Interest Expense, provided, however, that for purposes of this subsection (iv),
any cash, dividends or distributions of any such Subsidiary to the Issuer shall
be included in calculating Consolidated Net Income.

                                       5
<PAGE>

         "Consolidated Net Tangible Assets" means, for any period, the total
amount of assets (less accumulated depreciation or amortization, allowances for
doubtful receivables, other applicable reserves and other properly deductible
items) as set forth on the most recently available quarterly or annual
consolidated balance sheet of the Issuer and its Consolidated Subsidiaries,
determined on a consolidated basis in accordance with generally accepted
accounting principles, and after giving effect to purchase accounting and after
deducting therefrom, to the extent otherwise included, the amounts of: (i)
Consolidated Current Liabilities; (ii) minority interests in Consolidated
Subsidiaries held by Persons other than the Issuer or a Restricted Subsidiary;
(iii) excess of cost over fair value of assets of businesses acquired, as
determined in good faith by the Board of Directors as evidenced by Board of
Directors resolutions; (iv) any revaluation or other write-up in value of assets
subsequent to December 31, 1996, as a result of a change in the method of
valuation in accordance with generally accepted accounting principles; (v)
unamortized debt discount and expenses and other unamortized deferred charges,
goodwill, patents, trademarks, service marks, trade names, copyrights, licenses,
organization or developmental expenses and other intangible items; (vi) treasury
stock; and (vii) any cash set apart and held in a sinking or other analogous
fund established for the purpose of redemption or other retirement of Capital
Stock to the extent such obligation is not reflected in Consolidated Current
Liabilities.

         "Consolidated Net Worth" of any Person means the total of the amounts
shown on the consolidated balance sheet of such Person and its consolidated
subsidiaries, determined on a consolidated basis in accordance with generally
accepted accounting principles, as of any date selected by such Person not more
than 90 days prior to the taking of any action for the purpose of which the
determination is being made (and adjusted for any material events since such
date), as (i) the par or stated value of all outstanding Capital Stock plus (ii)
paid-in capital or capital surplus relating to such Capital Stock plus (iii) any
retained earnings or earned surplus less (A) any accumulated deficit, (B) any
amounts attributable to Redeemable Stock and (C) any amounts attributable to
Exchangeable Stock.

         "Consolidated Subsidiary" means any Subsidiary whose accounts are or
are required to be consolidated with the accounts of the Issuer in accordance
with generally accepted accounting principles.

         "Consumers" means Consumers Energy Company, a Michigan corporation, all
of whose common stock is on the date hereof owned by the Issuer.

         "Designated Enterprises Subsidiary" means any wholly-owned subsidiary
of Enterprises formed after the date of this Fourteenth Supplemental Indenture
which is designated a Designated Enterprises Subsidiary by the Board of
Directors.

         "Enterprises" means CMS Enterprises Company, a Michigan corporation and
wholly-owned subsidiary of the Issuer.

                                       6
<PAGE>

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

         "Exchangeable Stock" means any Capital Stock of a corporation that is
exchangeable or convertible into another security (other than Capital Stock of
such corporation that is neither Exchangeable Stock or Redeemable Stock).

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

         (i)      such Hybrid Preferred Securities Subsidiary lends
substantially all of the proceeds from the issuance of such preferred securities
to the Issuer or Consumers in exchange for subordinated debt issued by the
Issuer or Consumers respectively;

         (ii)     such preferred securities contain terms providing for the
deferral of distributions corresponding to provisions providing for the deferral
of interest payments on such subordinated debt; and

         (iii)    the Issuer or Consumers (as the case may be) makes periodic
interest payments on such subordinated debt, which interest payments are in turn
used by the Hybrid Preferred Securities Subsidiary to make corresponding
payments to the holders of the Hybrid Preferred Securities.

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

         "Indebtedness" of any Person means, without duplication:

         (i)      the principal of and premium (if any) in respect of (A)
indebtedness of such Person for money borrowed and (B) indebtedness evidenced by
notes, debentures, bonds or other similar instruments for the payment of which
such Person is responsible or liable;

         (ii)     all Capital Lease Obligations of such Person;

         (iii)    all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale obligations and all
obligations under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business);

                                       7
<PAGE>

         (iv)     all obligations of such Person for the reimbursement of any
obligor on any letter of credit, bankers' acceptance or similar credit
transaction (other than obligations with respect to letters of credit securing
obligations (other than obligations described in clauses (i) through (iii)
above) entered into in the ordinary course of business of such Person to the
extent such letters of credit are not drawn upon or, if and to the extent drawn
upon, such drawing is reimbursed no later than the third Business Day following
receipt by such Person of a demand for reimbursement following payment on the
letter of credit);

         (v)      all obligations of the type referred to in clauses (i) through
(iv) above of other Persons and all dividends of other Persons for the payment
of which, in either case, such Person is responsible or liable as obligor,
guarantor or otherwise; and

         (vi)     all obligations of the type referred to in clauses (i) through
(v) above of other Persons secured by any Lien on any property or asset of such
Person (whether or not such obligation is assumed by such Person), the amount of
such obligation being deemed to be the lesser of the value of such property or
assets or the amount of the obligation so secured.

         "Initial Purchasers" has the meaning ascribed to such term in the
Purchase Agreement.

         "Interest Rate Protection Agreement" means any interest rate swap
agreement, interest rate cap agreement or other financial agreement or
arrangement designed to protect the Issuer or any Subsidiary against
fluctuations in interest rates.

         "Letter Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) which is
intended to reflect the separate performance of certain of the businesses or
operations conducted by such corporation or any of its subsidiaries.

         "Net Cash Proceeds" means, (a) with respect to any Asset Sale, the
aggregate proceeds of such Asset Sale including the fair market value (as
determined by the Board of Directors and net of any associated debt and of any
consideration other than Capital Stock received in return) of property other
than cash, received by the Issuer, net of (i) brokerage commissions and other
fees and expenses (including fees and expenses of counsel and investment
bankers) related to such Asset Sale, (ii) provisions for all taxes (whether or
not such taxes will actually be paid or are payable) as a result of such Asset
Sale without regard to the consolidated results of operations of the Issuer and
its Restricted Subsidiaries, taken as a whole, (iii) payments made to repay
Indebtedness or any other obligation outstanding at the time of such Asset Sale
that either (A) is secured by a Lien on the property or assets sold or (B) is
required to be paid as a result of such sale and (iv) appropriate amounts to be
provided by the Issuer or any Restricted Subsidiary of the Issuer as a reserve
against any liabilities associated with such Asset Sale including, without
limitation, pension and other post-employment benefit liabilities, liabilities
related to environmental matters and liabilities under any indemnification

                                       8
<PAGE>

obligations associated with such Asset Sale, all as determined in conformity
with generally accepted accounting principles and (b) with respect to any
issuance or sale or contribution in respect of Capital Stock, the aggregate
proceeds of such issuance, sale or contribution, including the fair market value
(as determined by the Board of Directors and net of any associated debt and of
any consideration other than Capital Stock received in return) of property other
than cash, received by the Issuer, net of attorneys' fees, accountants' fees,
underwriters' or placement agents' fees, discounts or commissions and brokerage,
consultant and other fees incurred in connection with such issuance or sale and
net of taxes paid or payable as a result thereof, provided, however, that if
such fair market value as determined by the Board of Directors of property other
than cash is greater than $25 million, the value thereof shall be based upon an
opinion from an independent nationally recognized firm experienced in the
appraisal or similar review of similar types of transactions.

         "Non-Convertible Capital Stock" means, with respect to any corporation,
any non-convertible Capital Stock of such corporation and any Capital Stock of
such corporation convertible solely into non-convertible Capital Stock other
than Preferred Stock of such corporation; provided, however, that
Non-Convertible Capital Stock shall not include any Redeemable Stock or
Exchangeable Stock.

         "Operating Cash Flow" means, for any period, with respect to the Issuer
and its Consolidated Subsidiaries, the aggregate amount of Consolidated Net
Income after adding thereto Consolidated Interest Expense (adjusted to include
costs recognized on early retirement of debt), income taxes, depreciation
expense, Amortization Expense and any noncash amortization of debt issuance
costs, any nonrecurring, noncash charges to earnings and any negative accretion
recognition.

         "Other Rating Agency" means any one of Fitch, Inc. or Moody's Investors
Service, Inc., and any successor to any of these organizations which is a
nationally recognized statistical rating organization.

         "Paying Agent" means any Person authorized by the Issuer to pay the
principal of (and premium, if any) or interest on any of the 2010 Notes on
behalf of the Issuer. Initially, the Paying Agent shall be the Trustee.

         "Predecessor 2010 Note" of any particular 2010 Note means every
previous 2010 Note evidencing all or a portion of the same debt as that
evidenced by such particular 2010 Note; and, for the purposes of the definition,
any 2010 Note authenticated and delivered under Section 2.9 of the Indenture in
exchange for or in lieu of a mutilated, destroyed, lost or stolen 2010 Note
shall be deemed to evidence the same debt as the mutilated, destroyed, lost or
stolen 2010 Note.

         "Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of

                                       9
<PAGE>

any other class of such corporation; provided that Hybrid Preferred
Securities shall not be considered Preferred Stock for purposes of this
definition.

         "Purchase Agreement" means that certain Purchase Agreement dated July
9, 2003 among the Issuer and the Initial Purchasers which provides for the sale
by the Issuer to the Initial Purchasers of the 2010 Notes.

         "Redeemable Stock" means any Capital Stock that by its terms or
otherwise is required to be redeemed prior to the first anniversary of the
Stated Maturity of the outstanding 2010 Notes or is redeemable at the option of
the holder thereof at any time prior to the first anniversary of the Stated
Maturity of the outstanding 2010 Notes.

         "Registrable Securities" has the meaning ascribed to such term in the
Registration Rights Agreement.

         "Registration Default" has the meaning ascribed to such term in the
Registration Rights Agreement.

         "Registration Rights Agreement" means that certain Registration Rights
Agreement, dated as of July 17, 2003, by and among the Issuer and the Initial
Purchasers.

         "Regulation S" means Regulation S under the Securities Act.

         "Restricted Subsidiary" means any Subsidiary (other than Consumers and
its Subsidiaries) of the Issuer which, as of the date of the Issuer's most
recent quarterly consolidated balance sheet, constituted at least 10% of the
total Consolidated Assets of the Issuer and its Consolidated Subsidiaries and
any other Subsidiary which from time to time is designated a Restricted
Subsidiary by the Board of Directors; provided that no Subsidiary may be
designated a Restricted Subsidiary if, immediately after giving effect thereto,
an Event of Default or event that, with the lapse of time or giving of notice or
both, would constitute an Event of Default would exist or the Issuer and its
Restricted Subsidiaries could not incur at least one dollar of additional
Indebtedness under Section 4.04 hereof, and (i) any such Subsidiary so
designated as a Restricted Subsidiary must be organized under the laws of the
United States or any State thereof, (ii) more than 80% of the Voting Stock of
such Subsidiary must be owned of record and beneficially by the Issuer or a
Restricted Subsidiary and (iii) such Restricted Subsidiary must be a
Consolidated Subsidiary.

         "Standard & Poor's" means Standard & Poor's Ratings Group, a division
of The McGraw-Hill Companies, Inc., and any successor thereto which is a
nationally recognized statistical rating organization, or if such entity shall
cease to rate the 2010 Notes or shall cease to exist and there shall be no such
successor thereto, any other nationally recognized statistical rating
organization selected by the Issuer which is acceptable to the Trustee.

                                       10
<PAGE>

         "Subordinated Indebtedness" means any Indebtedness of the Issuer
(whether outstanding on the date of this Fourteenth Supplemental Indenture or
thereafter incurred) which is contractually subordinated or junior in right of
payment to the 2010 Notes.

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

         "Tax Sharing Agreement" means the Amended and Restated Agreement for
the Allocation of Income Tax Liabilities and Benefits, dated January 1, 1994, as
amended or supplemented from time to time, by and among Issuer, each of the
members of the Consolidated Group (as defined therein), and each of the
corporations that become members of the Consolidated Group.

         "Voting Stock" means securities of any class or classes the holders of
which are ordinarily, in the absence of contingencies, entitled to vote for
corporate directors (or persons performing similar functions).

                                       11
<PAGE>

                                   ARTICLE II

                 DESIGNATION AND TERMS OF THE 2010 NOTES; FORMS

         SECTION 2.01. Establishment of Series.

         (a)      There is hereby created a series of Securities to be known and
designated as the "7.75% Senior Notes due 2010" to be issued in aggregate
principal amount of $300,000,000. Additional Securities, without limitation as
to amount, having substantially the same terms as the 2010 Notes (except a
different issue date, issue price and bearing interest from the last Interest
Payment Date to which interest has been paid or duly provided for on the 2010
Notes, and, if no interest has been paid, from July 17, 2003), may also be
issued by the Issuer pursuant to the Indenture without the consent of the
existing Holders of the 2010 Notes. Such additional Securities shall be part of
the same series as the 2010 Notes. The Stated Maturity of the 2010 Notes is
August 1, 2010; the principal amount of the 2010 Notes shall be payable on such
date unless the 2010 Notes are earlier redeemed or purchased in accordance with
the terms of the Indenture.

         (b)      The 2010 Notes will bear interest from the Original Issue
Date, or from the most recent date to which interest has been paid or duly
provided for, at the rate of 7.75% per annum stated therein until the principal
thereof is paid or made available for payment. Interest will be payable
semiannually on each Interest Payment Date and at Maturity, as provided in the
form of the 2010 Note in Section 2.03 hereof.

         (c)      The Record Date referred to in Section 2.3(f)(4) of the
Indenture for the payment of the interest on any 2010 Note payable on any
Interest Payment Date (other than at Maturity) shall be the 15th day preceding
the relevant Interest Payment Date (whether or not a Business Day) except that
the Record Date for interest payable at Maturity shall be the date of Maturity.

         (d)      The payment of the principal of, premium (if any) and interest
on the 2010 Notes shall not be secured by a security interest in any property.

         (e)      The 2010 Notes shall be redeemable at the option of the
Issuer, in whole or in part, at any time and from time to time, or not less than
30 days notice at a redemption price equal to 100% of the principal amount of
such 2010 Notes being redeemed plus the Applicable Premium, if any, thereon at
the time of redemption, together with accrued interest, if any, thereon to the
redemption date. In no event will the redemption price ever be less than 100% of
the principal amount of the 2010 Notes plus accrued interest to the redemption
date. The 2010 Notes shall be purchased by the Issuer at the option of the
Holders thereof as provided in Article III hereof.

         (f)      The 2010 Notes shall not be convertible.

         (g)      The 2010 Notes will not be subordinated to the payment of
Senior Debt.

                                       12
<PAGE>

         (h)      The Issuer will not pay any additional amounts on the 2010
Notes held by a Person who is not a U.S. person (as defined in Regulation S) in
respect of any tax, assessment or government charge withheld or deducted.

         (i)      The events specified in Events of Default with respect to the
2010 Notes shall include the events specified in Article V of this Fourteenth
Supplemental Indenture. In addition to the covenants set forth in Article Three
of the Original Indenture, the Holders of the 2010 Notes shall have the benefit
of the covenants of the Issuer set forth in this Fourteenth Supplemental
Indenture.

         SECTION 2.02. Forms Generally. The 2010 Notes and Trustee's
certificates of authentication shall be in substantially the form set forth in
this Article II, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by the Indenture, and may have
such letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such 2010 Notes, as evidenced by their execution thereof.

         The definitive 2010 Notes shall be printed, lithographed or engraved on
steel engraved borders or may be produced in any other manner, all as determined
by the officers executing such 2010 Notes, as evidenced by their execution
thereof.

         SECTION 2.03. Form of Face of 2010 Note.

         THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR SECURITIES REGISTERED
IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE AND 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.

         Unless this Global 2010 Note is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to CMS Energy Corporation or its agent for registration of transfer, exchange or
payment, and any certificate issued is registered in the name of a nominee of
DTC or in such other name as is requested by an authorized representative of DTC
(and any payment is made to such nominee of DTC or to such other entity as is
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 has an interest herein.

                                       13
<PAGE>

                             CMS ENERGY CORPORATION
                           7.75% SENIOR NOTES DUE 2010

No. ________                                                        $300,000,000

CUSIP No.: [125896AU4/U12660AC7]

ISIN No.: [US125896AU48/USU12660AC70]

         CMS Energy Corporation, a corporation duly organized and existing under
the laws of the State of Michigan (herein called the "Issuer" or "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to CEDE & Co., or
registered assigns, the principal sum of Three Hundred Million Dollars on August
1, 2010 ("Maturity") and to pay interest thereon from July 17, 2003 (the
"Original Issue Date") or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually in arrears on
February 1 and August 1 in each year, commencing on February 1, 2004 (each an
"Interest Payment Date") to the Persons in whose names the 2010 Notes are
registered at the close of business on the 15th day preceding the relevant
Interest Payment Date (each a "Record Date"), and at Maturity, at the rate of
7.75% per annum, until the principal hereof is paid or made available for
payment. The amount of interest payable on any Interest Payment Date shall be
computed on the basis of a 360-day year of twelve 30-day months. The interest so
payable, and punctually paid or duly provided for, on any Interest Payment Date
will, as provided in such Indenture, be paid to the Person in whose name this
2010 Note (or one or more Predecessor 2010 Notes) is registered at the close of
business on the Record Date for such interest, which shall be the 15th day
preceding the relevant Interest Payment Date (whether or not a Business Day)
except that the Record Date for interest payable at Maturity shall be the date
of Maturity. Any such interest not so punctually paid or duly provided for will
forthwith cease to be payable to the Holder on such Record Date and may either
be paid to the Person in whose name this 2010 Note (or one or more Predecessor
2010 Notes) is registered at the close of business on a subsequent Record Date
(which shall be not less than five Business Days prior to the date of payment of
such defaulted interest) for the payment of such defaulted interest to be fixed
by the Trustee, notice whereof shall be given to Holders of 2010 Notes not less
than 15 days preceding such subsequent Record Date.

         This 2010 Note is subject to redemption at the option of the Issuer and
to purchase by the Issuer at the option of the Holder as specified on the
reverse of this 2010 Note.

         Payment of the principal of (and premium, if any) and interest, if any,
on this 2010 Note will be made at the office or agency of the Issuer maintained
for that purpose in New York, New York (the "Place of Payment"), 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; provided, however, that at the
option of the Issuer payment of interest (other than interest payable at
Maturity) may be made by check mailed to the address of

                                       14
<PAGE>

the Person entitled thereto as such address shall appear in the Security
Register or by wire transfer to an account designated by such Person not later
than ten days prior to the date of such payment.

         Reference is hereby made to the further provisions of this 2010 Note
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.

         THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE
SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF
THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY MAY
BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) IN THE UNITED
STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE
144A")) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE WITH RULE 903 OR RULE 904 UNDER
THE SECURITIES ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, (V) TO CMS ENERGY CORPORATION OR (VI) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH
(VI) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO, NOTIFY ANY PURCHASER OF THE SECURITY FROM IT OF THE RESALE RESTRICTIONS
REFERRED TO IN CLAUSE (A) ABOVE.

         THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE IN
HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS IN COMPLIANCE WITH THE
SECURITIES ACT.

         THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR
RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE

                                       15
<PAGE>

LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO
ANY SUCH AMENDMENT OR SUPPLEMENT.

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS
OF, A REGISTRATION RIGHTS AGREEMENT, DATED AS OF JULY 17, 2003 ENTERED INTO BY
THE COMPANY FOR THE BENEFIT OF CERTAIN HOLDERS OF SECURITIES FROM TIME TO TIME.

         Unless the certificate of authentication hereon has been executed by
the Trustee referred to on the reverse hereof by manual signature, this 2010
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.

         IN WITNESS WHEREOF, the Issuer has caused this instrument to be duly
executed under its corporate seal. Dated:

                                                  CMS ENERGY CORPORATION

                                                  By____________________________
                                                  Its:

                                                  By____________________________
                                                  Its:

         SECTION 2.04. Form of Reverse of 2010 Note.

         This 7.75% Senior Note due 2010 is one of a duly authorized issue of
securities of the Issuer (herein called the "2010 Notes"), issued and to be
issued under an Indenture, dated as of September 15, 1992, as supplemented by
certain supplemental indentures, including the Fourteenth Supplemental
Indenture, dated as of July 17, 2003 (herein collectively referred to as the
"Indenture"), between the Issuer and Bank One Trust Company, N.A., a national
banking association (successor to NBD Bank, National Association), as Trustee
(herein called the "Trustee", which term includes any successor trustee under
the Indenture), to which Indenture and all indentures supplemental thereto
reference is hereby made for a statement of the respective rights, limitations
of rights, duties and immunities thereunder of the Issuer, the Trustee, and the
Holders of the 2010 Notes and of the terms upon which the 2010 Notes are, and
are to be, authenticated and delivered. This 2010 Note is one of the series
designated on the face hereof, issued in an initial aggregate principal amount
of $300,000,000. Additional Securities, without limitation as to amount, having
substantially the same terms as the 2010 Notes (except a different issue date,
issue price and bearing interest from the last Interest Payment Date to

                                       16
<PAGE>

which interest has been paid or duly provided for on the 2010 Notes, and, if no
interest has been paid, from July 17, 2003), may also be issued by the Issuer
pursuant to the Indenture without the consent of the existing Holders of the
2010 Notes. Such additional Securities shall be part of the same series as the
2010 Notes.

         The 2010 Notes are subject to redemption at the option of the Issuer,
in whole or in part, upon not more than 60 nor less than 30 days' notice as
provided in the Indenture at any time and from time to time, at a redemption
price equal to 100% of the principal amount of such 2010 Notes being redeemed
plus the Applicable Premium, if any, thereon at the time of redemption, together
with accrued interest, if any, thereon to the redemption date, but interest
installments whose Stated Maturity is on or prior to such redemption date will
be payable to the Holder of record at the close of business on the relevant
Record Date referred to on the face hereof, all as provided in the Indenture. In
no event will the redemption price ever be less than 100% of the principal
amount of the 2010 Notes plus accrued interest to the redemption date.

         The following definitions are used to determine the Applicable Premium:

         "Applicable Premium" means, with respect to a 2010 Note (or portion
thereof) being redeemed at any time, the excess of (A) the present value at such
time of the principal amount of such 2010 Note (or portion thereof) being
redeemed plus all interest payments due on such 2010 Note (or portion thereof),
which present value shall be computed using a discount rate equal to the
Treasury Rate plus 50 basis points, over (B) the principal amount of such 2010
Note (or portion thereof) being redeemed at such time. For purposes of this
definition, the present values of the interest and principal payments will be
determined in accordance with generally accepted principles of financial
analysis.

         "Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two business days prior to the redemption
date or, in the case of defeasance, prior to the date of deposit (or, if such
Statistical Release is no longer published, any publicly available source of
similar market data)) most nearly equal to the then remaining average life to
stated maturity of the 2010 Notes; provided, however, that if the average life
to stated maturity of the 2010 Notes is not equal to the constant maturity of a
United States Treasury security for which a weekly average yield is given, the
Treasury Rate shall be obtained by linear interpolation (calculated to the
nearest one-twelfth of a year) from the weekly average yields of United States
Treasury securities for which such yields are given.

         The interest rate borne by the Registrable Securities will be increased
by 0.25% per annum upon the occurrence of a Registration Default, which rate
will increase by an additional 0.25% per annum if such Registration Default has
not been cured within 90 days after the occurrence thereof and will continue to
increase by 0.25% at the beginning of each subsequent 90-day period until all
Registration Defaults have been cured

                                       17
<PAGE>

("Additional Amounts"); provided, that the aggregate amount of any such increase
in the interest rate on the Registrable Securities shall in no event exceed
0.50% per annum. All accrued Additional Amounts shall be paid to Holders of
Registrable Securities in the same manner and at the same time as regular
payments of interest on the Registrable Securities. Following the cure of all
Registration Defaults, the accrual of Additional Amounts shall cease and the
interest rate on the Registrable Securities will revert to 7.75% per annum.

         In the event of redemption of this 2010 Note in part only, a new 2010
Note for the unredeemed portion hereof will be issued in the name of the Holder
hereof upon the cancellation hereof.

         If a Change in Control occurs, the Issuer shall notify the Holder of
this 2010 Note of such occurrence and such Holder shall have the right to
require the Issuer to make a Required Repurchase of all or any part of this 2010
Note at a Change in Control Purchase Price equal to 101% of the principal amount
of this 2010 Note to be so purchased as more fully provided in the Indenture and
subject to the terms and conditions set forth therein. In the event of a
Required Repurchase of only a portion of this 2010 Note, a new 2010 Note or 2010
Notes for the unrepurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.

         If an Event of Default with respect to this 2010 Note shall occur and
be continuing, the principal of this 2010 Note may be declared due and payable
in the manner and with the effect provided in the Indenture.

         In any case where any Interest Payment Date, redemption date,
repurchase date, Stated Maturity or Maturity of any 2010 Note shall not be a
Business Day at any Place of Payment, then (notwithstanding any other provision
of the Indenture or this 2010 Note) payment of interest or principal (and
premium, if any) need not be made at such Place of Payment on such date, but may
be made on the next succeeding Business Day at such Place of Payment with the
same force and effect as if made on the Interest Payment Date, repurchase date
or at the Stated Maturity or Maturity; provided that no interest shall accrue on
the amount so payable for the period from and after such Interest Payment Date,
redemption date, repurchase date, Stated Maturity or Maturity, as the case may
be, to such Business Day.

         The Trustee and the Paying Agent shall return to the Issuer upon
written request any money or property held by them for the payment of any amount
with respect to the 2010 Notes that remains unclaimed for two years, provided,
however, that the Trustee or such Paying Agent, before being required to make
any such return, shall at the expense of the Issuer cause to be published once
in a newspaper of general circulation in The City of New York or mail to each
such Holder notice that such money or property remains unclaimed and that, after
a date specified therein, which shall not be less than 30 days from the date of
such publication or mailing, any unclaimed money or property then remaining
shall be returned to the Issuer. After return to the Issuer, Holders entitled to

                                       18
<PAGE>

the money or property must look to the Issuer for payment as general creditors
unless an applicable abandoned property law designates another Person.

         The Indenture contains provisions for defeasance at any time of (i) the
entire indebtedness of this 2010 Note or (ii) certain restrictive covenants and
Events of Default with respect to this 2010 Note, in each case upon compliance
with certain conditions set forth therein.

         The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Issuer and the rights of the Holders of all outstanding 2010 Notes under the
Indenture at any time by the Issuer and the Trustee with the consent of the
Holders of not less than a majority in principal amount of Securities of all
series then outstanding and affected (voting as one class).

         The Indenture permits the Holders of not less than a majority in
principal amount of Securities of all series at the time outstanding with
respect to which a default shall have occurred and be continuing (voting as one
class) to waive on behalf of the Holders of all outstanding Securities of such
series any past default by the Issuer, provided that no such waiver may be made
with respect to a default in the payment of the principal of or the interest on
any Security of such series or the default by the Issuer in respect of certain
covenants or provisions of the Indenture, the modification or amendment of which
must be consented to by the Holder of each outstanding Security of each series
affected.

         As set forth in, and subject to, the provisions of the Indenture, no
Holder of any 2010 Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such Holder shall
have previously given to the Trustee written notice of a continuing Event of
Default, the Holders of not less than 25% in principal amount of the outstanding
Securities of each affected series (voting as one class) shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, and the Trustee shall not have received from the Holders
of a majority in principal amount of the outstanding Securities of each affected
series (voting as one class) a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days; provided,
however, that such limitations do not apply to a suit instituted by the Holder
hereof for the enforcement of payment of the principal of (and premium, if any)
or any interest on this 2010 Note on or after the respective due dates expressed
herein.

         No reference herein to the Indenture and no provision of this 2010 Note
or of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any premium and interest
on this 2010 Note at the times, place and rate, and in the coin or currency,
herein prescribed.

         As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this 2010 Note is registrable in the Security
Register, upon surrender of this 2010 Note for registration of transfer at the
office or agency of the Issuer in any place

                                       19
<PAGE>

where the principal of and any premium and interest on this 2010 Note are
payable, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Issuer and the Security Registrar duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new 2010 Notes of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.

         The 2010 Notes are issuable only in registered form without coupons in
denominations of $1,000 and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, 2010 Notes are
exchangeable for a like aggregate principal amount of 2010 Notes and of like
tenor of a different authorized denomination, as requested by the Holder
surrendering the same.

         No service charge shall be made for any such registration of transfer
or exchange, but the Issuer may require payment of a sum sufficient to cover any
tax or other governmental charge payable in connection therewith.

         The Issuer shall not be required to (i) issue, exchange or register the
transfer of this 2010 Note for a period of 15 days next preceding the mailing of
the notice of redemption of 2010 Notes or (ii) exchange or register the transfer
of any 2010 Note or any portion thereof selected, called or being called for
redemption, except in the case of any 2010 Note to be redeemed in part, the
portion thereof not so to be redeemed.

         Prior to due presentment of this 2010 Note for registration of
transfer, the Issuer, the Trustee and any agent of the Issuer or the Trustee may
treat the Person in whose name this 2010 Note is registered as the owner hereof
for all purposes, whether or not this 2010 Note be overdue, and neither the
Issuer, the Trustee nor any such agent shall be affected by notice to the
contrary.

         All terms used in this 2010 Note without definition which are defined
in the Indenture shall have the meanings assigned to them in the Indenture.

         SECTION 2.05. Form of Trustee's Certificate of Authentication. The
Trustee's certificates of authentication shall be in substantially the following
form:

         This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.

                                                  BANK ONE TRUST COMPANY, N.A.,
                                                         as Trustee

                                                  By__________________________

                                                  Authorized Officer

                                       20
<PAGE>

                                   ARTICLE III

                                CHANGE IN CONTROL

         SECTION 3.01. Change in Control. Upon the occurrence of a Change in
Control (the effective date of such Change in Control being the "Change in
Control Date"), each Holder of a 2010 Note shall have the right to require that
the Issuer repurchase (a "Required Repurchase") all or any part of such Holder's
2010 Note at a repurchase price payable in cash equal to 101% of the principal
amount of such 2010 Note plus accrued interest to the Purchase Date (the "Change
in Control Purchase Price").

         (a)      Within 30 days following the Change in Control Date, the
Issuer shall mail a notice (the "Required Repurchase Notice") to each Holder
with a copy to the Trustee stating:

                  (i)      that a Change in Control has occurred and that such
                  Holder has the right to require the Issuer to repurchase all
                  or any part of such Holder's 2010 Notes at the Change in
                  Control Purchase Price;

                  (ii)     the Change in Control Purchase Price;

                  (iii)    the date on which any Required Repurchase shall be
                  made (which shall be no earlier than 60 days nor later than 90
                  days from the date such notice is mailed) (the "Purchase
                  Date");

                  (iv)     the name and address of the Paying Agent; and

                  (v)      the procedures that Holders must follow to cause the
                  2010 Notes to be repurchased, which shall be consistent with
                  this Section 3.01 and the Indenture.

         (b)      Holders electing to have a 2010 Note repurchased must deliver
a written notice (the "Change in Control Purchase Notice") to the Paying Agent
(initially the Trustee) at its corporate trust office in Chicago, Illinois, or
any other office of the Paying Agent maintained for such purposes, not later
than 30 days prior to the Purchase Date. The Change in Control Purchase Notice
shall state: (i) the portion of the principal amount of any 2010 Notes to be
repurchased, which portion must be $1,000 or an integral multiple thereof; (ii)
that such 2010 Notes are to be repurchased by the Issuer pursuant to the change
in control provisions of the Indenture; and (iii) unless the 2010 Notes are
represented by one or more Global Notes, the certificate numbers of the 2010
Notes to be delivered by the Holder thereof for repurchase by the Issuer. Any
Change in Control Purchase Notice may be withdrawn by the Holder by a written
notice of withdrawal delivered to the Paying Agent not later than three Business
Days prior to the Purchase Date. The notice of withdrawal shall state the
principal amount and, if applicable, the certificate numbers of the 2010 Notes
as to which the withdrawal notice relates and the

                                       21
<PAGE>

principal amount of such 2010 Notes, if any, which remains subject to a Change
in Control Purchase Notice.

         If a 2010 Note is represented by a Global Note (as described in Article
VI hereof), the Depositary or its nominee will be the Holder of such 2010 Note
and therefore will be the only entity that can elect a Required Repurchase of
such 2010 Note. To obtain repayment pursuant to this Section 3.01 with respect
to such 2010 Note, the beneficial owner of such 2010 Note must provide to the
broker or other entity through which it holds the beneficial interest in such
2010 Note (i) the Change in Control Purchase Notice signed by such beneficial
owner, and such signature must be guaranteed by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States, and (ii) instructions to such broker or
other entity to notify the Depositary of such beneficial owner's desire to
obtain repayment pursuant to this Section 3.01. Such broker or other entity will
provide to the Paying Agent (i) the Change in Control Purchase Notice received
from such beneficial owner and (ii) a certificate satisfactory to the Paying
Agent from such broker or other entity stating that it represents such
beneficial owner. Such broker or other entity will be responsible for disbursing
any payments it receives pursuant to this Section 3.01 to such beneficial owner.

         (c)      Payment of the Change in Control Purchase Price for a 2010
Note for which a Change in Control Purchase Notice has been delivered and not
withdrawn is conditioned (except in the case of a 2010 Note represented by one
or more Global Notes) upon delivery of such 2010 Note (together with necessary
endorsements) to the Paying Agent at its office in Chicago, Illinois, or any
other office of the Paying Agent maintained for such purpose, at any time
(whether prior to, on or after the Purchase Date) after the delivery of such
Change in Control Purchase Notice. Payment of the Change in Control Purchase
Price for such 2010 Note will be made promptly following the later of the
Purchase Date or the time of delivery of such 2010 Note. If the Paying Agent
holds, in accordance with the terms of the Indenture, money sufficient to pay
the Change in Control Purchase Price of such 2010 Note on the Business Day
following the Purchase Date, then, on and after such date, interest will cease
accruing, and all other rights of the Holder shall terminate (other than the
right to receive the Change in Control Purchase Price upon delivery of the 2010
Note).

         (d)      The Issuer shall comply with the provisions of Regulation 14E
and any other tender offer rules under the Exchange Act, which may then be
applicable in connection with any offer by the Issuer to repurchase 2010 Notes
at the option of Holders upon a Change in Control.

         (e)      No 2010 Note may be repurchased by the Issuer as a result of a
Change in Control if there has occurred and is continuing an Event of Default
(other than a default in the payment of the Change in Control Purchase Price
with respect to the 2010 Notes).

                                       22
<PAGE>

                                   ARTICLE IV
                       ADDITIONAL COVENANTS OF THE ISSUER
                         WITH RESPECT TO THE 2010 NOTES

         SECTION 4.01. Existence. So long as any of the 2010 Notes are
outstanding, subject to Article Nine of the Original Indenture, the Issuer will
do or cause to be done all things necessary to preserve and keep in full force
and effect its corporate existence.

         SECTION 4.02. Limitation on Certain Liens.

         (a)      So long as any of the 2010 Notes are outstanding, the Issuer
shall not create, incur, assume or suffer to exist any lien, mortgage, pledge,
security interest, conditional sale, title retention agreement or other charge
or encumbrance of any kind, or any other type of arrangement intended or having
the effect of conferring upon a creditor of the Issuer or any Subsidiary a
preferential interest (hereinafter in this Section 4.02 referred to as a "Lien")
upon or with respect to any of its property of any character, including without
limitation any shares of Capital Stock of Consumers or Enterprises, without
making effective provision whereby the 2010 Notes shall (so long as any such
other creditor shall be so secured) be equally and ratably secured (along with
any other creditor similarly entitled to be secured) by a direct Lien on all
property subject to such Lien, provided, however, that the foregoing
restrictions shall not apply to:

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

         (ii)     pledges or deposits to secure (A) obligations under workmen's
         compensation laws or similar legislation, (B) statutory obligations of
         the Issuer or (C) Support Obligations;

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

         (iv)     purchase money Liens upon or in property acquired and held by
         the Issuer in the ordinary course of business to secure the purchase
         price of such property or to secure Indebtedness incurred solely for
         the purpose of financing the acquisition of any such property to be
         subject to such Liens, or Liens existing on any such property at the
         time of acquisition, or extensions, renewals or replacements of any of
         the foregoing for the same or a lesser amount, provided that no such
         Lien shall extend to or cover any property other than the property
         being acquired and no such extension, renewal or replacement shall
         extend to or cover property not theretofore subject to the Lien being
         extended, renewed or replaced, and provided, further, that the
         aggregate principal amount of the Indebtedness at any one time
         outstanding secured by Liens permitted by this clause (iv) shall not
         exceed $10,000,000; and

                                       23
<PAGE>

         (v)      Liens not otherwise permitted by clauses (i) through (iv) of
         this Section 4.02 securing Indebtedness of the Issuer; provided that on
         the date such Liens are created, and after giving effect to such
         Indebtedness, the aggregate principal amount at maturity of all of the
         secured Indebtedness of the Issuer at such date shall not exceed 5% of
         Consolidated Net Tangible Assets at such date.

         SECTION 4.03. Limitation on Consolidation, Merger, Sale or Conveyance.
So long as any of the 2010 Notes are outstanding and until the 2010 Notes are
rated BBB- or above (or an equivalent rating) by Standard & Poor's and one Other
Rating Agency (or, if Standard & Poor's shall change its rating system, an
equivalent of such rating then employed by such organization), at which time the
Issuer will be permanently released from the provisions of this Section 4.03,
and subject also to Article Nine of the Original Indenture, the Issuer shall not
consolidate with or merge into any other Person or sell, lease or convey the
property of the Issuer in the entirety or substantially as an entirety, unless
(a) immediately after giving effect to such transaction the Consolidated Net
Worth of the surviving entity is at least equal to the Consolidated Net Worth of
the Issuer immediately prior to the transaction and (b) after giving effect to
such transaction, the surviving entity would be entitled to incur at least one
dollar of additional Indebtedness (other than revolving Indebtedness to banks)
without violation of the limitations in Section 4.04 hereof.

         SECTION 4.04. Limitation on Consolidated Indebtedness.

         (a)      So long as any of the 2010 Notes are outstanding and until the
2010 Notes are rated BBB- or above (or an equivalent rating) by Standard &
Poor's and one Other Rating Agency (or, if Standard & Poor's shall change its
rating system, an equivalent of such rating then employed by such organization),
at which time the Issuer will be permanently released from the provisions of
this Section 4.04, the Issuer shall not, and shall not permit any Consolidated
Subsidiary of the Issuer to, issue, create, assume, guarantee, incur or
otherwise become liable for (collectively, "issue"), directly or indirectly, any
Indebtedness unless the Consolidated Coverage Ratio of the Issuer and its
Consolidated Subsidiaries for the four consecutive fiscal quarters immediately
preceding the issuance of such Indebtedness (as shown by a pro forma
consolidated income statement of the Issuer and its Consolidated Subsidiaries
for the four most recent fiscal quarters ending at least 30 days prior to the
issuance of such Indebtedness after giving effect to (i) the issuance of such
Indebtedness and (if applicable) the application of the net proceeds thereof to
refinance other Indebtedness as if such Indebtedness was issued at the beginning
of the period, (ii) the issuance and retirement of any other Indebtedness since
the first day of the period as if such Indebtedness was issued or retired at the
beginning of the period and (iii) the acquisition of any company or business
acquired by the Issuer or any Subsidiary since the first day of the period
(including giving effect to the pro forma historical earnings of such company or
business), including any acquisition which will be consummated contemporaneously
with the issuance of such Indebtedness, as if in each case such acquisition
occurred at the beginning of the period) exceeds a ratio of 1.6 to 1.0.

                                       24
<PAGE>

         (b)      Notwithstanding the foregoing paragraph, the Issuer or any
Restricted Subsidiary may issue, directly or indirectly, the following
Indebtedness:

         (1)      Indebtedness of the Issuer to banks not to exceed
         $1,000,000,000 in aggregate outstanding principal amount at any time;

         (2)      Indebtedness (other than Indebtedness described in Section
         4.04(b)(1) hereof) outstanding on the date of this Fourteenth
         Supplemental Indenture, as set forth on Schedule 4.04(b)(2) attached
         hereto and made a part hereof, and Indebtedness issued in exchange for,
         or the proceeds of which are used to refund or refinance, any
         Indebtedness permitted by this clause (2); provided, however, that (i)
         the principal amount (or accreted value in the case of Indebtedness
         issued at a discount) of the Indebtedness so issued shall not exceed
         the principal amount (or accreted value in the case of Indebtedness
         issued at a discount) of, premium, if any, and accrued but unpaid
         interest on, the Indebtedness so exchanged, refunded or refinanced and
         (ii) the Indebtedness so issued (A) shall not mature prior to the
         stated maturity of the Indebtedness so exchanged, refunded or
         refinanced, (B) shall have an Average Life equal to or greater than the
         remaining Average Life of the Indebtedness so exchanged, refunded or
         refinanced and (C) if the Indebtedness to be exchanged, refunded or
         refinanced is subordinated to the 2010 Notes, the Indebtedness is
         subordinated to the 2010 Notes in right of payment;

         (3)      Indebtedness of the Issuer owed to and held by a Subsidiary
         and Indebtedness of a Subsidiary owed to and held by the Issuer;
         provided, however, that, in the case of Indebtedness of the Issuer owed
         to and held by a Subsidiary, (i) any subsequent issuance or transfer of
         any Capital Stock that results in any such Subsidiary ceasing to be a
         Subsidiary or (ii) any transfer of such Indebtedness (except to the
         Issuer or a Subsidiary) shall be deemed for the purposes of this
         Section 4.04(b) to constitute the issuance of such Indebtedness by the
         Issuer;

         (4)      Indebtedness of the Issuer issued in exchange for, or the
         proceeds of which are used to refund or refinance, Indebtedness of the
         Issuer issued in accordance with Section 4.04(a) hereof, provided that
         (i) the principal amount (or accreted value in the case of Indebtedness
         issued at a discount) of the Indebtedness so issued shall not exceed
         the principal amount (or accreted value in the case of Indebtedness
         issued at a discount) of, premium, if any, and accrued but unpaid
         interest on, the Indebtedness so exchanged, refunded or refinanced and
         (ii) the Indebtedness so issued (A) shall not mature prior to the
         stated maturity of the Indebtedness so exchanged, refunded or
         refinanced, (B) shall have an Average Life equal to or greater than the
         remaining Average Life of the Indebtedness so exchanged, refunded or
         refinanced and (C) if the Indebtedness to be exchanged, refunded or
         refinanced is subordinated to the 2010 Notes, the Indebtedness so
         issued is subordinated to the 2010 Notes in right of payment;

                                       25
<PAGE>

         (5)      Indebtedness of a Restricted Subsidiary issued in exchange
         for, or the proceeds of which are used to refund or refinance,
         Indebtedness of a Restricted Subsidiary issued in accordance with
         Section 4.04(a) hereof, provided that (i) the principal amount (or
         accreted value in the case of Indebtedness issued at a discount) of the
         Indebtedness so issued shall not exceed the principal amount (or
         accreted value in the case of Indebtedness issued at a discount) of,
         premium, if any, and accrued but unpaid interest on, the Indebtedness
         so exchanged, refunded or refinanced and (ii) the Indebtedness so
         issued (A) shall not mature prior to the stated maturity of the
         Indebtedness so exchanged, refunded or refinanced and (B) shall have an
         Average Life equal to or greater than the remaining Average Life of the
         Indebtedness so exchanged, refunded or refinanced.

         (6)      Indebtedness of a Consolidated Subsidiary issued to acquire,
         develop, improve, construct or to provide working capital for a gas,
         oil or electric generation, exploration, production, distribution,
         storage or transmission facility and related assets, provided that such
         Indebtedness is without recourse to any assets of the Issuer,
         Consumers, Enterprises, CMS Generation, CMS Electric and Gas, CMS Gas
         Transmission, CMS MST or any other Designated Enterprises Subsidiary;

         (7)      Indebtedness of a Person existing at the time at which such
         Person became a Subsidiary and not incurred in connection with, or in
         contemplation of, such Person becoming a Subsidiary. Such Indebtedness
         shall be deemed to be incurred on the date the acquired Person becomes
         a Consolidated Subsidiary;

         (8)      Indebtedness issued by the Issuer not to exceed $150,000,000
         in aggregate principal amount at any time; and

         (9)      Indebtedness of a Consolidated Subsidiary in respect of rate
         reduction bonds issued to recover electric restructuring transition
         costs of Consumers, provided that such Indebtedness is without recourse
         to the assets of Consumers.

         SECTION 4.05. Limitation on Restricted Payments.

         (a)      So long as the 2010 Notes are outstanding and until the 2010
Notes are rated BBB- or above (or an equivalent rating) by Standard & Poor's and
one Other Rating Agency (or, if Standard & Poor's shall change its rating
system, an equivalent of such rating then employed by such organization), at
which time the Issuer will be permanently released from the provisions of this
Section 4.05, the Issuer shall not, and shall not permit any Restricted
Subsidiary of the Issuer, directly or indirectly, to (i) declare or pay any
dividend or make any distribution on the Capital Stock of the Issuer to the
direct or indirect holders of its Capital Stock (except dividends or
distributions payable solely in its Non-Convertible Capital Stock or in options,
warrants or other rights to purchase such Non-Convertible Capital Stock and
except dividends or distributions payable to the Issuer or a Subsidiary), (ii)
purchase, redeem or otherwise acquire or retire for value any Capital Stock of
the Issuer or (iii) purchase, repurchase, redeem, defease or otherwise acquire
or

                                       26
<PAGE>

retire for value, prior to scheduled maturity or scheduled repayment thereof,
any Subordinated Indebtedness (any such dividend, distribution, purchase,
redemption, repurchase, defeasing, other acquisition or retirement being herein
referred to as a "Restricted Payment") if at the time the Issuer or such
Subsidiary makes such Restricted Payment:

         (1)      an Event of Default, or an event that with the lapse of time
         or the giving of notice or both would constitute an Event of Default,
         shall have occurred and be continuing (or would result therefrom); or

         (2)      the aggregate amount of such Restricted Payment and all other
         Restricted Payments made since May 6, 1997 would exceed the sum of:

                  (A)      $100,000,000;

                  (B)      100% of Consolidated Net Income, accrued during the
                  period (treated as one accounting period) from May 6, 1997 to
                  the end of the most recent fiscal quarter ending at least 45
                  days prior to the date of such Restricted Payment (or, in case
                  such sum shall be a deficit, minus 100% of the deficit); and

                  (C)      the aggregate Net Cash Proceeds received by the
                  Issuer from the issue or sale of or contribution with respect
                  to its Capital Stock subsequent to May 6, 1997.

         For the purpose of determining the amount of any Restricted Payment not
in the form of cash, the amount shall be the fair value of such Restricted
Payment as determined in good faith by the Board of Directors, provided that if
the value of the non-cash portion of such Restricted Payment as determined by
the Board of Directors is in excess of $25 million, such value shall be based on
the opinion from a nationally recognized firm experienced in the appraisal of
similar types of transactions.

         (b)      The provisions of Section 4.05(a) hereof shall not prohibit:

                  (i)      any purchase or redemption of Capital Stock of the
                  Issuer made by exchange for, or out of the proceeds of the
                  substantially concurrent sale of, Capital Stock of the Issuer
                  (other than Redeemable Stock or Exchangeable Stock); provided,
                  however, that such purchase or redemption shall be excluded
                  from the calculation of the amount of Restricted Payments;

                  (ii)     dividends or other distributions paid in respect of
                  any class of the Issuer's Capital Stock issued in respect of
                  the acquisition of any business or assets by the Issuer or a
                  Restricted Subsidiary if the dividends or other distributions
                  with respect to such Capital Stock are payable solely from the
                  net earnings of such business or assets;

                                       27
<PAGE>

                  (iii)    dividends paid within 60 days after the date of
                  declaration thereof if at such date of declaration such
                  dividend would have complied with this Section 4.05; provided,
                  however, that at the time of payment of such dividend, no
                  Event of Default shall have occurred and be continuing (or
                  result therefrom), and provided further, however, that such
                  dividends shall be included (without duplication) in the
                  calculation of the amount of Restricted Payments; or

                  (iv)     payments pursuant to the Tax Sharing Agreement.

         SECTION 4.06. Limitation on Asset Sales. So long as any of the 2010
Notes are outstanding, the Issuer may not sell, transfer or otherwise dispose of
any property or assets of the Issuer, including Capital Stock of any
Consolidated Subsidiary, in one transaction or a series of transactions in an
amount which exceeds $50,000,000 (an "Asset Sale") unless the Issuer shall (i)
apply an amount equal to such excess Net Cash Proceeds to permanently repay
Indebtedness of a Consolidated Subsidiary or Indebtedness of the Issuer which is
pari passu with the 2010 Notes, (ii) invest an equal amount not so used in
clause (i) in property or assets of related business within 24 months after the
date of the Asset Sale (the "Application Period") or (iii) apply such excess Net
Cash Proceeds not so used in clause (i) or (ii) (the "Excess Proceeds") to make
an offer, within 30 days after the end of the Application Period, to purchase
from the Holders on a pro rata basis an aggregate principal amount of 2010 Notes
on the relevant purchase date equal to the Excess Proceeds on such date, at a
purchase price equal to 100% of the principal amount of the 2010 Notes on the
relevant purchase date and unpaid interest, if any, to the purchase date. The
Issuer shall only be required to make an offer to purchase 2010 Notes from
Holders pursuant to clause (iii) if the Excess Proceeds equal or exceed
$25,000,000 at any given time.

         The procedures to be followed by the Issuer in making an offer to
purchase 2010 Notes from the Holders with Excess Proceeds, and for the
acceptance of such offer by the Holders, shall be the same as those set forth in
Section 3.01 herein with respect to a Change in Control.

                                    ARTICLE V
                          ADDITIONAL EVENTS OF DEFAULT
                         WITH RESPECT TO THE 2010 NOTES

         SECTION 5.01. Definition. All of the events specified in clauses (a)
through (h) of Section 5.1 of the Original Indenture shall be Events of Default
with respect to the 2010 Notes.

         SECTION 5.02. Amendments to Section 5.1 of the Original Indenture.
Solely for the purpose of determining Events of Default with respect to the 2010
Notes, paragraphs Section 5.1(e), Section 5.1(f) and Section 5.1(h) of the
Original Indenture shall be amended such that each and every reference therein
to the Issuer shall be deemed to mean either the Issuer or Consumers.

                                       28
<PAGE>

         SECTION 5.03. Additional Events of Default. Solely for the purpose of
determining Events of Default with respect to the 2010 Notes, an Event of
Default shall also include the following:

         (i)      default in the payment of any interest upon any 2010 Note,
         including Additional Amounts, if any, when it becomes due and payable,
         and continuance of such default for 30 days;

         (ii)     default in the Issuer's obligation to redeem the 2010 Notes
         after exercising its redemption option pursuant to this Fourteenth
         Supplemental Indenture; and

         (iii)    default in the Issuer's obligation to purchase 2010 Notes upon
         the occurrence of a Change in Control in accordance with the terms of
         Article III hereof.

                                   ARTICLE VI

                                  GLOBAL NOTES

         The 2010 Notes will be issued initially in the form of Global Notes.
"Global Note" means a registered 2010 Note evidencing one or more 2010 Notes
issued to a depositary (the "Depositary") or its nominee, in accordance with
this Article VI and bearing the legend prescribed in this Article VI. One or
more Global Notes will represent all 2010 Notes. The Issuer shall execute and
the Trustee shall, in accordance with this Article VI and the Issuer Order with
respect to the 2010 Notes, authenticate and deliver one or more Global Notes in
temporary or permanent form that (i) shall represent and shall be denominated in
an aggregate amount equal to the aggregate principal amount of the 2010 Notes to
be represented by such Global Note or Global Notes, (ii) shall be registered in
the name of the Depositary for such Global Note or Global Notes or the nominee
of such Depositary, (iii) shall be delivered by the Trustee to such Depositary
or pursuant to such Depositary's instructions and (iv) shall bear a legend
substantially to the following effect: "Unless the Global 2010 Note is presented
by an authorized representative of the Depositary to the Issuer or its agent for
registration of transfer, exchange or payment, and any certificate issued is
registered in the name of a nominee of the Depositary or in such other name as
is requested by an authorized representative of the Depositary (and any payment
is made to such nominee of the Depositary or to such other entity as is
requested by an authorized representative of the Depositary), any transfer,
pledge or other use hereof for value or otherwise by or to any Person is
wrongful inasmuch as the registered owner hereof has an interest herein."

         Notwithstanding Section 2.8 of the Original Indenture, unless and until
it is exchanged in whole or in part for 2010 Notes in definitive form, a Global
Note representing one or more 2010 Notes may not be transferred except as a
whole by the Depositary, to a nominee of such Depositary or by a nominee of such
Depositary to such Depositary or another nominee of such Depositary or by such
Depositary or any such

                                       29
<PAGE>

nominee to a successor Depositary for 2010 Notes or a nominee of such successor
Depositary.

         If at any time the Depositary for the 2010 Notes is unwilling or unable
to continue as Depositary for the 2010 Notes, the Issuer shall appoint a
successor Depositary with respect to the 2010 Notes. If a successor Depositary
for the 2010 Notes is not appointed by the Issuer by the earlier of (i) 90 days
from the date the Issuer receives notice to the effect that the Depositary is
unwilling or unable to act, or the Issuer determines that the Depositary is
unable to act or (ii) the effectiveness of the Depositary's resignation or
failure to fulfill its duties as Depositary, the Issuer will execute, and the
Trustee, upon receipt of a Issuer Order for the authentication and delivery of
definitive 2010 Notes, will authenticate and deliver 2010 Notes in definitive
form in an aggregate principal amount equal to the principal amount of the
Global Note or Global Notes representing such 2010 Notes in exchange for such
Global Note or Global Notes.

         The Issuer may at any time and in its sole discretion determine that
the 2010 Notes issued in the form of one or more Global Notes shall no longer be
represented by such Global Note or Global Notes. In such event the Issuer will
execute, and the Trustee, upon receipt of an Issuer Order for the authentication
and delivery of definitive 2010 Notes, will authenticate and deliver 2010 Notes
in definitive form in an aggregate principal amount equal to the principal
amount of the Global Note or Global Notes representing such 2010 Notes in
exchange for such Global Note or Global Notes.

         The Depositary for such 2010 Notes may surrender a Global Note or
Global Notes for such 2010 Notes in exchange in whole or in part for 2010 Notes
in definitive form on such terms as are acceptable to the Issuer and such
Depositary. Thereupon, the Issuer shall execute, and the Trustee shall
authenticate and deliver, without service charge:

         (i)      to each Person specified by such Depositary a new 2010 Note or
         2010 Notes, of any authorized denomination as requested by such Person
         in aggregate principal amount equal to and in exchange for such
         Person's beneficial interest in the Global Note; and

         (ii)     to such Depositary a new Global Note in a denomination equal
         to the difference, if any, between the principal amount of the
         surrendered Global Note and the aggregate principal amount of 2010
         Notes in definitive form delivered to Holders thereof.

         In any exchange provided for in this Article VI, the Issuer will
execute and the Trustee will authenticate and deliver 2010 Notes in definitive
registered form in authorized denominations.

         Upon the exchange of a Global Note for 2010 Notes in definitive form,
such Global Note shall be cancelled by the Trustee. 2010 Notes in definitive
form issued in exchange for a Global Note pursuant to this Article VI shall be
registered in such names

                                       30
<PAGE>

and in such authorized denominations as the Depositary for such Global Note,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee or Security Registrar. The Trustee shall deliver such
2010 Notes to the Persons in whose names such 2010 Notes are so registered.

                                   ARTICLE VII

                                   DEFEASANCE

         All of the provisions of Article Ten of the Original Indenture shall be
applicable to the 2010 Notes. Upon satisfaction by the Issuer of the
requirements of Section 10.1(C) of the Indenture, in connection with any
covenant defeasance (as provided in Section 10.1(C) of the Indenture), the
Issuer shall be released from its obligations under Article Nine of the Original
Indenture and under Article IV of this Fourteenth Supplemental Indenture with
respect to the 2010 Notes.

                                  ARTICLE VIII
                             SUPPLEMENTAL INDENTURES

         This Fourteenth Supplemental Indenture is a supplement to the Original
Indenture. As supplemented by this Fourteenth Supplemental Indenture, the
Original Indenture is in all respects ratified, approved and confirmed, and the
Original Indenture and this Fourteenth Supplemental Indenture shall together
constitute one and the same instrument.

                                   ARTICLE IX
                             MODIFICATION AND WAIVER

         In addition to those matters set forth in Section 8.2 of the Original
Indenture (including the terms and conditions of the 2010 Notes set forth
herein), with respect to the 2010 Notes, no amendment or supplemental indenture
to the Indenture shall, without the consent of the Holder of each 2010 Note
affected thereby:

         (a)      reduce the redemption price or Change in Control Purchase
Price of the 2010 Notes;

         (b)      change the terms applicable to redemption or purchase of the
2010 Notes in a manner adverse to the Holder; or

         (c)      alter the manner of calculation or rate of Additional Amounts
payable on any 2010 Note or extend the time for payment of any such amount.

         In addition, with respect to the 2010 Notes, notwithstanding Section
5.10 of the Original Indenture, approval of the Holders of each outstanding 2010
Note shall be required to waive any default by the Issuer in any payment of the
redemption price or Change in Control Purchase Price with respect to any 2010
Notes.

                                       31
<PAGE>

The reference to "interest" in Section 5.10(i) of the Original Indenture shall
include Additional Amounts, if any.

                                   TESTIMONIUM

         This Fourteenth Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.

                                       32
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have caused this Fourteenth
Supplemental Indenture to be duly executed and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first written
above.



                                              CMS ENERGY CORPORATION

                                              /s/ Thomas J. Webb
                                              ----------------------------------
                                              Thomas J. Webb
                                              Executive Vice President and
                                              Chief Financial Officer

Attest:  /s/ Laura Mountcastle
         -----------------------
                                              BANK ONE TRUST COMPANY, N.A.,
                                              as Trustee

                                              /s/ Mietka Collins
                                              ----------------------------------
                                              Mietka Collins
                                              Account Representative

Attest:  /s/ Steven E. Charles
         -----------------------



                                       33
<PAGE>

                               Schedule 4.04(b)(2)

                                - See Attached -

                                       34
<PAGE>

                 CMS ENERGY INDEBTEDNESS SCHEDULE AS OF 7/17/03

<TABLE>
<CAPTION>
     PRIMARY                     SECONDARY                         FACILITY                                           MAXIMUM
     ENTITY                       ENTITY                          DESCRIPTION                  LENDER (BANK)          AMOUNT
- ------------------   --------------------------------   --------------------------------   --------------------   ---------------
<S>                  <C>                                <C>                                <C>                    <C>
CMS ENERGY
       CMS Energy                                       $185MM Credit Agmt 5/22/03         Bank One, NA              185,000,000
                     CMS Viron                                          Letter of Credit
                     Jamaica Private Power Co                           Letter of Credit
                     CMS Enterprises (Enporion)                         Letter of Credit
                     Hydra-Co Ent. (Salt City)                          Letter of Credit
                     CMS Generation (Shuweihat)                         Letter of Credit
                     CMS Generation (Shuweihat)                         Letter of Credit
                     CMS MS&T                                           Letter of Credit
                     CMS MS&T                                           Letter of Credit
                     CMS MS&T MI LLC                                    Letter of Credit
                     Jorf Lasfar                                        Letter of Credit
                     Jorf Lasfar                                        Letter of Credit
                     Jorf Lasfar                                        Letter of Credit
                     Jorf Lasfar                                        Letter of Credit
                     CMS Viron                                          Letter of Credit
                     Panhandle                                          Letter of Credit
                     CMS Viron                                          Letter of Credit
                     Jorf Lasfar Energy Co.                             Letter of Credit
                     Jorf Lasfar Energy Co.                             Letter of Credit
                     Grayling                                           Letter of Credit

       CMS Energy                                       $409MM Second A & R Credit Agmt.   Citicorp                  409,000,000

       CMS Energy                                       Term Loan                          CMS Methanol Co.           14,000,000

       CMS Energy                                       General Term Notes
                                                                                Series D                             200,000,000
                                                                                Series E                             400,000,000
                                                                                Series F                             300,000,000

       CMS Energy                                       Sr Unsecured Convertible Senior
                                                        Notes @ 3.375% due 2023                                      150,000,000

       CMS Energy                                       Sr. Unsecured Notes @ 7 5/8%                                 180,000,000

       CMS Energy                                       Convert. Sub. Debentures                                     172,500,000

       CMS Energy                                       Extend. Tenor Rate Adj. Sec.                                 180,000,000

       CMS Energy                                       Sr. Unsecured Notes @ 7.5%                                   480,000,000

       CMS Energy                                       Sr. Unsecured Notes @ 6.75%                                  300,000,000

       CMS Energy                                       Sr. Notes @ 8.9%                                             269,000,000

       CMS Energy                                       Sr. Notes @ 9.875%                                           500,000,000

       CMS Energy                                       Premium Equity Participating
                                                        Security Units @ 7.25%                                       220,000,000

       CMS Energy                                       Sr. Notes @ 8.5%                                             350,000,000

       CMS Energy    St. Clair Undergrnd Stor.          Indemnity
                                                                                                                         200,000
                                                                                                                          54,000

       CMS Energy    CMS MS&T                           Guaranty                                                       1,000,000

       CMS Energy    CMS Generation                     Guaranty                                                      24,155,500

       CMS Energy    Emirates CMS Power Co.             Letter of Credit                   Barclays Bank PLC UK       17,500,000

       CMS Energy    CMS Viron & CMS Enterprises        Indemnity                                                        305,220

       CMS Energy    Genesee Power Station              Svc Fee Support Agreement          US Bank                     3,000,000

CMS ENTERPRISES

   CMS Enterprises   CMS GT                             Indemnity                                                         20,000



   CMS Enterprises   CMS MS&T                           Guaranties                                                    30,100,000

   CMS Enterprises   CMS MS&T                           Indemnity                                                    168,484,895


   CMS Enterprises   CMS MS&T                           Indemnity                                                     78,581,671


   CMS Enterprises   CMS MS&T                           Indemnity                                                     26,315,263

   CMS Enterprises   CMS MS&T MI LLC                    Guaranty                                                      10,000,000

   CMS Enterprises   CMS Viron, CMS MS&T                Indemnity                                                      9,992,448

   CMS Enterprises   CMS Viron                          Indemnity                                                              -

   CMS Enterprises   CMS Viron                          Indemnity                                                     17,311,248
</TABLE>


<TABLE>
<CAPTION>
     PRIMARY                     SECONDARY                AMOUNT         ISSUE       EXPIRATION   LATEST AMEND
     ENTITY                       ENTITY                OUTSTANDING       DATE          DATE          DATE        #
- ------------------   --------------------------------   ------------   ----------    ----------   ------------   ---
<S>                  <C>                                <C>            <C>           <C>          <C>            <C>
CMS ENERGY
       CMS Energy                                                  0    5/23/2003     5/21/2004
                     CMS Viron                               320,507   12/21/2001     9/24/2003    3/11/2002      1
                     Jamaica Private Power Co              7,000,000   10/29/2001    12/31/2003
                     CMS Enterprises (Enporion)            1,919,470   10/26/2001     5/14/2004
                     Hydra-Co Ent. (Salt City)             1,250,000    12/3/2001     5/14/2004    12/4/2002      1
                     CMS Generation (Shuweihat)            2,500,000    12/5/2001     5/14/2004
                     CMS Generation (Shuweihat)           70,300,000    12/5/2001     5/14/2004
                     CMS MS&T                              5,000,000   10/17/2001     12/1/2003    6/6/2002       3
                     CMS MS&T                              1,000,000    1/18/2002     5/14/2004
                     CMS MS&T MI LLC                       1,200,000    1/18/2002     5/14/2004
                     Jorf Lasfar                           3,000,000    3/18/2002     5/14/2004    10/2/2002      1
                     Jorf Lasfar                          39,086,700    5/15/2002     5/14/2004    10/2/2002      1
                     Jorf Lasfar                          11,300,000    5/15/2002     5/14/2004    10/2/2002      1
                     Jorf Lasfar                          17,272,500    5/15/2002     5/14/2004    10/2/2002      1
                     CMS Viron                               136,272    5/24/2002     7/24/2003
                     Panhandle                               350,000    3/16/2003    11/30/2003
                     CMS Viron                               228,516    3/26/2003    11/30/2003
                     Jorf Lasfar Energy Co.                4,800,000   11/15/2002     5/14/2004
                     Jorf Lasfar Energy Co.                2,500,000   11/15/2002     5/14/2004
                     Grayling                              2,026,689    3/11/2003      6/9/2004

       CMS Energy                                       5,000,000.00    3/30/2003     3/30/2006

       CMS Energy                                         14,000,000    1/28/2002    12/15/2004

       CMS Energy
                                                          65,772,000
                                                         183,055,000
                                                         296,726,000

       CMS Energy
                                                         150,000,000   7/16/2003     7/15/2023

       CMS Energy                                        175,815,000    9/26/1997    11/15/2004

       CMS Energy                                        172,500,000    6/20/1997     7/15/2027

       CMS Energy                                        180,000,000    1/13/1998     1/15/2005

       CMS Energy                                        408,845,000    1/25/1999     1/15/2009

       CMS Energy                                        287,025,000     2/3/1999     1/15/2004

       CMS Energy                                        260,475,000     7/2/2001     7/15/2008

       CMS Energy                                        467,558,000   10/10/2000    10/15/2007

       CMS Energy                                        220,000,000    8/22/2000     8/18/2004

       CMS Energy                                        300,375,000    3/29/2001     4/15/2011

       CMS Energy    St. Clair Undergrnd Stor.
                                                             200,000
                                                              54,000

       CMS Energy    CMS MS&T                              1,000,000    11/1/2000

       CMS Energy    CMS Generation                       24,155,500     9/4/1997

       CMS Energy    Emirates CMS Power Co.               17,500,000    4/27/1999     4/27/2004

       CMS Energy    CMS Viron & CMS Enterprises             305,220

       CMS Energy    Genesee Power Station                 3,000,000     3/1/1994          2021

CMS ENTERPRISES

   CMS Enterprises   CMS GT                                   20,000    9/20/1994     9/20/2002

   CMS Enterprises   CMS MS&T                             30,100,000

   CMS Enterprises   CMS MS&T                            168,484,895    4/28/1999      6/1/2009


   CMS Enterprises   CMS MS&T                             78,581,671   12/14/1999    11/25/2011


   CMS Enterprises   CMS MS&T                             26,315,263   11/15/2000     2/25/2011

   CMS Enterprises   CMS MS&T MI LLC                      10,000,000    8/22/2000                  11/28/2000     1

   CMS Enterprises   CMS Viron, CMS MS&T                   9,992,448

   CMS Enterprises   CMS Viron                                     -

   CMS Enterprises   CMS Viron                            17,311,248

<CAPTION>
     PRIMARY                        ADDITIONAL
     ENTITY                         DESCRIPTION                             BENEFICIARY
- ------------------   -----------------------------------------   ------------------------------------
<S>                  <C>                                         <C>
CMS ENERGY
       CMS Energy    Used to support Letters of Credit
                     SLT751236                                   County of Los Angeles
                     SLT751239                                   Bank of Tokyo - Mitsubishi Trust Co.
                     SLT751227                                   TCF Leasing Inc.
                     SLT751226                                   Honeywell International
                     SLT751237                                   Barclays Bank PLC
                     SLT751238                                   Barclays Bank PLC
                     SLT751224                                   Constellation Power Source Inc
                     SLT751231                                   Midwest Independent System Operator
                     SLT751232                                   Midwest Independent System Operator
                     SLT751230                                   Deutsche Bank Trust Co. Americas
                     SLT751225                                   Deutsche Bank Trust Co. Americas
                     SLT751234                                   Deutsche Bank Trust Co. Americas
                     SLT751233                                   Deutsche Bank Trust Co. Americas
                     00332014                                    County of Los Angeles
                     SLT751229                                   Federal Insurance Co.
                     SLT751228                                   Seaboard Surety Co. & others
                     Collateral reserve .  LC#SLT751271          Deutsche Bank Trust
                     Collateral reserve .  LC#SLT751270          Deutsche Bank Trust
                     LC#00331042                                 Consumers Energy

       CMS Energy    Facilities A & B combined.

       CMS Energy

       CMS Energy




       CMS Energy


       CMS Energy

       CMS Energy    Issued for QUIPS *

       CMS Energy    X-TRAS *

       CMS Energy

       CMS Energy

       CMS Energy

       CMS Energy

       CMS Energy
                     PEPS

       CMS Energy

       CMS Energy    Surety & Operations bonds
                     Surety bond to state of Michigan            Insurance company
                     Surety Bond to US EPA                       Insurance company

       CMS Energy    7/1/99 Natural Gas Agreement                MCV

       CMS Energy    Jorf Lasfar Capital Contribution Agmt.

       CMS Energy    Taweelah A2                                 Barclays Abu Dhabi

       CMS Energy    Surety Bond to outside party                Insurance company

       CMS Energy    Tax exempt bond financing                   US Bank (Trustee)

CMS ENTERPRISES

   CMS Enterprises   Kalkaska 30 Project Underground
                     Gas Storage Lease and Surety Bond
                     w/State of MI                               State of MI

   CMS Enterprises   $342.1MM reciprocal taken                   Various counterparties

   CMS Enterprises   Performance based Surety bond to
                     Tennergy Corp.                              St. Paul Insurance Co.

   CMS Enterprises   Performance based Surety bond to
                     OH Schools Council                          St. Paul Insurance Co.

   CMS Enterprises   Performance base surety bond to CCAC        St. Paul Insurance Co.

   CMS Enterprises                                               Detroit Edison

   CMS Enterprises   Surety bonds to outside parties             Insurance companies

   CMS Enterprises   Covers York gty for Viron                   York International

   CMS Enterprises   Surety Bonds to outside parties             Insurance companies
</TABLE>

                                   Page 1 of 2

<PAGE>

<TABLE>
<CAPTION>
     PRIMARY                     SECONDARY                         FACILITY                                           MAXIMUM
     ENTITY                       ENTITY                          DESCRIPTION                  LENDER (BANK)          AMOUNT
- ------------------   --------------------------------   --------------------------------   --------------------   ---------------
<S>                  <C>                                <C>                                <C>                    <C>
   CMS Enterprises   CMS Oil and Gas Co.                Indemnity                                                         75,000

   CMS Enterprises   CMS Oil and Gas Co.                Indemnity                                                        300,000

   CMS Enterprises   Terra Energy Ltd.                  Indemnity                                                      9,649,954

   CMS Enterprises   CMS Viron                          Guaranty                                                       4,300,000

   CMS Enterprises   CMS Viron                          Guaranty                                                      37,500,000

   CMS Enterprises   CMS Viron                          Guaranty                                                      34,020,044

   CMS Enterprises   CMS Viron                          Guaranty                                                       4,235,747

   CMS Enterprises   CMS Viron                          Guaranty                                                         430,023

   CMS Enterprises   CMS Viron                          Guaranty                                                       1,248,000

   CMS Enterprises   CMS Viron                          Guaranty                                                       6,720,000

   CMS Enterprises   CMS Viron                          Guaranty                                                       1,168,144

   CMS Enterprises   CTM                                Guaranty                                                       3,780,000

   CMS Enterprises   Western Australia Gas Trans. Co.   Guaranty                                                      20,000,000

   CMS Enterprises   CMS Ensenada S.A.                  Guaranty                                                         135,000

   CMS Enterprises   CMS Ensenada S.A.                  Guaranty                                                         800,000

   CMS Enterprises   CMS Ensenada S.A.                  Guaranty                                                      11,697,519

   CMS Enterprises   Jegrupadu O&M                      Guaranty                                                         750,000

   CMS Enterprises   CMS Morocco Op Co                  Guaranty                                                      45,000,000

   CMS Enterprises   DIG                                Guaranty                                                         650,000

<CAPTION>
     PRIMARY                     SECONDARY                AMOUNT         ISSUE       EXPIRATION   LATEST AMEND
     ENTITY                       ENTITY                OUTSTANDING       DATE          DATE          DATE        #
- ------------------   --------------------------------   ------------   ----------    ----------   ------------   ---
<S>                  <C>                                <C>            <C>           <C>          <C>            <C>
   CMS Enterprises   CMS Oil and Gas Co.                      75,000

   CMS Enterprises   CMS Oil and Gas Co.                     300,000

   CMS Enterprises   Terra Energy Ltd.                     9,649,954

   CMS Enterprises   CMS Viron                             4,300,000    3/24/2000

   CMS Enterprises   CMS Viron                            37,500,000    3/31/2000

   CMS Enterprises   CMS Viron                            34,020,044   12/14/2000

   CMS Enterprises   CMS Viron                             4,235,747   12/20/2001

   CMS Enterprises   CMS Viron                               430,023     7/1/2001

   CMS Enterprises   CMS Viron                             1,248,000     1/1/2002

   CMS Enterprises   CMS Viron                             6,720,000     4/1/2001

   CMS Enterprises   CMS Viron                             1,168,144     3/1/2001

   CMS Enterprises   CTM                                   3,780,000    6/25/1996    12/31/2006

   CMS Enterprises   Western Australia Gas Trans. Co.     20,000,000    10/9/2000    10/15/2002   10/19/2000      1

   CMS Enterprises   CMS Ensenada S.A.                       135,000     5/5/1997

   CMS Enterprises   CMS Ensenada S.A.                       800,000     5/7/1997          2009

   CMS Enterprises   CMS Ensenada S.A.                    11,697,519     5/7/1997          2009

   CMS Enterprises   Jegrupadu O&M                           750,000   12/23/1996

   CMS Enterprises   CMS Morocco Op Co                    45,000,000

   CMS Enterprises   DIG                                     650,000     4/1/2002

<CAPTION>
     PRIMARY                    SECONDARY                            ADDITIONAL
     ENTITY                      ENTITY                              DESCRIPTION                             BENEFICIARY
- ------------------  --------------------------------  -----------------------------------------  -----------------------------------
<S>                 <C>                               <C>                                        <C>
   CMS Enterprises  CMS Oil and Gas Co.               Surety Bonds to outside parties            Insurance companies

   CMS Enterprises  CMS Oil and Gas Co.               Surety Bonds to outside parties            Insurance companies

   CMS Enterprises  Terra Energy Ltd.                 Appeal bonds to Michigan Court             Insurance companies

   CMS Enterprises  CMS Viron                         Performance based energy savings contract  GE Capital Public Finance

   CMS Enterprises  CMS Viron                         Supports CMS Viron in MDW contract         ABB Energy Capital

   CMS Enterprises  CMS Viron                         Performance based energy savings contract  University of Utah

   CMS Enterprises  CMS Viron                                                                    Trigen Development Corp

   CMS Enterprises  CMS Viron                                                                    BT Broad Street - Philadephia

   CMS Enterprises  CMS Viron                                                                    Opus Corporation (Lease)

   CMS Enterprises  CMS Viron                                                                    Opus Corporation (Lease)

   CMS Enterprises  CMS Viron                                                                    PPL Spectrum(Sacred Hearl Hospital)

   CMS Enterprises  CTM                               CTM's Maintenance Agmt.                    Siemens

   CMS Enterprises  Western Australia Gas Trans. Co.                                             Centrales Termicas Mendoza S.A.

   CMS Enterprises  CMS Ensenada S.A.                 La Plata gas transportation                Transportadora de Gas Del Sur S.A.

   CMS Enterprises  CMS Ensenada S.A.                 Project Support & Guaranty Agmt.           YPF

   CMS Enterprises  CMS Ensenada S.A.                 Project Support & Guaranty Agmt.           OPIC

   CMS Enterprises  Jegrupadu O&M                     O&M Agreement                              GVK Industries Ltd

   CMS Enterprises  CMS Morocco Op Co                 Jorf Lasfar O&M                            JLEC

   CMS Enterprises  DIG                               Settlement Agmt:  Interconnection          Detroit Edison
</TABLE>


* Direct Obligation does not include "Common Contribution to Trust" of approx.
3%

                                  Page 2 of 2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(H)
<SEQUENCE>5
<FILENAME>k82154aexv4wxhy.txt
<DESCRIPTION>CREDIT AGREEMENT, AS AMENDED, DATED MAY 22, 2003
<TEXT>
<PAGE>

                                                                    EXHIBIT 4(h)

                                                                  EXECUTION COPY

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

                                CREDIT AGREEMENT

                            Dated as of May 22, 2003

                                      among

                             CMS ENERGY CORPORATION,

                    THE FINANCIAL INSTITUTIONS NAMED HEREIN,

                         UNION BANK OF CALIFORNIA, N.A.
                             as Documentation Agent,

                                       and

                                  BANK ONE, NA,
                             as Administrative Agent

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

                         BANC ONE CAPITAL MARKETS, INC.

                          Lead Arranger and Book Runner

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<S>                                                                                                                 <C>
ARTICLE I
DEFINITIONS.....................................................................................................     2
         1.1      Definitions...................................................................................     2
         1.2      Other Interpretive Provisions.................................................................    17
         1.3      Accounting Terms..............................................................................    17
ARTICLE II
THE ADVANCES....................................................................................................    17
         2.1      Commitment....................................................................................    17
         2.2      Required Payments.............................................................................    18
         2.3      Ratable Loans.................................................................................    18
         2.4      Types of Advances.............................................................................    18
         2.5      Commitment Fee and Reductions of Commitment...................................................    18
         2.6      Minimum Amount of Advances....................................................................    18
         2.7      Optional Principal Payments...................................................................    18
         2.8      Method of Selecting Types and Interest Periods for New Advances...............................    19
         2.9      Conversion and Continuation of Outstanding Advances...........................................    19
         2.10     Interest Rates, Interest Payment Dates........................................................    20
         2.11     Rate after Maturity...........................................................................    20
         2.12     Method of Payment.............................................................................    20
         2.13     Record-keeping; Noteless Agreement; Telephonic Notices........................................    21
         2.14     Lending Installations.........................................................................    22
         2.15     Non-Receipt of Funds by the Agent.............................................................    22
ARTICLE III
LETTER OF CREDIT FACILITY.......................................................................................    22
         3.1      Issuance......................................................................................    22
         3.2      Participations................................................................................    22
         3.3      Notice........................................................................................    23
         3.4      LC Fees.......................................................................................    23
         3.5      Administration; Reimbursement by Banks........................................................    23
         3.6      Reimbursement by Company......................................................................    24
         3.7      Obligations Absolute..........................................................................    24
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                                       -i-

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         3.8      Actions of LC Issuer..........................................................................    25
         3.9      Indemnification...............................................................................    25
         3.10     Banks' Indemnification........................................................................    25
         3.11     Rights as a Bank..............................................................................    26
ARTICLE IV
CHANGE IN CIRCUMSTANCES.........................................................................................    26
         4.1      Yield Protection..............................................................................    26
         4.2      Replacement Bank..............................................................................    27
         4.3      Availability of Eurodollar Rate Loans.........................................................    27
         4.4      Funding Indemnification.......................................................................    28
         4.5      Taxes.........................................................................................    28
         4.6      Bank Certificates, Survival of Indemnity......................................................    30
ARTICLE V
REPRESENTATIONS AND WARRANTIES..................................................................................    30
         5.1      Incorporation and Good Standing...............................................................    30
         5.2      Corporate Power and Authority: No Conflicts...................................................    30
         5.3      Governmental Approvals........................................................................    31
         5.4      Legally Enforceable Agreements................................................................    31
         5.5      Financial Statements..........................................................................    31
         5.6      Litigation....................................................................................    31
         5.7      Insurance.....................................................................................    32
         5.8      ERISA.........................................................................................    32
         5.9      Casualty......................................................................................    32
         5.10     Taxes.........................................................................................    32
         5.11     Consumers Dividends...........................................................................    32
         5.12     Ownership.....................................................................................    32
         5.13     Solvency......................................................................................    32
         5.14     Investment Company Act........................................................................    32
         5.15     Use of Proceeds...............................................................................    32
         5.16     Public Utility Holding Company Act............................................................    33
         5.17     Material Adverse Change.......................................................................    33
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<TABLE>
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ARTICLE VI
AFFIRMATIVE COVENANTS...........................................................................................    33
         6.1      Payment of Taxes, Etc.........................................................................    33
         6.2      Maintenance of Insurance......................................................................    33
         6.3      Preservation of Existence, Etc................................................................    33
         6.4      Compliance with Laws, Etc.....................................................................    33
         6.5      Inspection Rights.............................................................................    34
         6.6      Keeping of Books..............................................................................    34
         6.7      Maintenance of Properties, Etc................................................................    34
         6.8      Use of Proceeds...............................................................................    34
         6.9      Consolidated Leverage Ratio...................................................................    34
         6.10     Cash Dividend Coverage Ratio..................................................................    34
         6.11     Pledged Collateral; Further Assurances........................................................    35
ARTICLE VII
NEGATIVE COVENANTS..............................................................................................    35
         7.1      Liens.........................................................................................    35
         7.2      Enterprises Debt..............................................................................    37
         7.3      Lease Obligations.............................................................................    38
         7.4      Investments in Other Persons..................................................................    38
         7.5      Compliance with ERISA.........................................................................    39
         7.6      Transactions With Affiliates..................................................................    39
         7.7      Restricted Payments...........................................................................    39
         7.8      Mergers, Etc..................................................................................    40
         7.9      Sales, Etc., of Assets........................................................................    40
         7.10     Maintenance of Ownership of Subsidiaries......................................................    41
         7.11     Amendment of Tax Sharing Agreement............................................................    41
         7.12     Prepayments of Indebtedness...................................................................    41
         7.13     Conduct of Business...........................................................................    42
         7.14     Organizational Documents......................................................................    42
         7.15     Off-Balance Sheet Liabilities.................................................................    42
ARTICLE VIII
REPORTING REQUIREMENTS..........................................................................................    42
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                                      -iii-
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<TABLE>
<S>                                                                                                                 <C>
ARTICLE IX
EVENTS OF DEFAULT...............................................................................................    45
         9.1      Events of Default.............................................................................    45
         9.2      Remedies......................................................................................    47
ARTICLE X
WAIVERS, AMENDMENTS AND REMEDIES................................................................................    48
         10.1     Amendments....................................................................................    48
         10.2     Preservation of Rights........................................................................    48
ARTICLE XI
CONDITIONS PRECEDENT............................................................................................    49
         11.1     Initial Credit Extension......................................................................    49
         11.2     Each Credit Extension.........................................................................    50
ARTICLE XII
GENERAL PROVISIONS..............................................................................................    50
         12.1     Successors and Assigns........................................................................    50
         12.2     Survival of Representations...................................................................    52
         12.3     Governmental Regulation.......................................................................    52
         12.4     Taxes.........................................................................................    52
         12.5     Choice of Law.................................................................................    52
         12.6     Headings......................................................................................    52
         12.7     Entire Agreement..............................................................................    52
         12.8     Expenses; Indemnification.....................................................................    53
         12.9     Severability of Provisions....................................................................    53
         12.10    Setoff........................................................................................    53
         12.11    Ratable Payments..............................................................................    53
         12.12    Nonliability of Bank..........................................................................    54
         12.13    Investment of Pledged Collateral..............................................................    54
ARTICLE XIII
THE AGENT.......................................................................................................    54
         13.1     Appointment...................................................................................    54
         13.2     Powers........................................................................................    54
         13.3     General Immunity..............................................................................    55
         13.4     No Responsibility for Loans, Recitals, Etc....................................................    55
         13.5     Action on Instructions of Banks...............................................................    55
         13.6     Employment of Agents and Counsel..............................................................    55
         13.7     Reliance on Documents; Counsel................................................................    55
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                                      -iv-
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         13.8     Agent's Reimbursement and Indemnification.....................................................    55
         13.9     Rights as a Bank..............................................................................    56
         13.10    Bank Credit Decision..........................................................................    56
         13.11    Successor Agent...............................................................................    56
         13.12    Agent and Arranger Fees.......................................................................    56
ARTICLE XIV
    NOTICES.....................................................................................................    57
         14.1     Giving Notice.................................................................................    57
         14.2     Change of Address.............................................................................    57
ARTICLE XV
COUNTERPARTS....................................................................................................    57
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                                      -v-
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<TABLE>
<S>                 <C>
SCHEDULES

Schedule I          Commitments
Schedule II         Material Liabilities
Schedule III        Existing Letters of Credit

EXHIBITS

Exhibit A           Form of Note
Exhibit B           Required Opinion from Michael D. VanHemert
Exhibit C           Form of Compliance Certificate
Exhibit D           Form of Assignment and Assumption Agreement
Exhibit E           Form of Pledge Agreement
Exhibit F           Form of Issuance/Modification Request
</TABLE>

                                      -vi-

<PAGE>

                                CREDIT AGREEMENT

         This Credit Agreement, dated as of May 22, 2003, is among CMS Energy
Corporation, a Michigan corporation (the "Company"), the financial institutions
listed on the signature pages hereof (together with their respective successors
and assigns, the "Banks"), Union Bank of California, N.A., as Documentation
Agent, and Bank One, NA, a national banking association having its principal
office in Chicago, Illinois, as Administrative Agent and LC Issuer.

                              W I T N E S S E T H:

         WHEREAS, the Company has requested, and the Banks have agreed to enter
into, a credit facility in an aggregate amount of $185,000,000;

         NOW THEREFORE, the parties hereto agree as follows:

                                   ARTICLE I

                                  DEFINITIONS

         1.1      Definitions. As used in this Agreement:

         "Accounting Changes" - see Section 1.3.

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

         "Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling (including all directors and officers of such
Person), controlled by, or under direct or indirect common control with such
Person. A Person shall be deemed to control another entity if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such entity, whether through the ownership of
voting securities, by contract, or otherwise.

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

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

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

         "Agreement" means this Credit Agreement.

                                        2
<PAGE>

         "AIG Pledge Agreement" means the Pledge and Security Agreement, dated
as of January 8, 2003, by and among Enterprises and other grantors parties
thereto in favor of American Home Assurance Company, as collateral agent.

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

         "Arranger" - see Section 13.12.

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

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

         "Banks" - see the preamble.

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

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

         "Borrowing Date" means a date on which Loans are made hereunder.

         "Borrower Interest Expense" means at any date, the total interest
expense in respect of Debt of the Company for the four calendar quarters
immediately preceding such date, including, without duplication, (i) interest
expense attributable to Capital Leases, (ii) amortization of debt discount,
(iii) capitalized interest, (iv) cash and noncash payments, (v) commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, (vi) net costs under interest rate swap, "cap",
"collar" or other hedging agreements (including amortization of discount) and
(vii) interest expense in respect of obligations of Persons deemed to be Debt of
the Company under clause (ix) of the definition of Debt, provided that Borrower
Interest Expense shall exclude any costs otherwise included in interest expense
recognized on early retirement of debt.

         "Borrowing Notice" - see Section 2.8.

         "Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Advances, a day (other than a Saturday or Sunday) on
which banks generally are

                                       3
<PAGE>

open in Chicago, Illinois and New York, New York for the conduct of
substantially all of their commercial lending activities, interbank wire
transfers can be made on the Fedwire system and dealings in United States
dollars are carried on in the London interbank market and (ii) for all other
purposes, a day (other than a Saturday or Sunday) on which banks generally are
open in Chicago, Illinois and New York, New York for the conduct of
substantially all of their commercial lending activities and interbank wire
transfers can be made on the Fedwire system.

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

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

         "Closing Date" means May 22, 2003.

         "CMS 2003 Credit Agreement" means the Second Amended and Restated
Credit Agreement, dated as of March 30, 2003, by and among the Company, as
borrower, the lenders from time to time parties thereto, and CUSA, as
administrative agent.

         "Code" means the Internal Revenue Code of 1986.

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

         "Commitment Fee" - see Section 2.5.

         "Commitment Fee Rate" means, for any period for which such rate is to
be calculated, (a) if the average daily Unused Commitment during such period was
$20,000,000 or less, 0.15% per annum, and (b) otherwise, 0.30% per annum.

         "Company" - see the preamble.

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

         (a)      Consolidated Debt shall not include any Support Obligation
described in clause (iv) or (v) of the definition thereof if such Support
Obligation or the primary obligation so

                                       4
<PAGE>

supported is not fixed or conclusively determined or is not otherwise reasonably
quantifiable as of the date of determination;

         (b)      Consolidated Debt shall not include (i) any Junior
Subordinated Debt owned by any Hybrid Preferred Securities Subsidiary or (ii)
any guaranty by the Company of payments with respect to any Hybrid Preferred
Securities, provided that such guaranty is subordinated to the rights of the
Banks hereunder and under the other Credit Documents pursuant to terms of
subordination substantially similar to those set forth in Exhibit H to the CMS
2003 Credit Agreement, or pursuant to other terms and conditions satisfactory to
the Majority Banks;

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

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

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

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

         "Consolidated EBITDA" means, with reference to any period, the pretax
operating income of the Company and its Subsidiaries ("Pretax Operating Income")
for such period plus,

                                        5
<PAGE>

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

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

         "Credit Documents" means this Agreement, the Facility LC Applications,
any Note, the Pledge Agreement and any account control agreement or similar
document issued in connection with the Pledge Agreement.

         "Credit Extension" means the making of an Advance or the issuance or
Modification (other than a reduction in the amount) of a Facility LC.

         "Consumers" means Consumers Energy Company, a Michigan corporation, all
of whose common stock is on the Closing Date owned by the Company.

         "Consumers Credit Facility" means, collectively, Consumers' existing
(i) $300,000,000 term loan facility, (ii) $150,000,000 term loan B facility,
(iii) $140,000,000 term loan facility and (iv) $250,000,000 revolving loan
facility, as in effect on the date hereof.

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

         "CUSA" means Citicorp USA, Inc.

         "Debt" means, for any Person, without duplication, any and all
indebtedness, liabilities and other monetary obligations of such Person (whether
for principal, interest, fees, costs, expenses or otherwise, and whether
contingent or otherwise) (i) for borrowed money or evidenced by bonds,
debentures, notes or other similar instruments, (ii) to pay the deferred
purchase price of property or services (except trade accounts payable arising in
the ordinary course of business which are not overdue), (iii) as lessee under
leases which shall have been or should be, in accordance with GAAP, recorded as
capital leases, (iv) under reimbursement or similar agreements with respect to
letters of credit issued thereunder (except reimbursement obligations and
letters of credit that are cash collateralized), (v) under any interest rate
swap, "cap", "collar" or other hedging agreements; provided that for purposes of
the calculation of Debt for this clause (v) only, the actual amount of Debt of
such Person shall be determined on a

                                        6
<PAGE>

net basis to the extent such agreements permit such amounts to be calculated on
a net basis, (vi) to pay rent or other amounts under leases entered into in
connection with sale and leaseback transactions involving assets of such Person
being sold in connection therewith, (vii) arising from any accumulated funding
deficiency (as defined in Section 412(a) of the Code) for a Plan, (viii) arising
in connection with any withdrawal liability under ERISA to any Multiemployer
Plan and (ix) arising from (A) direct or indirect guaranties in respect of, and
obligations to purchase or otherwise acquire, or otherwise to warrant or hold
harmless, pursuant to a legally binding agreement, a creditor against loss in
respect of, Debt of others referred to in clauses (i) through (viii) above and
(B) other guaranty or similar financial obligations in respect of the
performance of others, including Support Obligations. Notwithstanding the
foregoing, solely for purposes of the calculation required under Section 6.10,
Debt shall not include any Junior Subordinated Debt issued by the Company and
owned by any Hybrid Preferred Securities Subsidiary.

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

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

         "Dividend Coverage Ratio" means, at any date, the ratio of (i) Pro
Forma Dividend Amounts to (ii) Borrower Interest Expense.

         "Effective Date" means the date on which all conditions precedent to
the initial Credit Extension have been satisfied.

         "Enterprises" means CMS Enterprises Company, a Michigan corporation,
all of whose common stock is on the Closing Date owned by the Company.

         "Enterprises 2003 Credit Agreement" means, collectively, (i) the
revolving Credit Agreement, dated as of March 30, 2003, by and among
Enterprises, as borrower, the Company, the lenders from time to time parties
thereto and CUSA, as administrative agent, and (ii) the revolving Credit
Agreement, dated as of April 21, 2003, by and among Enterprises, as borrower,
the Company, the lenders from time to time parties thereto and CUSA, as
administrative agent.

         "Equity Distributions" means, for any period, the aggregate amount of
cash received by the Company from its Subsidiaries during such period that are
paid out of proceeds from the sale of common equity of Subsidiaries of the
Company.

         "ERISA" means the Employee Retirement Income Security Act of 1974.

         "ERISA Affiliate" means, with respect to any Person, any trade or
business (whether or not incorporated) that is a member of a commonly controlled
trade or business under Sections 414(b), (c), (m) and (o) of the Code.

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

                                       7
<PAGE>

         "Eurodollar Rate" means, with respect to a Eurodollar Advance for the
relevant Interest Period, an interest rate per annum equal to the sum of (i) the
quotient obtained by dividing (a) the Base Eurodollar Rate applicable to such
Interest Period by (b) one minus the Reserve Requirement (expressed as a
decimal) applicable to such Interest Period, plus (ii) 1.50%.

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

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

         "Exchange Act" means the Securities Exchange Act of 1934.

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

         "Existing Letters of Credit" means the letters of credit listed on
Schedule III.

         "Facility LC" - see Section 3.1.

         "Facility LC Application" - see Section 3.3.

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

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

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

         "Floating Rate" means a rate per annum equal to (i) the Alternate Base
Rate plus (ii) the 0.50%, changing when and as the Alternate Base Rate changes.

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

                                       8
<PAGE>

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

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

         "GAAP" - see Section 1.3.

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

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

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

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

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

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

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

         "Indenture" means the Indenture, dated as of September 15, 1992,
between the Company and the Trustee (as such term is defined in the Indenture).

                                        9
<PAGE>

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

         "Issuance/Modification Request" - see Section 3.3.

         "Junior Subordinated Debt" means any unsecured Debt of the Company or a
Subsidiary of the Company (i) issued in exchange for the proceeds of Hybrid
Preferred Securities and (ii) subordinated to the rights of the Banks hereunder
and under the other Credit Documents pursuant to terms of subordination
substantially similar to those set forth in Exhibit G to the CMS 2003 Credit
Agreement, or pursuant to other terms and conditions satisfactory to the
Majority Banks.

         "LC Fee" - see Section 3.4.

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

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

         "LC Payment Date" - see Section 3.5.

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

         "Lien" is defined in Section 7.1.

         "Loan" - see Section 2.1.

         "Loan Party" has the meaning assigned thereto in the CMS 2003 Credit
Agreement as in effect on the date hereof and without giving effect to any
amendment thereto (unless the same shall be consented to in a writing signed by
the Majority Banks) or termination thereof.

         "Majority Banks" means, as of any date of determination, Banks in the
aggregate having more than 50% of the Aggregate Commitment as of such date or,
if the Aggregate Commitment has been terminated, Banks in the aggregate holding
more than 50% of the aggregate unpaid principal amount of the Aggregate
Outstanding Credit Exposure as of such date. Any

                                       10
<PAGE>

determination of those Banks constituting Majority Banks shall be made by the
Agent and shall be conclusive and binding on all parties absent manifest error.

         "Material Adverse Change" means any event, development or circumstance
that has had or could reasonably be expected to have a material adverse effect
on (a) the business, assets, property, financial condition, results of
operations or prospects of the Company and its Subsidiaries, considered as a
whole, (b) the Company's ability to perform its obligations under this Agreement
or any other Credit Document to which it is or will be a party or (c) the
validity or enforceability of any Credit Document or the rights or remedies of
any Agent or the Banks hereunder.

         "Material Subsidiary" means Consumers and each Restricted Subsidiary.

         "Measurement Quarter" - see Section 6.9.

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

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

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

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

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

                                       11
<PAGE>

Company pursuant to any transaction with the Company or any Subsidiary of the
Company otherwise permitted hereunder.

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

         "Non-U.S. Bank" - see Section 4.5(d).

         "Note" means any promissory note issued at the request of a Bank
pursuant to Section 2.13 to evidence its Loans.

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

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

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

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

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

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

         "Ownership Interest" of the Company in any Consolidated Subsidiary
means, at any date of determination, the percentage determined by dividing (i)
the aggregate amount of Project Finance Equity in such Consolidated Subsidiary
owned or controlled, directly or indirectly, by the Company and any other
Consolidated Subsidiary on such date, by (ii) the aggregate amount of Project
Finance Equity in such Consolidated Subsidiary owned or controlled, directly or
indirectly, by all Persons (including the Company and the Consolidated
Subsidiaries) on such

                                       12
<PAGE>

date. Notwithstanding anything to the contrary set forth above, if the
"Ownership Interest," calculated as set forth above, is 50% or less, such
percentage shall be deemed to equal 0%.

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

         "Payment Date" means the second Business Day of each calendar quarter.

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

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

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

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

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

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

                  (v)      any eurodollar certificate of deposit issued by any
         Bank or any other commercial bank, trust company, savings and loan
         association or savings bank organized under the laws of the United
         States, or any State thereof, or of any county which is a member of the
         OECD, or a political subdivision of any such county, and in each case
         having outstanding unsecured indebtedness that (on the date of
         acquisition thereof) is rated AA- or better by S&P or Aa3 or better by
         Moody's (or an equivalent rating by

                                       13
<PAGE>

         another nationally-recognized credit rating agency of similar standing
         if neither of such corporations is then in the business of rating
         unsecured bank indebtedness); and

                  (vi)     interests in any money market mutual fund which at
         the date of investment in such fund has the highest fund rating by each
         of Moody's and S&P which has issued a rating for such fund (which, for
         S&P, shall mean a rating of AAAm or AAAmg).

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

         "Plan" means, with respect to any Person, an "employee benefit plan" as
defined in Section 3(3) of ERISA (other than a Multiemployer Plan) maintained
for employees of such Person or any ERISA Affiliate of such Person that is
subject to Title IV of ERISA and has "unfunded benefit liabilities" as
determined under Section 4001(a)(18) of ERISA.

         "Plan Termination Event" means, (i) with respect to any Plan, a
"reportable event" within the meaning of Section 4043 of ERISA and the
regulations issued thereunder (other than a "reportable event" not subject to
the provision for 30-day notice to the PBGC under such regulations or a
"reportable event" for which the provision for the 30-day notice to the PBGC
under such regulations has been waived), or (ii) the withdrawal by the Company
or any of its ERISA Affiliates from a Plan during a plan year in which it was a
"substantial employer" as defined in Section 4001(a)(2) of ERISA resulting in
liability to the Company or any of its ERISA Affiliates under Section 4063 or
4064 of ERISA, or (iii) the filing of a notice of intent to terminate a Plan or
the termination of a Plan under Section 4041 of ERISA, or (iv) the institution
of proceedings to terminate a Plan by the PBGC, or (v) any other event or
condition which is reasonably likely to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Plan.

         "Pledge Agreement" means a Pledge Agreement executed by Enterprises in
favor of the Agent on behalf of the Banks, substantially in the form of Exhibit
E.

         "Pledged Collateral" means cash and other investment property in which
a security interest has been granted to the Agent pursuant to the Pledge
Agreement.

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

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

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

                                       14
<PAGE>

         "Project Finance Equity" means, at any date of determination,
consolidated equity of the common, preference and preferred stockholders of the
Company and the Consolidated Subsidiaries relating to any obligor with respect
to Project Finance Debt.

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

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

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

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

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

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

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

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

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

         "6.75% Senior Notes" means the Company's 6.75% Senior Notes due January
2004, the aggregate outstanding principal amount of which was equal to
$287,025,000 as of February 8, 2003.

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

                  (i)      the fair market value of its assets is in excess of
         the total amount of its liabilities (including net contingent
         liabilities); and

                                       15
<PAGE>

                  (ii)     it is then able and expects to be able to pay its
         debts (including contingent debts and other commitments) as they
         mature; and

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

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

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

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

         "Tax Sharing Agreement" means the Amended and Restated Agreement for
the Allocation of Income Tax Liabilities and Benefits, dated as of January 1,
1994, by and among the Company, each of the members of the Consolidated Group
(as defined therein), and each of the corporations that become members of the
Consolidated Group.

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

          "Termination Date" means the earlier of (i) May 21, 2004 or (ii) the
date on which the Commitments are terminated.

         "Type" - see Section 2.4.

                                       16
<PAGE>

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

         1.2      Other Interpretive Provisions. (a) The meanings of defined
terms are equally applicable to the singular and plural forms of such terms.

         (b)      Article, Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified.

         (c)      The term "including" is not limiting and means "including
without limitation."

         (d)      Unless otherwise expressly provided herein, (i) references to
agreements (including this Agreement) and other contractual instruments shall be
deemed to include all subsequent amendments and other modifications thereto, but
only to the extent such amendments and other modifications are not prohibited by
the terms of any Credit Document, and (ii) references to any statute or
regulation are to be construed as including all statutory and regulatory
provisions consolidating, amending, replacing, supplementing or interpreting
such statute or regulation.

         1.3      Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 5.5 ("GAAP"). If any changes in
generally accepted accounting principles are hereafter required or permitted and
are adopted by the Company or any of its Subsidiaries, or the Company or any of
its Subsidiaries shall change its application of generally accepted accounting
principles with respect to any Off-Balance Sheet Liabilities, in each case, with
the agreement of its independent certified public accountants, and such changes
result in a change in the method of calculation of any of the financial
covenants, tests, restrictions or standards herein or in the related definitions
or terms used therein ("Accounting Changes"), the parties hereto agree, at the
Company's request, to enter into negotiations, in good faith, in order to amend
such provisions in a credit neutral manner so as to reflect equitably such
changes with the desired result that the criteria for evaluating the Company's
and its Subsidiaries' financial condition shall be the same after such changes
as if such changes had not been made; provided that until such provisions are
amended in a manner reasonably satisfactory to the Agent and the Majority Banks,
no Accounting Change shall be given effect in such calculations. In the event
such amendment is entered into, all references in this Agreement to GAAP shall
mean generally accepted accounting principles as of the date of such amendment.
Notwithstanding the foregoing, all financial statements to be delivered by the
Company pursuant to Article VIII shall be prepared in accordance with generally
accepted accounting principles in effect at such time.

                                   ARTICLE II

                                  THE ADVANCES

         2.1      Commitment. From and including the Effective Date and prior to
the Termination Date, each Bank severally agrees, on the terms and conditions
set forth in this Agreement, (a) to make loans to the Company from time to time
(the "Loans"), and (b) to participate in Facility LCs issued upon the request of
the Company from time to time, provided

                                       17
<PAGE>

that, after giving effect to the making of each such Loan and the issuance of
each such Facility LC, such Bank's Outstanding Credit Exposure shall not exceed
its Commitment. In no event may the Aggregate Outstanding Credit Exposure exceed
the Aggregate Commitment. Subject to the terms and conditions of this Agreement,
the Company may borrow, repay and reborrow at any time prior to the Termination
Date. The Commitments shall expire on the Termination Date.

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

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

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

         2.5      Commitment Fee and Reductions of Commitment.

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

         (b)      The Company may permanently reduce the Aggregate Commitment in
whole, or in part ratably among the Banks in a minimum amount of $5,000,000 (or
any higher integral multiple of $1,000,000), upon at least five Business Days'
written notice to the Agent, which shall specify the amount of any such
reduction, provided that the Aggregate Commitment may not be reduced below the
Aggregate Outstanding Credit Exposure. All accrued Commitment Fees shall be
payable on the effective date of any termination of the obligation of the Banks
to make Credit Extensions hereunder.

         2.6      Minimum Amount of Advances. Each Advance shall be in the
amount of $5,000,000 (or a higher integral multiple of $1,000,000), provided
that any Floating Rate Advance may be in the amount of the Available Aggregate
Commitment (rounded down, if necessary, to an integral multiple of $1,000,000).

         2.7      Optional Principal Payments. The Company may from time to time
prepay, without penalty or premium, all outstanding Floating Rate Advances or,
in an aggregate amount of $5,000,000 or a higher integral multiple of
$1,000,000, any portion of the outstanding Floating Rate Advances upon one
Business Day's prior notice to the Agent. The Company may from time to time pay,
subject to the payment of any funding indemnification amounts required by
Section 4.4 but without penalty or premium, all outstanding Eurodollar Advances
or, in an aggregate amount of $5,000,000 or a higher integral multiple of
$1,000,000, any portion of any outstanding Eurodollar Advance upon three
Business Days' prior notice to the Agent; provided

                                       18
<PAGE>

that if after giving effect to any such prepayment the principal amount of any
Eurodollar Advance is less than $5,000,000, such Eurodollar Advance shall
automatically convert into a Floating Rate Advance.

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

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

         (ii)     the aggregate amount of such Advance,

         (iii)    the Type of Advance selected, and

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

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

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

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

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

                                       19
<PAGE>

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

provided that no Advance may be continued as, or converted into, a Eurodollar
Advance if (x) such continuation or conversion would violate any provision of
this Agreement or (y) a Default or Event of Default exists.

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

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

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

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

         (b)      Interest accrued on each Floating Rate Advance shall be
payable on each Payment Date and at maturity. Interest accrued on each
Eurodollar Advance shall be payable on the last day of its applicable Interest
Period, on any date on which such Eurodollar Advance is prepaid and at maturity.
Interest accrued on each Eurodollar Advance having an Interest Period longer
than three months shall also be payable on the last day of each three-month
interval during such Interest Period. Interest on Eurodollar Advances, interest
on Floating Rate Advances based on the Federal Funds Effective Rate and the LC
Fee shall be calculated for actual days elapsed on the basis of a 360-day year.
Interest on Floating Rate Advances based on the Prime Rate shall be calculated
for actual days elapsed on the basis of a 365- or 366-day year, as appropriate.
Interest on each Advance shall accrue from and including the date such Advance
is made to but excluding the date payment thereof is received in accordance with
Section 2.12. If any payment of principal of or interest on an Advance shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day (unless, in the case of a Eurodollar Advance,
such next succeeding Business Day falls in a new calendar month, in which case
such payment shall be due on the immediately preceding Business Day) and, in the
case of a principal payment, such extension of time shall be included in
computing interest in connection with such payment.

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

         2.12     Method of Payment. All payments of principal, interest and
fees hereunder shall be made in immediately available funds to the Agent at its
address specified on its signature page to this Agreement (or at any other
Lending Installation of the Agent specified in writing by the Agent to the
Company) not later than noon (Chicago time) on the date when due and shall
(except in the case of Reimbursement Obligations for which the LC Issuer has not
been fully indemnified by the Banks, or as otherwise specifically required
hereunder) be applied ratably by the Agent among the Banks. Funds received after
such time shall be deemed received on the

                                       20
<PAGE>

following Business Day unless the Agent shall have received from, or on behalf
of, the Company a Federal Reserve reference number with respect to such payment
before 3:00 p.m. (Chicago time) on the date of such payment. Each payment
delivered to the Agent for the account of any Bank shall be delivered promptly
by the Agent in the same type of funds received by the Agent to such Bank at the
address specified for such Bank on its signature page to this Agreement or at
any Lending Installation specified in a notice received by the Agent from such
Bank. The Agent is hereby authorized to charge the account of the Company
maintained with Bank One, if any, for each payment of principal, interest,
Reimbursement Obligation and fees as such payment becomes due hereunder. Each
reference to the Agent in this Section 2.12 shall also be deemed to refer, and
shall apply equally, to the LC Issuer, in the case of payments required to be
made by the Company to the LC Issuer pursuant to Section 3.6.

         2.13     Record-keeping; Noteless Agreement; Telephonic Notices.

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

         (b)      The Agent shall also maintain accounts in which it will record
(i) the amount of each Loan made hereunder, the Type thereof and the Interest
Period with respect thereto, (ii) the amount of any principal or interest due
and payable or to become due and payable from the Company to each Bank
hereunder, (iii) the original stated amount of each Facility LC and the amount
of LC Obligations outstanding at any time, and (iv) the amount of any sum
received by the Agent hereunder from the Company and each Bank's share thereof.

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

         (d)      Any Bank may request that its Loans be evidenced by a Note. In
such event, the Company shall prepare, execute and deliver to such Bank a Note,
payable to the order of such Bank, substantially in the form of Exhibit A.
Thereafter, the Loans evidenced by such Note and interest thereon shall at all
times (including after any assignment pursuant to Section 12.1) be represented
by a Note payable to the order of the payee named therein or any assignee
pursuant to Section 12.1, except to the extent that any such Bank or assignee
subsequently returns any such Note for cancellation and requests that such Loans
once again be evidenced as described in paragraphs (a) and (b) above.

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

                                       21

<PAGE>

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

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

                                   ARTICLE III

                            LETTER OF CREDIT FACILITY

         3.1      Issuance. The LC Issuer hereby agrees, on the terms and
conditions set forth in this Agreement, to issue standby and commercial letters
of credit (together with the Existing Letters of Credit, collectively the
"Facility LCs" and individually each a "Facility LC") and to renew, extend,
increase, decrease or otherwise modify each Facility LC ("Modify," and each such
action a "Modification"), from time to time from and including the Closing Date
and prior to the Termination Date upon the request of the Company; provided that
(a) unless otherwise agreed by all Banks, each Facility LC shall be issued to
support obligations of Enterprises or a Subsidiary of Enterprises; and (b)
immediately after each Facility LC is issued or Modified, the Aggregate
Outstanding Credit Exposure shall not exceed the Aggregate Commitment. Unless
otherwise agreed by all Banks in writing, no Facility LC shall have an expiry
date later than the fifth Business Day prior to the scheduled Termination Date
(and the Banks hereby agree that Irrevocable Standby Letter of Credit No. 331042
dated March 11, 2003 in the face amount of $2,026,689 issued by Bank One in
favor of Consumers Energy Company shall qualify as a Facility LC notwithstanding
the June 9, 2004 expiry date thereof). All Existing Letters of Credit shall be
deemed to have been issued pursuant hereto and, from and after the Closing Date,
shall be subject to and governed by the terms and conditions hereof.

         3.2      Participations. Upon the issuance or Modification by the LC
Issuer of a Facility LC in accordance with this Article III, the LC Issuer shall
be deemed, without further action by

                                       22

<PAGE>

any party hereto, to have unconditionally and irrevocably sold to each Bank, and
each Bank shall be deemed, without further action by any party hereto, to have
unconditionally and irrevocably purchased from the LC Issuer, a participation in
such Facility LC (and each Modification thereof) and the related LC Obligations
in proportion to its Pro Rata Share.

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

         3.4      LC Fees. The Company shall pay to the Agent, for the account
of the Banks ratably in accordance with their respective Pro Rata Shares, a
letter of credit fee (the "LC Fee") at 0.30% per annum on the average daily
undrawn stated amount under each Facility LC, such fee to be payable in arrears
on each Payment Date and the Termination Date (and, if applicable, thereafter on
demand). The Company shall also pay to the LC Issuer for its own account the
fees and charges set forth in the fee letter referred to in Section 13.12.

         3.5      Administration; Reimbursement by Banks. Upon receipt from the
beneficiary of any Facility LC of any demand for payment under such Facility LC,
the LC Issuer shall notify the Agent and the Agent shall promptly notify the
Company and each other Bank as to the amount to be paid by the LC Issuer as a
result of such demand and the proposed payment date (the "LC Payment Date"). The
responsibility of the LC Issuer to the Company and each Bank shall be only to
determine that the documents (including each demand for payment) delivered under
each Facility LC in connection with such presentment shall be in conformity in
all material respects with such Facility LC. The LC Issuer shall endeavor to
exercise the same care in the issuance and administration of the Facility LCs as
it does with respect to letters of credit in which no participations are
granted, it being understood that in the absence of any gross negligence or
willful misconduct by the LC Issuer, each Bank shall be unconditionally and
irrevocably liable without regard to the occurrence of any Default or any
condition precedent whatsoever, to reimburse the LC Issuer on demand for (i)
such Bank's Pro Rata Share of the amount of each payment made by the LC Issuer
under each Facility LC to the extent such amount is not reimbursed by the
Company pursuant to Section 3.6 below, plus (ii) interest on the

                                       23

<PAGE>

foregoing amount to be reimbursed by such Bank, for each day from the date of
the LC Issuer's demand for such Reimbursement (or, if such demand is made after
11:00 a.m. (Chicago time) on such date, from the next succeeding Business Day)
to the date on which such Bank pays the amount to be reimbursed by it, at a rate
of interest per annum equal to the Federal Funds Effective Rate for the first
three days and, thereafter, at a rate of interest equal to the rate applicable
to Floating Rate Advances.

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

         3.7      Obligations Absolute. The Company's obligations under this
Article III shall be absolute and unconditional under any and all circumstances
and irrespective of any setoff, counterclaim or defense to payment which the
Company may have or have had against the LC Issuer, any Bank or any beneficiary
of a Facility LC. The Company further agrees with the LC Issuer and the Banks
that the LC Issuer and the Banks shall not be responsible for, and the Company's
Reimbursement Obligation in respect of any Facility LC shall not be affected by,
among other things, the validity or genuineness of documents or of any
endorsements thereon, even if such documents should in fact prove to be in any
or all respects invalid, fraudulent or forged, or any dispute between or among
the Company, any of its affiliates, the beneficiary of any Facility LC or any
financing institution or other party to whom any Facility LC may be transferred
or any claims or defenses whatsoever of the Company or of any of its affiliates
against the beneficiary of any Facility LC or any such transferee. The LC Issuer
shall not be liable for any error, omission, interruption or delay in
transmission, dispatch or delivery of any message or advice, however
transmitted, in connection with any Facility LC. The Company agrees that any
action taken or omitted by the LC Issuer or any Bank under or in connection with
each Facility LC and the related drafts and documents, if done without gross
negligence or

                                       24

<PAGE>

willful misconduct, shall be binding upon the Company and shall not put the LC
Issuer or any Bank under any liability to the Company. Nothing in this Section
3.7 is intended to limit the right of the Company to make a claim against the LC
Issuer for damages as contemplated by the proviso to the first sentence of
Section 3.6.

         3.8      Actions of LC Issuer. The LC Issuer shall be entitled to rely,
and shall be fully protected in relying, upon any Facility LC, draft, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or other
document believed by it to be genuine and correct and to have been signed, sent
or made by the proper Person or Persons, and upon advice and statements of legal
counsel, independent accountants and other experts selected by the LC Issuer.
The LC Issuer shall be fully justified in failing or refusing to take any action
under this Agreement unless it shall first have received such advice or
concurrence of the Majority Banks as it reasonably deems appropriate or it shall
first be indemnified to its reasonable satisfaction by the Banks against any and
all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. Notwithstanding any other provision of this
Article III, the LC Issuer shall in all cases be fully protected in acting, or
in refraining from acting, under this Agreement in accordance with a request of
the Majority Banks, and such request and any action taken or failure to act
pursuant thereto shall be binding upon the Banks and any future holders of a
participation in any Facility LC.

         3.9      Indemnification. The Company hereby agrees to indemnify and
hold harmless each Bank, the LC Issuer and the Agent, and their respective
directors, officers, agents and employees from and against any and all claims
and damages, losses, liabilities, reasonable costs or expenses which such Bank,
the LC Issuer or the Agent may incur (or which may be claimed against such Bank,
the LC Issuer or the Agent by any Person whatsoever) by reason of or in
connection with the issuance, execution and delivery or transfer of or payment
or failure to pay under any Facility LC or any actual or proposed use of any
Facility LC, including any claims, damages, losses, liabilities, costs or
expenses which the LC Issuer may incur by reason of or in connection with (i)
the failure of any other Bank to fulfill or comply with its obligations to the
LC Issuer hereunder (but nothing herein contained shall affect any rights the
Company may have against any defaulting Bank) or (ii) by reason of or on account
of the LC Issuer issuing any Facility LC which specifies that the term
"Beneficiary" included therein includes any successor by operation of law of the
named Beneficiary, but which Facility LC does not require that any drawing by
any such successor Beneficiary be accompanied by a copy of a legal document,
satisfactory to the LC Issuer, evidencing the appointment of such successor
Beneficiary; provided that the Company shall not be required to indemnify any
Bank, the LC Issuer or the Agent for any claims, damages, losses, liabilities,
costs or expenses to the extent, but only to the extent, caused by (x) the
willful misconduct or gross negligence of the LC Issuer in determining whether a
request presented under any Facility LC complied with the terms of such Facility
LC or (y) the LC Issuer's failure to pay under any Facility LC after the
presentation to it of a request strictly complying with the terms and conditions
of such Facility LC. Nothing in this Section 3.9 is intended to limit the
obligations of the Company under any other provision of this Agreement.

         3.10     Banks' Indemnification. Each Bank shall, ratably in accordance
with its Pro Rata Share, indemnify the LC Issuer, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Company) against any cost, expense (including

                                       25

<PAGE>

reasonable counsel fees and disbursements), claim, demand, action, loss or
liability (except such as result from such indemnitees' gross negligence or
willful misconduct or the LC Issuer's failure to pay under any Facility LC after
the presentation to it of a request strictly complying with the terms and
conditions of the Facility LC) that such indemnitees may suffer or incur in
connection with this Article III or any action taken or omitted by such
indemnitees hereunder.

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

                                   ARTICLE IV

                             CHANGE IN CIRCUMSTANCES

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

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

         (ii)     imposes or increases or deems applicable any reserve,
assessment, insurance charge, special deposit or similar requirement against
assets of, deposits with or for the account of, or credit extended by any Bank,
the LC Issuer or any applicable Lending Installation (including any reserve
costs under Regulation D of the FRB with respect to Eurocurrency liabilities (as
defined in such Regulation D)), or

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

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

then, upon presentation by such Bank or the LC Issuer to the Company of a
certificate (as referred to in the immediately succeeding sentence of this
Section 4.1) setting forth the basis for such determination and the additional
amounts reasonably determined by such Bank or the LC

                                       26

<PAGE>

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

         (b)      Neither the LC Issuer nor any Bank shall be entitled to demand
compensation or be compensated hereunder to the extent that such compensation
relates to any period of time more than 90 days prior to the date upon which
such Bank or the LC Issuer, as applicable, first notified the Company of the
occurrence of the event entitling such Bank or the LC Issuer, as applicable, to
such compensation (unless, and to the extent, that any such compensation so
demanded shall relate to the retroactive application of any event so notified to
the Company).

         4.2      Replacement Bank. (a) If any Bank shall make a demand for
payment under Section 4.1, then within 30 days after such demand, the Company
may, with the approval of the Agent (which approval shall not be unreasonably
withheld) and provided that no Default or Event of Default shall then have
occurred and be continuing, demand that such Bank assign to one or more
financial institutions designated by the Company and approved by the Agent all
(but not less than all) of such Bank's Commitment and Outstanding Credit
Exposure within the period ending on the later of such 30th day and the last day
of the longest of the then current Interest Periods or maturity dates for such
Outstanding Credit Exposure. It is understood that such assignment shall be
consummated on terms satisfactory to the assigning Bank, provided that such
Bank's consent to such an assignment shall not be unreasonably withheld.

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

         4.3      Availability of Eurodollar Rate Loans. If

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

                                       27

<PAGE>

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

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

         4.4      Funding Indemnification. If any payment of a Eurodollar Rate
Loan occurs on a date which is not the last day of an applicable Interest
Period, whether because of prepayment or otherwise, or a Eurodollar Rate Loan is
not made on the date specified by the Company for any reason other than default
by the Banks, the Company will indemnify each Bank for any loss or cost (but not
lost profits) incurred by it resulting therefrom, including any loss or cost in
liquidating or employing deposits acquired to fund or maintain such Eurodollar
Rate Loan; provided that the Company shall not be liable for any of the
foregoing to the extent they arise because of acceleration by any Bank.

         4.5      Taxes.

         (a)      All payments by the Company to or for the account of any Bank,
the LC Issuer or the Agent hereunder or under any Note or any Facility LC
Application shall be made free and clear of and without deduction for any and
all Taxes. If the Company shall be required by law to deduct any Taxes from or
in respect of any sum payable hereunder to any Bank, the LC Issuer or the Agent,
(i) the sum payable shall be increased as necessary so that after making all
required deductions (including deductions applicable to additional sums payable
under this Section 4.5) such Bank, the LC Issuer or the Agent (as the case may
be) receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Company shall make such deductions, (iii) the
Company shall pay the full amount deducted to the relevant authority in
accordance with applicable law and (iv) the Company shall furnish to the Agent
the original copy of a receipt evidencing payment thereof within 30 days after
such payment is made.

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

         (c)      The Company hereby agrees to indemnify the Agent, the LC
Issuer and each Bank for the full amount of Taxes or Other Taxes (including any
Taxes or Other Taxes imposed on amounts payable under this Section 3.5) paid by
the Agent, the LC Issuer or such Bank and any liability (including penalties,
interest and expenses) arising therefrom or with respect thereto. Payments due
under this indemnification shall be made within 30 days of the date the Agent,
the LC Issuer or such Bank makes demand therefor pursuant to Section 4.6.

         (d)      Each Bank that is not incorporated under the laws of the
United States of America or a state thereof (each a "Non-U.S. Bank") agrees that
it will, not more than ten Business Days after the Closing Date, or, if later,
not more than ten Business Days after becoming a Bank

                                       28

<PAGE>

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

         (e)      For any period during which a Non-U.S. Bank has failed to
provide the Company with an appropriate form pursuant to clause (d), above
(unless such failure is due to a change in treaty, law or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, occurring subsequent to the date on which a form originally was
required to be provided), such Non-U.S. Bank shall not be entitled to
indemnification under this Section 4.5 with respect to Taxes imposed by the
United States; provided that, should a Non-U.S. Bank which is otherwise exempt
from or subject to a reduced rate of withholding tax become subject to Taxes
because of its failure to deliver a form required under clause (d) above, the
Company shall take such steps as such Non-U.S. Bank shall reasonably request to
assist such Non-U.S. Bank to recover such Taxes.

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

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

                                       29

<PAGE>

(including attorneys fees and time charges of attorneys for the Agent, which
attorneys may be employees of the Agent). The obligations of the Banks under
this Section 4.5(g) shall survive the payment of the Obligations and termination
of this Agreement.

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

                                    ARTICLE V

                         REPRESENTATIONS AND WARRANTIES

         The Company hereby represents and warrants that:

         5.1      Incorporation and Good Standing. Each of the Company and each
Material Subsidiary is duly organized, validly existing and in good standing
under the laws of the state of its organization and is duly qualified to do
business in, and is in good standing in, all other jurisdictions where the
nature of its business or the nature of property owned or used by it makes such
qualification necessary.

         5.2      Corporate Power and Authority: No Conflicts. The execution,
delivery and performance by the Company and Enterprises of each Credit Document
to which it is or will be a party (i) are within the corporate powers of the
Company and Enterprises, (ii) have been duly authorized by all necessary
corporate or other organizational action or proceedings on the part of the
Company and Enterprises and (iii) do not and will not (A) require any consent or
approval of the stockholders (or other applicable holder of equity) of the
Company or Enterprises (other than such consents and approvals which have been
obtained and are in full force and effect), (B) violate any provision of the
charter or by-laws of the Company or Enterprises or of law, (C) violate any
legal restriction binding on or affecting the Company or Enterprises, (D) result
in a breach of, or constitute a default under, any indenture or loan or credit
agreement or any other agreement, lease or instrument to which the Company or
Enterprises is a party or by which it is or its properties may be bound or
affected, or (E) result in or require the creation of any Lien (other than any
Lien in favor of the Agent) upon or with respect to any of the properties of the
Company or Enterprises.

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<PAGE>

         5.3      Governmental Approvals. No Governmental Approval is required
for the due execution, delivery and performance by the Company or Enterprises of
any Credit Document to which it is or will be a party, other than filings
necessary to perfect security interests in the Pledged Collateral.

         5.4      Legally Enforceable Agreements. Each Credit Document to which
the Company or Enterprises is a party constitutes a legal, valid and binding
obligation of such entity, enforceable against such entity in accordance with
its terms, subject to (a) the effect of applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors' rights generally and (b) the application of general principles of
equity (regardless of whether considered in a proceeding in equity or at law).

         5.5      Financial Statements. (i) The consolidated balance sheet of
the Company and its Consolidated Subsidiaries as at December 31, 2002, and the
related consolidated statements of income, retained earnings and cash flows of
the Company and its Consolidated Subsidiaries for the fiscal year then ended,
included in the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2002, copies of which have been furnished to each Bank, fairly
present the financial condition of the Company and its Consolidated Subsidiaries
as at such date and the results of operations of the Company and its
Consolidated Subsidiaries for the fiscal year ended on such date, all in
accordance with generally accepted accounting principles consistently applied;
(ii) the consolidated balance sheet of Consumers and its consolidated
Subsidiaries as at December 31, 2002, and the related consolidated statements of
income, retained earnings and cash flows of Consumers and its consolidated
Subsidiaries for the fiscal year then ended, included in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, copies of each
of which have been furnished to each Bank, fairly present the financial
condition of Consumers and its consolidated Subsidiaries as at such date and the
results of operations of Consumers and its consolidated Subsidiaries for the
period ended on such date, all in accordance with generally accepted accounting
principles consistently applied; (iii) since December 31, 2002, there has been
no Material Adverse Change; and (iv) the Company has no material liabilities or
obligations except as reflected in the foregoing financial statements and in
Schedule II, as evidenced by the Credit Documents and as may be incurred, in
accordance with the terms of this Agreement, in the ordinary course of business
(as presently conducted) following the Closing Date.

         5.6      Litigation. Except (i) as disclosed in the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002, and (ii) such
other similar actions, suits and proceedings predicated on the occurrence of the
same events giving rise to any actions, suits and proceedings described in the
Annual Report filed with the SEC set forth in clause (i) above (all such matters
in clauses (i) and (ii), the "Disclosed Matters"), there are no pending or
threatened actions, suits or proceedings against or, to the knowledge of the
Company, affecting the Company or any of its Subsidiaries or the properties of
the Company or any of its Subsidiaries before any court, governmental agency or
arbitrator, that would, if adversely determined, reasonably be expected to
materially adversely affect the financial condition, properties, business or
operations of the Company and its Subsidiaries, considered as a whole, or affect
the legality, validity or enforceability of this Agreement or any other Credit
Document. There have been no adverse developments with respect to the Disclosed
Matters that have had or could reasonably be expected to result in a Material
Adverse Change.

                                       31

<PAGE>

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

         5.8      ERISA. No Plan Termination Event has occurred or is reasonably
expected to occur with respect to any Plan of the Company or any of its ERISA
Affiliates which would result in a material liability to the Company, except as
disclosed and consented to by the Majority Banks in writing from time to time.
Except as disclosed in the Company's Annual Report on Form 10-K for the period
ended December 31, 2002, since the date of the most recent Schedule B (Actuarial
Information) to the annual report of the Company (Form 5500 Series), if any,
there has been no material adverse change in the funding status of the Plans
referred therein and no "prohibited transaction" has occurred with respect
thereto which is reasonably expected to result in a material liability to the
Company. Neither the Company nor any of its ERISA Affiliates has incurred nor
reasonably expects to incur any material withdrawal liability under ERISA to any
Multiemployer Plan, except as disclosed and consented to by the Majority Banks
in writing from time to time.

         5.9      Casualty. No fire, explosion, accident, strike, lockout or
other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of
the public enemy or other casualty (except for any such circumstance, if any,
which is covered by insurance which coverage has been confirmed and not disputed
by the relevant insurer) affecting the properties, business or operations of the
Company or any Material Subsidiary has occurred that could reasonably be
expected to have a material adverse effect on the business, assets, property,
financial condition, results of operations or prospects of (A) the Company and
its Subsidiaries, considered as a whole, or (B) Consumers and its Subsidiaries,
considered as a whole.

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

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

         5.12     Ownership. The Company owns not less than 80% of the
outstanding shares of common stock of (i) Enterprises and (ii) Consumers.

         5.13     Solvency. After giving effect to each Credit Extension (and,
in the case of Loans, the disbursement of the proceeds of such Loans pursuant to
the Company's instructions), the Company and its Subsidiaries, taken as a whole,
are Solvent.

         5.14     Investment Company Act. The Company is not an investment
company (within the meaning of the Investment Company Act of 1940).

         5.15     Use of Proceeds. (a) No proceeds of any Credit Extension will
be used to acquire any security in any transaction without the approval of the
board of directors of the Person issuing such security if (i) the acquisition of
such security would cause the Company to

                                       32

<PAGE>

own, directly or indirectly, 5.0% or more of any outstanding class of securities
issued by such Person, or (ii) such security is being acquired in connection
with a tender offer.

         (a)      After giving effect to each Credit Extension, not more than
25% of the value of the assets of the Company and its Subsidiaries on a
consolidated basis will be margin stock (as defined in Regulation U of the FRB).

         5.16     Public Utility Holding Company Act. The Company is not a
registered "holding company" or a "subsidiary" or an "affiliate" of a registered
"holding company," as such terms are defined in the Public Utility Holding
Company Act of 1935.

         5.17     Material Adverse Change. The Company has not withheld any fact
from the Agent or the Banks in regard to the occurrence of any Material Adverse
Change.

                                   ARTICLE VI

                              AFFIRMATIVE COVENANTS

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

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

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

         6.3      Preservation of Existence, Etc. Except as otherwise permitted
by Article VII, the Company shall preserve and maintain, and each Material
Subsidiary shall preserve and maintain, its corporate or limited liability
company existence, material rights (statutory and otherwise) and franchises, and
take such other action as may be necessary or advisable to preserve and maintain
its right to conduct its business in the states where it shall be conducting its
business.

         6.4      Compliance with Laws, Etc. Comply, and each Material
Subsidiary shall comply, in all material respects with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
including any such laws, rules, regulations and orders relating to zoning,
environmental protection, use and disposal of Hazardous Substances, land use,
construction and building restrictions, and employee safety and health matters
relating to business operations.

                                       33

<PAGE>

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

         6.6      Keeping of Books. From and after December 31, 2002, the
Company shall keep, and each of its Subsidiaries shall keep, proper records and
books of account, in which full and correct entries shall be made of all
financial transactions of, and of the assets and business of the Company and its
Subsidiaries, in each case sufficient to prepare financial statements in
accordance with GAAP.

         6.7      Maintenance of Properties, Etc. The Company shall maintain,
and each of its Restricted Subsidiaries shall maintain, in substantial
conformity with all laws and material contractual obligations, good and
marketable title to all of its properties which are used or useful in the
conduct of its business; provided that the foregoing shall not restrict the sale
of any asset of the Company or any Restricted Subsidiary to the extent not
prohibited by Section 7.9. In addition, the Company shall preserve, maintain,
develop and operate, in substantial conformity with all laws and material
contractual obligations, all of its material properties which are used or useful
in the conduct of its business in good working order and condition, ordinary
wear and tear excepted.

         6.8      Use of Proceeds. The Company shall use each Loan solely for
purposes of making loans or advances to, or capital contributions in, or
otherwise for the benefit of, Enterprises or any Subsidiary thereof; and the
Company shall request the issuance of Facility LCs solely for purposes of
supporting obligations of Enterprises or any Subsidiary thereof.

         6.9      Consolidated Leverage Ratio. The Company shall maintain, as of
the last day of each fiscal quarter (in each case, the "Measurement Quarter"), a
maximum ratio of (i) Consolidated Debt for the immediately preceding
four-fiscal-quarter period ending on the last day of such Measurement Quarter
(calculated exclusive of Panhandle and its Subsidiaries), to (ii) Consolidated
EBITDA for such period (calculated exclusive of Panhandle and its Subsidiaries),
of not more than 7.00 to 1.00, commencing with the period ending June 30, 2003.

         6.10     Cash Dividend Coverage Ratio. The Company shall maintain, as
of the last day of each Measurement Quarter, a minimum ratio of (i) the sum of
(A) Cash Dividend Income for the four-fiscal-quarter period ending on such day,
plus (B) 25% of the amount of Equity Distributions received by the Company
during such period but in no event in excess of $10,000,000 to (ii) an amount
equal to (A) interest expense (excluding all arrangement, underwriting and other
similar fees payable in connection with this Agreement, the CMS 2003 Credit
Agreement and each of the Enterprises 2003 Credit Agreements) accrued by the
Company

                                       34

<PAGE>

in respect of all Debt during such period, minus (B) cash interest income
received by the Company and its Subsidiaries from Persons other than the Company
or any of its Subsidiaries, minus (C) all amounts received by the Company from
its Subsidiaries and Affiliates during such period constituting reimbursement of
interest expense and commitment, guaranty and letter of credit charges of the
Company to such Subsidiary or Affiliate, of not less than 1.20 to 1.00,
commencing with the Measurement Quarter ending on June 30, 2003; provided that
the Company shall be deemed not to be in breach of the foregoing covenant if,
during the Measurement Quarter, it has permanently reduced the principal amount
outstanding under this Agreement and the Notes, such that the amount determined
pursuant to clause (ii) above, when recalculated on a pro forma basis assuming
that the amount of such reduced principal amount outstanding under such
agreements and promissory notes were in effect at all times during such
four-fiscal-quarter period, would result in the Company being in compliance with
such ratio.

         6.11     Pledged Collateral; Further Assurances. Beginning on the
Effective Date and continuing until the Commitments have terminated and all
Obligations have been paid in full, cause Enterprises: (a) to maintain at all
times Pledged Collateral in an amount equal to or greater than 100.5% of the
Aggregate Outstanding Credit Exposure; (b) to execute and deliver any instrument
or document, and take any further action, as may be necessary or as any Bank
through the Agent may reasonably request in order to establish and maintain in
favor of the Agent a perfected, first-priority security interest in all Pledged
Collateral; and (c) to keep all Pledged Collateral free and clear of any Lien
other than the security interest of the Agent.

                                   ARTICLE VII

                               NEGATIVE COVENANTS

         So long as any Obligations shall remain unpaid or any Bank shall have
any Commitment under this Agreement, the Company shall not:

         7.1      Liens. (1) Create, incur, assume or suffer to exist, or permit
any other Loan Party to create, incur, assume or suffer to exist, any lien,
security interest, or other charge or encumbrance (including the lien or
retained security title of a conditional vendor) of any kind, or any other type
of arrangement intended or having the effect of conferring upon a creditor a
preferential interest upon or with respect to any of its properties of any
character (including capital stock and other ownership interests of the
Company's directly-owned Subsidiaries, intercompany obligations and accounts)
(any of the foregoing being referred to herein as a "Lien"), whether now owned
or hereafter acquired, or (2) file, or permit any other Loan Party to file,
under the Uniform Commercial Code of any jurisdiction a financing statement
which names the Company or any other Loan Party as debtor (other than financing
statements that do not evidence a Lien), or (3) sign, or permit any other Loan
Party to sign, any security agreement authorizing any secured party thereunder
to file any such financing statement, or (4) assign, or permit any other Loan
Party to assign, accounts, excluding, however, from the operation of the
foregoing restrictions Liens created under the Credit Documents and the
following:

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

                                       35

<PAGE>

         (b)      cash pledges or deposits to secure (i) obligations under
workmen's compensation laws or similar legislation, (ii) public or statutory
obligations of the Company or any other Loan Party, (iii) Support Obligations of
the Company or any other Loan Party, or (iv) obligations of Enterprises or MS&T
in respect of hedging arrangements and commodity purchases and sales (including
any cash margins with respect thereto); provided that with respect to clauses
(iii) and (iv) above the aggregate amount of cash pledges or deposits securing
such Support Obligations and such obligations of Enterprises or MS&T shall not
exceed $400,000,000 at any one time outstanding;

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

         (d)      Liens securing the obligations under the "Loan Documents" as
defined in the CMS 2003 Credit Agreement or the Enterprises 2003 Credit
Agreements and any refinancing of either of the foregoing;

         (e)      Liens securing Off-Balance Sheet Liabilities (and all
refinancings and recharacterizations thereof permitted under Section 7.2(d)) in
an aggregate amount not to exceed $775,000,000;

         (f)      purchase money Liens or purchase money security interests upon
or in property acquired or held by the Company or any other Loan Party in the
ordinary course of business to secure the purchase price of such property or to
secure indebtedness incurred solely for the purpose of financing the acquisition
of any such property to be subject to such Liens or security interests, or Liens
or security interests existing on any such property at the time of acquisition,
or extensions, renewals or replacements of any of the foregoing for the same or
a lesser amount, provided that no such Lien or security interest shall extend to
or cover any property other than the property being acquired and no such
extension, renewal or replacement shall extend to or cover property not
theretofore subject to the Lien or security interest being extended, renewed or
replaced, and provided, further, that the aggregate principal amount of the Debt
at any one time outstanding secured by Liens permitted by this clause (f) shall
not exceed $15,000,000;

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

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

                                       36

<PAGE>

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

         (j)      Liens existing as of the Closing Date;

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

         (l)      Liens arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by any of the foregoing
clauses (g), (h), (i), (j) or (k); provided that (a) such Debt is not secured by
any additional assets and (b) the amount of Debt secured by any such Lien is
otherwise permitted under this Agreement;

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

         (n)      Liens granted pursuant to the terms of the AIG Pledge
Agreement; and

         (o)      Liens arising out of the refinancing, extension, renewal or
refunding of the 6.75% Senior Notes, the Company's reset put securities due July
1, 2003 and the Company's general term notes due in 2003.

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

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

         (b)      in the form of indemnities in respect of unfiled mechanics'
liens and Liens affecting Enterprises' or its Subsidiaries' properties permitted
under Section 7.1(c);

         (c)      debt arising under (i) the "Loan Documents" as defined in the
CMS 2003 Credit Agreement, (ii) the "Loan Documents" as defined in the
Enterprises 2003 Credit Agreement described in clause (i) of the definition
thereof in a principal amount not to exceed $441,000,000 minus any principal
payments (but with respect to principal payments of revolving loans prior to the
"Conversion Date" thereunder, only to the extent of any concurrent reduction or
termination of the "Commitments" as defined therein) made from time to time
thereunder, and (iii) the "Loan Documents" as defined in the Enterprises 2003
Credit Agreement described in clause (ii) of the definition thereof in a
principal amount not to exceed $75,000,000 minus any principal payments (but
with respect to principal payments of revolving loans prior to the "Conversion
Date" thereunder, only to the extent of any concurrent reduction or termination
of the "Commitments" as defined therein) made from time to time thereunder;

                                       37

<PAGE>

         (d)      debt constituting Off-Balance Sheet Liabilities (including any
recharacterization thereof as debt pursuant to any changes in generally accepted
accounting principles hereafter required or permitted and which are adopted by
the Company or any of its Subsidiaries with the agreement of its independent
certified public accountants) to the extent permitted by Section 7.15, and any
extensions, renewals, refundings or replacements thereof, provided that any such
extension, renewal, refunding or replacement is in an aggregate principal amount
not greater than the principal amount of, is an obligation of the same Person
that is the obligor in respect of, and has a weighted average life to maturity
not less than the weighted average life to maturity of, the debt so extended,
renewed, refunded or replaced;

         (e)      other debt of Enterprises and its Subsidiaries outstanding as
of March 31, 2003 (including the debt of the Loan Parties as of February 28,
2003 as set forth on Schedule II), and any extensions, renewals, refundings or
replacements thereof, provided that any such extension, renewal, refunding or
replacement is in an aggregate principal amount not greater than the principal
amount of, is an obligation of the same Person that is the obligor in respect
of, and has a weighted average life to maturity not less than the weighted
average life to maturity of, the debt so extended, renewed, refunded or
replaced;

         (f)      (i) unsecured, subordinated debt owed (A) to the Company by
Enterprises, (B) to Enterprises or CMS Capital, L.L.C. (or any successor by
merger to CMS Capital, L.L.C.) and (C) to any Grantor (as such term is defined
in the CMS 2003 Credit Agreement) by any Loan Party, and (ii) unsecured debt
owed to any Subsidiary of Enterprises (other than a Grantor) by CMS Capital,
L.L.C. (or any successor by merger to CMS Capital, L.L.C.), and (iii) unsecured
debt of any Foreign Subsidiary (as such term is defined in the CMS 2003 Credit
Agreement) of Enterprises owed to another Foreign Subsidiary of Enterprises
provided that the proceeds of any repayment of such debt are remitted to a Loan
Party;

         (g)      Project Finance Debt of any Loan Party or any of its
Subsidiaries incurred on or after the Closing Date; and

         (h)      capital lease obligations and other Debt secured by purchase
money Liens to the extent such Liens shall be permitted under Section 7.1(f).

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

         7.4      Investments in Other Persons. Make, or permit any of the other
Loan Parties to make, any loan or advance to any Person, or purchase or
otherwise acquire any capital stock, obligations or other securities of, make
any capital contribution to, or otherwise invest in, any Person, other than (i)
Permitted Investments, (ii) pursuant to the contractual or contingent
obligations of the Company or any other Loan Party as in effect as of the
Closing Date and in amounts not to exceed the estimated amounts as set forth on
Schedule II (whether such obligation is conditioned upon a change in the ratings
of the securities issued by such Person or

                                       38

<PAGE>

otherwise) and, in each case, in an amount not to exceed such contractual or
contingent obligation as in effect on the Closing Date, (iii) investments,
directly or indirectly, by any Loan Party (x) in the capital of any Subsidiary
of the Company that is a Loan Party and (y) in assets contributed to such Loan
Party, (iv) investments in the capital stock or other ownership interests of any
of the Company's Subsidiaries arising from the conversion of intercompany
indebtedness to equity, (v) intercompany loans and advances to the extent the
corresponding debt is permitted under Section 7.2(f), (vi) investments
constituting non-cash consideration received in connection with the sale of any
asset permitted under Section 7.9 and (vii) additional loans, advances,
purchases, contributions and other investments in an amount not to exceed
$340,000,000 in the aggregate at any time; provided that investments described
in clauses (iv) (solely with respect to investments made in any Subsidiary that
is not a Loan Party) and (vii) above shall not be permitted to be made at a time
when either a Default or an Event of Default shall be continuing or would result
therefrom; provided, further, that, notwithstanding the foregoing, neither the
Company nor any other Loan Party shall make any loans or advances to any of the
Company's Subsidiaries other than, to the extent otherwise permitted hereunder,
Enterprises or any Subsidiary of Enterprises.

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

         7.6      Transactions With Affiliates. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with any of its Affiliates unless
such transaction is on terms no less favorable to the Company or such Subsidiary
than if the transaction had been negotiated in good faith on an arm's-length
basis with a non-Affiliate; provided that (x) the purchase by, or other transfer
to, Trunkline Field Services Company of certain assets of CMS Field Services,
Inc. as described to the Agent and the Banks prior to the date hereof shall be
permitted hereunder and (y) any transactions permitted under Sections 7.6 and
7.7 shall be permitted hereunder.

         7.7      Restricted Payments. Declare or pay, directly or indirectly,
any dividend, payment or other distribution of assets, properties, cash, rights,
obligations or securities on account of any share of any class of capital stock
or other ownership interests of the Company or any of the other Loan Parties
(other than (1) stock splits and dividends payable solely in nonconvertible
equity securities of the Company (other than Redeemable Stock or Exchangeable
Stock (as such terms are defined in the Indenture on the Closing Date)) and (2)
dividends and distributions made to the Company or any other Loan Party), or
purchase, redeem, retire, or otherwise acquire for value, any shares of any
class of capital stock or other ownership interests of the Company or any
warrants, rights, or options to acquire any such shares, now or hereafter
outstanding, any distribution of assets to any of its shareholders (other than
distributions to the Company) (any such dividend, payment, distribution,
purchase, redemption, retirement or

                                       39

<PAGE>

acquisition being hereinafter referred to as a "Restricted Payment") other than
(i) pursuant to the terms of any class of capital stock of the Company issued
and outstanding (and as in effect on) the Closing Date, any purchase or
redemption of capital stock of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, capital stock of the Company
(other than Redeemable Stock or Exchangeable Stock (as such terms are defined in
the Indenture on the Closing Date)); and (ii) payments made by the Company
pursuant to the Tax Sharing Agreement.

         7.8      Mergers, Etc. Merge with or into or consolidate with or into,
or permit any of the other Loan Parties or Consumers to merge with or into or
consolidate with or into, any other Person, except that (i) (x) any Loan Party
may merge with or into any other Loan Party, (y) any Subsidiary of a Loan Party
that is not a Loan Party may merge into such Loan Party or with or into any
other Subsidiary of any Loan Party, provided that (a) in any such merger with or
into the Company, the Company is the surviving corporation, (b) in any such
merger into a Loan Party under clause (y) above, the Loan Party is the survivor
thereof, (c) no Default or Event of Default shall be continuing or result
therefrom and (d) such Loan Party shall not be liable with respect to any Debt
or allow its property to be subject to any Lien which it could not become liable
with respect to or allow its property to become subject to under this Agreement
or any other Credit Document on the date of such transaction, and (ii) any Loan
Party may merge with or into any other Person, provided that (a) the Loan Party
is the survivor thereof, or, in the case of any Loan Party that is a corporation
reconstituting itself as limited liability company, such limited liability
company shall be the survivor thereof and shall be thereafter deemed to be a
Loan Party hereunder, (b) no Default or Event of Default shall be continuing or
result therefrom, (c) such Loan Party shall not be liable with respect to any
Debt or allow its property to be subject to any Lien which it could not become
liable with respect to or allow its property to become subject to under this
Agreement or any other Credit Document on the date of such transaction, and (d)
immediately after giving effect to such merger, the Net Worth of such Loan Party
shall be equal to or greater than the Net Worth of such Loan Party as of the
last day of the fiscal quarter immediately preceding the date of such merger.

         7.9      Sales, Etc., of Assets. Sell, lease, transfer, assign, or
otherwise dispose of all or any substantial part of its assets, or permit any of
the other Loan Parties (other than MS&T) to sell, lease, transfer, or otherwise
dispose of all or any substantial part of its assets, except (i) to give effect
to a transaction permitted by Section 7.8 above or Section 7.10 below, and (ii)
with respect to Enterprises or any of its Subsidiaries, as permitted under the
Enterprises 2003 Credit Agreements; provided, further, that neither the Company
nor any of the other Loan Parties (other than MS&T) shall sell, assign,
transfer, lease, convey or otherwise dispose of any property, whether now owned
or hereafter acquired, or any income or profits therefrom, or enter into any
agreement to do so, except:

         (a)      the sale of property for consideration not less than the Fair
Market Value thereof;

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

         (c)      the transfer of property constituting an investment otherwise
permitted under Section 7.4;

                                       40

<PAGE>

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

         (e)      any transfer of an interest in receivables and related
security, accounts or notes receivable on a limited recourse basis in connection
with the incurrence of Off-Balance Sheet Liabilities, provided that such
transfer qualifies as a legal sale and as a sale under GAAP and the incurrence
of such Off-Balance Sheet Liabilities is permitted under Section 7.15;

         (f)      the transfer of property constituting not more than two
percent (2%) of the ownership interests held by the Company and its Subsidiaries
as of the Closing Date in CMS International Ventures, L.L.C. to CMS Energy
Foundation and/or Consumers Foundation and/or any other third-party 501(c)(3)
charitable organization;

         (g)      the disposition of equipment if such equipment is obsolete or
no longer useful in the ordinary course of the Company's or such Subsidiary's
business;

         (h)      the sale of substantially all of the capital stock and assets
of Panhandle; provided that such sale shall be consummated substantially in
accordance with, and on terms not materially more adverse to the interests of
the Agent and the Banks than the terms and conditions set forth in, the Stock
Purchase Agreement, dated as of December 21, 2002, by and among CMS Gas
Transmission Company, AIG Highstar Capital, L.P., AIG Highstar II Funding Corp.,
Southern Union Company and Southern Union Panhandle Corp. (the "Panhandle Sale
Agreement"); provided that any modifications to the Panhandle Sale Agreement to
reflect purchase price adjustments in the aggregate not to exceed $50,000,000
and otherwise on terms and conditions reasonably acceptable to the Agent shall
be deemed to be permitted hereunder.

         7.10     Maintenance of Ownership of Subsidiaries. Sell, transfer,
assign or otherwise dispose of any shares of capital stock or other ownership
interests of any of the other Loan Parties or Consumers (other than preferred or
preference stock of Consumers) or any warrants, rights or options to acquire
such capital stock or other ownership interests, or permit any other Loan Party
or Consumers to issue, sell, transfer, assign or otherwise dispose of any shares
of its capital stock (other than preferred or preference stock of Consumers) or
other ownership interests or the capital stock or other ownership interests of
any other Loan Party or any warrants, rights or options to acquire such capital
stock or other ownership interests, except (i) to give effect to a transaction
permitted by Section 7.8 and 7.9 above, and (ii) in connection with foreclosure
of any Liens permitted under Section 7.1(c).

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

         7.12     Prepayments of Indebtedness. Make or agree to pay or make, or
permit any of the other Loan Parties to make or agree to pay or make, directly
or indirectly, any payment or other

                                       41

<PAGE>
distribution (whether in cash, securities or other property) of or in respect of
principal of or interest on any Debt, or any payment or other distribution
(whether in cash, securities or other property), including any sinking fund or
similar deposit, on account of the purchase, redemption, retirement,
acquisition, cancellation or termination of any Debt (other than the obligations
of the Loan Parties under the Credit Documents), other than (i) any payments on
account of (a) any Debt when and as such payment was due (including at the
maturity thereof if the initial stated maturity thereof is on or prior to May
21, 2004) pursuant to the mandatory payment provisions applicable to such Debt
at the time it was incurred (including regularly scheduled payment dates for
principal, interest, fees and other amounts due thereon) or any extension
thereof thereafter granted by the holder of such Debt, (b) refinancings of Debt
otherwise permitted under this Agreement, (c) any Debt owed to the Company or
any of its Subsidiaries, (d) Debt secured by a Lien on assets subject to an
asset sale permitted by Section 7.6 and (e) the extinguishment of any
intercompany Debt in connection with a dividend or distributions permitted under
Section 7.7, (ii) payments constituting the exchange of the Company's common
stock (other than Redeemable Stock or Exchangeable Stock (as such terms are
defined in the Indenture on the Closing Date)) for the Company's outstanding
Debt (and any cash payments made in lieu of the issuance of fractional shares)
to the extent such exchange is permitted under the Securities and Exchange Act
of 1934 and (iii) prepayments of (x) the Company's reset put securities due July
1, 2003 and the Company's general term notes due in 2003, (y) if the aggregate
principal amount of the Loans shall be less than $250,000,000 any securities
with maturities on or after January 1, 2004 but prior to April 1, 2004, and (z)
if the aggregate principal amount of the Loans shall be less than $175,000,000,
any securities with maturities on or after January 1, 2004.

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

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

         7.15     Off-Balance Sheet Liabilities. Create, incur, assume or suffer
to exist, or permit any Subsidiary (other than Consumers and its Subsidiaries)
to create, incur, assume or suffer to exist, Off-Balance Sheet Liabilities
(exclusive of lease obligations otherwise permitted under Section 7.3) in the
aggregate in excess of $775,000,000 at any time.

                                  ARTICLE VIII

                             REPORTING REQUIREMENTS

         So long as any of the Obligations shall remain unpaid or any Bank shall
have any Commitment, the Company will, unless the Majority Banks shall otherwise
consent in writing, furnish to the Agent (with sufficient copies for each Bank),
the following:

                                       42

<PAGE>

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

         (b)      as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the Company,
commencing with the fiscal quarter ending on March 31, 2003, a consolidated
balance sheet and consolidated statements of income and retained earnings and of
cash flows of the Company and its Subsidiaries as at the end of such quarter and
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter (which requirement shall be deemed satisfied by the
delivery of the Company's quarterly report on Form 10-Q for such quarter), all
in reasonable detail and duly certified (subject to year-end audit adjustments)
by the chief financial officer or chief accounting officer of the Company as
having been prepared in accordance with GAAP, together with (A) a compliance
certificate (substantially in the form of Exhibit C appropriately completed) of
(1) the computations used by the Company for the periods ending June 30, 2003
and thereafter in determining compliance with the covenants contained in
Sections 6.9 and 6.10 and the ratio set forth in Section 9.1(j), (2) all Project
Finance Debt of the Consolidated Subsidiaries, together with the Company's
Ownership Interest in each such Consolidated Subsidiary and (3) all Support
Obligations of the Company of the types described in clauses (iv) and (v) of the
definition of Support Obligations (whether or not each such Support Obligation
or the primary obligation so supported is fixed, conclusively determined or
reasonably quantifiable) to the extent such Support Obligations have not been
previously disclosed as "Consolidated Debt" pursuant to clause (1) above, and
(B) a certificate of said officer stating that no Default or Event of Default
has occurred and is continuing or, if a Default or Event of Default has occurred
and is continuing, a statement as to the nature thereof and the action that the
Company proposes to take with respect thereto;

         (c)      as soon as available and in any event within 120 days after
the end of each fiscal year of the Company and its Subsidiaries, commencing with
the fiscal year ending on December 31, 2003, a copy of the Annual Report on Form
10-K (or any successor form) for the Company and its Subsidiaries for such year,
including therein a consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal year and consolidated statements of
income and retained earnings and of cash flows of the Company and its
Subsidiaries for such fiscal year, accompanied by a report thereon of a
nationally-recognized independent public accounting firm, together with (1) a
schedule in form satisfactory to the Majority Banks of (A) the computations used
by such accounting firm in determining, as of the end of such fiscal year,
compliance with the covenants contained in Sections 6.9 and 6.10 and the ratio
set forth in Section 9.1(j), (B) all Project Finance Debt of the Consolidated
Subsidiaries, together with the Company's Ownership Interest in each such
Consolidated Subsidiary and (C) all Support Obligations of the Company of the
types described in clauses (iv) and (v) of the definition of Support Obligations
(whether or not each such Support Obligation or the primary obligation so
supported is fixed, conclusively determined or reasonably quantifiable) to the
extent such Support Obligations have not been previously disclosed as
"Consolidated Debt" pursuant to clause (A) above, and (2) a certificate of the
chief financial officer or chief accounting officer of the Company stating that
no Default or Event of Default has occurred and is continuing or, if a Default
or Event of Default has

                                       43

<PAGE>

occurred and is continuing, a statement as to the nature thereof and the action
that the Company proposes to take with respect thereto;

         (d)      as soon as available and in any event within 60 days after the
end of each of the first three quarters of each fiscal year of the Company,
commencing with the fiscal quarter ending on March 31, 2003, a balance sheet and
statements of income and retained earnings and of cash flows of the Company as
at the end of such quarter and for the period commencing at the end of the
previous fiscal year and ending with the end of such quarter, all in reasonable
detail and duly certified (subject to year-end audit adjustments) by the chief
financial officer or chief accounting officer of the Company as having been
prepared in accordance with GAAP;

         (e)      as soon as available and in any event within 120 days after
the end of each fiscal year of the Company, commencing with the fiscal year
ending on December 31, 2003, a balance sheet of the Company as at the end of
such fiscal year and statements of income and retained earnings and of cash
flows of the Company for such fiscal year, all in reasonable detail and duly
certified (subject to year end audit adjustments) by the chief financial officer
or chief accounting officer of the Company as having been prepared in accordance
with GAAP;

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

         (g)      except as may arise in connection with the sale of Panhandle,
promptly after receipt thereof by the Company or any of its ERISA Affiliates
from the PBGC copies of each notice received by the Company or any such ERISA
Affiliate of the PBGC's intention to terminate any Plan or to have a trustee
appointed to administer any Plan;

         (h)      except as may arise in connection with the sale of Panhandle,
promptly and in any event within 30 days after the filing thereof with the
Internal Revenue Service, copies of each Schedule B (Actuarial Information) to
the annual report (Form 5500 Series) with respect to each Plan (if any) to which
the Company is a contributing employer;

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

         (j)      promptly after the Company becomes aware of the occurrence
thereof, notice of all actions, suits, proceedings or other events of the type
described in Section 5.6;

                                       44

<PAGE>

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

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

         (m)      promptly after requested, such other information respecting
the business, properties, condition or operations, financial or otherwise, of
the Company and its Subsidiaries as any Agent or the Majority Banks may from
time to time reasonably request in writing.

         The Company shall be deemed to have fulfilled its obligations pursuant
to clauses (b), (c), (d), (e) and (k) above to the extent the Agent (and the
Banks, if applicable) receives an electronic copy of the requisite document or
documents in a format reasonably acceptable to the Agent, provided that (1) an
executed, tangible copy of any report required pursuant to clause (e) above is
delivered to the Agent at the time of any such electronic delivery, and (2) a
tangible copy of each requisite document delivered electronically is made
available by the Company promptly upon request by any Agent or Bank.

                                   ARTICLE IX

                                EVENTS OF DEFAULT

         9.1      Events of Default. The occurrence of any of the following
events shall constitute an "Event of Default":

         (a)      The Company shall fail to pay (i) any principal of any Loan
when due, or (ii) any Reimbursement Obligation within one Business Day after the
same becomes due, or (iii) any interest on any Advance or any fee or other
Obligations payable hereunder within two Business Days after such interest, fees
or other amounts shall have become due; or

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

         (c)      The Company or any of its Subsidiaries shall fail to perform
or observe any term or covenant on its part to be performed or observed
contained in Section 6.3, 6.8, 6.9 or 6.10, or in Article VII hereof (and the
Company, each Bank and each Agent hereby agrees that an Event

                                       45

<PAGE>

of Default under this subsection (c) shall be given effect as if the defaulting
Subsidiary were a party to this Agreement); or

         (d)      The Company or any of its Subsidiaries shall fail to perform
or observe any other term or covenant on its part to be performed or observed
contained in any Credit Document and any such failure shall remain unremedied,
after written notice thereof shall have been given to the Company by the Agent,
for a period of 10 Business Days (and the Company, each Bank and each Agent
hereby agrees that an Event of Default under this subsection (d) shall be given
effect as if the defaulting Subsidiary were a party to this Agreement); or

         (e)      The Company or any Material Subsidiary shall fail to pay any
of its Debt (including any interest or premium thereon but excluding Debt
incurred under this Agreement) (i) under the CMS 2003 Credit Agreement, (ii)
under either of the Enterprises 2003 Credit Agreements, or (iii) otherwise
aggregating, in the case of the Company and each Restricted Subsidiary,
$6,000,000 or more or, in the case of Consumers, $25,000,000 or more, when due
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise) and such failure shall continue after the applicable grace period, if
any, specified in any agreement or instrument relating to such Debt; or any
other default under any agreement or instrument relating to any such Debt
(including any "amortization event" or event of like import in connection with
any Off-Balance Sheet Liabilities), or any other event, shall occur and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such default or event is (i) to accelerate, or
to permit the acceleration of, the maturity of such Debt; or any such Debt shall
be declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;
unless in each such case the obligee under or holder of such Debt shall have
waived in writing such circumstance so that such circumstance is no longer
continuing, or (ii) with respect to any such event occurring in connection with
any Off-Balance Sheet Liabilities aggregating $6,000,000 or more, to terminate
the reinvestment of collections or proceeds of receivables and related security
under any agreements or instruments related thereto (other than a termination
resulting solely from the request of the Company or its Subsidiaries); or

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

                                       46

<PAGE>

         (g)      Any judgment or order for the payment of money in excess of
$6,000,000 shall be rendered against the Company or Enterprises and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or

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

         (i)      Any "Event of Default" shall occur under and as defined in the
AIG Pledge Agreement as in effect on January 8, 2003 (and without giving effect
to any amendment or other modification thereto); or

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

         (k)      At any time, for any reason (except due to any failure by the
Agent to take any action on its part to be performed under applicable law in
order to maintain the perfection or priority of its security interest under the
Pledge Agreement), (i) the Agent shall fail to have, for the benefit of the
Banks, a perfected, first-priority security interest in Pledged Collateral, free
and clear of all other Liens, in an amount equal to or greater than 100.5% of
the Aggregate Outstanding Credit Exposure or (ii) the Company or Enterprises
seeks to render the Agent's security interest invalid, unenforceable or
unperfected.

         9.2      Remedies. If any Event of Default has occurred and is
continuing, then the Agent shall at the request, or may with the consent, of the
Majority Banks, upon notice to the Company (i) declare the Commitments and the
obligation and power of the LC Issuer to issue Facility LCs to be terminated or
suspended, whereupon the same shall forthwith terminate or be suspended, as the
case may be, (ii) declare the Obligations to be forthwith due and payable,
whereupon the Aggregate Outstanding Credit Exposure and all other Obligations
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Company, and/or (iii) in addition to the continuing right to demand
payment of all amounts payable under this agreement, exercise in respect of any
and all Pledged Collateral all of the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of New York and
in effect in any other jurisdiction in which collateral is located at that time;
provided that in the event of an actual or deemed entry of an order for relief
with respect to the Company or Enterprises under the Federal Bankruptcy Code,
(A) the Commitments and the obligation and power of the LC Issuer to issue
Facility LCs shall automatically be terminated and (B) the Obligations shall
automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the Company.

                                       47

<PAGE>

                                    ARTICLE X

                        WAIVERS, AMENDMENTS AND REMEDIES

         10.1     Amendments. Subject to the provisions of this Article X, the
Majority Banks (or the Agent with the consent in writing of the Majority Banks)
and the Company may enter into written agreements supplemental hereto for the
purpose of adding or modifying any provisions to the Credit Documents or
changing in any manner the rights of the Banks or the Company hereunder or
waiving any Event of Default hereunder, provided that no such supplemental
agreement shall, without the consent of all of the Banks:

         (a)      Extend the maturity of any Loan or reduce the principal amount
thereof, or extend the expiry date of any Facility LC to a date after the
Termination Date, or reduce the rate or extend the time of payment of interest
thereon or fees thereon or Reimbursement Obligations related thereto.

         (b)      Modify the percentage specified in the definition of Majority
Banks.

         (c)      Extend the Termination Date or increase the amount of the
Commitment of any Bank hereunder or the commitment to issue Facility LCs, or
permit the Company to assign its rights under this Agreement.

         (d)      Amend this Section 10.1.

         (e)      Make any change in an express right in this Agreement of a
single Bank to give its consent, make a request or give a notice.

No amendment of any provision of this Agreement relating to the Agent shall be
effective without the written consent of the Agent, and no amendment of any
provision relating to the LC Issuer shall be effective without the written
consent of the LC Issuer.

         10.2     Preservation of Rights. No delay or omission of the Banks, the
LC Issuer or the Agent to exercise any right under the Credit Documents shall
impair such right or be construed to be a waiver of any Default or Event of
Default or an acquiescence therein, and the making of a Credit Extension
notwithstanding the existence of a Default or Event of Default or the inability
of the Company to satisfy the conditions precedent to such Credit Extension
shall not constitute any waiver or acquiescence. Any single or partial exercise
of any such right shall not preclude other or further exercise thereof or the
exercise of any other right, and no waiver, amendment or other variation of the
terms, conditions or provisions of the Credit Documents whatsoever shall be
valid unless in writing signed by the Banks required pursuant to Section 10.1,
and then only to the extent in such writing specifically set forth. All remedies
contained in the Credit Documents or by law afforded shall be cumulative and all
shall be available to the Agent, the LC Issuer and the Banks until the
Obligations have been paid in full.

                                       48

<PAGE>

                                   ARTICLE XI

                              CONDITIONS PRECEDENT

         11.1     Initial Credit Extension. The Banks shall not be required to
make the initial Credit Extension hereunder unless the Company has furnished to
the Agent with sufficient copies for the Banks:

         (a)      Copies of the Restated Articles of Incorporation of each of
the Company and Enterprises, together with all amendments, certified by the
Secretary or an Assistant Secretary of the applicable entity, and a certificate
of good standing, certified by the appropriate governmental officer in its
jurisdiction of incorporation.

         (b)      Copies, certified by the Secretary or an Assistant Secretary
of the applicable entity, of bylaws of each of the Company and Enterprises and
of Board of Directors' resolutions (and resolutions of other bodies, if any are
deemed necessary by counsel for any Bank) of each of the Company and Enterprises
authorizing the execution, delivery and performance of the Credit Documents to
which such entity is a party.

         (c)      An incumbency certificate from each of the Company and
Enterprises, executed by the Secretary or an Assistant Secretary of the
applicable entity, which shall identify by name and title and bear the original
or facsimile signature of the officers of such entity authorized to sign the
Credit Documents to which such entity is a party and, in the case of the
Company, the officers or other employees authorized to make borrowings and
request Facility LCs hereunder, upon which certificates the Banks shall be
entitled to rely until informed of any change in writing by the Company or
Enterprises, as applicable.

         (d)      A certificate, signed by a Designated Officer of the Company,
stating that on the Closing Date no Default or Event of Default has occurred and
is continuing.

         (e)      The Pledge Agreement signed by Enterprises, together with such
account control agreements and other agreements and documents as the Agent or
any Bank may reasonably request to create and perfect the security interest of
the Agent in all Pledged Collateral.

         (f)      Any Note requested by a Bank pursuant to Section 2.13 payable
to the order of each such requesting Bank.

         (g)      A favorable legal opinion of Michael D. VanHemert, Esq.,
Deputy General Counsel of the Company, as to the matters set forth in Exhibit B
and as to such other matters as the Agent may reasonably request. Such opinion
shall be addressed to the Agent and the Banks and shall be satisfactory in form
and substance to the Agent.

         (h)      Evidence satisfactory to the Agent that prior to or
concurrently with the initial Credit Extension, all non-contingent amounts owed
to Bank One in connection with the Existing Letters of Credit have been or will
be paid in full.

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<PAGE>

         (i)      Evidence, in form and substance satisfactory to the Agent,
that each of the Company and Enterprises has obtained all governmental
approvals, if any, necessary for it to enter into the Credit Documents to which
it is a party.

         (j)      Such other documents as any Bank or its counsel may have
reasonably requested.

         It shall be a further condition precedent to the making of the initial
Credit Extension hereunder that the Company shall have paid (i) to the Agent for
the account of the Banks the fees required to be paid on the Effective Date and
(ii) to the Agent and the Arranger the fees required to be paid to them pursuant
to the fee letter described in Section 13.12.

         11.2     Each Credit Extension. The Banks shall not be required to make
any Credit Extension unless on the date of such Credit Extension (i) no Default
or Event of Default exists, (ii) the representations and warranties contained in
Article V are true and correct as of such date, (iii) after giving effect to
such Credit Extension, the value of the Pledged Collateral will be equal to or
greater than 100.5% of the Aggregate Outstanding Credit Exposure and (iv) all
legal matters incident to the making of such Credit Extension are satisfactory
to the Banks and their counsel. Each Borrowing Notice and each
Issuance/Modification Request shall constitute a representation and warranty by
the Company that the conditions contained in subsections (i), (ii) and (iii)
above will be satisfied on the date of the requested Credit Extension. For the
avoidance of doubt, the conversion or continuation of an Advance shall not be
considered the making of a Credit Extension.

                                   ARTICLE XII

                               GENERAL PROVISIONS

         12.1     Successors and Assigns. (a) The terms and provisions of the
Credit Documents shall be binding upon and inure to the benefit of the Company
and the Banks and their respective successors and assigns, except that the
Company shall not have the right to assign its rights under the Credit
Documents. Any Bank may sell participations in all or a portion of its rights
and obligations under this Agreement pursuant to subsection (b) below and any
Bank may assign all or any part of its rights and obligations under this
Agreement pursuant to subsection (c) below.

         (b)      Any Bank may sell participations to one or more banks or other
entities (each a "Participant") in all or a portion of its rights and
obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and its Outstanding Credit Exposure), provided that
(i) such Bank's obligations under this Agreement (including its Commitment to
the Company hereunder) shall remain unchanged, (ii) such Bank shall remain
solely responsible to the other parties hereto for the performance of such
obligations, (iii) such Bank shall remain the holder of the Outstanding Credit
Exposure of such Bank for all purposes of this Agreement and (iv) the Company
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Each Bank shall retain
the sole right to approve, without the consent of any Participant, any
amendment, modification or waiver of any provision of the Credit Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which would require consent
of all of the Banks pursuant to the terms of Section 10.1 or of any other Credit

                                       50

<PAGE>

Document. The Company agrees that each Participant shall be deemed to have the
right of setoff provided in Section 12.10 in respect of its participating
interest in amounts owing under the Credit Documents to the same extent as if
the amount of its participating interest were owing directly to it as a Bank
under the Credit Documents, provided that each Bank shall retain the right of
setoff provided in Section 12.10 with respect to the amount of participating
interests sold to each Participant. The Banks agree to share with each
Participant, and each Participant, by exercising the right of setoff provided in
Section 12.10, agrees to share with each Bank, any amount received pursuant to
the exercise of its right of setoff, such amounts to be shared in accordance
with Section 12.10 as if each Participant were a Bank. The Company further
agrees that each Participant shall be entitled to the benefits of Sections 4.1,
4.3, 4.4 and 4.5 to the same extent as if it were a Bank and had acquired its
interest by assignment pursuant to Section 12.1(c), provided that (i) a
Participant shall not be entitled to receive any greater payment under Section
4.1, 4.3, 4.4 or 4.5 than the Bank who sold the participating interest to such
Participant would have received had it retained such interest for its own
account, unless the sale of such interest to such Participant is made with the
prior written consent of the Company, and (ii) any Participant not incorporated
under the laws of the United States of America or any State thereof agrees to
comply with the provisions of Section 4.5 to the same extent as if it were a
Bank.

         (c)      Any Bank may, in the ordinary course of its business and in
accordance with applicable law, at any time assign to one or more financial
institutions all or any part of its rights and obligations under this Agreement,
provided that (i) such Bank has received the Agent's and, so long as no Event of
Default exists, the Company's prior written consent to such assignment, which
consent shall not be unreasonably withheld, and (ii) the minimum principal
amount of any such assignment (other than assignments to a Federal Reserve Bank,
or to any other Bank or affiliate of such assigning Bank, or to any direct or
indirect contractual counterparties in swap agreements relating to the Loans to
the extent required in connection with the physical settlement of any Bank's
obligations pursuant thereto) shall be $5,000,000 (or such lesser amount
consented to by the Agent and, so long as no Event of Default shall be
continuing, the Company); provided that after giving effect to such assignment
the assigning Bank shall have a Commitment of not less than $5,000,000 (unless
otherwise consented to by the Agent and, so long as no Event of Default shall be
continuing, the Company). Notwithstanding the foregoing sentence, any Bank may
at any time, without the consent of the Company or the Agent, assign all or any
portion of its rights under this Agreement and any Note to (i) a Federal Reserve
Bank, provided that no such assignment shall release the transferor Bank from
its obligations hereunder; and (ii) any Bank or any affiliate of such assigning
Bank, provided that the creditworthiness of such affiliate (as determined in
accordance with customary standards of the banking industry) is no less than
that of the assigning Bank; and (iii) any direct or indirect contractual
counterparties in swap agreements relating to the Loans to the extent required
in connection with the physical settlement of any Bank's obligations pursuant
thereto.

         (d)      Any Bank may, in connection with any sale or participation or
proposed sale or participation pursuant to this Section 12.1, disclose to the
purchaser or participant or proposed purchaser or participant any information
relating to the Company furnished to such Bank by or on behalf of the Company,
provided that prior to any such disclosure of non-public information, the
purchaser or participant or proposed purchaser or participant (which purchaser
or participant is not an affiliate of a Bank) shall agree to preserve the
confidentiality of any confidential

                                       51

<PAGE>

information (except any such disclosure as may be required by law or regulatory
process) relating to the Company received by it from such Bank.

         (e)      Assignments under this Section 12.1 shall be made pursuant to
an agreement ("Assignment Agreement") substantially in the form of Exhibit D or
in such other form as may be agreed to by the parties thereto and shall not be
effective until a $3,500 fee has been paid to the Agent by the assignee, which
fee shall cover the cost of processing such assignment, provided that such fee
shall not be incurred in the event of an assignment by any Bank of all or a
portion of its rights under this Agreement and any Note to (i) a Federal Reserve
Bank or (ii) a Bank or an affiliate of the assigning Bank or (iii) to any direct
or indirect contractual counterparties in swap agreements relating to the Loans
to the extent required in connection with the physical settlement of any Bank's
obligations pursuant thereto.

         12.2     Survival of Representations. All representations and
warranties of the Company contained in this Agreement shall survive the making
of the Credit Extensions herein contemplated.

         12.3     Governmental Regulation. Anything contained in this Agreement
to the contrary notwithstanding, neither the LC Issuer nor any Bank shall be
obligated to extend credit to the Company in violation of any limitation or
prohibition provided by any applicable statute or regulation.

         12.4     Taxes. Any taxes (excluding income taxes) payable or ruled
payable by any Federal or State authority in respect of the execution of the
Credit Documents shall be paid by the Company, together with interest and
penalties, if any.

         12.5     Choice of Law. THE CREDIT DOCUMENTS SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS (INCLUDING, WITHOUT LIMITATION SECTION 5-1401
OF THE GENERAL OBLIGATIONS LAW OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO THE
LAW OF CONFLICTS) OF THE STATE OF NEW YORK, BUT GIVING EFFECT TO FEDERAL LAWS
APPLICABLE TO NATIONAL BANKS. THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE
NON-EXCLUSIVE JURISDICTION OF ANY UNITED STATES FEDERAL OR NEW YORK STATE COURT
SITTING IN NEW YORK, NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO ANY CREDIT DOCUMENT AND THE COMPANY HEREBY IRREVOCABLY AGREES THAT
ALL CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND
DETERMINED IN ANY SUCH COURT. THE COMPANY HEREBY WAIVES ANY RIGHT TO A JURY
TRIAL IN ANY ACTION OR ARISING HEREUNDER OR UNDER ANY CREDIT DOCUMENT.

         12.6     Headings. Section headings in the Credit Documents are for
convenience of reference only, and shall not govern the interpretation of any of
the provisions of the Credit Documents.

         12.7     Entire Agreement. The Credit Documents embody the entire
agreement and understanding between the Company, the LC Issuer, the Agent and
the Banks and supersede all

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<PAGE>

prior agreements and understandings between the Company, the LC Issuer, the
Agent and the Banks relating to the subject matter thereof (other than those
contained in the fee letter described in Section 13.12 which shall survive and
remain in full force and effect during the term of this Agreement).

         12.8     Expenses; Indemnification. The Company shall reimburse the
Agent and the Arranger for (a) any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Agent) paid or incurred by the Agent or the Arranger in
connection with the preparation, review, execution, delivery, syndication,
distribution (including via the internet), amendment and modification of the
Credit Documents and (b) any reasonable costs, internal charges and
out-of-pocket expenses (including reasonable attorneys' fees and time charges of
attorneys for the Agent) paid or incurred by the Agent or the Arranger on its
own behalf or on behalf of the LC Issuer or any Bank in connection with the
collection and enforcement of the Credit Documents. The Company further agrees
to indemnify the Agent, the Arranger, the LC Issuer and each Bank and their
respective directors, officers and employees against all losses, claims,
damages, penalties, judgments, liabilities and reasonable expenses (including
all material expenses of litigation or preparation therefor whether or not the
Agent, the Arranger, the LC Issuer or any Bank is a party thereto) which any of
them may pay or incur arising out of or relating to this Agreement, the other
Credit Documents, the transactions contemplated hereby or the direct or indirect
application or proposed application of the proceeds of any Credit Extension
hereunder, provided that the Company shall not be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Agent, the Arranger, the LC Issuer or any Bank. The
obligations of the Company under this Section shall survive the termination of
this Agreement.

         12.9     Severability of Provisions. Any provision in any Credit
Document that is held to be inoperative, unenforceable or invalid in any
jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or
invalid without affecting the remaining provisions in that jurisdiction or the
operation, enforceability or validity of that provision in any other
jurisdiction, and to this end the provisions of all Credit Documents are
declared to be severable.

         12.10    Setoff. In addition to, and without limitation of, any rights
of the Banks under applicable law, if the Company becomes insolvent, however
evidenced, or any Default or Event of Default occurs, any indebtedness from any
Bank to the Company (including all account balances, whether provisional or
final and whether or not collected or available) may be offset and applied
toward the payment of the Obligations owing to such Bank, whether or not the
Obligations, or any part hereof, shall then be due. The Company agrees that any
purchaser or participant under Section 12.1 may, to the fullest extent permitted
by law, exercise all its rights of payment with respect to such purchase or
participation as if it were the direct creditor of the Company in the amount of
such purchase or participation.

         12.11    Ratable Payments. If any Bank, whether by setoff or otherwise,
has payment made to it upon its Outstanding Credit Exposure in a greater
proportion than that received by any other Bank, such Bank agrees, promptly upon
demand, to purchase a portion of the Aggregate Outstanding Credit Exposure held
by the other Banks so that after such purchase each Bank will hold its Pro Rata
Share of the Aggregate Outstanding Credit Exposure. If any Bank, whether in
connection with setoff or amounts which might be subject to setoff or otherwise,
receives

                                       53

<PAGE>

collateral or other protection for its Obligations or such amounts which may be
subject to setoff, such Bank agrees, promptly upon demand, to take such action
necessary such that all Banks share in the benefits of such collateral ratably
in proportion to their respective Pro Rata Share of the Aggregate Outstanding
Credit Exposure. In case any such payment is disturbed by legal process, or
otherwise, appropriate further adjustments shall be made.

         12.12    Nonliability of Bank. The relationship between the Company, on
the one hand, and the Banks, the LC Issuer and the Agent, on the other hand,
shall be solely that of borrower and lender. Neither the Agent, the Arranger,
the LC Issuer nor any Bank shall have any fiduciary responsibilities to the
Company. Neither the Agent, the Arranger, the LC Issuer nor any Bank undertakes
any responsibility to the Company to review or inform the Company of any matter
in connection with any phase of the Company's business or operations. The
Company shall rely entirely upon its own judgment with respect to its business,
and any review, inspection, supervision or information supplied to the Company
by the Banks is for the protection of the Banks and neither the Company nor any
third party is entitled to rely thereon. The Company agrees that neither the
Agent, the Arranger, the LC Issuer nor any Bank shall have liability to the
Company (whether sounding in tort, contract or otherwise) for losses suffered by
the Company in connection with, arising out of, or in any way related to, the
transactions contemplated and the relationship established by the Credit
Documents, or any act, omission or event occurring in connection therewith,
unless it is determined in a final non-appealable judgment by a court of
competent jurisdiction that such losses resulted from the gross negligence or
willful misconduct of the party from which recovery is sought. Neither the
Agent, the Arranger, the LC Issuer nor any Bank shall have any liability with
respect to, and the Company hereby waives, releases and agrees not to sue for,
any special, indirect, consequential or punitive damages suffered by the Company
in connection with, arising out of, or in any way related to the Credit
Documents or the transactions contemplated thereby.

         12.13    Investment of Pledged Collateral. The Agent shall invest the
Pledged Collateral from time to time in such investments as Enterprises shall
reasonably request and are reasonably satisfactory to the Agent. Unless
otherwise agreed among the Company, Union Bank of California, N.A., Bank One and
the Agent, approximately 50% of such investments shall be maintained with Bank
One and approximately 50% of such investments shall be maintained with Union
Bank of California, N.A.

                                  ARTICLE XIII

                                    THE AGENT

         13.1     Appointment. Bank One, NA (Main Office - Chicago) is hereby
appointed Agent hereunder, and each of the Banks irrevocably authorizes the
Agent to act as the contractual representative on behalf of such Bank. The Agent
agrees to act as such upon the express conditions contained in this Article
XIII. The Agent shall not have a fiduciary relationship in respect of any Bank
by reason of this Agreement.

         13.2     Powers. The Agent shall have and may exercise such powers
hereunder as are specifically delegated to the Agent by the terms hereof,
together with such powers as are reasonably incidental thereto. The Agent shall
not have any implied duties to the Banks or any

                                       54

<PAGE>

obligation to the Banks to take any action hereunder except any action
specifically provided by this Agreement to be taken by the Agent.

         13.3     General Immunity. Neither the Agent nor any of its directors,
officers, agents or employees shall be liable to the Banks or any Bank for any
action taken or omitted to be taken by it or them hereunder or in connection
herewith except for its or their own gross negligence or willful misconduct.

         13.4     No Responsibility for Loans, Recitals, Etc. The Agent shall
not be responsible to the Banks for any recitals, reports, statements,
warranties or representations herein or in any Credit Document or be bound to
ascertain or inquire as to the performance or observance of any of the terms of
this Agreement.

         13.5     Action on Instructions of Banks. The Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder and under
any other Credit Document in accordance with written instructions signed by the
Majority Banks (or all of the Banks if required by Section 10.1), and such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all of the Banks. The Banks hereby acknowledge that the Agent shall
be under no duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement or any other Credit Document unless
it shall be requested in writing to do so by the Majority Banks. The Agent shall
be fully justified in failing or refusing to take any action hereunder and under
any other Credit Document unless it shall first be indemnified to its
satisfaction by the Banks pro rata against any and all liability, cost and
expense that it may incur by reason of taking or continuing to take any such
action.

         13.6     Employment of Agents and Counsel. The Agent may execute any of
its duties as Agent hereunder by or through employees, agents and
attorneys-in-fact and shall not be answerable to the Banks, except as to money
or securities received by it or its authorized agents, for the default or
misconduct of any such agents or attorneys-in-fact selected by it with
reasonable care. The Agent shall be entitled to advice of counsel concerning all
matters pertaining to the agency hereby created and its duties hereunder.

         13.7     Reliance on Documents; Counsel. The Agent shall be entitled to
rely upon any notice, consent, certificate, affidavit, letter, telegram,
statement, paper or document believed by it to be genuine and correct and to
have been signed or sent by the proper person or persons, and, in respect to
legal matters, upon the opinion of counsel selected by the Agent, which counsel
may be employees of the Agent.

         13.8     Agent's Reimbursement and Indemnification. The Banks agree to
reimburse and indemnify the Agent ratably in proportion to their respective
Commitments (i) for any amounts not reimbursed by the Company for which the
Agent is entitled to reimbursement by the Company under the Credit Documents,
(ii) for any other expenses reasonably incurred by the Agent on behalf of the
Banks, in connection with the preparation, execution, delivery, administration
and enforcement of the Credit Documents, and for which the Agent is not entitled
to reimbursement by the Company under the Credit Documents, and (iii) for any
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind and nature whatsoever which may be
imposed on, incurred by or

                                       55

<PAGE>

asserted against the Agent in any way relating to or arising out of this
Agreement or any other document delivered in connection with this Agreement or
the transactions contemplated hereby or the enforcement of any of the terms
hereof or of any such other documents, and for which the Agent is not entitled
to reimbursement by the Company under the Credit Documents, provided that no
Bank shall be liable for any of the foregoing to the extent they arise from the
gross negligence or willful misconduct of the Agent.

         13.9     Rights as a Bank. With respect to its Commitment and any
Credit Extension made by it, the Agent shall have the same rights and powers
hereunder as any Bank and may exercise the same as though it were not the Agent,
and the term "Bank" or "Banks" shall, unless the context otherwise indicates,
include Bank One in its individual capacity. The Agent may accept deposits from,
lend money to, and generally engage in any kind of banking or trust business
with the Company or any Subsidiary as if it were not the Agent.

         13.10    Bank Credit Decision. Each Bank acknowledges that it has,
independently and without reliance upon the Agent or any other Bank and based on
the financial statements prepared by the Company and such other documents and
information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Bank also acknowledges that it will,
independently and without reliance upon the Agent or any other Bank and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement.

         13.11    Successor Agent. The Agent may resign at any time by giving
written notice thereof to the Banks and the Company, and the Agent may be
removed at any time with or without cause by written notice received by the
Agent from the Majority Banks. Upon any such resignation or removal, the
Majority Banks shall have the right to appoint, on behalf of the Banks, a
successor Agent. If no successor Agent shall have been so appointed by the
Majority Banks and shall have accepted such appointment within thirty days after
the retiring Agent's giving notice of resignation, then the retiring Agent may
appoint, on behalf of the Banks, a successor Agent. Such successor Agent shall
be a commercial bank having capital and retained earnings of at least
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring Agent,
and the retiring Agent shall be discharged from its duties and obligations
hereunder. After any retiring Agent's resignation hereunder as Agent, the
provisions of this Article XIII shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting as
the Agent hereunder.

         13.12    Agent and Arranger Fees. The Company agrees to pay to the
Agent, the LC Issuer and Banc One Capital Markets, Inc. (the "Arranger"), for
their respective accounts, the fees agreed to by the Company, the Agent, the LC
Issuer and the Arranger pursuant to the letter agreement dated May 21, 2003, or
as otherwise agreed from time to time.

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<PAGE>

                                   ARTICLE XIV

                                     NOTICES

         14.1     Giving Notice. Except as otherwise permitted by Section 2.8
with respect to Borrowing Notices, all notices, requests and other
communications to any party hereunder shall be in writing (including electronic
transmission, facsimile transmission or similar writing) and shall be given to
such party: (x) in the case of the Company or the Agent or the LC Issuer, at its
address or facsimile number set forth on the signature pages hereof, (y) in the
case of any Bank, at its address or facsimile number set forth below its
signature hereto or (z) in the case of any party, at such other address or
facsimile number as such party may hereafter specify for the purpose by notice
to the Agent and the Company in accordance with the provisions of this Section
14.1. Each such notice, request or other communication shall be effective (i) if
given by facsimile transmission, when transmitted to the facsimile number
specified in this Section and confirmation of receipt is received, (ii) if given
by mail, 72 hours after such communication is deposited in the mails with first
class postage prepaid, addressed as aforesaid, or (iii) if given by any other
means, when delivered (or, in the case of electronic transmission, received) at
the address specified in this Section; provided that notices to the Agent under
Article II shall not be effective until received.

         14.2     Change of Address. The Company, the Agent and any Bank may
each change the address for service of notice upon it by a notice in writing to
the other parties hereto.

                                   ARTICLE XV

                                  COUNTERPARTS

         This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Company, the
Agent, the LC Issuer and the Banks and each party has notified the Agent by
facsimile or telephone that it has taken such action.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       57

<PAGE>

         IN WITNESS WHEREOF, the Company, the Banks, the LC Issuer and the Agent
have executed this Agreement as of the date first above written.

                                        CMS ENERGY CORPORATION

                                        By: /s/ Paul Stadnikia
                                            -----------------------------------
                                            Name: Paul Stadnikia
                                            Title: Assistant Treasurer

                                        One Energy Plaza, EP11-291
                                        Jackson, Michigan 49201

                                        Attention: Treasurer
                                        Facsimile No.: (517) 788-1409
                                        Confirmation (Phone) No: (517) 788-7090
                                        E-Mail Address: bsburger@cmsenergy.com

                                              Signature Page to Credit Agreement

                                       58

<PAGE>

                                        BANK ONE, NA (MAIN OFFICE - CHICAGO),
                                        Individually and as Agent and as
                                        LC Issuer

                                        By: /s/ Jane Beck
                                            -------------------------------
                                            Name: Jane Beck
                                            Title: Director

                                        ADDRESS:
                                        Bank One Plaza
                                        Chicago, Illinois 60670
                                        Attention:
                                        Facsimile No.: (312) 732-
                                        Confirmation (Phone) No: (312) 732-
                                        E-Mail Address:

                                              Signature Page to Credit Agreement

                                       59

<PAGE>

                                        UNION BANK OF CALIFORNIA, N.A.
                                        Individually and as Documentation Agent

                                        By: /s/ Dennis G. Blank
                                            -----------------------------------
                                            Name: Dennis G. Blank
                                            Title: Vice President

                                        ADDRESS:
                                        445 South Figueroa Street
                                        15th Floor
                                        Los Angeles, California  90071
                                        Attention:  Kevin M. Zitar
                                        Facsimile No.:  (    )   -
                                        Confirmation (Phone) No: (213) 236-5503
                                        E-Mail Address: Kevin.Zitar@uboc.com

                                              Signature Page to Credit Agreement

                                       60

<PAGE>

                                    EXHIBIT A

                                      NOTE

                                                                          [Date]

         CMS Energy Corporation, a Michigan corporation (the "Company"),
promises to pay to the order of ____________________________________ (the
"Bank") the aggregate unpaid principal amount of all Loans made by the Bank to
the Company pursuant to Section 2.1 of the Agreement (as hereinafter defined),
in immediately available funds at the main office of Bank One, NA in Chicago,
Illinois, as Agent, together with interest on the unpaid principal amount hereof
at the rates and on the dates set forth in the Agreement. The Company shall pay
the principal of and accrued and unpaid interest on the Loans in full on the
Termination Date.

         The Bank shall, and is hereby authorized to, record on the schedule
attached hereto, or to otherwise record in accordance with its usual practice,
the date and amount of each Loan and the date and amount of each principal
payment hereunder.

         This Note is one of the Notes issued pursuant to, and is entitled to
the benefits of, the Credit Agreement dated as of May 19, 2003 (which, as it may
be amended or modified and in effect from time to time, is herein called the
"Agreement"), among the Company, the lenders party thereto, including the Bank,
and Bank One, NA, as Agent, to which Agreement reference is hereby made for a
statement of the terms and conditions governing this Note, including the terms
and conditions under which this Note may be prepaid or its maturity date
accelerated. Capitalized terms used herein and not otherwise defined herein are
used with the meanings attributed to them in the Agreement.

                                        CMS ENERGY CORPORATION

                                        By:_____________________________________
                                        Print Name:_____________________________
                                        Title:__________________________________

<PAGE>

                   SCHEDULE OF LOANS AND PAYMENTS OF PRINCIPAL
                                       TO
                         NOTE OF CMS ENERGY CORPORATION,
                               DATED MAY __, 2003,

<TABLE>
<CAPTION>
              Principal        Maturity     Principal
              Amount of      of Interest      Amount           Unpaid
Date            Loan            Period         Paid            Balance
- ----            ----            ------         ----            -------
<S>           <C>            <C>            <C>                <C>
</TABLE>

<PAGE>

                                    EXHIBIT B

                             REQUIRED OPINIONS FROM

                      DEPUTY GENERAL COUNSEL OF THE COMPANY

1.       The Company is a corporation duly incorporated, validly existing and in
         good standing under the laws of the State of Michigan.

2.       The execution and delivery of the Company and Enterprises of the Credit
         Documents to which it is a party and the performance by the Company and
         Enterprises of their respective obligations thereunder have been duly
         authorized by all necessary corporate action and proceedings on the
         part of the Company and Enterprises and will not:

                           (a)      contravene Restated Articles of
                  Incorporation, as amended, or bylaws of the Company or the
                  Restated Articles of Incorporation, as amended, or bylaws of
                  Enterprises;

                           (b)      contravene any law or any contractual
                  restriction imposed by any indenture or any other agreement or
                  instrument evidencing or governing indebtedness for borrowed
                  money of the Company or Enterprises; or

                           (c)      result in or require the creation of any
                  Lien upon or with respect to any of the properties of the
                  Company or Enterprises, except the security interest in favor
                  of the Agent under the Pledge Agreement.

3.       Each Credit Document to which the Company or Enterprises is a party
         constitutes a legal, valid and binding obligation of the Company or
         Enterprises, as applicable, enforceable against the Company or
         Enterprises, as applicable, in accordance with its terms, subject to
         (a) the effect of applicable bankruptcy, insolvency, reorganization,
         moratorium or other similar laws affecting the enforcement of
         creditors' rights generally and (b) the application of general
         principles of equity (regardless of whether considered in a proceeding
         in equity or at law).

4.       Each of the Company and Enterprises has duly executed and delivered
         each Credit Document to which it is a party.

5.       To the best of my knowledge, there is no pending or threatened action
         or proceeding against the Company or any of its Consolidated
         Subsidiaries before any court, governmental agency or arbitrator
         (except (i) to the extent described in the Company's annual report on
         Form 10-K/A for the year ended December 31, 2002 as filed with the SEC,
         and (ii) such other similar actions, suits and proceedings predicated
         on the occurrence of the same events giving rise to any actions, suits
         and proceedings described in the reports referred to in clause (i) of
         this paragraph 4) which might reasonably be expected to materially
         adversely affect the financial condition or results of operations of
         the Company and its Consolidated Subsidiaries, taken as a whole, or
         that would materially adversely affect the ability of the Company or
         Enterprises

<PAGE>

         to perform its obligations under any Credit Document to which it is a
         party. To the best of my knowledge, there is no litigation challenging
         the validity or the enforceability of any of the Credit Documents.

6.       No authorization or approval or other action by, and no notice to or
         filing with, any governmental authority or regulatory body is required
         for the due execution, delivery and performance by the Company or
         Enterprises of any Credit Document.

7.       The Company is not an "investment company" or a company "controlled" by
         an "investment company" as such terms are defined in the Investment
         Company Act of 1940, as amended.

8.       The Company is not a registered "holding company" or a "subsidiary" or
         an "affiliate" of a registered "holding company", as such terms are
         defined in the Public Utility Holding Company Act of 1935.

9.       In a properly presented case, a Michigan court or a federal court
         applying Michigan choice of law rules should give effect to the choice
         of law provisions of the Agreement and should hold that the Agreement
         is to be governed by the laws of the State of New York rather than the
         laws of the State of Michigan, except in the case of those provisions
         set forth in the Agreement the enforcement of which would contravene a
         fundamental policy of the State of Michigan. In the course of our
         review of the Agreement, nothing has come to my attention to indicate
         that any of such provisions would do so. Notwithstanding the foregoing,
         even if a Michigan court or a federal court holds that the Agreement is
         to be governed by the laws of the State of Michigan, the Agreement
         constitutes a legal, valid and binding obligation of the Company,
         enforceable under Michigan law (including usury provisions) against the
         Company in accordance with its terms, subject to (a) the effect of
         applicable bankruptcy, insolvency, reorganization, moratorium or other
         similar laws affecting the enforcement of creditors' rights generally
         and (b) the application of general principles of equity (regardless of
         whether considered in a proceeding in equity or at law).

<PAGE>

                                    EXHIBIT C

                         FORM OF COMPLIANCE CERTIFICATE

         I, _________________, ______________ of CMS Energy Corporation, a
Michigan corporation (the "Company"), DO HEREBY CERTIFY in connection with the
Credit Agreement dated as of May 19, 2003 (the "Credit Agreement"; the terms
defined therein being used herein as so defined) among the Company, various
financial institutions and Bank One, NA (Main Office - Chicago), as Agent, that:

I.       Section 6.9 of the Credit Agreement provides that the Company shall
         maintain a consolidated leverage ratio of not greater than 7.00 to 1.0.

         The following calculations are made in accordance with Section 6.9 and
are correct and accurate as of _____________, 200__:

A.       CONSOLIDATED DEBT:

         (a)     Debt of Company and Consolidated Subsidiaries            $
                 (excluding Panhandle and Subsidiaries)

minus    (b)     Support Obligations described in clause (iv) or (v)      $
                 of the definition of Support Obligations

minus    (c)     Junior Subordinated Debt owned by Hybrid Preferred       $
                 Securities Subsidiaries

minus    (d)     Subordinated guarantees provided by the Company with     $
                 respect to Hybrid Preferred Securities

minus    (e)     Agreed upon percentage of Net Proceeds from issuance     $
                 of hybrid debt/equity securities (other than Junior
                 Subordinated Debt and Hybrid Preferred Securities)

plus     (f)     Specified Support Obligations provided by the            $
                 Company in respect of obligations of MS&T

minus    (g)     Project Finance Debt of the Company or any               $
                 Consolidated Subsidiary

minus    (h)     Principal amount of any Securitized Bonds                $

                                                   TOTAL                  $
<PAGE>


B.     CONSOLIDATED EBITDA:

       (a)   Pretax Operating Income of the Company and its       $
             Subsidiaries

plus   (b)   Depreciation, depletion and amortization             $

plus   (c)   Non-cash write-offs and write-downs contained in     $
             the Company's Pretax Operating Income, including
             write-offs or write-downs related to the sale of
             assets, impairment of assets and loss on contracts

minus  (d)   Revenues of Consumers dedicated to repayment of      $
             Securitized Bonds

                                                   TOTAL          $
C.     CONSOLIDATED LEVERAGE RATIO:                                  ___ TO 1.00
       (TOTAL OF A DIVIDED BY TOTAL OF B)

II.    Section 6.10 of the Credit Agreement provides that the Company shall
       maintain a cash dividend coverage ratio of not less than 1.20 to 1.0.

       The following calculations are made in accordance with Section 6.10 and
       are correct and accurate as of _____________, 200__:

A.     DIVIDEND INCOME:

       (a)     Cash Dividend Income                                     $

plus   (b)     25% of Equity Distributions received by the Company      $
               (up to $10,000,000)
                                                     TOTAL              $



<PAGE>
B.     INTEREST EXPENSE:

       (a)   Interest expense (excluding arrangement,           $
             underwriting and similar fees payable in
             connection with the Agreement, CMS 2003 Credit
             Agreement and Enterprises 2003 Credit Agreements)

minus  (b)   Cash interest income received by the Company and   $
             its Subsidiaries from Persons other than the
             Company or any of its Subsidiaries

minus  (c)   Amounts received by the Company from Subsidiaries  $
             and Affiliates as reimbursement of interest
             expense and commitment, guaranty and letter
             of credit charges of the Company to such
             Subsidiary or Affiliate

                                                   TOTAL        $

C.     CASH DIVIDEND COVERAGE RATIO:                               _____ TO 1.00

       (TOTAL OF A DIVIDED BY TOTAL OF B)

       IN WITNESS WHEREOF, I have signed this Certificate this ___ day
         of _________, ___.


<PAGE>

                                    EXHIBIT D

                       ASSIGNMENT AND ASSUMPTION AGREEMENT

         This Assignment and Assumption (the "Assignment and Assumption") is
dated as of the Effective Date set forth below and is entered into by and
between [Insert name of Assignor] (the "Assignor") and [Insert name of Assignee]
(the "Assignee"). Capitalized terms used but not defined herein shall have the
meanings given to them in the Credit Agreement identified below (as amended, the
"Credit Agreement"), receipt of a copy of which is hereby acknowledged by the
Assignee. The Terms and Conditions set forth in Annex 1 attached hereto are
hereby agreed to and incorporated herein by reference and made a part of this
Assignment and Assumption as if set forth herein in full.

         For an agreed consideration, the Assignor hereby irrevocably sells and
assigns to the Assignee, and the Assignee hereby irrevocably purchases and
assumes from the Assignor, subject to and in accordance with the Standard Terms
and Conditions and the Credit Agreement, as of the Effective Date inserted by
the Agent as contemplated below, the interest in and to all of the Assignor's
rights and obligations in its capacity as a Bank under the Credit Agreement and
any other documents or instruments delivered pursuant thereto that represents
the amount and percentage interest identified below of all of the Assignor's
outstanding rights and obligations under the respective facilities identified
below (including any letters of credit, guaranties and swingline loans included
in such facilities and, to the extent permitted to be assigned under applicable
law, all claims (including contract claims, tort claims, malpractice claims,
statutory claims and all other claims at law or in equity), suits, causes of
action and any other right of the Assignor against any Person whether known or
unknown arising under or in connection with the Credit Agreement, any other
documents or instruments delivered pursuant thereto or the loan transactions
governed thereby) (the "Assigned Interest"). Such sale and assignment is without
recourse to the Assignor and, except as expressly provided in this Assignment
and Assumption, without representation or warranty by the Assignor.

1.       Assignor:________________________________________________

2.       Assignee: _______________________________________________ [and is an
      affiliate of Assignor]

3.       Borrower: CMS ENERGY CORPORATION

4.       Agent: Bank One, NA, as the Agent under the Credit Agreement.

5.       Credit Agreement: The Credit Agreement dated as of May 19, 2003 among
CMS Energy Corporation, the Banks party thereto, and Bank One, NA, as Agent.


                                      D-1

<PAGE>
6.       Assigned Interest:

<TABLE>
<CAPTION>
                     Aggregate Amount of
                   Commitment/ Outstanding     Amount of Commitment/        Percentage Assigned of
                   Credit Exposure for all  Outstanding Credit Exposure  Commitment/ Outstanding Credit
Facility Assigned         Banks*                    Assigned*                      Exposure(2)
- -------------------------------------------------------------------------------------------------------
<S>                <C>                      <C>                          <C>
____________       $                        $                                       _______%
- -------------------------------------------------------------------------------------------------------
____________       $                        $                                       _______%
- -------------------------------------------------------------------------------------------------------
____________       $                        $                                       _______%
- -------------------------------------------------------------------------------------------------------
</TABLE>

7. Trade Date:________________________________________ (3)

Effective Date: ____________________, 20__ TO BE INSERTED BY AGENT AND WHICH
SHALL BE THE EFFECTIVE DATE OF RECORDATION OF TRANSFER BY THE AGENT.]

         The terms set forth in this Assignment and Assumption are hereby agreed
to:

                                            ASSIGNOR

                                            [NAME OF ASSIGNOR]

                                            By:_________________________________
                                                     Title:

                                            ASSIGNEE

                                            [NAME OF ASSIGNEE]

                                            By:_________________________________
                                                     Title:

[Consented to and](4) Accepted:
BANK ONE, NA, as Agent

By:_________________________________________
Title:

[Consented to:](5)
[NAME OF RELEVANT PARTY]

By:_________________________________________
Title:

- -------------------
*Amount to be adjusted by the counterparties to take into account any payments
or prepayments made between the Trade Date and the Effective Date.

(2) Set forth, to at least 9 decimals, as a percentage of the Commitment/Loans
of all Banks thereunder.

(3) Insert if satisfaction of minimum amounts is to be determined as of the
Trade Date.

(4) To be added only if the consent of the Agent is required by the terms of the
Credit Agreement.

(5) To be added only if the consent of the Company and/or other parties (e.g. LC
Issuer) is required by the terms of the Credit Agreement.

<PAGE>

                                     ANNEX 1
                            TERMS AND CONDITIONS FOR
                            ASSIGNMENT AND ASSUMPTION

                  1. Representations and Warranties.

                  1.1 Assignor. The Assignor represents and warrants that (i) it
is the legal and beneficial owner of the Assigned Interest, (ii) the Assigned
Interest is free and clear of any lien, encumbrance or other adverse claim and
(iii) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby. Neither the Assignor nor any of its officers,
directors, employees, agents or attorneys shall be responsible for (i) any
statements, warranties or representations made in or in connection with the
Credit Agreement or any other Credit Document, (ii) the execution, legality,
validity, enforceability, genuineness, sufficiency, perfection, priority,
collectibility, or value of the Credit Documents or any collateral thereunder,
(iii) the financial condition of the Company, any of its Subsidiaries or
Affiliates or any other Person obligated in respect of any Credit Document, (iv)
the performance or observance by the Company, any of its Subsidiaries or
Affiliates or any other Person of any of their respective obligations under any
Credit Document, (v) inspecting any of the property, books or records of the
Company, or (vi) any mistake, error of judgment, or action taken or omitted to
be taken in connection with the Credit Extensions or the Credit Documents.

                  1.2. Assignee. The Assignee (a) represents and warrants that
(i) it has full power and authority, and has taken all action necessary, to
execute and deliver this Assignment and Assumption and to consummate the
transactions contemplated hereby and to become a Bank under the Credit
Agreement, (ii) from and after the Effective Date, it shall be bound by the
provisions of the Credit Agreement as a Bank thereunder and, to the extent of
the Assigned Interest, shall have the obligations of a Bank thereunder, (iii)
agrees that its payment instructions and notice instructions are as set forth in
Schedule 1 to this Assignment and Assumption, (iv) confirms that none of the
funds, monies, assets or other consideration being used to make the purchase and
assumption hereunder are "plan assets" as defined under ERISA and that its
rights, benefits and interests in and under the Credit Documents will not be
"plan assets" under ERISA, (v) agrees to indemnify and hold the Assignor
harmless against all losses, costs and expenses (including reasonable attorneys'
fees) and liabilities incurred by the Assignor in connection with or arising in
any manner from the Assignee's non-performance of the obligations assumed under
this Assignment and Assumption, (vi) it has received a copy of the Credit
Agreement, together with copies of financial statements and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment and Assumption and to purchase the
Assigned Interest on the basis of which it has made such analysis and decision
independently and without reliance on the Agent or any other Bank, and (vii)
attached as Schedule 1 to this Assignment and Assumption is any documentation
required to be delivered by the Assignee with respect to its tax status pursuant
to the terms of the Credit Agreement, duly completed and executed by the
Assignee and (b) agrees that (i) it will, independently and without reliance on
the Agent, the Assignor or any other Bank, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Credit Documents, and
(ii) it will

                                    Annex 1-1

<PAGE>

perform in accordance with their terms all of the obligations which by the terms
of the Credit Documents are required to be performed by it as a Bank.

                  2. Payments. The Assignee shall pay the Assignor, on the
Effective Date, the amount agreed to by the Assignor and the Assignee. From and
after the Effective Date, the Agent shall make all payments in respect of the
Assigned Interest (including payments of principal, interest, Reimbursement
Obligations, fees and other amounts) to the Assignor for amounts which have
accrued to but excluding the Effective Date and to the Assignee for amounts
which have accrued from and after the Effective Date.

                  3. General Provisions. This Assignment and Assumption shall be
binding upon, and inure to the benefit of, the parties hereto and their
respective successors and assigns. This Assignment and Assumption may be
executed in any number of counterparts, which together shall constitute one
instrument. Delivery of an executed counterpart of a signature page of this
Assignment and Assumption by telecopy shall be effective as delivery of a
manually executed counterpart of this Assignment and Assumption. This Assignment
and Assumption shall be governed by, and construed in accordance with, the law
of the State of Illinois.

                                    Annex 1-2

<PAGE>

                                    EXHIBIT E

                            FORM OF PLEDGE AGREEMENT

                                PLEDGE AGREEMENT

         This Pledge Agreement (this "Pledge Agreement") dated as of May __,
2003 is made by CMS Enterprises Company (the "Pledgor"), in favor of Bank One,
NA, as agent under the Credit Agreement referred to below (in such capacity, the
"Administrative Agent").

                              W I T N E S S E T H:

         WHEREAS, CMS Energy Corporation (the "Company"), various financial
institutions and the Administrative Agent have entered into a Credit Agreement
dated as of May __, 2003 (the "Credit Agreement"; capitalized terms used but not
defined here have the respective meanings ascribed to such terms in the Credit
Agreement);

         WHEREAS, pursuant to the Credit Agreement, the Company may obtain funds
to make loans or advances to, or obtain letters of credit to support obligations
of, the Pledgor and/or one or more of the Pledgor's Subsidiaries;

         WHEREAS, to secure payment by the Company of all Obligations, the
Pledgor has agreed to pledge certain collateral to the Administrative Agent,
including certain investments previously pledged to Bank One, NA, in its
individual capacity pursuant to an Amended and Restated Pledge Agreement between
the Pledgor and Bank One, NA dated as of April 30, 2003;

         NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Pledgor and the Administrative
Agent agree as follows:

         1.       The term "Collateral" means (a) all shares of the One Group
Institutional Prime Money Market Fund, Account #701121622 (the "Bank One
Account") held at State Street Bank and Trust Company, (b) Account #4430001049,
titled "Bank One, NA, as Administrative Agent, f/b/o CMS Enterprises Company"
and maintained with Union Bank of California, N.A. (the "UBOC Account" and,
together with the Bank One Account, each an "Account" and collectively the
"Accounts") and all funds deposited therein and interest thereon and (c) all
investment property, securities entitlements, commodity accounts, commodities,
instruments, investments, cash, other funds and other assets of any nature and
description at any time held in or credited to either Account, together with all
substitutions, replacements, additions, proceeds, products and supporting
obligations of or related to the foregoing. The foregoing grant also includes
any stock rights, stock dividends, liquidating dividends, new securities and
other property to which the Pledgor may become entitled because it owns any of
the property described above. Any securities, investment property or other
property of the Pledgor at any time in the custody, possession or control of the
Administrative Agent or any Bank shall also constitute Collateral unless the
Administrative Agent or such Bank holds such property solely in a fiduciary
capacity.

<PAGE>

         2.       To secure the prompt and complete payment of all Obligations,
the Pledgor hereby pledges, assigns, delivers and sets over to the
Administrative Agent, and hereby grants to the Administrative Agent a security
interest in, all of the Collateral and all proceeds thereof.

         3.       The Pledgor agrees to execute and deliver from time to time
such documents and instruments, and take such other actions, as are necessary or
appropriate to ensure that the Administrative Agent has a first perfected
security interest in the Collateral to secure the Obligations (and, without
limiting the foregoing, the Pledgor hereby authorizes the Administrative Agent
to file, at the Pledgor's expense, financing statements, continuations thereof
and similar documents in any public office reasonably deemed appropriate by the
Administrative Agent).

         4.       (a) If any Event of Default has occurred and is continuing,
the Administrative Agent may: (i) require all interest and dividends on, and
other cash proceeds of, the Collateral to be deposited in a special non-interest
bearing cash collateral account with the Administrative Agent or any designee
thereof and/or (ii) at its option, apply any of the collected balances in such
cash collateral account to the payment of the Obligations, whether or not the
Obligations shall then be due, or hold such cash collateral account as further
security for the Obligations. The Pledgor shall have no control whatsoever over
any such cash collateral account and hereby grants to the Administrative Agent a
security interest in each such cash collateral account if and when created.

                  (b)      If the Pledgor shall become entitled to receive or
shall receive any instrument or deposit (whether certificated or uncertificated)
in substitution or exchange for any of the Collateral, the Pledgor agrees to
accept the same as the Administrative Agent's agent and to hold the same in
trust for the Administrative Agent and to deliver the same forthwith to the
Administrative Agent in the exact form received, with the endorsement of the
Pledgor when necessary, to be held by the Administrative Agent, subject to the
terms hereof, as further security for the Obligations.

         5.       If any amount payable by the Company under or in connection
with the Credit Agreement is not paid when due (by acceleration or otherwise),
then the Administrative Agent shall have the right, without any notice, to
forthwith appropriate and realize upon the Collateral, or any part thereof. Such
realization may include (a) the redemption of shares in the Bank One Account
and/or (b) the withdrawal of funds from the UBOC Account, and the net proceeds
of any such redemption and/or withdrawal (which, in the aggregate, shall not
exceed the total amount of the Obligations) shall be forwarded directly to the
Administrative Agent for application to the Obligations as provided below. If,
for any reason, the Administrative Agent is unable or elects not to effect such
a redemption or withdrawal, the Administrative Agent may avail itself of any and
all other rights and remedies provided by any law or this Pledge Agreement,
including but not limited to the rights and remedies of a secured party under
the Uniform Commercial Code as in effect from time to time in the State of New
York. The Pledgor agrees and acknowledges that, as a result of applicable
securities laws, the Administrative Agent may not be able to effect a public
sale of the Collateral, and sales at a private sale may be on terms and at a
price less favorable than if the Collateral were sold at a public sale. The
Pledgor agrees that all private sales made under these circumstances shall be
construed to have been made in a commercially reasonable manner. The
Administrative Agent's compliance with any applicable state or federal law
requirement in connection with the disposition of the Collateral will

<PAGE>
not adversely affect the commercial reasonableness of any sale or other
disposition of the Collateral. If the Pledgor is entitled to any notice, that
requirement will be met if the Administrative Agent sends notice at least ten
(10) days prior to the date of the sale, disposition or other event requiring
notice, and such notice shall be deemed commercially reasonable.

         The proceeds of any appropriation of or realization upon the Collateral
shall be applied first, to the costs and expenses of every kind (including,
without limitation, the fees and expenses of outside and in-house counsel to the
Administrative Agent) incurred by the Administrative Agent in connection with
the safekeeping or liquidation of the Collateral and the collection and
enforcement of the Obligations, second, to payment of any accrued and unpaid
interest and fees on the Obligations, third, to payment of the principal of the
Obligations and, then, to the Pledgor or any other party entitled thereto under
applicable law.

         6.       The Pledgor represents and warrants that (a) as of the date
hereof it is the direct and beneficial owner of all of the Collateral, free and
clear of any Lien except for the security interest granted to the Administrative
Agent hereunder, (b) this Pledge Agreement creates a valid security interest in
favor of the Administrative Agent in all of the Collateral and (c) the
Administrative Agent has a perfected first-priority security interest in all
Collateral in the Bank One Account and, upon the deposit of funds therein as
contemplated by the Credit Agreement, the Administrative Agent will have a
perfected first-priority security interest in all Collateral in the UBOC
Account, in each case subject to no other Liens.

         7.       (a) The Pledgor covenants and agrees that so long as any
Obligations are unpaid, any Facility LC is outstanding or any Bank has any
Commitment, the Pledgor will not (i) liquidate, withdraw or otherwise dispose of
any of the Collateral (except as permitted pursuant to clause (c) below) or (ii)
create, incur or permit to exist any Lien on any of the Collateral other than
the security interest in favor of the Administrative Agent created hereby.

                  (b)      The Pledgor warrants and will defend the right, title
and security interest of the Administrative Agent in and to the Collateral
against the claims of any other Person.

                  (c)      The Pledgor covenants and agrees that so long as any
Obligations are unpaid, any Facility LC is outstanding or any Bank has any
Commitment, the amount of the Collateral shall at all times be equal to or
exceed 100.5% of the stated amount of the undrawn and unexpired Facility LCs
(the "Required Amount"). The Administrative Agent shall at all times have the
right to require that the Pledgor deliver to the Administrative Agent (for
deposit in the Accounts) additional Collateral so that the amount of the
Collateral shall not be less than the Required Amount. The Administrative Agent
agrees that, so long as no Default or Event of Default exists, it will from time
to time, upon written request of the Pledgor, release to the Pledgor any of the
Collateral in excess of the Required Amount.

         8.       No course of dealing between the Pledgor and the
Administrative Agent or any Bank, nor any failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent or any Bank, any right,
power or privilege hereunder or under the Credit Agreement or any other Credit
Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or thereunder preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies

<PAGE>
herein provided and provided in the other Credit Documents and in all other
agreements, instruments and documents delivered, or to be delivered, in
connection therewith are cumulative and are in addition to, and not exclusive
of, any rights or remedies provided by law, including, without limitation, the
rights and remedies of a secured party under the Uniform Commercial Code. The
provisions of this Pledge Agreement are severable and if any clause or provision
hereof shall be held invalid or unenforceable in whole or in part then such
invalidity or unenforceability shall attach only to such clause or provision, or
part thereof, and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision in this Pledge Agreement in
any jurisdiction.

          9.      This Pledge Agreement shall inure to the benefit of the
Pledgor and the Administrative Agent and their respective successors and
assigns, except that the Pledgor shall not assign this Pledge Agreement without
the prior written consent of the Administrative Agent.

         10.      The Pledgor agrees to reimburse the Administrative Agent
promptly upon demand for any and all costs and out-of-pocket expenses (including
attorneys' fees) paid or incurred by the Administrative Agent in connection with
the amendment, modification, collection and enforcement of this Pledge
Agreement. The obligations of the Pledgor under this Section 10 shall survive
the termination of this Pledge Agreement.

         11.      THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF NEW YORK.

         12.      THE PLEDGOR HEREBY CONSENTS TO THE JURISDICTION OF ANY LOCAL,
STATE, OR FEDERAL COURT LOCATED WITHIN THE CITY OF NEW YORK, NEW YORK AND WAIVES
ANY OBJECTION WHICH THE PLEDGOR MAY HAVE BASED ON IMPROPER VENUE OR FORUM NON
CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND CONSENTS THAT
ALL SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT AT THE
ADDRESS SET FORTH BELOW ITS SIGNATURE HERETO. NOTHING CONTAINED IN THIS SECTION
SHALL AFFECT THE RIGHT OF THE ADMINISTRATIVE AGENT TO BRING ANY ACTION OR
PROCEEDING AGAINST THE PLEDGOR OR ITS PROPERTY IN THE COURTS OF ANY OTHER
JURISDICTION. THE PLEDGOR AND THE ADMINISTRATIVE AGENT WAIVE THEIR RIGHT TO
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING RELATING TO OR IN ANY WAY ARISING OUT
OF THIS PLEDGE AGREEMENT.

         13.      All notices and other communications provided to any party
hereto under this Pledge Agreement shall be in writing or by telex or by
facsimile and addressed or delivered to such party at its address set forth
below its signature hereto or at such other address as may be designated by such
party in a notice to the other party. Any notice, if mailed and properly
addressed with postage prepaid, shall be deemed given when received; any notice,
if transmitted by telex or facsimile, shall be deemed given when transmitted
(answerback confirmed in the case of telexes and electronic or telephonic
confirmation in the case of facsimiles). Either party hereto may each change its
address for notices by a written notice to the other party.

<PAGE>
         14.      The Administrative Agent or any Bank may, from time to time,
at its sole discretion and without notice to the Pledgor, take any or all of the
following actions without affecting the obligations of the Pledgor hereunder:
(a) retain or obtain a security interest in any property to secure any of the
Obligations, (b) retain or obtain the primary or secondary obligation of any
obligor or obligors, in addition to the Pledgor, with respect to any of the
Obligations, (c) extend or renew any of the Obligations for one or more periods
(whether or not longer than the original period), alter or exchange any of the
Obligations, or release or compromise any obligation of any obligor with respect
to any of the Obligations, (d) release its security interest in, or surrender,
release or permit any substitution or exchange for, all or any part of any
property of any other person or entity securing any of the Obligations, or
extend or renew for one or more periods (whether or not longer than the original
period) or release, compromise, alter or exchange any obligations of any nature
of any obligor with respect to any such property, and (e) resort to the Pledgor
for payment of any of the Obligations when due, whether or not the
Administrative Agent or such Bank shall have resorted to any property securing
any of the Obligations or shall have proceeded against any other obligor
primarily or secondarily obligated with respect to any of the Obligations.

         The Pledgor hereby expressly waives: (a) notice of the existence or
creation or non-payment of all or any of the Obligations, (b) presentment,
demand, notice of dishonor, protest and all other notices whatsoever and (c) all
diligence in collection or protection of or realization upon any Obligations or
any security for or guaranty of any Obligations.

         Notwithstanding any application of any Collateral to the payment of any
of the Obligations, the Pledgor shall not be subrogated to any right of the
Administrative Agent or any Bank until such time as the Administrative Agent and
the Banks shall have received final payment in cash of the full amount of all
Obligations.

         15.      This Pledge Agreement shall remain in full force effect until
all Facility LCs have expired, been fully drawn or otherwise been terminated,
all Obligations have been paid in full in cash and all Commitments have
terminated. Thereafter, the Administrative Agent shall, promptly upon request by
the Pledgor, execute and deliver (at the Pledgor's expense) such documents and
instruments as the Pledgor may reasonably request to release the Administrative
Agent's security interest in the remaining Collateral, to cause such release to
be evidenced on all appropriate public records and to cause all remaining
Collateral to be returned to the Pledgor (or such other Person as may be
entitled thereto under applicable law).

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

<PAGE>

         IN WITNESS WHEREOF, the Pledgor has executed this Pledge Agreement in
favor of the Administrative Agent as of the date first above written.

                                           CMS ENTERPRISES COMPANY

                                           By:__________________________________
                                           Title:_______________________________
                                                 One Energy Plaza
                                                 Jackson, MI 49201
                                                 Attention: Treasurer

Accepted:

BANK ONE, NA, as Administrative Agent

By:___________________________________
Title:________________________________
         1 Bank One Plaza
         Suite 0363
         Chicago, Illinois  60670
         Attention: Jane Bek

<PAGE>

                                    EXHIBIT F

                      FORM OF ISSUANCE/MODIFICATION REQUEST

Bank One, NA, as LC Issuer under
         the Credit Agreement referred to below

Attention:__________________

Ladies and Gentlemen:

         Please refer to the Credit Agreement dated as of May 19, 2003 (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"; capitalized terms used but not defined herein have the respective
meanings ascribed thereto in the Credit Agreement) among CMS Energy Corporation
(the "Company"), various financial institutions and Bank One, NA as LC Issuer
and as Agent. Pursuant to Section 3.3 of the Credit Agreement, the Company
hereby requests the [issuance/Modification] of a Facility LC (the "Specified
LC") [in substantially the form attached hereto][in accordance with the
following terms]:

                         INSERT THESE ITEMS FOR ISSUANCE

         (i)      The requested date of issuance of the Specified LC
is_______________.(1)

         (ii)     The expiration date of the Specified LC is _________.(2)

         (iii)    The proposed stated amount of the Specified LC is
_______________.

         (iv)     The beneficiary of the Specified LC is: [insert name and
address of beneficiary].

         (v)      The conditions under which a drawing may be made under the
Specified LC are as follows: ______________.

                       INSERT THESE ITEMS FOR MODIFICATION

         (i)      The requested date of [extension] [increase] [decrease]
[modification] of the Specified LC is ______________.(1)

         (ii)     The [expiration date for the] [stated amount of the] Specified
LC is to be [extended to ___________] [increased to ___________] [decreased to
___________] [modified as follows: ________________].

         (iii) Attached hereto as Annex A is a consent to the requested
[decrease] [modification] executed by the beneficiary of the Specified LC.(3)

- ---------------------------
(1)        Must be a Business Day.

(2)        Not later than the fifth Business Day preceding the Termination Date.

(3)        Include only if required.
<PAGE>

         INSERT INFORMATION REGARDING SPECIAL CONDITIONS / INSTRUCTIONS (IF ANY)

         (i)      _____________________________________________________________.

         (ii)     _____________________________________________________________.

                                           CMS ENERGY CORPORATION

                                           By:__________________________________
                                              Name:
                                              Title:

<PAGE>

                                   SCHEDULE I

<TABLE>
<CAPTION>
            BANK                                 COMMITMENT
            ----                                 ----------
<S>                                             <C>
Bank One, NA                                    $ 92,500,000

Union Bank of California, N.A.                  $ 92,500,000

AGGREGATE COMMITMENT                            $185,000,000
</TABLE>

<PAGE>

                                   SCHEDULE II

                              MATERIAL LIABILITIES

              CMS ENERGY CORPORATION OFF-BALANCE SHEET LIABILITIES
                             AS OF FEBRUARY 28, 2003

<TABLE>
<CAPTION>
                                TYPE                          BENEFICIARY                             AMOUNT
<S>                       <C>                          <C>                                         <C>
CMS ENERGY
                          Letter of Credit             County of Los Angeles                       $    320,507
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bank of Tokyo Mitsubishi                       7,000,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             TCF Leasing Inc.                               1,919,470
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Honeywell International                        1,250,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Barclays Bank PLC                              2,500,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Barclays Bank PLC                             70,300,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Royal Bank of Canada                           4,715,075
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Constellation Power Source                     5,000,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Midwest Independent System                     3,500,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Midwest Independent System                     1,900,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Consumers Energy                               1,979,556
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Federal Insurance Company                        350,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             St. Paul Insurance Company                       228,516
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bankers Trust Company                          1,600,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             American Electric Power                        5,000,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             County of Los Angeles                            136,272
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Morgan Stanley Capital Group                   4,000,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Barclays Bank Abu Dhabi                       17,500,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Deutsche Bank Trust Co                         4,800,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Deutsche Bank Trust Co                         2,500,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Deutsche Bank Trust Co                        12,400,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Deutsche Bank Trust Co                         2,086,700
                          -------------------------------------------------------------------------------------
                          Support Obligation           Comerica (Genesse Power)                       3,000,000
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS GENERATION

                          -------------------------------------------------------------------------------------
                          Letter of Credit             Prudential Insurance                           1,338,973
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Prudential Insurance                             546,915
                          -------------------------------------------------------------------------------------
                          Letter of Credit             ICICI Bank Ltd.                                2,966,247
                          -------------------------------------------------------------------------------------
                          Letter of Credit             ICICI Bank Ltd.                                1,165,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             ICICI Bank Ltd.                                1,605,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             ICICI Bank Ltd.                                2,551,290
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bankers Trust Company                          3,000,000
                          -------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                       <C>                          <C>                                           <C>
                          Letter of Credit             Bankers Trust Company                         23,000,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bankers Trust Company                         11,300,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bankers Trust Company                         15,745,500
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bank One                                       2,086,700
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bank One                                       1,600,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bank One                                       4,800,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bank One                                       2,500,000
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Bank One                                      12,400,000
                          -------------------------------------------------------------------------------------
                          Support Obligation           ICICI Bank Ltd.                                3,671,072
                          -------------------------------------------------------------------------------------
                          Support Obligation           AFCO Credit Corporation                        2,475,656
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Michigan                                200,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  United States EPA                                 54,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Kansas                                  305,220
                          -------------------------------------------------------------------------------------
                          Surety Bond                  City of Flint                                    100,000
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS ELECTRIC & GAS
                          -------------------------------------------------------------------------------------
                          Service Contract             General Electric                               1,351,866
                          -------------------------------------------------------------------------------------
                          Service Contract             General Electric                               1,803,340
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS GAS TRANSMISSION
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Michigan                                270,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Twp of Addison                                   250,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Oklahoma Tax Commission                           77,691
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Oklahoma Tax Commission                           10,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Railroad Commission of TX                         25,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Railroad Commission of TX                         25,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Railroad Commission of TX                         25,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Walworth County                                  208,500
                          -------------------------------------------------------------------------------------
                          Surety Bond                  McHenry City Hwy Dept.                           260,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Lisbon Twp                                        10,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Town of Ixonia                                    10,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Town of Walworth                                  30,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Town of Concord                                   40,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Town of Sullivan                                 100,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Town of Richmond                                 250,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Town of Whitewater                                40,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Town of Darien                                   300,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  US Corps of Engineers                            200,000
                          -------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                       <C>                          <C>                                          <C>
CMS MARKETING SERVICES &
TRADING
                          -------------------------------------------------------------------------------------
                          Surety Bond                  St. Paul Insurance Company                   175,035,391
                          -------------------------------------------------------------------------------------
                          Surety Bond                  St. Paul Insurance Company                    81,182,179
                          -------------------------------------------------------------------------------------
                          Surety Bond                  St. Paul Insurance Company                    27,385,899
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Texas                                    30,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  United States of America                       9,201,987
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Maryland                             13,603,456
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Arizona                                  40,000
                          -------------------------------------------------------------------------------------
                          Lease Obligation             Rent                                           1,640,257
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS ENTERPRISES
                          -------------------------------------------------------------------------------------
                          Lease Obligation-Viron       Oakland, CA                                      151,145
                          -------------------------------------------------------------------------------------
                          Lease Obligation-Viron       Pasadena, CA                                   1,036,571
                          -------------------------------------------------------------------------------------
                          Lease Obligation-Viron       Salt Lake City, UT                               127,094
                          -------------------------------------------------------------------------------------
                          Lease Obligation-Viron       Ft. Lauderdale, FL                               133,981
                          -------------------------------------------------------------------------------------
                          Lease Obligation-Viron       Nashville, TN                                     61,710
                          -------------------------------------------------------------------------------------
                          Lease Obligation-Viron       Troy, MI                                         178,841
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Kansas                                  365,208
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Chambersburg Schools                           4,833,460
                          -------------------------------------------------------------------------------------
                          Surety Bond                  City of Garden Grove                           5,556,848
                          -------------------------------------------------------------------------------------
                          Surety Bond                  St. Louis Symphony                             4,435,600
                          -------------------------------------------------------------------------------------
                          Surety Bond                  City of Manteca                                7,491,530
                          -------------------------------------------------------------------------------------
                          Surety Bond                  U.S. Postal Service                            2,374,918
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Arkansas                                 10,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Mt San Antonio College                           356,319
                          -------------------------------------------------------------------------------------
                          Surety Bond                  University of SA Oklahoma                      6,949,396
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Metro Govt of Nashville, TN                       40,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  County of Los Angeles                          1,329,972
                          -------------------------------------------------------------------------------------
                          Surety Bond                  L.A. Community College                           302,227
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
DEARBORN INDUSTRIAL
GENERATION LLC
                          -------------------------------------------------------------------------------------
                          None
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
DEARBORN INDUSTRIAL
ENERGY LLC
                          -------------------------------------------------------------------------------------
                          None
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                       <C>                          <C>                                           <C>
CMS INTERNATIONAL
VENTURES LLC
                          -------------------------------------------------------------------------------------
                          None
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS CAPITAL LLC
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Michigan                                 87,000
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS GENERATION MICHIGAN
POWER LLC
                          -------------------------------------------------------------------------------------
                          None
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS GAS PROCESSING LLC
                          -------------------------------------------------------------------------------------
                          Lease Obligation             PW, LM, J and MM Barby                               500
                          -------------------------------------------------------------------------------------
                          Lease Obligation             LD & Winona Robins                                   600
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
CMS NATURAL GAS
GATHERING LLC
                          -------------------------------------------------------------------------------------
                          Lease Obligation             Nannie Kirk                                        8,000
                          -------------------------------------------------------------------------------------
                          Lease Obligation             A.D. Reed                                          1,000
                          -------------------------------------------------------------------------------------
                          Lease Obligation             Eddie and Janet Wiley                                500
                          -------------------------------------------------------------------------------------

                          -------------------------------------------------------------------------------------
PANHANDLE PIPE LINE
COMPANY
                          -------------------------------------------------------------------------------------
                          Letter of Credit             Prudential Insurance Co                       62,500,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Indiana                                  50,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Oklahoma                                 25,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Lenawee County                                     1,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Michigan                                 51,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Illinois Dept of Transp.                          25,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  City of Fort Wayne                                 5,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  United States of America                         300,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Harris County, Texas                               5,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Texas Dept of Transp.                             10,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Texas                                    25,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  People of the State of Illinois                   50,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Arkansas                                  1,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Louisiana                                 2,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  United States of America                         350,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Commonwealth of Kentucky                          50,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Michigan                                250,000
                          -------------------------------------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S>                       <C>                          <C>                                         <C>
                          Surety Bond                  United States of America                         300,000
                          -------------------------------------------------------------------------------------
                          Lease Obligations            Various                                       49,328,000
                          -------------------------------------------------------------------------------------


                          -------------------------------------------------------------------------------------
CMS FIELD SERVICES, INC.
                          -------------------------------------------------------------------------------------
                          Lease Obligation             K/B Fund IV                                      650,000
                          -------------------------------------------------------------------------------------
                          Lease Obligation             Canon                                              6,000
                          -------------------------------------------------------------------------------------
                          Lease Obligation             Ricoh                                             10,000
                          -------------------------------------------------------------------------------------
                          Lease Obligation             Ascom Hasler                                       3,600
                          -------------------------------------------------------------------------------------
                          Lease Obligation             Prairie Land Company                              12,500
                          -------------------------------------------------------------------------------------
                          Surety Bond                  Oklahoma Tax Commission                        1,533,322
                          -------------------------------------------------------------------------------------
                          Surety Bond                  United States of America                         300,000
                          -------------------------------------------------------------------------------------
                          Surety Bond                  State of Wyoming                                  33,000
                          -------------------------------------------------------------------------------------

  TOTAL OFF-BALANCE SHEET DEBT                                                                     $712,512,077

                                                       Surety Bonds                                 350,100,000

                                                       Indebt Sched. Indemnities                    369,700,000
</TABLE>

<PAGE>

                                   SCHEDULE II

                          MATERIAL LIABILITIES (CONT.)

                   CMS ENERGY CORPORATION GAAP DEBT BREAKDOWN
                             AS OF FEBRUARY 28, 2003

<TABLE>
<CAPTION>
      BORROWER                             FACILITY                             CURRENT BALANCE
<S>                       <C>                                        <C>                         <C>
CMS ENERGY

                          $295.8MM Credit Agreement                                              $   123,819,866
                          $300MM Credit Agreement                                                    133,800,000
                          General Term Notes
                                                                     Series D                         79,922,000
                                                                     Series E                        215,955,000
                                                                     Series F                        297,686,000
                          Sr. Unsecured Notes @ 7 5/8%                                               175,815,000
                          Convert. Sub. Debentures                                                   172,500,000
                          Extend. Tenor Rate Adj. Sec.                                               180,000,000
                          Sr. Unsecured Notes @ 7.5%                                                 408,845,000
                          Sr. Unsecured Notes @ 6.75%                                                287,025,000
                          Sr. Notes @ 8.9%                                                           260,475,000
                          Sr. Notes @ 8 3/8%                                                         150,000,000
                          Sr. Notes @ 9.875%                                                         467,558,000
                          Premium Equity Participating Security Units                                220,000,000
                          Sr. Notes @ 8.5%                                                           300,375,000
                          CMS Methanol Company                                                        14,000,000

PANHANDLE EASTERN
PIPE LINE

                          Sr. Notes @ 6.125%                                                         292,500,000
                          Sr. Notes @ 6.5%                                                           158,980,000
                          Sr. Notes @ 7.0%                                                           135,890,000
                          Sr. Notes @ 8.25%                                                           60,000,000
                          Notes @ 7.785%                                                             100,000,000
                          Debentures @ 7.2%                                                           58,000,000
                          Debentures @ 7.95%                                                          76,500,000
                          Citibank Bridge Loan                                                        40,000,000

</TABLE>

<PAGE>

<TABLE>
<S>                       <C>                                                                        <C>
CMS ENTERPRISES
                          None

CMS GENERATION COMPANY

                          CMS Capital LLC                                                              4,957,214

CMS GAS TRANSMISSION

                          CMS Capital LLC                                                             11,394,197
                          Antrim Gas Term Loan with BOM                                               22,625,000
                          Jackson Pipeline RCF with Tor Dom                                            2,687,000

CMS ELECTRIC & GAS

                          None

CMS MARKETING SERVICES & TRADING

                                  CMS Capital LLC                                                    127,353,473

CMS INTERNATIONAL VENTURES LLC

                                  None

DEARBORN INDUSTRIAL ENERGY LLC

                                  None

CMS GENERATION MICHIGAN POWER LLC

                                  None

DEARBORN INDUSTRIAL GENERATION

                                  CMS Capital LLC                                                     13,337,242

CMS FIELD SERVICES

                                  The CIT Group                                                          731,204

CMS GAS PROCESSING LLC

                                  CMS Capital LLC                                                      6,036,529

CMS NATURAL GAS GATHERING LLC

                                  CMS Capital LLC                                                      3,346,852

</TABLE>

<PAGE>

<TABLE>
<S>                               <C>                                                                <C>
PANHANDLE PIPE LINE COMPANY
                                  Trunkline Gas Company S-T                                          100,000,000
                                  Trunkline Gas Company L-T                                          100,000,000

CMS CAPITAL LLC

                                  CMS Enterprises Company                                             11,197,420
                                  CMSG Filer City Operating Company                                      413,815
                                  CMSG Honey Lake Company                                                462,258
                                  CMS Jackson Pipeline Company                                            91,705
                                  CMS Bay Area Pipeline Company                                        1,054,924
                                  CMSG Graying Holdings Company                                        1,164,325
                                  CMSG Operating Company                                               1,323,669
                                  CMSG Mon Valley Company                                                 11,563
                                  CMS Saginaw Bay Lateral Company                                        276,140
                                  CMS Antrim Gas LLC                                                   1,370,523
                                  CMSG Holdings Company                                                1,206,958
                                  CMSG Altoona Company                                                   182,228
                                  CMSG Genesee Company                                                 1,513,182
                                  CMS Resource Development                                             2,855,881
                                  CMSG Recycling Company                                                 371,025
                                  CMSG Lyonsdale Company                                                  20,160
                                  Mon Valley Energy                                                          113
                                  CMSG Chateaugay Company                                                 35,096
                                  CMS Grands Lacs LLC                                                  1,400,457
                                  HYDRA-CO Enterprises, Inc.                                           1,696,027
                                  CMSG Operating Company II                                            1,055,368
                                  HCE Appomattox, Inc.                                                   341,816
                                  HCE Jamaica Development, Inc.                                            5,780
                                  HCO Jamaica, Inc.                                                      164,957
                                  CMS Electric & Gas Company                                           4,036,096
                                  CMS Texon Company                                                      632,042
                                  CMS Marysville Gas Liquids Company                                     670,134
                                  CMSG Stratton Company                                                   72,258
                                  CMS Field Services, Inc.                                            34,262,090
                                  CMS Laverne Gas Processing, LLC                                         64,085
                                  Panhandle Eastern Pipeline Company                                 308,744,037
                                  Taweeelah A2 Operating Company                                         810,173
                                  Dearborn Generation Operating, LLC                                   3,955,220
                                  CMS Capital Financial Services, Inc.                                   602,157
</TABLE>

<PAGE>

<TABLE>
<S>                               <C>                                                             <C>
                                  CMSG Michigan Power, LLC                                               804,292
                                  CMS Enterprises Data Mart                                              243,398
                                  CMS MS&T Michigan, LLC                                              15,991,117
                                  CMS Energy UK Limited                                                1,879,798
                                  CMS MicroPower Systems, LLC                                          3,422,229
                                  CMSG Investment Company I                                              808,707
                                  CMS Business Development, LLC                                        3,266,068
                                  CMS Enterprises Development, LLC                                       232,701
                                  CMS International Ventures, LLC                                      3,436,843
                                  CMS Enterprise Oil & Gas Company                                   108,856,818
                                  CMSG Investment Company V                                            1,553,780

  Total Gaap Debt                                                                                 $5,324,674,009
</TABLE>

<PAGE>

                                   SCHEDULE II

                          MATERIAL LIABILITIES (CONT.)

      CMS ENERGY CORPORATION INVESTMENTS IN SUBSIDIARIES AND OTHER PERSONS
      (INCLUDING INTERCOMPANY INVESTMENTS AND PLANNED CAPITAL EXPENDITURE /
                       EQUITY CONTRIBUTIONS TO SUCH SUBS)

<TABLE>
<S>                                                                               <C>
CMS FIELD SERVICES

 Investee - 18 month Capex

 Bighorn Gas Gathering, L.L.C. (50% of "Common Membership
 Interests" and all of Preferred B Units) (1% of the Common
 Membership Interests are owned by CMS Field Services
 Holdings Company)                                                                $8,000,000
 Bradshaw Energy, L.L.C. (97.5%)                                                           0
 CBC/Leon Limited Partnership (89%)                                                        0
 CMS Cherokee Gas Processing, L.L.C. (100%)                                          500,000
 CMS Gas Processing, L.L.C. (100%)                                                   700,000
 CMS Field Services Holdings Company (100%)                                                0
 CMS Gulf Coast Field Services, L.L.C. (100%)                                              0
 CMS Hydrocarbons, L.L.C. (100%)                                                           0
 CMS Laverne Gas Processing, L.L.C. (100%)                                                 0
 CMS Natural Gas Gathering, L.L.C. (100%)                                            900,000
 CMS Oklahoma Natural Gas Gathering, L.L.C. (100%)                                   200,000
 CMS Taurus Holdings Company, L.L.C. (100%)                                                0
 CMS Taurus Field Services, L.P. (99% limited partnership
 interest) (the remaining 1% general partnership interest
 is owned by CMS Field Services Holdings Company)                                    750,000
 Fort Union Gas Gathering, L.L.C. (33.33%)                                         1,000,000
 Leon Limited Partnership (50%)                                                            0

CMS GENERATION

 Investee
 Benton Falls                                                                      4,330,000
 Salt Lake City                                                                    3,000,000
 Lake Wood                                                                         4,000,000
 Filbman Tire Sale                                                                 6,000,000
 Shuweihat                                                                        70,300,000
 Shuweihat L/C fees                                                                1,724,000
 Development Offices                                                               1,500,000
 Overheads Jackson/Dearbon                                                         2,150,000

PANHANDLE HOLDINGS

 Partnership contributions to Guardian                                             1,533,000

  TOTAL INVESTMENTS                                                             $106,587,000
</TABLE>

<PAGE>


                                  SCHEDULE III

                           EXISTING LETTERS OF CREDIT

<TABLE>
<CAPTION>
LC NUMBER              BENEFICIARY                               AMOUNT         FACILITY LC #
- ---------              -----------                               ------         -------------
<S>          <C>                                            <C>                 <C>
 330024      Deutsche Bank Trust Co. of Americas            $     4,800,000
 330025      Deutsche Bank Trust Co. of Americas            $     2,500,000
 330026      Deutsche Bank Trust Co. of Americas            $    12,400,000
 330911      Deutsche Bank Trust Co. of Americas            $     2,086,700
 331042      Consumers Energy Company                       $     2,026,689
SB00122      TCF Leasing                                    $     1,919,470        751207
SB00118      Bank of Tokyo/Mitsubishi Trust                 $     7,000,000        751219
SB00117      Constellation Power Source                     $     5,000,000        751204
SB00130      Honeywell                                      $     1,250,000        751206
SB00131      Shuweihat                                      $    70,300,000        751218
SB00132      Shuweihat                                      $     2,500,000        751217
SB00136      City of Los Angeles                            $    320,507.39        751216
SB00138      Midwest Independent System Operator, Inc.      $     3,500,000        751211
SB00139      Midwest Independent System Operator, Inc.      $     1,900,000        751212
SB00147      Bankers Trust                                  $     3,000,000        751210
SB00184      Jorf Lasfar                                    $     1,600,000        751205
SB00148      Jorf Lasfar                                    $    23,000,000        751215
SB00149      Jorf Lasfar                                    $    11,300,000        751214
SB00150      Jorf Lasfar                                    $    16,209,000        751213
SB00188      County of Los Angeles                          $    136,271.81        332014
SB00226      Federal Insurance Company                      $       350,000        751209
SB00228      St.Paul Insurance Company                      $       228,516        751208

                                               TOTAL        $173,327,154.20

                                          Bank One Share    $ 86,663,577.10
                                         Union Bank Share   $ 86,663,577.10
</TABLE>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(I)
<SEQUENCE>6
<FILENAME>k82154aexv4wxiy.txt
<DESCRIPTION>CERTIFICATE OF DESIGNATION
<TEXT>
<PAGE>

                                                                    EXHIBIT 4(i)

                           CERTIFICATE OF DESIGNATION
                                       OF
                  4.50% CUMULATIVE CONVERTIBLE PREFERRED STOCK
                                       OF
                             CMS ENERGY CORPORATION

         Pursuant to Section 302(4) of the Michigan Business Corporation Act,
MCLA Section 450.1302(4):

         CMS ENERGY CORPORATION, a Michigan corporation (the "Corporation"),
does hereby certify that the following resolution was duly adopted pursuant to
the authority of the Board of Directors of the Corporation, with the provisions
thereof fixing the number of shares of the series and the dividend rate being
set through a Special Financing Committee of the Board of Directors:

         RESOLVED: That, pursuant to the authority expressly granted to and
vested in the Board of Directors of the Corporation by the provisions of Article
III of the Restated Articles of Incorporation of the Corporation , as amended
from time to time (the "Articles of Incorporation"), and pursuant to Section
302(4) of the Michigan Business Corporation Act, the Board of Directors hereby
establishes a series of the preferred stock of the Corporation and hereby states
that the series' voting powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof (in addition to the provisions set forth in the Articles
of Incorporation which are applicable to the preferred stock of all series),
shall be as follows:

         1.       Designation and Amount; Ranking.

         (a)      There shall be created from the 10,000,000 shares of preferred
stock, par value $0.01 per share, of the Corporation authorized to be issued
pursuant to the Articles of Incorporation, a series of preferred stock,
designated as the "4.50% Cumulative Convertible Preferred Stock," par value
$0.01 per share (the "Preferred Stock"), and the number of shares of such series
shall be 5,000,000. Such number of shares may be decreased by resolution of the
Board of Directors; provided that no decrease shall reduce the number of shares
of Preferred Stock to a number less than that of the shares of Preferred Stock
then outstanding plus the number of shares issuable upon exercise of options or
rights then outstanding.

         (b)      The Preferred Stock will, with respect to both dividend rights
and rights upon the liquidation, winding-up or dissolution of the Corporation,
rank (i) senior to all Junior Stock and (ii) on a parity with all other Parity
Stock.

         2.       Definitions. As used herein, the following terms shall have
the following meanings:

                  "Accumulated Dividends" shall mean, with respect to any share
         of Preferred Stock, as of any date, the aggregate accumulated and
         unpaid dividends on such share from and including the most recent
         Dividend Payment Date to which dividends have been paid (or the Issue
         Date, if such date is prior to the first Dividend Payment Date) to but
         not including such date.

                  "Additional Dividends" shall have the meaning given to it in
         Section 3(b).

                  "Affiliate" shall have the meaning ascribed to it, on the date
         hereof, under Rule 405 of the Securities Act..

                  "Agent Members" shall have the meaning given to it in Section
         11(a)(ii).

                  "Board of Directors" shall mean the Board of Directors of the
         Corporation or, with respect to any action to be taken by the Board of
         Directors, any committee (special or otherwise) of the Board of
         Directors duly authorized to take such action.

                                       1

<PAGE>

                  "Business Day" shall mean any day other than a Saturday,
         Sunday or other day on which commercial banks in The City of New York
         are authorized or required by law or executive order to close.

                  "Certificate of Designation" means this certificate of
         designation designating the Preferred Stock.

                  "Certificated Preferred Stock" shall have the meaning given to
         it in Section 4(f).

                  "Common Equity" of any Person means capital stock of such
         Person that is generally entitled to (i) vote in the election of
         directors of such Person or (ii) if such Person is not a corporation,
         vote or otherwise participate in the selection of the governing body,
         partners, managers or others that will control the management or
         policies of such Person.

                  "Common Stock" shall mean the common stock, par value $0.01
         per share, of the Corporation, or any other class of stock resulting
         from successive changes or reclassifications of such common stock
         consisting solely of changes in par value, or from par value to no par
         value, or as a result of a subdivision, combination or merger,
         consolidation or similar transaction in which the Corporation is a
         constituent corporation.

                  "Continuing Director" means a director who either was a member
         of the Board of Directors on December 5, 2003 or who becomes a member
         of the Board of Directors subsequent to that date and whose
         appointment, election or nomination for election by the Corporation's
         shareholders is duly approved by a majority of the Continuing Directors
         on the Board of Directors at the time of such approval, either by a
         specific vote or by approval of the proxy statement issued by the
         Corporation on behalf of the Board of Directors in which such
         individual is named as nominee for director.

                  "Conversion Agent" means the office or agency designated by
         the Corporation where Preferred Stock may be presented for conversion.
         Initially, the Conversion Agent shall be the Corporation located at One
         Energy Plaza, Jackson, Michigan 49201.

                  "Conversion Date" shall have the meaning given to it in
         Section 7(b).

                  "Conversion Notice" shall have the meaning given to it in
         Section 7(a).

                  "Conversion Price" shall mean $9.893 per share of Common
         Stock.

                  "Conversion Rate" shall mean the number of shares of Common
         Stock issuable upon conversion of a share of Preferred Stock per
         Liquidation Preference. The initial Conversion Rate is 5.0541 shares of
         Common Stock issuable upon conversion of a share of Preferred Stock per
         Liquidation Preference.

                  "Corporation Notice" shall have the meaning given to it in
         Section 4(e).

                  "Corporation Notice Date" shall have the meaning given to it
         in Section 4(e).

                  "Distributed Assets or Securities" shall have the meaning
         given to it in Section 7(f)(iii).

                  "Dividend Payment Date" shall mean March 1, June 1, September
         1 and December 1 of each year, commencing March 1, 2004.

                  "Dividend Rate" shall have the meaning given to it in Section
         3(a).

                  "Dividend Record Date" shall mean February 15, May 15, August
         15 and November 15 of each year.

                   "DTC" or "Depository" means The Depository Trust Company.

                                       2

<PAGE>

                  "Equity Interests" means any capital stock, partnership, joint
         venture, member or limited liability or unlimited liability company
         interest, beneficial interest in a trust or similar entity or other
         equity interest or investment of whatever nature.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
         as amended, and the rules and regulations promulgated thereunder.

                  "Fair Market Value" means the amount which a willing buyer
         would pay a willing seller in an arm's length transaction.

                  A "Fundamental Change" shall be deemed to have occurred at
         such time after the original issuance of the Preferred Stock that any
         of the following occurs: (i) the Common Stock or other capital stock
         into which the Preferred Stock is convertible is neither listed for
         trading on a United States national securities exchange nor approved
         for trading on the NASDAQ National Market or another established
         automated over-the-counter trading market in the United States; (ii) a
         "person" or "group" within the meaning of Section 13(d) of the Exchange
         Act, other than the Corporation, any subsidiary of the Corporation or
         any employee benefit plan of the Corporation or any such subsidiary,
         files a Schedule TO (or any other schedule, form or report under the
         Exchange Act) disclosing that such person or group has become the
         direct or indirect ultimate "beneficial owner" (as such term is used in
         Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or
         group shall be deemed to have "beneficial ownership" of all shares that
         such Person or group has the right to acquire whether such right is
         exercisable immediately or only after the passage of time) of Common
         Equity of the Corporation representing more than 50% of the voting
         power of the Corporation's Common Equity; (iii) consummation of any
         share exchange, consolidation or merger of the Corporation pursuant to
         which the Common Stock will be converted into cash, securities or other
         property or any sale, lease or other transfer (in one transaction or a
         series of transactions) of all or substantially all of the consolidated
         assets of the Corporation and its subsidiaries, taken as a whole, to
         any Person (other than the Corporation or one or more of the
         Corporation's subsidiaries); provided, however, that a transaction
         where the holders of the Corporation's Common Equity immediately prior
         to such transaction own, directly or indirectly, more than 50% of the
         aggregate voting power of all classes of Common Equity of the
         continuing or surviving corporation or transferee immediately after
         such event shall not be a Fundamental Change; or (iv) Continuing
         Directors cease to constitute at least a majority of the Board of
         Directors; provided, however, that a Fundamental Change shall not be
         deemed to have occurred in respect of any of the foregoing if either
         (A) the Last Reported Sale Price per share of Common Stock for any five
         Trading Days within the period of 10 consecutive Trading Days ending
         immediately before the later of the Fundamental Change or the public
         announcement thereof shall equal or exceed 105% of the Conversion Price
         in effect immediately before the Fundamental Change or the public
         announcement thereof or (B) at least 90% of the consideration
         (excluding cash payments for fractional shares) in the transaction or
         transactions constituting the Fundamental Change consists of shares of
         capital stock traded on a national securities exchange or quoted on the
         NASDAQ National Market (or which shall be so traded or quoted when
         issued or exchanged in connection with such Fundamental Change) (such
         securities being referred to as "Publicly Traded Securities") and as a
         result of such transaction or transactions the Preferred Stock becomes
         convertible into such Publicly Traded Securities (excluding cash
         payments for fractional shares).

                  "Fundamental Change Purchase Date" shall have the meaning
         given to it in Section 4(a).

                  "Fundamental Change Purchase Notice" shall have the meaning
         given to it in Section 4(c).

                  "Fundamental Change Purchase Price" shall have the meaning
         given to it in Section 4(a).

                  "Global Preferred Stock" shall have the meaning given to it in
         Section 11(a)(i).

                  "Holder" or "holder" shall mean a holder of record of the
         Preferred Stock.

                  "Issue Date" shall mean December 5, 2003, the original date of
         issuance of the Preferred Stock.

                                       3

<PAGE>

                  "Junior Stock" shall mean all classes of common stock of the
         Corporation and each other class of capital stock or series of
         preferred stock established after the Issue Date, by the Board of
         Directors, the terms of which do not expressly provide that such class
         or series ranks senior to or on parity with the Preferred Stock as to
         dividend rights or rights upon the liquidation, winding-up or
         dissolution of the Corporation.

                  "Last Reported Sale Price" of Common Stock on any date means
         the closing sale price per share (or, if no closing sale price is
         reported, the average of the bid and ask prices or, if more than one in
         either case, the average of the average bid and the average ask prices)
         on that date as reported in composite transactions for the principal
         U.S. securities exchange on which Common Stock is traded or, if the
         Common Stock is not listed on a U.S. national or regional securities
         exchange, as reported by the NASDAQ National Market. If the Common
         Stock is not listed for trading on a U.S. national or regional
         securities exchange and not reported by the NASDAQ National Market on
         the relevant date, the Last Reported Sale Price shall be the last
         quoted bid price for Common Stock in the over-the-counter market on the
         relevant date as reported by the National Quotation Bureau or similar
         organization. If the Common Stock is not so quoted, the Last Reported
         Sale Price will be the average of the mid-point of the last bid and ask
         prices for the Common Stock on the relevant date from each of at least
         three nationally recognized independent investment banking firms
         selected by the Corporation for this purpose.

                  "Liquidation Preference" shall mean, with respect to each
         share of Preferred Stock, $50.

                  "Mandatory Conversion Date" shall have the meaning given to it
         in Section 8(b).

                  "Market Price" means the average of the Last Reported Sales
         Price per share of Common Stock for the 20 Trading Day period ending on
         the applicable date of determination (if the applicable date of
         determination is a Trading Day or, if not, then on the last Trading Day
         prior to such applicable date of determination), appropriately adjusted
         to take into account the occurrence, during the period commencing on
         the first of the Trading Days during such 20 Trading Day period and
         ending on the applicable date of determination, of any event that would
         result in an adjustment of the Conversion Rate under this Certificate
         of Designation.

                  "Market Value" shall mean the average closing price of the
         Common Stock for a five consecutive Trading Day period on the NYSE (or
         such other national securities exchange or automated quotation system
         on which the Common Stock is then listed or authorized for quotation
         or, if the Common Stock is not so listed or authorized for quotation,
         an amount determined in good faith by the Board of Directors to be the
         fair value of the Common Stock).

                  "Maximum Conversion Rate" shall have the meaning given to it
         in Section 7(f)(viii).

                  "NYSE" shall mean the New York Stock Exchange, Inc.

                  "Officer" means the Chairman of the Board of Directors, the
         President, any Vice President, the Treasurer, the Secretary or any
         Assistant Secretary of the Corporation.

                  "Officers' Certificate" means a certificate signed by two
         Officers.

                  "Opinion of Counsel' means a written opinion from legal
         counsel who is acceptable to the Transfer Agent. The counsel may be an
         employee of or counsel to the Corporation or the Transfer Agent.

                  "Parity Stock" shall mean any class of capital stock or series
         of preferred stock established as of or after the Issue Date by the
         Board of Directors, the terms of which expressly provide that such
         class or series will rank on parity with the Preferred Stock as to
         dividend rights or rights upon the liquidation, winding-up or
         dissolution of the Corporation.

                  "Paying Agent" means any Person authorized by the Corporation
         to pay the dividends or Fundamental

                                       4

<PAGE>

         Change Purchase Price on any of the shares of Preferred Stock on behalf
         of the Corporation. Initially, the Paying Agent shall be the
         Corporation.

                  "Person" shall mean any individual, corporation, general
         partnership, limited partnership, limited liability partnership, joint
         venture, association, joint-stock company, trust, limited liability
         company, unincorporated organization or government or any agency or
         political subdivision thereof.

                  "Registration Default" shall have the meaning given to it in
         Section 3(b).

                  "Registration Rights Agreement" means the Registration Rights
         Agreement dated as of December 5, 2003, among the Corporation,
         Citigroup Global Markets Inc., Merrill Lynch, Pierce, Fenner & Smith
         Incorporated and the certain other initial purchasers of the Preferred
         Stock.

                  "SEC" or "Commission" shall mean the Securities and Exchange
         Commission.

                  "Securities Act" means the Securities Act of 1933, as amended.

                  "Security Register" means the security register recording the
         holders of Preferred Stock kept at the offices of the Corporation.

                  "Security Registrar" shall be the Person holding the Security
         Register, and the Corporation will initially be designated as the
         Security Registrar.

                  "Senior Stock" shall mean each class of capital stock or
         series of preferred stock established after the Issue Date by the Board
         of Directors, the terms of which expressly provide that such class or
         series will rank senior to the Preferred Stock as to dividend rights or
         rights upon the liquidation, winding-up or dissolution of the
         Corporation.

                  "Shelf Registration Statement" shall mean a shelf registration
         statement filed with the SEC to cover resales of Transfer Restricted
         Securities by holders thereof, as required by the Registration Rights
         Agreement.

                  "Spin-Off Market Price" per share of Common Stock of the
         Corporation or the Equity Interests in a Subsidiary or other business
         unit of the Corporation on any day means the average of the daily Last
         Reported Sale Prices for the 10 consecutive Trading Days commencing on
         and including the fifth Trading Day after the ex date with respect to
         the issuance or distribution requiring such computations. As used
         herein, the term "ex date," when used with respect to any issuance or
         distribution, shall mean the first date on which the security trades
         regular way on the NYSE or such other national regional exchange or
         market in which the security trades without the right to receive such
         issuance or distribution.

                  "Subsidiary" means a Person more than 50% of the outstanding
         voting stock of which is owned, directly or indirectly, by the
         Corporation or by one or more other Subsidiaries, or by the Corporation
         and one or more other Subsidiaries. For the purposes of this
         definition, "voting stock" means stock which ordinarily has voting
         power of the election of directors, whether at all times or only so
         long as no senior class of stock has such voting power by reason of any
         contingency.

                  "Trading Day" means (i) if the applicable security is listed,
         admitted for trading or quoted on the NYSE, the NASDAQ National Market
         or another national security exchange, a day on which the NYSE, the
         NASDAQ National Market or another national security exchange is open
         for business or (ii) if the applicable security is not so listed,
         admitted for trading or quoted, any day other than a Saturday or Sunday
         or a day on which banking institutions in the State of New York are
         authorized or obligated by law, regulation or executive order to close.

                  "Trading Exception" shall have the meaning given to it in
         Section 7(a)(ii).

                                       5

<PAGE>

                  "Trading Price" of the Preferred Stock on any date of
         determination means the average of the secondary market bid quotations
         per share of Preferred Stock obtained by the Conversion Agent for
         $5,000,000 Liquidation Preference of the Preferred Stock at
         approximately 3:30 p.m., New York City time, on such determination date
         from three independent nationally recognized securities dealers the
         Corporation selects, provided that if three such bids cannot reasonably
         be obtained by the Conversion Agent, but two such bids are obtained,
         then the average of the two bids shall be used, and if only one such
         bid can reasonably be obtained by the Conversion Agent, this one bid
         shall be used. If the Conversion Agent cannot reasonably obtain at
         least one bid for $5,000,000 Liquidation Preference of the Preferred
         Stock from a nationally recognized securities dealer, then the Trading
         Price will be deemed to be less than 95% of the product of the sale
         price of Common Stock and the then applicable Conversion Rate.

                  "Transfer Agent" shall mean the Corporation's duly appointed
         transfer agent for the Preferred Stock. Initially, the Corporation will
         be the Transfer Agent.

                  "Transfer Restricted Securities" shall mean each share of
         Preferred Stock (or the shares of Common Stock into which such share of
         Preferred Stock is convertible) until (i) the date on which such
         security or its predecessor has been effectively registered under the
         Securities Act and disposed of in accordance with the Shelf
         Registration Statement, (ii) the date on which such security or
         predecessor is distributed to the public pursuant to Rule 144 under the
         Securities Act or is saleable pursuant to Rule 144(k) under the
         Securities Act or (iii) the date that such Preferred Stock ceases to be
         outstanding.

                  "Voting Rights Class" shall have the meaning given to it in
         Section 5(a)(i).

                  "Voting Rights Triggering Event" shall mean the failure of the
         Corporation to pay dividends on the Preferred Stock with respect to six
         or more quarterly periods (whether or not consecutive).

                  "Voting Stock" shall mean, with respect to any Person,
         securities of any class or classes of Capital Stock in such Person
         entitling the holders thereof (whether at all times or only so long as
         no senior class of stock has voting power by reason of contingency)
         generally to vote in the election of members of the Board of Directors
         or other governing body of such Person. For purposes of this
         definition, "Capital Stock" shall mean, with respect to any Person, any
         and all shares, interests, participations or other equivalents (however
         designated) of corporate stock or partnership interests and any and all
         warrants, options and rights with respect thereto (whether or not
         currently exercisable), including each class of common stock and
         preferred stock of such Person.

         3.       Dividends.

         (a)      The holders of shares of the outstanding Preferred Stock shall
be entitled, when, as and if declared by the Board of Directors out of funds of
the Corporation legally available therefor, to receive cumulative cash dividends
at the rate per annum of 4.50% per share on the Liquidation Preference
(equivalent to $2.25 per annum per share), payable quarterly in arrears (the
"Dividend Rate"). The Dividend Rate may be increased in the circumstances
described in Section 3(b) below. Dividends payable for each full dividend period
will be computed by dividing the Dividend Rate by four and shall be payable in
arrears on each Dividend Payment Date (commencing March 1, 2004) for the
quarterly period ending immediately prior to such Dividend Payment Date, to the
holders of record of Preferred Stock at the close of business on the Dividend
Record Date applicable to such Dividend Payment Date. Such dividends shall be
cumulative from the most recent date as to which dividends shall have been paid
or, if no dividends have been paid, from the Issue Date (whether or not in any
dividend period or periods the Board of Directors shall have declared such
dividends or there shall be funds of the Corporation legally available for the
payment of such dividends) and shall accumulate on a day-to-day basis, whether
or not earned or declared, from and after the Issue Date. Dividends payable for
any partial dividend period shall be computed on the basis of days elapsed over
a 360-day year consisting of twelve 30-day months. Accumulated unpaid dividends
accrue and cumulate dividends at the annual rate of 4.50% and are payable in the
manner provided in this Section 3.

                                       6

<PAGE>

         (b)      If (i) by November 5, 2004, the Shelf Registration Statement
has not been filed with the Commission, (ii) by March 5, 2005, the Shelf
Registration Statement has not been declared effective by the Commission, (iii)
after the Shelf Registration Statement has been declared effective the
Corporation fails to file a post-effective amendment, prospectus supplement,
amendment or supplement to any document incorporated by reference into such
prospectus or document if required by applicable law with the SEC within five
business days after a Holder provides the Corporation with certain required
information, if such filing is necessary to enable the Holder to deliver the
prospectus to purchasers of such Holder's Transfer Restricted Securities, (iv)
the Shelf Registration Statement ceases to be effective or fails to be usable
without being succeeded within 30 days by a post-effective amendment or an
additional registration statement filed and declared effective (other than as
permitted in (iii) above) pursuant to the Exchange Act that cures the failure of
the registration statement to be effective or usable, and (v) the aggregate
duration of any suspension periods in any period exceeds certain limits
described in the Registration Rights Agreement (each such event referred to in
clauses (i), (ii), (iii), (iv) and (v) a "Registration Default"), additional
dividends shall accumulate on the Preferred Stock, from and including the date
on which any such Registration Default shall occur to, but excluding, the date
on which the Registration Default has been cured, at the rate of 0.25% per year
for the first 90 days following such date and at a rate of 0.50% per year
thereafter ("Additional Dividends"). With respect to shares of Common Stock
issued upon conversion of the Preferred Stock, Additional Dividends will
accumulate on the then applicable conversion price from and including the date
on which any such Registration Default shall occur to, but excluding, the date
on which the Registration Default has been cured, at the rate of 0.25% per year
for the first 90 days following such date and at a rate of 0.50% per year
thereafter. Except as mentioned above, the Corporation will have no other
liabilities for monetary damages with respect to its registration obligations.
The receipt of Additional Dividends will be the sole monetary remedy available
to a Holder if the Corporation fails to meet these obligations.

         (c)      No dividend will be declared or paid upon, or any sum set
apart for the payment of dividends upon, any outstanding share of the Preferred
Stock with respect to any dividend period unless all dividends for all preceding
dividend periods have been declared and paid or declared and a sufficient sum
set apart for the payment of such dividend upon all outstanding shares of
Preferred Stock.

         (d)      No dividends or other distributions (other than a dividend or
distribution payable solely in shares of Parity Stock or Junior Stock (in the
case of Parity Stock) or Junior Stock (in the case of Junior Stock) and other
than cash paid in lieu of fractional shares) may be declared, made or paid, or
set apart for payment upon, any Parity Stock or Junior Stock, nor may any Parity
Stock or Junior Stock be redeemed, purchased or otherwise acquired for any
consideration (or any money paid to or made available for a sinking fund for the
redemption of any Parity Stock or Junior Stock) by or on behalf of the
Corporation (except by conversion into or exchange for shares of Parity Stock or
Junior Stock (in the case of Parity Stock) or Junior Stock (in the case of
Junior Stock)), unless full Accumulated Dividends shall have been or
contemporaneously are declared and paid, or are declared and a sum sufficient
for the payment thereof is set apart for such payment, on the Preferred Stock
and any Parity Stock for all dividend payment periods terminating on or prior to
the date of such declaration, payment, redemption, purchase or acquisition.
Notwithstanding the foregoing, if full dividends have not been paid on the
Preferred Stock and any Parity Stock, dividends may be declared and paid on the
Preferred Stock and such Parity Stock so long as the dividends are declared and
paid pro rata so that the amounts of dividends declared per share on the
Preferred Stock and such Parity Stock will in all cases bear to each other the
same ratio that accumulated and unpaid dividends per share on the shares of
Preferred Stock and such other Parity Stock bear to each other.

         (e)      Holders of shares of Preferred Stock shall not be entitled to
any dividends on the Preferred Stock, whether payable in cash, property or
stock, in excess of full cumulative dividends and Additional Dividends (if any).

         (f)      The holders of shares of Preferred Stock at the close of
business on a Dividend Record Date will be entitled to receive the dividend
payment on those shares on the corresponding Dividend Payment Date
notwithstanding the subsequent conversion thereof or the Corporation's default
in payment of the dividend due on that Dividend Payment Date. However, shares of
Preferred Stock surrendered for conversion during the period between the close
of business on any Dividend Record Date and the close of business on the
Business Day

                                       7

<PAGE>

immediately preceding the applicable Dividend Payment Date must be accompanied
by payment of an amount equal to the dividend payable on the shares on that
Dividend Payment Date; provided, however, that no such payment need be made if
(1) the Corporation has specified a Mandatory Conversion Date that is after a
Dividend Record Date and on or prior to the immediately following Dividend
Payment Date or (2) any accumulated and unpaid dividends exist at the time of
conversion with respect to such shares of Preferred Stock to the extent of such
accumulated and unpaid dividends. A holder of shares of Preferred Stock on a
Dividend Record Date who (or whose transferee) tenders any shares for conversion
on the corresponding Dividend Payment Date will receive the dividend payable by
the Corporation on the Preferred Stock on that date, and the converting holder
need not include payment in the amount of such dividend upon surrender of shares
of Preferred Stock for conversion. Except as provided above with respect to a
voluntary conversion pursuant to Section 7, the Corporation shall make no
payment or allowance for unpaid dividends, whether or not in arrears, on
converted shares or for dividends on the shares of Common Stock issued upon
conversion.

         (g)      In any case where any Dividend Payment Date or Conversion Date
(including upon the occurrence of a Fundamental Change) of any Preferred Stock
shall not be a Business Day, at any place of payment, then payment of dividends
(and Additional Dividends, if any) need not be made on such date, but may be
made on the next succeeding Business Day at such place of payment with the same
force and effect as if made on the dividend payment date or Conversion Date
(including upon the occurrence of a Fundamental Change); and no interest shall
accumulate on the amount so payable for the period from and after such Dividend
Payment Date or Conversion Date, as the case may be, to such Business Day.

         (h)      The Paying Agent shall return to the Corporation upon written
request any money or property held by it for the payment of any amount with
respect to the Preferred Stock that remains unclaimed for two years, provided,
however, that the Paying Agent, before being required to make any such return,
shall at the expense of the Corporation cause to be published once in a
newspaper of general circulation in The City of New York or mail to each such
Holder notice that such money or property remains unclaimed and that, after a
date specified therein, which shall not be less than 30 days from the date of
such publication or mailing, any unclaimed money or property then remaining
shall be returned to the Corporation. After return to the Corporation, Holders
entitled to the money or property must look to the Corporation for payment as
general creditors unless an applicable abandoned property law designates another
Person.

         4.       Fundamental Change.

         (a)      Purchase at the Option of the Holder Upon a Fundamental
Change. Each Holder shall have the right, at such Holder's option, to require
the Corporation to purchase any or all of such Holder's Preferred Stock for cash
or a check on the date that is no earlier than 60 days nor later than 90 days
after the date of the Corporation Notice of the occurrence of such Fundamental
Change (subject to extension to comply with applicable law, as provided in
Section 4(h) (the "Fundamental Change Purchase Date"). The Preferred Stock shall
be repurchased in integral multiples of $50.00 (representing the Liquidation
Preference). The Corporation shall purchase such Preferred Stock at a price (the
"Fundamental Change Purchase Price") equal to 100% of the Liquidation Price of
the number of shares of Preferred Stock to be purchased plus accumulated and
unpaid dividends, including Additional Dividends, if any, to the Fundamental
Change Purchase Date.

         (b)      Notice of Fundamental Change. The Corporation, or at its
request (which must be received by the Paying Agent at least three Business Days
(or such lesser period as agreed to by the Paying Agent) prior to the date the
Paying Agent is requested to give such notice as described below), the Paying
Agent, in the name of and at the expense of the Corporation, shall mail to all
Holders a Corporation Notice of the occurrence of a Fundamental Change and of
the purchase right arising as a result thereof, including the information
required by Section 4(e) hereof, on or before the 30th day after the occurrence
of such Fundamental Change.

         (c)      Exercise of Option. For Preferred Stock to be so purchased at
the option of the Holder, the Paying Agent must receive at its office in
Jackson, Michigan, or any other offices of the Paying Agent maintained for such

                                       8

<PAGE>

purposes, such shares of Preferred Stock duly endorsed for transfer, together
with a written notice of purchase in the form attached hereto as Exhibit A (a
"Fundamental Change Purchase Notice") duly completed, on or before the 30th day
prior to the Fundamental Change Purchase Date, subject to extension to comply
with applicable law. The Fundamental Change Purchase Notice shall state:

         (i)      if certificated, the certificate numbers of the shares of
                  Preferred Stock which the Holder shall deliver to be
                  purchased, or, if not certificated, the Fundamental Change
                  Purchase Notice must comply with appropriate Depository
                  procedures;

         (ii)     the number of shares of Preferred Stock which the Holder shall
                  deliver to be purchased, which portion must be $50.00 or an
                  integral multiple thereof; and

         (iii)    that such Preferred Stock shall be purchased as of the
                  Fundamental Change Purchase Date pursuant to the terms and
                  conditions specified in the Preferred Stock and in this
                  Certificate of Designation.

         (d)      Procedures. The Corporation shall purchase from a Holder,
pursuant to this Section 4, shares of Preferred Stock or multiples of $50.00 if
so requested by such Holder.

         Any purchase by the Corporation contemplated pursuant to the provisions
of this Section 4 shall be consummated by the delivery of the Fundamental Change
Purchase Price to be received by the Holder promptly following the later of the
Fundamental Change Purchase Date or the time of book-entry transfer or delivery
of the Preferred Stock.

         Notwithstanding anything herein to the contrary, any Holder delivering
to the Paying Agent the Fundamental Change Purchase Notice contemplated by
Section 4(c) hereof shall have the right at any time prior to the close of
business on the Business Day prior to the Fundamental Change Purchase Date to
withdraw such Fundamental Change Purchase Notice (in whole or in part) by
delivery of a written notice of withdrawal to the Paying Agent in accordance
with Section 4(f) hereof.

         The Paying Agent shall promptly notify the Corporation of the receipt
by it of any Fundamental Change Purchase Notice or written notice of withdrawal
thereof.

         On or before 10:00 a.m. (New York City time) on the Fundamental Change
Purchase Date, the Corporation shall deposit with the Paying Agent (or if the
Corporation or an Affiliate of the Corporation is acting as the Paying Agent,
shall segregate and hold in trust) money sufficient to pay the aggregate
Fundamental Change Purchase Price of the Preferred Stock to be purchased
pursuant to this Section 4. Payment by the Paying Agent of the Fundamental
Change Purchase Price for such Preferred Stock shall be made promptly following
the later of the Fundamental Change Purchase Date or the time of book-entry
transfer or delivery of such Preferred Stock. If the Paying Agent holds, in
accordance with the terms of this Certificate of Designation, money sufficient
to pay the Fundamental Change Purchase Price of such Preferred Stock on the
Business Day following the Fundamental Change Purchase Date, then, on and after
such date, such Preferred Stock shall cease to be outstanding and dividends
(including Additional Dividends, if any) on such Preferred Stock shall cease to
accumulate, whether or not book-entry transfer of such Preferred Stock is made
or such Preferred Stock is delivered to the Paying Agent, and all other rights
of the Holder shall terminate (other than the right to receive the Fundamental
Change Purchase Price upon delivery or transfer of the Preferred Stock). Nothing
herein shall preclude any withholding tax required by law.

         The Corporation shall require each Paying Agent to agree in writing
that the Paying Agent shall hold in trust for the benefit of Holders all money
held by the Paying Agent for the payment of the Fundamental Change Purchase
Price. If the Corporation or an Affiliate of the Corporation acts as Paying
Agent, it shall segregate the money held by it as Paying Agent and hold it as a
separate trust fund.

         All questions as to the validity, eligibility (including time of
receipt) and acceptance of any Preferred Stock pursuant to a Fundamental Change
shall be determined by the Corporation, whose determination shall be final and
binding.

                                       9

<PAGE>

         (e)      Notice of Fundamental Change. The Corporation shall send
notices (each, a "Corporation Notice") to the Holders (and to beneficial owners
as required by applicable law) at their addresses shown in the Security Register
maintained by the Security Registrar, and delivered to the Paying Agent on or
before the 30th day after the occurrence of the Fundamental Change ("Corporation
Notice Date"). Each Corporation Notice shall include a form of Fundamental
Change Purchase Notice to be completed by a Holder and shall state:

         (i)      the applicable Fundamental Change Purchase Price, excluding
                  accumulated and unpaid dividends, Conversion Rate at the time
                  of such notice (and any adjustments to the Conversion Rate)
                  and, to the extent known at the time of such notice, the
                  amount of dividends (including Additional Dividends, if any),
                  if any, that will be payable with respect to the Preferred
                  Stock on the applicable Fundamental Change Purchase Date;

         (ii)     the events causing the Fundamental Change and the date of the
                  Fundamental Change;

         (iii)    the Fundamental Change Purchase Date;

         (iv)     the last date on which a Holder may exercise its purchase
                  right;

         (v)      the name and address of the Paying Agent and the Conversion
                  Agent;

         (vi)     that the Preferred Stock must be surrendered to the Paying
                  Agent to collect payment of the Fundamental Change Purchase
                  Price;

         (vii)    that the Preferred Stock as to which a Fundamental Change
                  Purchase Notice has been given may be converted only if the
                  applicable Fundamental Change Purchase Notice has been
                  withdrawn in accordance with the terms of this Certificate of
                  Designation;

         (viii)   that the Fundamental Change Purchase Price for any of the
                  Preferred Stock as to which a Fundamental Change Purchase
                  Notice has been given and not withdrawn shall be paid by the
                  Paying Agent promptly following the later of the Fundamental
                  Change Purchase Date or the time of book-entry transfer or
                  delivery of such Preferred Stock;

         (ix)     the procedures the Holder must follow under this Section 4;

         (x)      briefly, the conversion rights of the Preferred Stock;

         (xi)     that, unless the Corporation defaults in making payment of
                  such Fundamental Change Purchase Price on the Preferred Stock
                  covered by any Fundamental Change Purchase Notice, dividends
                  (including Additional Dividends, if any) will cease to
                  accumulate on and after the Fundamental Change Purchase Date;

         (xii)    the CUSIP or ISIN number of the Preferred Stock; and

         (xiii)   the procedures for withdrawing a Fundamental Change Purchase
                  Notice.

         In connection with providing such Corporation Notice, the Corporation
will issue a press release and publish a notice containing the information in
such Corporation Notice in a newspaper of general circulation in The City of New
York or publish such information on the Corporation's then existing Web site or
through such other public medium as the Corporation may use at the time.

         At the Corporation's request, made at least five Business Days prior to
the date upon which such notice is to be mailed, and at the Corporation's
expense, the Paying Agent shall give the Corporation Notice in the Corporation's
name; provided, however, that, in all cases, the text of the Corporation Notice
shall be prepared by the Corporation.

                                       10

<PAGE>

         (f)      Effect of Fundamental Change Purchase Notice. Upon receipt by
the Corporation of the Fundamental Change Purchase Notice specified in this
Section 4, the Holder of the Preferred Stock in respect of which such
Fundamental Change Purchase Notice was given shall (unless such Fundamental
Change Purchase Notice is withdrawn as specified in this Section 4(f))
thereafter be entitled to receive solely the Fundamental Change Purchase Price
with respect to such Preferred Stock. Such Fundamental Change Purchase Price
shall be paid by the Paying Agent to such Holder promptly following the later of
(x) the Fundamental Change Purchase Date with respect to such Preferred Stock
(provided the conditions in this Section 4 have been satisfied) and (y) the time
of delivery or book-entry transfer of such Preferred Stock to the Paying Agent
by the Holder thereof in the manner required by this Section 4. Preferred Stock
in respect of which a Fundamental Change Purchase Notice has been given by the
Holder thereof may not be converted for shares of Common Stock on or after the
date of the delivery of such Fundamental Change Purchase Notice unless such
Fundamental Change Purchase Notice has first been validly withdrawn as specified
in this Section 4(f). Payment of the Fundamental Change Purchase Price for
shares of Preferred Stock in registered, certificated form ("Certificated
Preferred Stock") for which a Fundamental Change Purchase Notice has been
delivered and not withdrawn is conditioned upon delivery of such Certificated
Preferred Stock (together with necessary endorsements) to the Paying Agent at
its office in Jackson, Michigan, or any other office of the Paying Agent
maintained for such purpose, at any time (whether prior to, on or after the
Fundamental Change Purchase Date) after the delivery of such Fundamental Change
Purchase Notice. Payment of the Fundamental Change Purchase Price for such
Certificated Preferred Stock will be made promptly following the later of the
Fundamental Change Purchase Date or the time of delivery of such Certificated
Preferred Stock.

         If the Paying Agent holds, in accordance with the terms of this
Certificate of Designation, money sufficient to pay the Fundamental Change
Purchase Price of shares of Preferred Stock on the Business Day following the
Fundamental Change Purchase Date for such Preferred Stock, then, on and after
such date, dividends on such Preferred Stock will cease to accumulate, whether
or not such Preferred Stock is delivered to the Paying Agent, and all other
rights of the Holder shall terminate (other than the right to receive the
Fundamental Change Purchase Price upon delivery of the Preferred Stock).

         A Fundamental Change Purchase Notice may be withdrawn by means of a
written notice of withdrawal delivered to the office of the Paying Agent at any
time prior to 5:00 p.m. New York City time on the Business Day prior to the
Fundamental Change Purchase Date to which it relates specifying:

         (i)      if certificated, the certificate number of Preferred Stock in
                  respect of which such notice of withdrawal is being submitted,
                  or, if not certificated, the written notice of withdrawal must
                  comply with appropriate Depository procedures;

         (ii)     the number of shares of Preferred Stock with respect to which
                  such notice of withdrawal is being submitted; and

         (iii)    the number of shares of Preferred Stock, if any, which remains
                  subject to the original Fundamental Change Purchase Notice and
                  which have been or shall be delivered for purchase by the
                  Corporation.

         (g)      Preferred Stock Purchased in Part. Any shares of Preferred
Stock that are to be purchased only in part shall be surrendered (in physical or
book-entry form) at the office of the Paying Agent (with, if the Corporation so
requires, due endorsement by, or a written instrument of transfer in form
satisfactory to the Corporation duly executed by, the Holder thereof or such
Holder's attorney duly authorized in writing) and the Corporation shall execute
and the Transfer Agent shall authenticate and deliver to the Holder of such
Preferred Stock, without service charge, new shares of Preferred Stock, as
requested by such Holder in an amount equal to, and in exchange for, the portion
of the Liquidation Preference of the Preferred Stock so surrendered which is not
purchased.

         (h)      Covenant to Comply with Securities Laws Upon Purchase of the
Preferred Stock. In connection with any offer to purchase Preferred Stock under
this Section 4, the Corporation shall, to the extent applicable: (i) comply with
Rules 13e-4 and 14e-1 (and any successor provisions thereto) under the Exchange
Act, if applicable; (ii) file the related Schedule TO (or any successor
schedule, form or report) under the Exchange Act, if applicable; and (iii)
otherwise comply with all applicable federal and state securities laws so as to
permit the rights and obligations under this Section 4 hereof to be exercised in
the time and in the manner specified in this Section 4.

                                       11

<PAGE>

         (i)      Repayment to the Corporation. The Paying Agent shall return to
the Corporation any cash or property that remains unclaimed as provided in the
Preferred Stock, together with interest that the Paying Agent has agreed to pay,
if any, held by it for the payment of a Fundamental Change Purchase Price;
provided, however, that to the extent that the aggregate amount of cash or
property deposited by the Corporation pursuant to this Section 4 exceeds the
aggregate Fundamental Change Purchase Price of the Preferred Stock or portions
thereof which the Corporation is obligated to purchase as of the Fundamental
Change Purchase Date, then promptly on and after the Business Day following the
Fundamental Change Purchase Date, the Paying Agent shall return any such excess
to the Corporation together with interest that the Paying Agent has agreed to
pay, if any.

         (j)      Officers' Certificate. At least five Business Days before the
Corporation Notice Date, the Corporation shall deliver an Officers' Certificate
to the Paying Agent (provided, that, at the Corporation's option, the matters to
be addressed in such Officers' Certificate may be divided among two such
certificates) specifying:

         (i)      the manner of payment selected by the Corporation; and

         (ii)     whether the Corporation desires the Paying Agent to give the
                  Corporation Notice required by Section 4(e) hereof.

         5.       Voting.

         (a)      The shares of Preferred Stock shall have no voting rights
except as set forth below or as otherwise required by Michigan law from time to
time:

         (i)      If and whenever at any time or times a Voting Rights
                  Triggering Event occurs, then the holders of shares of
                  Preferred Stock, voting as a single class with any other
                  preferred stock or preference securities having similar voting
                  rights that are exercisable (the "Voting Rights Class"), will
                  be entitled at the next regular or special meeting of
                  shareholders of the Corporation to elect two additional
                  directors of the Corporation, unless the Board of Directors is
                  comprised of fewer than six directors at such time, in which
                  case the Voting Rights Class shall be entitled to elect one
                  additional director. Upon the election of any such additional
                  directors, the number of directors that comprise the Board of
                  Directors shall be increased by such number of additional
                  directors.

         (ii)     Such voting rights may be exercised at a special meeting of
                  the holders of the shares of the Voting Rights Class, called
                  as hereinafter provided, or at any annual meeting of
                  shareholders held for the purpose of electing directors, and
                  thereafter at each such annual meeting until such time as all
                  dividends in arrears on the shares of Preferred Stock shall
                  have been paid in full, at which time or times such voting
                  rights and the term of the directors elected pursuant to
                  Section 5(a)(i) shall terminate.

         (iii)    At any time when such voting rights shall have vested in
                  holders of shares of the Voting Rights Class, an Officer of
                  the Corporation may call, and, upon written request of the
                  record holders of shares representing at least twenty-five
                  percent (25%) of the voting power of the shares then
                  outstanding of the Voting Rights Class, addressed to the
                  Secretary of the Corporation, shall call a special meeting of
                  the holders of shares of the Voting Rights Class. Such meeting
                  shall be held at the earliest practicable date upon the notice
                  required for annual meetings of shareholders at the place for
                  holding annual meetings of shareholders of the Corporation,
                  or, if none, at a place designated by the Board of Directors.
                  Notwithstanding the provisions of this Section 5(a)(iii), no
                  such special meeting shall be called during a period within
                  the 60 days immediately preceding the date fixed for the next
                  annual meeting of shareholders, in which such case the
                  election of directors pursuant to Section 5(a)(i) shall be
                  held at such annual meeting of shareholders.

         (iv)     At any meeting held for the purpose of electing directors at
                  which the holders of the Voting Rights Class shall have the
                  right to elect directors as provided herein, the presence in
                  person or by proxy of the holders of shares representing more
                  than fifty percent (50%) in voting power of the then
                  outstanding shares of the Voting Rights Class shall be
                  required and shall be sufficient to constitute a quorum of
                  such class for the election of directors by such class. The
                  affirmative vote of the holders of shares of Preferred

                                       12

<PAGE>

                  Stock constituting a majority of the shares of Preferred Stock
                  present at such meeting, in person or by proxy shall be
                  sufficient to elect any such director.

         (v)      Any director elected pursuant to the voting rights created
                  under this Section 5(a) shall hold office until the next
                  annual meeting of shareholders (unless such term has
                  previously terminated pursuant to Section 5(a)(ii)) and any
                  vacancy in respect of any such director shall be filled only
                  by vote of the remaining director so elected by holders of the
                  Voting Rights Class, or, if there be no such remaining
                  director, by the holders of shares of the Voting Rights Class
                  at a special meeting called in accordance with the procedures
                  set forth in this Section 5, or, if no such special meeting is
                  called, at the next annual meeting of shareholders. Upon any
                  termination of such voting rights, the term of office of all
                  directors elected pursuant to this Section 5 shall terminate.

         (vi)     So long as any shares of Preferred Stock remain outstanding,
                  unless a greater percentage shall then be required by law, the
                  Corporation shall not, without the affirmative vote or consent
                  of the holders of all of the outstanding Preferred Stock
                  voting or consenting, as the case may be, separately as one
                  class, (i) create, authorize or issue any class or series of
                  Senior Stock (or any security convertible into Senior Stock)
                  or (ii) amend the Articles of Incorporation so as to affect
                  adversely the specified rights, preferences, privileges or
                  voting rights of holders of shares of Preferred Stock.

         (vii)    In exercising the voting rights set forth in this Section
                  5(a), each share of Preferred Stock shall be entitled to one
                  vote.

         (b)      The Corporation may authorize, increase the authorized amount
of, or issue any class or series of Parity Stock or Junior Stock, without the
consent of the holders of Preferred Stock, and in taking such actions the
Corporation shall not be deemed to have affected adversely the rights,
preferences, privileges or voting rights of holders of shares of Preferred
Stock.

         6.       Liquidation Rights.

         (a)      In the event of any liquidation, winding-up or dissolution of
the Corporation, whether voluntary of involuntary, each holder of shares of
Preferred Stock shall be entitled to receive and to be paid out of the assets of
the Corporation available for distribution to its shareholders the Liquidation
Preference plus Accumulated Dividends and Additional Dividends thereon in
preference to the holders of, and before any payment or distribution is made on,
any Junior Stock, including, without limitation, on any Common Stock.

         (b)      Neither the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
the assets or business of the Corporation (other than in connection with the
liquidation, winding-up or dissolution of its business) nor the merger or
consolidation of the Corporation into or with any other Person shall be deemed
to be a liquidation, winding-up or dissolution, voluntary or involuntary, for
the purposes of this Section 6.

         (c)      After the payment to the holders of the shares of Preferred
Stock of full preferential amounts provided for in this Section 6, the holders
of Preferred Stock as such shall have no right or claim to any of the remaining
assets of the Corporation.

         (d)      In the event the assets of the Corporation available for
distribution to the holders of shares of Preferred Stock upon any liquidation,
winding-up or dissolution of the Corporation, whether voluntary or involuntary,
shall be insufficient to pay in full all amounts to which such holders are
entitled pursuant to Section 6(a), no such distribution shall be made on account
of any shares of Parity Stock upon such liquidation, dissolution or winding-up
unless proportionate distributable amounts shall be paid on account of the
shares of Preferred Stock, ratably, in proportion to the full distributable
amounts for which holders of all Preferred Stock and of any Parity Stock are
entitled upon such liquidation, winding-up or dissolution.


                                       13

<PAGE>
         7.       Conversion.

         (a)      Conversion Rights. A Holder may convert Preferred Stock into
Common Stock during the periods and upon satisfaction of at least one of the
conditions set forth below:

         (i)      in any calendar quarter (and only during such calendar
                  quarter) if the Last Reported Sale Price for Common Stock for
                  at least 20 Trading Days during the period of 30 consecutive
                  Trading Days ending on the last Trading Day of the previous
                  calendar quarter is greater than or equal to 120% of the
                  Conversion Price per share of Common Stock on such last
                  Trading Day;

         (ii)     during the five Business Days immediately following any ten
                  consecutive Trading Day period in which the Trading Price per
                  Liquidation Preference of Preferred Stock (as determined
                  following a request by a Holder of Preferred Stock in
                  accordance with the procedures described herein) for each day
                  of that period was less than 95% of the product of the sale
                  price of Common Stock and the then applicable Conversion Rate
                  (the "Trading Exception"); provided, however, that a Holder
                  may not convert its Preferred Stock if the average closing
                  sale price of Common Stock for such ten consecutive Trading
                  Day period is between the then current Conversion Price and
                  120% of the then applicable Conversion Price; in connection
                  with any conversion upon satisfaction of such Trading Price
                  condition, the Conversion Agent shall have no obligation to
                  determine the Trading Price unless the Corporation has
                  requested such determination; and the Corporation shall have
                  no obligation to make such request unless the Holder provides
                  reasonable evidence that the Trading Price would be less than
                  95% of the product of the sale price of Common Stock and the
                  then applicable Conversion Rate; at which time, the
                  Corporation shall instruct the Conversion Agent to determine
                  the Trading Price beginning on the next Trading Day and on
                  each successive Trading Day until the Trading Price is greater
                  than or equal to 95% of the product of the sale price of
                  Common Stock and the then applicable Conversion Rate;

         (iii)    the Corporation becomes a party to a consolidation, merger or
                  binding share exchange pursuant to which the Common Stock
                  would be converted into cash or property (other than
                  securities), in which case a Holder may surrender Preferred
                  Stock for conversion at any time from and after the date which
                  is 15 days prior to the anticipated effective date for the
                  transaction until 15 days after the actual effective date of
                  such transaction; or

         (iv)     the Corporation elects to (i) distribute to all holders of
                  Common Stock assets, debt securities or rights to purchase
                  securities of the Corporation, which distribution has a per
                  share value as determined by the Board of Directors exceeding
                  15% of the Last Reported Sale Price of a share of Common Stock
                  on the Trading Day immediately preceding the declaration date
                  for such distribution, or (ii) distribute to all holders of
                  Common Stock rights entitling them to purchase, for a period
                  expiring within 60 days after the date of such distribution,
                  shares of Common Stock at less than the Last Reported Sale
                  Price of Common Stock on the Trading Day immediately preceding
                  the declaration date of the distribution. In the case of the
                  foregoing clauses (i) and (ii), the Corporation must notify
                  the Holders at least 20 Business Days immediately prior to the
                  ex-dividend date for such distribution. Once the Corporation
                  has given such notice, Holders may surrender their Preferred
                  Stock for conversion at any time thereafter until the earlier
                  of the close of business on the Business Day immediately prior
                  to the ex-dividend date or the Corporation's announcement that
                  such distribution will not take place; provided, however, that
                  a Holder may not exercise this right to convert if the Holder
                  may participate in the distribution without conversion. As
                  used herein, the term "ex dividend date," when used with
                  respect to any issuance or distribution, shall mean the first
                  date on which the Common Stock trades regular way on such
                  exchange or in such market without the right to receive such
                  issuance or distribution.

         The initial Conversion Rate is 5.0541 shares of Common Stock per share
of Preferred Stock, subject to adjustment in certain events as described herein.
The Corporation shall deliver cash or a check in lieu of any fractional share of
Common Stock. A Holder may convert fewer than all of its Preferred Stock so long
as the Preferred Stock converted is an integral multiple of the Liquidation
Preference.

         Holders of Preferred Stock at the close of business on a Dividend
Record Date will receive payment of

                                       14

<PAGE>

dividends, payable on the corresponding Dividend Payment Date notwithstanding
the conversion of such Preferred Stock at any time after the close of business
on such Dividend Record Date. Preferred Stock surrendered for conversion by a
Holder during the period from the close of business on any Dividend Record Date
to the opening of business on the immediately following Dividend Payment Date
must be accompanied by payment of an amount equal to the dividend that the
Holder is to receive on such Preferred Stock; provided, however, that no such
payment need be made if (1) the Corporation has specified a Mandatory Conversion
Date that is after a Dividend Record Date and on or prior to the immediately
following Dividend Payment Date or (2) any accumulated and unpaid dividends
exist at the time of conversion with respect to such shares of Preferred Stock
to the extent of such accumulated and unpaid dividends.

         To convert Preferred Stock a Holder must (i) complete and manually sign
the irrevocable conversion notice in the form attached hereto as Exhibit B (a
"Conversion Notice") (or complete and manually sign a facsimile of such notice)
and deliver such notice to the Conversion Agent at its office in Jackson,
Michigan or any other offices of the Conversion Agent maintained by the
Conversion Agent for such purpose, (ii) surrender the shares of Preferred Stock
to the Conversion Agent, (iii) furnish appropriate endorsements and transfer
documents if required by the Conversion Agent or the Corporation and (iv) pay
any transfer or similar tax, if required.

         (b)      Conversion Procedures. To convert Preferred Stock, a Holder
must satisfy the requirements in this Section 7 and in the Preferred Stock. The
date on which the Holder satisfies all those requirements is the conversion date
(the "Conversion Date"). As soon as practicable, but in no event later than the
fifth Business Day following the Conversion Date, the Corporation shall update
the global security representing the shares of Common Stock to record the
Holder's interest in the Common Stock, or deliver to the Holder, through the
Conversion Agent, a certificate for the number of full shares of Common Stock
issuable upon the conversion and cash or a check in lieu of any fractional share
determined pursuant to Section 7(c) hereof. The Person in whose name the
certificate is registered shall be treated as a shareholder of record on and
after the Conversion Date; provided, however, that no surrender of Preferred
Stock on any date when the stock transfer books of the Corporation shall be
closed shall be effective to constitute the Person or Persons entitled to
receive the shares of Common Stock upon such conversion as the record holder or
holders of such shares of Common Stock on such date, but such surrender shall be
effective to constitute the Person or Persons entitled to receive such shares of
Common Stock as the record holder or holders thereof for all purposes at the
close of business on the next succeeding day on which such stock transfer books
are open; such conversion shall be at the Conversion Rate in effect on the date
that such shares of Preferred Stock shall have been surrendered for conversion,
as if the stock transfer books of the Corporation had not been closed. Upon
conversion of Preferred Stock, such Person shall no longer be a Holder of such
Preferred Stock.

         No payment or adjustment shall be made for dividends on or other
distributions with respect to any Common Stock except as provided in Section
7(f) hereof or as otherwise provided in this Certificate of Designation.

         On conversion of Preferred Stock, that portion of Accumulated Dividends
with respect to the converted Preferred Stock will be deemed canceled,
extinguished or forfeited, rather than paid in full to the Holder thereof
through delivery of the Common Stock (together with the cash or check payment,
if any, in lieu of fractional shares) in exchange for the shares of Preferred
Stock being converted pursuant to the provisions hereof, and the Fair Market
Value of such shares of Common Stock (together with any such cash or check
payment in lieu of fractional shares) shall be treated as issued, to the extent
thereof, first in exchange for Accumulated Dividends through the Conversion
Date, and the balance, if any, of such Fair Market Value of such Common Stock
(and any such cash or check payment) shall be treated as issued in exchange for
the Liquidation Preference of the Preferred Stock being converted pursuant to
the provisions hereof.

         Upon surrender of Preferred Stock that is converted in part, the
Corporation shall execute, and the Transfer Agent shall authenticate and deliver
to the Holder, new shares of Preferred Stock in a number equal to the
unconverted portion of the shares of Preferred Stock surrendered.

         If the last day on which Preferred Stock may be converted is a legal
holiday in a place where a Conversion Agent is located, the Preferred Stock may
be surrendered to that Conversion Agent on the next succeeding day that it is
not a legal holiday.

                                       15

<PAGE>

         (c)      Cash or Check Payments in Lieu of Fractional Shares. The
Corporation shall not issue a fractional share of Common Stock upon conversion
of Preferred Stock. Instead the Corporation shall deliver cash (or Corporation's
check) for the current market value of the fractional share. The current market
value of a fractional share shall be determined to the nearest 1/10,000th of a
share by multiplying the Last Reported Sale Price of a full share of Common
Stock on the Trading Day immediately preceding the Conversion Date by the
fractional amount and rounding the product to the nearest whole cent.

         (d)      Taxes on Conversion. If a Holder converts Preferred Stock, the
Corporation shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the conversion. However, the
Holder shall pay any such tax which is due because the Holder requests the
shares to be issued in a name other than the Holder's name. The Conversion Agent
may refuse to deliver the certificates representing the Common Stock being
issued in a name other than the Holder's name until the Conversion Agent
receives a sum sufficient to pay any tax which shall be due because the shares
are to be issued in a name other than the Holder's name. Nothing herein shall
preclude any withholding tax required by law.

         (e)      Covenants of the Corporation. The Corporation shall, prior to
issuance of any Preferred Stock hereunder, and from time to time as may be
necessary, reserve out of its authorized but unissued Common Stock a sufficient
number of shares of Common Stock to permit the conversion of the Preferred
Stock.

         All shares of Common Stock delivered upon conversion of the Preferred
Stock shall be newly issued shares or treasury shares, shall be duly and validly
issued and fully paid and nonassessable and shall be free from preemptive rights
and free of any lien or adverse claim.

         The Corporation shall endeavor promptly to comply with all federal and
state securities laws regulating the order and delivery of shares of Common
Stock upon the conversion of Preferred Stock, if any, and shall cause to have
listed or quoted all such shares of Common Stock on each United States national
securities exchange or over-the-counter or other domestic market on which the
Common Stock is then listed or quoted.

         (f)      Adjustments to Conversion Rate. The Conversion Rate shall be
adjusted from time to time, without duplication, as follows:

         (i)      In case the Corporation shall: (a) pay a dividend, or make a
                  distribution, exclusively in shares of its capital stock, on
                  the Common Stock; (b) subdivide its outstanding Common Stock
                  into a greater number of shares; (c) combine its outstanding
                  Common Stock into a smaller number of shares; or (d)
                  reclassify its Common Stock, the Conversion Rate in effect
                  immediately prior to the record date or effective date, as the
                  case may be, for the adjustment pursuant to this Section 7(f)
                  as described below, shall be adjusted so that the Holder of
                  any Preferred Stock thereafter surrendered for conversion
                  shall be entitled to receive the number of shares of Common
                  Stock of the Corporation which such Holder would have owned or
                  have been entitled to receive after the happening of any of
                  the events described above had such Preferred Stock been
                  converted immediately prior to such record date or effective
                  date, as the case may be. An adjustment made pursuant to this
                  Section 7(f) shall become effective immediately after the
                  applicable record date in the case of a dividend or
                  distribution and shall become effective immediately after the
                  applicable effective date in the case of subdivision,
                  combination or reclassification of the Corporation's Common
                  Stock. If any dividend or distribution of the type described
                  in clause (a) above is not so paid or made, the Conversion
                  Rate shall again be adjusted to the Conversion Rate which
                  would then be in effect if such dividend or distribution had
                  not been declared.

         (ii)     In case the Corporation shall issue rights or warrants to all
                  holders of the Common Stock entitling them (for a period
                  expiring within 60 days after the date of issuance of such
                  rights or warrants) to subscribe for or purchase Common Stock
                  at a price per share less than the Market Price per share of
                  Common Stock on the record date fixed for determination of
                  shareholders entitled to receive such rights or warrants, the
                  Conversion Rate in effect immediately after such record date
                  shall be adjusted so that the same shall equal the Conversion
                  Rate determined by multiplying the Conversion Rate in effect
                  immediately after such record date by a fraction of which (a)
                  the numerator shall be the number

                                       16

<PAGE>

                  of shares of Common Stock outstanding on such record date plus
                  the number of additional shares of Common Stock offered for
                  subscription or purchase, and (b) the denominator shall be the
                  number of shares of Common Stock outstanding on such record
                  date plus the number of shares which the aggregate offering
                  price of the total number of shares so offered would purchase
                  at the Market Price per share of Common Stock on the earlier
                  of such record date or the Trading Day immediately preceding
                  the ex-dividend date for such issuance of rights or warrants.
                  Such adjustment shall be made successively whenever any such
                  rights or warrants are issued, and shall become effective
                  immediately after the opening of business on the day following
                  the record date for the determination of shareholders entitled
                  to receive such rights or warrants. To the extent that shares
                  of Common Stock are not delivered after the expiration of such
                  rights or warrants, the Conversion Rate shall be readjusted to
                  the Conversion Rate which would then be in effect had the
                  adjustments made upon the issuance of such rights or warrants
                  been made on the basis of delivery of only the number of
                  shares of Common Stock actually delivered. If such rights or
                  warrants are not so issued, the Conversion Rate shall again be
                  adjusted to be the Conversion Rate which would then be in
                  effect if such record date for the determination of
                  shareholders entitled to receive such rights or warrants had
                  not been fixed. In determining whether any rights or warrants
                  entitle the holders to subscribe for or purchase shares of
                  Common Stock at less than such Market Price, and in
                  determining the aggregate offering price of such shares of
                  Common Stock, there shall be taken into account any
                  consideration received by the Corporation for such rights or
                  warrants, the value of such consideration, if other than cash,
                  to be determined by the Board of Directors.

         (iii)    In case the Corporation shall, by dividend or otherwise,
                  distribute to all holders of Common Stock any assets, debt
                  securities or rights or warrants to purchase any of its
                  securities (excluding (a) any dividend, distribution or
                  issuance covered by those referred to in Section 7(f)(i) or
                  Section 7(f)(ii) hereof and (b) any dividend or distribution
                  paid exclusively in cash) (any of the foregoing hereinafter in
                  this Section 7(f)(iii) called the "Distributed Assets or
                  Securities") in an aggregate amount per share of Common Stock
                  that, combined together with the aggregate amount of any other
                  such distributions to all holders of its Common Stock made
                  within the 12 months preceding the date of payment of such
                  distribution, and in respect of which no adjustment pursuant
                  to this Section 7(f)(iii) has been made, exceeds 15% of the
                  Market Price on the Trading Day immediately preceding the
                  declaration of such distribution, then the Conversion Rate
                  shall be adjusted so that the same shall equal the Conversion
                  Rate determined by multiplying the Conversion Rate in effect
                  immediately prior to the close of business on the record date
                  mentioned below by a fraction of which (A) the numerator shall
                  be the Market Price per share of the Common Stock on the
                  earlier of such record date or the Trading Day immediately
                  preceding the ex-dividend date for such dividend or
                  distribution, and (B) the denominator shall be (1) the Market
                  Price per share of the Common Stock on the earlier of such
                  record date or the Trading Day immediately preceding the
                  ex-dividend date for such dividend or distribution less (2)
                  the Fair Market Value on the earlier of such record date or
                  the Trading Day immediately preceding the ex-dividend date for
                  such dividend or distribution (as determined by the Board of
                  Directors, whose determination shall be conclusive, and
                  described in a certificate filed with the Paying Agent) of the
                  Distributed Assets or Securities so distributed applicable to
                  one share of Common Stock. Such adjustment shall become
                  effective immediately after the record date for the
                  determination of shareholders entitled to receive such
                  distribution; provided, however, that, if (a) the Fair Market
                  Value of the portion of the Distributed Assets or Securities
                  so distributed applicable to one share of Common Stock is
                  equal to or greater than the Market Price of the Common Stock
                  on the record date for the determination of shareholders
                  entitled to receive such distribution or (b) the Market Price
                  of the Common Stock on the record date for the determination
                  of shareholders entitled to receive such distribution is
                  greater than the Fair Market Value per share of such
                  Distributed Assets or Securities by less than $1.00, then, in
                  lieu of the foregoing adjustment, adequate provision shall be
                  made so that each Holder shall have the right to receive upon
                  conversion, in addition to the shares of Common Stock, the
                  kind and amount of assets, debt securities, or rights or
                  warrants comprising the Distributed Assets or Securities the
                  Holder would have received had such Holder converted such
                  Preferred Stock immediately prior to the record date for the
                  determination of shareholders entitled to receive such
                  distribution. In the event that such distribution is not so
                  paid or made, the Conversion Rate shall again

                                       17

<PAGE>

                  be adjusted to the Conversion Rate which would then be in
                  effect if such distribution had not been declared.

         (iv)     In case the Corporation shall make (a) any distributions, by
                  dividend or otherwise, during any quarterly fiscal periods
                  consisting exclusively of cash to all holders of outstanding
                  shares of Common Stock in an aggregate amount that, together
                  with (b) other all-cash or all-check distributions made to all
                  holders of outstanding shares of Common Stock during such
                  quarterly fiscal period, and (c) any cash and the Fair Market
                  Value, as of the expiration of any tender or exchange offer
                  (other than consideration payable in respect of any odd-lot
                  tender offer) of consideration payable in respect of any
                  tender or exchange offer by the Corporation or any of the
                  Corporation's Subsidiaries for all or any portion of shares of
                  Common Stock concluded during such quarterly fiscal period,
                  exceed the product of $0 multiplied by the number of shares of
                  Common Stock outstanding on the record date for such
                  distribution, then, and in each such case, the Conversion Rate
                  shall be adjusted so that the same shall equal the Conversion
                  Rate determined by multiplying the Conversion Rate in effect
                  immediately prior to the close of business on the record date
                  fixed for the determination of holders of Common Stock
                  entitled to receive such distribution by a fraction of which
                  (A) the numerator shall be the Market Price per share of the
                  Common Stock on the earlier of such record date or the Trading
                  Day immediately preceding the ex-dividend date for such
                  dividend or distribution and (B) the denominator shall be (1)
                  the Market Price per share of Common Stock on the earlier of
                  such record date or the Trading Day immediately preceding the
                  ex-dividend date for such dividend or distribution plus (2) $0
                  less (3) an amount equal to the quotient of (x) the combined
                  amount distributed or payable in the transactions described in
                  clauses (a), (b) and (c) above during such quarterly fiscal
                  period and (y) the number of shares of Common Stock
                  outstanding on such record date, such adjustment to become
                  effective immediately after the record date for the
                  determination of shareholders entitled to receive such
                  distribution.

         (v)      With respect to Section 7(f)(iii) hereof, in the event that
                  the Corporation makes any distribution to all holders of
                  Common Stock consisting of Equity Interests in a Subsidiary or
                  other business unit of the Corporation, the Conversion Rate
                  shall be adjusted so that the same shall equal the Conversion
                  Rate determined by multiplying the Conversion Rate in effect
                  immediately prior to the close of business on the record date
                  fixed for the determination of holders of Common Stock
                  entitled to receive such distribution by a fraction of which
                  (i) the numerator shall be (x) the Spin-off Market Price per
                  share of the Common Stock on such record date plus (y) the
                  Spin-off Market Price per Equity Interest of the Subsidiary or
                  other business unit of the Corporation on such record date and
                  (ii) the denominator shall be the Spin-off Market Price per
                  share of the Common Stock on such record date, such adjustment
                  to become effective 10 Trading Days after the effective date
                  of such distribution of Equity Interests in a Subsidiary or
                  other business unit of the Corporation.

         (vi)     Upon conversion of the Preferred Stock, the Holders shall
                  receive, in addition to the Common Stock issuable upon such
                  conversion, the rights issued under any future shareholder
                  rights plan the Corporation implements (notwithstanding the
                  occurrence of an event causing such rights to separate from
                  the Common Stock at or prior to the time of conversion)
                  unless, prior to conversion, the rights have expired,
                  terminated or been redeemed or exchanged in accordance with
                  such rights plan. If, and only if, the Holders of Preferred
                  Stock receive rights under such shareholder rights plans as
                  described in the preceding sentence upon conversion of their
                  Preferred Stock, then no other adjustment pursuant to this
                  Section 7(f) shall be made in connection with such shareholder
                  rights plans.

         (vii)    For purposes of this Section 7(f), the number of shares of
                  Common Stock at any time outstanding shall not include shares
                  held in the treasury of the Corporation but shall include
                  shares issuable in respect of scrip certificates issued in
                  lieu of fractions of shares of Common Stock. The Corporation
                  shall not pay any dividend or make any distribution on shares
                  of Common Stock held in the treasury of the Corporation.

                                       18

<PAGE>

         (viii)   Notwithstanding the foregoing, in no event shall the
                  Conversion Rate exceed the maximum conversion rate specified
                  under this Section 7(f)(viii) (the "Maximum Conversion Rate")
                  as a result of an adjustment pursuant to Section 7(f)(iii) or
                  Section 7(f)(iv) hereof. The Maximum Conversion Rate shall
                  initially be 6.5703 and shall be appropriately adjusted from
                  time to time for any stock dividends on or subdivisions or
                  combinations of the Common Stock. The Maximum Conversion Rate
                  shall not apply to any adjustments made pursuant to any of the
                  events in Section 7(f)(i) or Section 7(f)(ii) hereof.

         (g)      Calculation Methodology. No adjustment in the Conversion Price
need be made unless the adjustment would require an increase or decrease of at
least 1% in the Conversion Price then in effect, provided that any adjustment
that would otherwise be required to be made shall be carried forward and taken
into account in any subsequent adjustment. Except as stated in this Section 7,
the Conversion Rate will not be adjusted for the issuance of Common Stock or any
securities convertible into or exchangeable for Common Stock or carrying the
right to purchase any of the foregoing. Any adjustments that are made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under Section 4 and Section 7(f) hereof and this Section 7(g) shall
be made to the nearest cent or to the nearest 1/10,000th of a share, as the case
may be.

         (h)      When No Adjustment Required. No adjustment to the Conversion
Rate need be made:

         (i)      upon the issuance of any shares of Common Stock pursuant to
                  any present or future plan providing for the reinvestment of
                  dividends or interest payable on securities of the Corporation
                  and the investment of additional optional amounts in shares of
                  Common Stock under any plan;

         (ii)     upon the issuance of any shares of Common Stock or options or
                  rights to purchase those shares pursuant to any present or
                  future employee, director or consultant benefit plan or
                  program of or assumed by the Corporation or any of its
                  Subsidiaries;

         (iii)    upon the issuance of any shares of Common Stock pursuant to
                  any option, warrant, right, or exercisable, exchangeable or
                  convertible security not described in clause (ii) above and
                  outstanding as of the date of this Certificate of Designation;

         (iv)     for a change in the par value or no par value of the Common
                  Stock;

         (v)      for accumulated and unpaid dividends (including Additional
                  Dividends, if any); or

         (vi)     if Holders are to participate in a merger or consolidation on
                  a basis and with notice that the Board of Directors determines
                  to be fair and appropriate in light of the basis and notice on
                  which holders of Common Stock participate in the transaction;
                  provided that the basis on which the Holders are to
                  participate in the transaction shall not be deemed to be fair
                  if it would require the conversion of securities at any time
                  prior to the expiration of the conversion period specified for
                  such securities.

         To the extent the Preferred Stock becomes convertible into cash, assets
or property (other than capital stock of the Corporation or securities to which
Section 7(l) hereof applies), no adjustment shall be made thereafter as to the
cash, assets or property. Interest shall not accumulate on such cash.

         (i) Notice of Adjustment. Whenever the Conversion Rate is adjusted, the
Corporation shall promptly mail to Holders a notice of the adjustment. The
Corporation shall file with the Conversion Agent such notice. The certificate
shall, absent manifest error, be conclusive evidence that the adjustment is
correct. No Conversion Agent shall be under any duty or responsibility with
respect to any such certificate except to exhibit the same to any Holder
desiring inspection thereof.

         (j) Voluntary Increase. The Corporation may make such increases in the
Conversion Rate, in addition to those required by Section 7(f) hereof, as the
Board of Directors considers to be advisable to avoid or diminish any income tax
to holders of Common Stock or rights to purchase Common Stock resulting from any
dividend or distribution of stock (or rights to acquire stock) or from any event
treated as such for income tax purposes. To the

                                       19

<PAGE>

extent permitted by applicable law, the Corporation may from time to time
increase the Conversion Rate by any amount, temporarily or otherwise, for any
period of at least 20 days if the increase is irrevocable during the period and
the Board of Directors shall have made a determination that such increase would
be in the best interests of the Corporation, which determination shall be
conclusive. Whenever the Conversion Rate is so increased, the Corporation shall
mail to Holders and file with the Conversion Agent a notice of such increase.
The Conversion Agent shall not be under any duty or responsibility with respect
to any such notice except to exhibit the same to any holder desiring inspection
thereof. The Corporation shall mail the notice at least 15 days before the date
the increased Conversion Rate takes effect. The notice shall state the increased
Conversion Rate and the period it shall be in effect.

         (k)      Notice to Holders Prior to Certain Actions. In case:

         (i)      the Corporation shall declare a dividend (or any other
                  distribution) on its Common Stock that would require an
                  adjustment in the Conversion Rate pursuant to Section 7(f)
                  hereof;

         (ii)     the Corporation shall authorize the granting to all or
                  substantially all the holders of its Common Stock of rights or
                  warrants to subscribe for or purchase any share of any class
                  or any other rights or warrants;

         (iii)    of any reclassification or reorganization of the Common Stock
                  of the Corporation (other than a subdivision or combination of
                  its outstanding Common Stock, or a change in par value, or
                  from par value to no par value, or from no par value to par
                  value), or of any consolidation or merger to which the
                  Corporation is a party and for which approval of any
                  shareholders of the Corporation is required, or of the sale or
                  transfer of all or substantially all of the assets of the
                  Corporation; or

         (iv)     of the voluntary or involuntary dissolution, liquidation or
                  winding-up of the Corporation,

                  the Corporation shall cause to be filed with the Conversion
                  Agent and to be mailed to each Holder at its address appearing
                  on the Security Register, as promptly as possible but in any
                  event at least 15 days prior to the applicable date
                  hereinafter specified, a notice stating (x) the date on which
                  a record is to be taken for the purpose of such dividend,
                  distribution or rights or warrants, or, if a record is not to
                  be taken, the date as of which the holders of Common Stock of
                  record to be entitled to such dividend, distribution, or
                  rights or warrants are to be determined or (y) the date on
                  which such reclassification, reorganization, consolidation,
                  merger, sale, transfer, dissolution, liquidation or winding-up
                  is expected to become effective or occur, and the date as of
                  which it is expected that holders of Common Stock of record
                  shall be entitled to exchange their Common Stock for
                  securities or other property deliverable upon such
                  reclassification, reorganization, consolidation, merger, sale,
                  transfer, dissolution, liquidation or winding-up. Failure to
                  give such notice, or any defect therein, shall not affect the
                  legality or validity of such dividend, distribution,
                  reclassification, reorganization, consolidation, merger, sale,
                  transfer, dissolution, liquidation or winding-up.

         (l)      Effect of Reclassification, Consolidation, Merger, Binding
Share Exchange or Sale. If any of the following events occur, namely: (i) any
reclassification or change of outstanding shares of Common Stock (other than a
change in par value, or from par value to no par value, or from no par value to
par value, or as a result of a subdivision or combination); (ii) any
consolidation, merger, combination or binding share exchange of the Corporation
with another Person as a result of which holders of Common Stock shall be
entitled to receive stock, securities or other property or assets (including
cash) with respect to or in exchange for such Common Stock; or (iii) any sale or
conveyance of the properties and assets of the Corporation as, or substantially
as, an entirety to any other Person as a result of which holders of Common Stock
shall be entitled to receive stock, securities or other property or assets
(including cash) with respect to or in exchange for such Common Stock, then the
Corporation or the successor or purchasing Person, as the case may be, shall
cause an amendment to this Certificate of Designation to be executed and filed
in accordance with Michigan law, providing that each share of Preferred Stock
shall be convertible into the kind and amount of shares of stock and other
securities or property or assets (including cash) receivable upon such
reclassification, change, consolidation, merger, combination, binding share
exchange, sale or conveyance by a holder of a number of shares of Common Stock
issuable upon conversion of such Preferred Stock

                                       20

<PAGE>

immediately prior to such reclassification, change, consolidation, merger,
combination, binding share exchange, sale or conveyance. Such amended
Certificate of Designation shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 7(l).

         The Corporation shall cause notice of the execution of such amended
Certificate of Designation to be mailed to each Holder, at its address appearing
on the Security Register, within 20 days after filing thereof. Failure to
deliver such notice shall not affect the legality or validity of such
supplemental indenture.

         The above provisions of this Section 7(l) shall similarly apply to
successive reclassifications, changes, consolidations, mergers, combinations,
binding share exchanges, sales and conveyances.

         If this Section 7(l) applies to any event or occurrence, Section 7(f)
hereof shall not apply.

         (m)      Responsibility of Conversion Agent. The Conversion Agent shall
not at any time be under any duty or responsibility to any Holder to either
calculate the Conversion Rate or determine whether any facts exist which may
require any adjustment of the Conversion Rate, or with respect to the nature or
extent or calculation of any such adjustment when made, or with respect to the
method employed, or herein or in any amended Certificate of Designation provided
to be employed, in making the same and shall be protected in relying upon an
Officers' Certificate with respect to the same. The Conversion Agent shall not
be accountable with respect to the validity or value (or the kind or amount) of
any shares of Common Stock, or of any securities or property, which may at any
time be issued or delivered upon the conversion of any Preferred Stock and the
Conversion Agent makes no representations with respect thereto. The Conversion
Agent shall not be responsible for any failure of the Corporation to issue,
transfer or deliver any shares of Common Stock or stock certificates or other
securities or property or cash upon the surrender of any Preferred Stock for the
purpose of conversion or to comply with any of the duties, responsibilities or
covenants of the Corporation contained in this Section 7(m). Without limiting
the generality of the foregoing, the Conversion Agent shall not be under any
responsibility to determine the correctness of any provisions contained in any
amended Certificate of Designation entered into pursuant to this Section 7
relating either to the kind or amount of shares of stock or securities or
property (including cash) receivable by Holders upon the conversion of their
Preferred Stock after any event referred to in this Section 7 or to any
adjustment to be made with respect thereto, but may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, the Officers' Certificate (which the Corporation shall be
obligated to file with the Conversion Agent prior to the execution of any such
amended Certificate of Designation) with respect thereto.

         (n)      Simultaneous Adjustments. In the event that Section 7(f)
hereof requires adjustments to the Conversion Rate under more than one of
Section 7(f)(i), Section 7(f)(ii), Section 7(f)(iii) or Section 7(f)(iv) hereof,
and the Dividend Record Dates for the distributions giving rise to such
adjustments shall occur on the same date, then such adjustments shall be made by
applying, first, the provisions of Section 7(f)(iii) hereof, second, the
provisions of Section 7(f)(i) hereof and third, the provisions of Section
7(f)(ii) hereof; provided, however, that nothing in this Section 7(n) shall be
done to evade the principle set forth in Section 7(f)(viii) hereof that the
Maximum Conversion Rate shall not apply to any adjustments made with respect to
any of the events in Section 7(f)(i) or Section 7(f)(ii) hereof.

         (o)      Successive Adjustments. After an adjustment to the Conversion
Rate under Section 7(f) hereof, any subsequent event requiring an adjustment
under Section 7(f) shall cause an adjustment to the Conversion Rate as so
adjusted.

         (p)      General Considerations. Whenever successive adjustments to the
Conversion Rate are called for pursuant to this Section 7, such adjustments
shall be made to the Market Price as may be necessary or appropriate to
effectuate the intent of this Section 7 and to avoid unjust or inequitable
results as determined in good faith by the Board of Directors.

         (q)      Corporation Determination Final. Any determination which the
Board of Directors must make pursuant to this Section 7 shall be conclusive and
binding on the Holders.

                                       21

<PAGE>

         8.       Mandatory Conversion.

         (a)      At any time on or after December 5, 2008, the Corporation
shall have the right, at its option, to cause the Preferred Stock, in whole but
not in part, to be automatically converted into that number of whole shares of
Common Stock for each share of Preferred Stock equal to the quotient of (i) the
Liquidation Preference divided by (ii) the Conversion Price then in effect, with
any resulting fractional shares of Common Stock to be settled in accordance with
Section 7(c). The Corporation may exercise its right to cause a mandatory
conversion pursuant to this Section 8(a) only if the Last Reported Sale Price of
the Common Stock equals or exceeds 130% of the Conversion Price then in effect
for at least 20 Trading Days in any consecutive 30-day trading period on the
NYSE (or such other national securities exchange or automated quotation system
on which the Common Stock is then listed or authorized for quotation), including
the last Trading Day of such 30-day period, ending on the Trading Day prior to
the Corporation's issuance of a press release announcing the mandatory
conversion as described in Section 8(b).

         (b)      To exercise the mandatory conversion right described in
Section 8(a), the Corporation must issue a press release for publication on the
Dow Jones News Service prior to the opening of business on the first trading day
following any date on which the conditions described in Section 8(a) are met,
announcing such a mandatory conversion. The Corporation shall also give notice
by mail or by publication (with subsequent prompt notice by mail) to the holders
of Preferred Stock (not more than four Business Days after the date of the press
release) of the mandatory conversion announcing the Corporation's intention to
convert the Preferred Stock. The conversion date will be a date selected by the
Corporation (the "Mandatory Conversion Date") and will be no more than five days
after the date on which the Corporation issues the press release described in
this Section 8(b).

         (c)      In addition to any information required by applicable law or
regulation, the press release and notice of a mandatory conversion described in
Section 8(b) shall state, as appropriate: (i) the Mandatory Conversion Date;
(ii) the number of shares of Common Stock to be issued upon conversion of each
share of Preferred Stock; (iii) the number of shares of Preferred Stock to be
converted; and (iv) that dividends on the Preferred Stock to be converted will
cease to accumulate on the Mandatory Conversion Date.

         (d)      On and after the Mandatory Conversion Date, dividends will
cease to accumulate on the Preferred Stock called for a mandatory conversion
pursuant to Section 8(a) and all rights of holders of such Preferred Stock will
terminate except for the right to receive the whole shares of Common Stock
issuable upon conversion thereof and cash, in lieu of any fractional shares of
Common Stock in accordance with Section 7(c). The dividend payment with respect
to the Preferred Stock called for a mandatory conversion pursuant to Section
8(a) on a date during the period between the close of business on any Dividend
Record Date to the close of business on the corresponding Dividend Payment Date
will be payable on such Dividend Payment Date to the record holder of such share
on such Dividend Record Date if such share has been converted after such
Dividend Record Date and prior to such Dividend Payment Date. Except as provided
in the immediately preceding sentence with respect to a mandatory conversion
pursuant to Section 8(a), no payment or adjustment will be made upon conversion
of Preferred Stock for Accumulated Dividends or for dividends with respect to
the Common Stock issued upon such conversion.

         (e)      The Corporation may not authorize, issue a press release or
give notice of any mandatory conversion pursuant to Section 8(a) unless, prior
to giving the mandatory conversion notice, all Accumulated Dividends on the
Preferred Stock for periods ended prior to the date of such mandatory conversion
notice shall have been paid in cash.

         (f)      In addition to the mandatory conversion right described in
Section 8(a), if there are less than 250,000 shares of Preferred Stock
outstanding, the Corporation shall have the right, at any time on or after
December 5, 2008, at its option, to cause the Preferred Stock to be
automatically converted into that number of whole shares of Common Stock equal
to the quotient of (i) the Liquidation Preference divided by (ii) the lesser of
(A) the Conversion Price then in effect and (B) the Market Value for the period
ending on the second Trading Day immediately prior to the Mandatory Conversion
Date, with any resulting fractional shares of Common Stock to be

                                       22

<PAGE>

settled in cash in accordance with Section 7(c). The provisions of clauses (b),
(c), (d) and (e) of this Section 8 shall apply to any mandatory conversion
pursuant to this clause (f); provided, that (i) the Mandatory Conversion Date
described in Section 8(b) shall not be less than 15 days nor more than 30 days
after the date on which the Corporation issues a press release pursuant to
Section 8(b) announcing such mandatory conversion and (ii) the press release and
notice of mandatory conversion described in Section 8(c) will not state the
number of shares of Common Stock to be issued upon conversion of each share of
Preferred Stock.

         9.       Consolidation, Merger and Sale of Assets.

         (a)      The Corporation, without the consent of the Holders of any of
the outstanding Preferred Stock, may consolidate with or merge into any other
Person or convey, transfer or lease all or substantially all its assets to any
Person or may permit any Person to consolidate with or merge into, or transfer
or lease all or substantially all its properties to, the Corporation; provided,
however, that: (a) the successor, transferee or lessee is organized under the
laws of the United States or any political subdivision thereof; (b) the shares
of Preferred Stock will become shares of such successor, transferee or lessee,
having in respect of such successor, transferee or lessee the same powers,
designations, preferences and relative, participating, optional or other rights
on which, and the qualification, limitations or restrictions thereon, the
Preferred Stock had immediately prior to such transaction; and (c) the
Corporation delivers to the Transfer Agent an Officers' Certificate and an
Opinion of Counsel stating that such transaction complies with this Certificate
of Designation (including without limitation the requirements of Section 7(l).

         (b)      Upon any consolidation by the Corporation with, or merger by
the Corporation into, any other Person or any conveyance, transfer or lease of
all or substantially all the assets of the Corporation as described in Section
9(a), the successor resulting from such consolidation or into which the
Corporation is merged or the transferee or lessee to which such conveyance,
transfer or lease is made will succeed to, and be substituted for, and may
exercise every right and power of, the Corporation under the shares of Preferred
Stock, and, thereafter, except in the case of a lease, the predecessor (if still
in existence) will be released from its obligations and covenants with respect
to the Preferred Stock.

         10.      SEC Reports.

         Whether or not the Corporation is required to file reports with the
Commission, if any shares of Preferred Stock are outstanding, the Corporation
shall file with the Commission all such reports and other information as it
would be required to file with the Commission by Section l3(a) or 15(d) under
the Exchange Act. The Corporation shall supply each holder of Preferred Stock,
upon request, without cost to such holder, copies of such reports or other
information.

         11.      Certificates.

         (a)      Form and Dating. The Preferred Stock and the Transfer Agent's
certificate of authentication shall be substantially in the form of Exhibit C,
which is hereby incorporated in and expressly made a part of this Certificate of
Designation. The Preferred Stock certificate may have notations, legends or
endorsements required by law, stock exchange rule, agreements to which the
Corporation is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Corporation). Each
Preferred Stock certificate shall be dated the date of its authentication. The
terms of the Preferred Stock certificate set forth in Exhibit C are part of the
terms of this Certificate of Designation.

                                       23

<PAGE>

         (i)      Global Preferred Stock. The Preferred Stock shall be issued
                  initially in the form of one or more fully registered global
                  certificates with the global securities legend and restricted
                  securities legend set forth in Exhibit C hereto (the "Global
                  Preferred Stock"), which shall be deposited on behalf of the
                  purchasers represented thereby with DTC (or with such
                  custodian as DTC may direct), and registered in the name of
                  DTC or a nominee of DTC, duly executed by the Corporation and
                  authenticated by the Transfer Agent as hereinafter provided.
                  The number of shares of Preferred Stock represented by Global
                  Preferred Stock may from time to time be increased or
                  decreased by adjustments made on the records of the Transfer
                  Agent and DTC or its nominee as hereinafter provided. With
                  respect to shares of Preferred Stock that are not "restricted
                  securities" as defined in Rule 144 under the Securities Act on
                  a Conversion Date, all shares of Common Stock distributed on
                  such Conversion Date will be freely transferable without
                  restriction under the Securities Act (other than by
                  affiliates), and such shares will be eligible for receipt in
                  global form through the facilities of DTC.

         (ii)     Book-Entry Provisions. In the event Global Preferred Stock is
                  deposited with or on behalf of DTC, the Corporation shall
                  execute and the Transfer Agent shall authenticate and deliver
                  initially one or more Global Preferred Stock certificates that
                  (a) shall be registered in the name of DTC as depository for
                  such Global Preferred Stock or the nominee of DTC and (b)
                  shall be delivered by the Transfer Agent to DTC or pursuant to
                  DTC's instructions or held by the Transfer Agent as custodian
                  for DTC.

                  Members of, or participants in, DTC ("Agent Members") shall
                  have no rights under this Certificate of Designation with
                  respect to any Global Preferred Stock held on their behalf by
                  DTC or by the Transfer Agent as the custodian of DTC or under
                  such Global Preferred Stock, and DTC may be treated by the
                  Corporation, the Transfer Agent and any agent of the
                  Corporation or the Transfer Agent as the absolute owner of
                  such Global Preferred Stock for all purposes whatsoever.
                  Notwithstanding the foregoing, nothing herein shall prevent
                  the Corporation, the Transfer Agent or any agent of the
                  Corporation or the Transfer Agent from giving effect to any
                  written certification, proxy or other authorization furnished
                  by DTC or impair, as between DTC and its Agent Members, the
                  operation of customary practices of DTC governing the exercise
                  of the rights of a holder of a beneficial interest in any
                  Global Preferred Stock.

         (iii)    Certificated Preferred Stock. Except as provided in Section
                  11(c), owners of beneficial interests in Global Preferred
                  Stock will not be entitled to receive Certificated Preferred
                  Stock.

         (b)      Execution and Authentication. Two Officers shall sign the
Preferred Stock certificate for the Corporation by manual or facsimile
signature.

         If an Officer whose signature is on a Preferred Stock certificate no
longer holds that office at the time the Transfer Agent authenticates the
Preferred Stock certificate, the Preferred Stock certificate shall be valid
nevertheless.

         A Preferred Stock certificate shall not be valid until an authorized
signatory of the Transfer Agent and the Security Registrar manually signs the
certificate of authentication on the Preferred Stock certificate. The signature
shall be conclusive evidence that the Preferred Stock certificate has been
authenticated under this Certificate of Designation.

         The Transfer Agent shall authenticate and deliver certificates for up
to 5,000,000 shares of Preferred Stock for original issue upon a written order
of the Corporation signed by two Officers or by an Officer and an Assistant
Treasurer of the Corporation. Such order shall specify the number of shares of
Preferred Stock to be authenticated and the date on which the original issue of
Preferred Stock is to be authenticated.

         The Transfer Agent may appoint an authenticating agent reasonably
acceptable to the Corporation to authenticate the certificates for Preferred
Stock. Unless limited by the terms of such appointment, an authenticating

                                       24

<PAGE>

agent may authenticate certificates for Preferred Stock whenever the Transfer
Agent may do so. Each reference in this Certificate of Designation to
authentication by the Transfer Agent includes authentication by such agent. An
authenticating agent has the same rights as the Transfer Agent or agent for
service of notices and demands.

         (c)      Transfer and Exchange of Global Preferred Stock. The transfer
and exchange of Global Preferred Stock or beneficial interests therein shall be
effected through DTC, in accordance with this Certificate of Designation
(including applicable restrictions on transfer set forth herein, if any) and the
procedures of DTC therefor.

         (i)      Restrictions on Transfer and Exchange of Global Preferred
                  Stock.

                  (1)      Notwithstanding any other provisions of this
                           Certificate of Designation (other than the provisions
                           set forth in Section 11(c)(ii)), Global Preferred
                           Stock may not be transferred as a whole except by DTC
                           to a nominee of DTC or by a nominee of DTC to DTC or
                           another nominee of DTC or by DTC or any such nominee
                           to a successor depository or a nominee of such
                           successor depository.

                  (2)      In the event that the Global Preferred Stock is
                           exchanged for Preferred Stock in definitive
                           registered form pursuant to Section 11(c)(ii) prior
                           to the effectiveness of a Shelf Registration
                           Statement with respect to such securities, such
                           Preferred Stock may be exchanged only in accordance
                           with such procedures as are substantially consistent
                           with the provisions of this Section 11(c) (including
                           the certification requirements set forth in the
                           Exhibits to this Certificate of Designation intended
                           to ensure that such transfers comply with Rule 144A
                           or such other applicable exemption from registration
                           under the Securities Act, as the case may be) and
                           such other procedures as may from time to time be
                           adopted by the Corporation.

                  (3)      The Preferred Stock, and any shares of Common Stock
                           distributed pursuant to the conversion of the
                           Preferred Stock, may not be sold or otherwise
                           transferred until the expiration of two years
                           following the date of payment for and delivery of the
                           Preferred Stock, except (a) pursuant to registration
                           under the Securities Act, (b) in accordance with Rule
                           144 (if available) or Rule 144A under the Securities
                           Act (if available) or (c) in offshore transactions in
                           reliance on Regulation S, and will bear a legend to
                           this effect.

         (ii)     Authentication of Certificated Preferred Stock. If at any
                  time:

                  (1)      DTC notifies the Corporation that DTC is unwilling or
                           unable to continue as depository for the Global
                           Preferred Stock and a successor depository for the
                           Global Preferred Stock is not appointed by the
                           Corporation within 90 days after delivery of such
                           notice;

                  (2)      DTC ceases to be a clearing agency registered under
                           the Exchange Act and a successor depository for the
                           Global Preferred Stock is not appointed by the
                           Corporation within 90 days; or

                  (3)      the Corporation, in its sole discretion, notifies the
                           Transfer Agent in writing that it elects to cause the
                           issuance of Certificated Preferred Stock under this
                           Certificate of Designation,

                           then the Corporation will execute, and the Transfer
                           Agent, upon receipt of a written order of the
                           Corporation signed by two Officers or by an Officer
                           and an Assistant Treasurer of the Corporation
                           requesting the authentication and delivery of
                           Certificated Preferred Stock to the Persons
                           designated by the Corporation, will authenticate and
                           deliver Certificated Preferred Stock equal to the
                           number of shares of Preferred Stock represented by
                           the Global Preferred Stock, in exchange for such
                           Global Preferred Stock.

         (iii)    Cancellation or Adjustment of Global Preferred Stock. At such
                  time as all beneficial interests in Global Preferred Stock
                  have either been exchanged for Certificated Preferred Stock,
                  converted or canceled, such Global Preferred Stock shall be
                  returned to DTC for cancellation or retained and

                                       25

<PAGE>

                  canceled by the Transfer Agent. At any time prior to such
                  cancellation, if any beneficial interest in Global Preferred
                  Stock is exchanged for Certificated Preferred Stock, converted
                  or canceled, the number of shares of Preferred Stock
                  represented by such Global Preferred Stock shall be reduced
                  and an adjustment shall be made on the books and records of
                  the Transfer Agent with respect to such Global Preferred
                  Stock, by the Transfer Agent or DTC, to reflect such
                  reduction.

                           (iv)     Obligations with Respect to Transfers and
                                    Exchanges of Preferred Stock.

                                    (1) To permit registrations of transfers and
                  exchanges, the Corporation shall execute and the Transfer
                  Agent shall authenticate Certificated Preferred Stock and
                  Global Preferred Stock as required pursuant to the provisions
                  of this Section 11(c).

                                    (2) All Certificated Preferred Stock and
                  Global Preferred Stock issued upon any registration of
                  transfer or exchange of Certificated Preferred Stock or Global
                  Preferred Stock shall be the valid obligations of the
                  Corporation, entitled to the same benefits under this
                  Certificate of Designation as the Certificated Preferred Stock
                  or Global Preferred Stock surrendered upon such registration
                  of transfer or exchange.

                                    (3) Prior to due presentment for
                  registration of transfer of any shares of Preferred Stock, the
                  Transfer Agent and the Corporation may deem and treat the
                  Person in whose name such shares of Preferred Stock are
                  registered as the absolute owner of such Preferred Stock and
                  neither the Transfer Agent nor the Corporation shall be
                  affected by notice to the contrary.

                                    (4) No service charge shall be made to a
                  Holder for any registration of transfer or exchange upon
                  surrender of any Preferred Stock certificate or Common Stock
                  certificate at the office of the Transfer Agent maintained for
                  that purpose. However, the Corporation may require payment of
                  a sum sufficient to cover any tax or other governmental charge
                  that may be imposed in connection with any registration of
                  transfer or exchange of Preferred Stock certificates or Common
                  Stock certificates.

                                    (5) Upon any sale or transfer of shares of
                  Preferred Stock (including any Preferred Stock represented by
                  a Global Preferred Stock certificate) or of certificated
                  Common Stock pursuant to an effective registration statement
                  under the Securities Act or pursuant to Rule 144 or another
                  exemption from registration under the Securities Act (and
                  based upon an Opinion of Counsel reasonably satisfactory to
                  the Corporation if it so requests):

                                             (A) in the case of any Certificated
                                    Preferred Stock or certificated Common
                                    Stock, the Corporation and the Transfer
                                    Agent shall permit the holder thereof to
                                    exchange such Preferred Stock or
                                    certificated Common Stock for Certificated
                                    Preferred Stock or certificated Common
                                    Stock, as the case may be, that does not
                                    bear the restrictive legend set forth on
                                    Exhibit C and rescind any restriction on the
                                    transfer of such Preferred Stock or Common
                                    Stock issuable in respect of the conversion
                                    of the Preferred Stock; and

                                             (B) in the case of any Global
                                    Preferred Stock, such Preferred Stock shall
                                    not be required to bear the restrictive
                                    legend set forth on Exhibit C; provided,
                                    however, that with respect to any request
                                    for an exchange of Preferred Stock that is
                                    represented by Global Preferred Stock for
                                    Certificated Preferred Stock that does not
                                    bear a restrictive as set forth on Exhibit C
                                    in connection with a sale or transfer
                                    thereof pursuant to Rule 144 or another
                                    exemption from registration under the
                                    Securities Act (and based upon an Opinion of
                                    Counsel if the Corporation so requests), the
                                    Holder thereof shall certify in writing to
                                    the Transfer Agent that such request is
                                    being made pursuant to such exemption (such
                                    certification to be substantially in the
                                    form of Exhibit D hereto).

         (v)      No Obligation of the Transfer Agent.

                  (1)      The Transfer Agent shall have no responsibility or
                           obligation to any beneficial owner of Global

                                       26

<PAGE>

                           Preferred Stock, a member of, or a participant in,
                           DTC or any other Person with respect to the accuracy
                           of the records of DTC or its nominee or of any
                           participant or member thereof, with respect to any
                           ownership interest in the Preferred Stock or with
                           respect to the delivery to any participant, member,
                           beneficial owner or other Person (other than DTC) of
                           any notice or the payment of any amount, under or
                           with respect to such Global Preferred Stock. All
                           notices and communications to be given to the Holders
                           and all payments to be made to Holders under the
                           Preferred Stock shall be given or made only to the
                           Holders (which shall be DTC or its nominee in the
                           case of the Global Preferred Stock). The rights of
                           beneficial owners in any Global Preferred Stock shall
                           be exercised only through DTC subject to the
                           applicable rules and procedures of DTC. The Transfer
                           Agent may rely and shall be fully protected in
                           relying upon information furnished by DTC with
                           respect to its members, participants and any
                           beneficial owners.

                  (2)      The Transfer Agent shall have no obligation or duty
                           to monitor, determine or inquire as to compliance
                           with any restrictions on transfer imposed under this
                           Certificate of Designation or under applicable law
                           with respect to any transfer of any interest in any
                           Preferred Stock (including any transfers between or
                           among DTC participants, members or beneficial owners
                           in any Global Preferred Stock) other than to require
                           delivery of such certificates and other documentation
                           or evidence as are expressly required by, and to do
                           so if and when expressly required by, the terms of
                           this Certificate of Designation, and to examine the
                           same to determine substantial compliance as to form
                           with the express requirements hereof.

         (d)      Replacement Certificates. If a mutilated Preferred Stock
certificate is surrendered to the Transfer Agent or if the Holder of a Preferred
Stock certificate claims that the Preferred Stock certificate has been lost,
destroyed or wrongfully taken, the Corporation shall issue and the Transfer
Agent shall countersign a replacement Preferred Stock certificate if the
reasonable requirements of the Transfer Agent are met. If required by the
Transfer Agent or the Corporation, such Holder shall furnish an indemnity bond
sufficient in the judgment of the Corporation and the Transfer Agent to protect
the Corporation and the Transfer Agent from any loss which either of them may
suffer if a Preferred Stock certificate is replaced. The Corporation and the
Transfer Agent may charge the Holder for their expenses in replacing a Preferred
Stock certificate.

         12.      Additional Rights of Holders. In addition to the rights
provided to Holders under this Certificate of Designation, Holders shall have
the rights set forth in the Registration Rights Agreement.

         13.      Other Provisions.

         (a) With respect to any notice to a Holder of shares of Preferred Stock
required to be provided hereunder, neither failure to mail such notice, nor any
defect therein or in the mailing thereof, to any particular Holder shall affect
the sufficiency of the notice or the validity of the proceedings referred to in
such notice with respect to the other Holders or affect the legality or validity
of any distribution, rights, warrant, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up, or the vote upon
any such action. Any notice which was mailed in the manner herein provided shall
be conclusively presumed to have been duly given whether or not the Holder
receives the notice.

         (b) Shares of Preferred Stock issued and reacquired will be retired and
canceled promptly after reacquisition thereof and, upon compliance with the
applicable requirements of Michigan law, have the status of authorized but
unissued shares of preferred stock of the Corporation undesignated as to series
and may with any and all other authorized but unissued shares of preferred stock
of the Corporation be designated or redesignated and issued or reissued, as the
case may be, as part of any series of preferred stock of the Corporation, except
that any issuance or reissuance of shares of Preferred Stock must be in
compliance with this Certificate of Designation.

         (c) The shares of Preferred Stock shall be issuable only in whole
shares.

         (d) All notice periods referred to herein shall commence on the date of
the mailing of the applicable notice.

                                       27

<PAGE>

         IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed and attested this 4th day of December, 2003.

                                               CMS ENERGY CORPORATION

                                               By: /S/ Michael D. VanHemert
                                                   --------------------------
                                                   Name: Michael D. VanHemert
                                                   Title: Vice President and
                                                          Secretary

         Attest: /S/ Joyce H. Norkey
                 -------------------
                 Joyce H. Norkey

                                       28

<PAGE>

                                                                       EXHIBIT A

                   FORM OF FUNDAMENTAL CHANGE PURCHASE NOTICE

To: CMS Energy Corporation

         The undersigned registered holder of shares of Preferred Stock hereby
acknowledges receipt of a notice from CMS Energy Corporation (the "Corporation")
as to the occurrence of a Fundamental Change with respect to the Corporation and
requests and instructs the Corporation to repurchase the shares of Preferred
Stock ($50.00 liquidation preference or an integral multiple thereof) designated
below, in accordance with the terms of the Certificate of Designation referred
to in such Preferred Stock and directs that the check of the Corporation, in
payment for these shares of Preferred Stock, be issued and delivered to the
registered holder hereof unless a different name has been indicated below. If
any portion of these shares of Preferred Stock are not repurchased and are to be
issued in the name of a Person other than the undersigned, the undersigned shall
pay all transfer taxes payable with respect thereto.

Dated:                                      _____________________________
                                                     Signature(s)

                           Signature(s) must be guaranteed by a commercial bank
                           or trust company or a member firm of a major stock
                           exchange if shares of Preferred Stock are to be
                           delivered other than to or in the name of the
                           registered holder.

                                            _____________________________
                                                 Signature Guarantee

Fill in for registration
of Preferred Stock if to
be issued other than to
and in the name of
registered holder:

_________________________             Number of shares of Preferred Stock to be
(Name)                                purchased (if less than all are to be
                                      be purchased):
_________________________
(Street Address)                      _____________________

_________________________             Certificate Number (if shares of Preferred
(City, state and zip code)            Stock are Certificated):
Please print name and address
                                      _____________________

                                      Social Security or other taxpayer number:

                                      _____________________

                                       29

<PAGE>

                                                                       EXHIBIT B

                            FORM OF CONVERSION NOTICE

To: CMS Energy Corporation

         The undersigned registered holder of these shares of Preferred Stock
hereby exercises the option to convert these shares of Preferred Stock, or
portion hereof (which is $50.00 liquidation preference or an integral multiple
thereof) designated below, for shares of Common Stock of CMS Energy Corporation
in accordance with the terms of the Certificate of Designation referred to in
the Preferred Stock, and directs that the shares, if any, issuable and
deliverable upon such conversion, together with any check for cash deliverable
upon such conversion, and any shares of Preferred Stock representing any
unconverted shares hereof, be issued and delivered to the registered holder
hereof unless a different name has been indicated below. If shares or any
portion of the Preferred Stock not converted are to be issued in the name of a
Person other than the undersigned, the undersigned shall pay all transfer taxes
payable with respect thereto.

         This notice shall be deemed to be an irrevocable exercise of the option
to convert these shares of Preferred Stock.

Dated:                                      _____________________________
                                                     Signature(s)

                           Signature(s) must be guaranteed by a commercial bank
                           or trust company or a member firm of a major stock
                           exchange if shares of Common Stock are to be issued,
                           or shares of Preferred Stock to be delivered, other
                           than to or in the name of the registered holder.

                                            _____________________________
                                                 Signature Guarantee

Fill in for registration
of shares if to be
delivered, and shares of
Preferred Stock if to be
issued other than to and
in the name of registered
holder:

_________________________             Number of shares of Preferred Stock to be
(Name)                                converted (if less than all):

_________________________             _____________________
(Street Address)
                                      Certificate Number (if shares of Preferred
_________________________             Stock are Certificated):
(City, state and zip code)
Please print name and address         _____________________

                                      Social Security or other taxpayer number:

                                      _____________________

                                       30

<PAGE>

                                                                       EXHIBIT C

                             FORM OF PREFERRED STOCK
                                FACE OF SECURITY

         THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND THE COMMON STOCK ISSUABLE
UPON CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH
PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY AND THE COMMON
STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE OFFERED, RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (I) IN THE UNITED STATES TO A PERSON WHOM THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT ("RULE 144A")) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN ACCORDANCE
WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (III) PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), (IV) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (V) TO CMS ENERGY CORPORATION
OR (VI) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT, IN EACH OF CASES (I) THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND
EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY FROM
IT OF THE RESALE RESTRICTIONS REFERRED TO IN CLAUSE (A) ABOVE.

         THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE IN
HEDGING TRANSACTIONS INVOLVING THIS SECURITY AND THE COMMON STOCK ISSUABLE UPON
CONVERSION HEREOF UNLESS IN COMPLIANCE WITH THE SECURITIES ACT.

         THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND PROCEDURES FOR
RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT ANY CHANGE IN APPLICABLE
LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES RELATING TO
THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS
SECURITY SHALL BE DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO
ANY SUCH AMENDMENT OR SUPPLEMENT.

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS
OF, A REGISTRATION RIGHTS AGREEMENT, DATED AS OF DECEMBER 5, 2003 ENTERED INTO
BY THE COMPANY FOR THE BENEFIT OF CERTAIN HOLDERS OF SECURITIES FROM TIME TO
TIME.

                                       31

<PAGE>

    Certificate Number                                    Number of Shares
[ ]                                                                    [ ]

                                                         CUSIP NO.: ______

   4.50% Cumulative Convertible Preferred Stock (par value $0.01) (liquidation
                            preference $50 per share)

                                       of

                             CMS Energy Corporation

         CMS Energy Corporation, a Michigan corporation (the `Corporation"),
hereby certifies that [______] (the "Holder") is the registered owner of
[______] fully paid and non-assessable preferred securities of the Corporation
designated the 4.50% Cumulative Convertible Preferred Stock (par value $0.01)
(liquidation preference $50 per share) (the "Preferred Stock"). The shares of
Preferred Stock are transferable on the books and records of the Transfer Agent,
in person or by a duly authorized attorney, upon surrender of this certificate
duly endorsed and in proper form for transfer. The designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated December 4,
2003, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The Corporation will
provide a copy of the Certificate of Designation to a Holder without charge upon
written request to the Corporation at its principal place of business.

         Reference is hereby made to select provisions of the Preferred Stock
set forth on the reverse hereof, and to the Certificate of Designation, which
select provisions and the Certificate of Designation shall for all purposes have
the same effect as if set forth at this place.

         Upon receipt of this certificate, the Holder is bound by the
Certificate of Designation and is entitled to the benefits thereunder.

         Unless the Transfer Agent's Certificate of Authentication hereon has
been properly executed, these shares of Preferred Stock shall not be entitled to
any benefit under the Certificate of Designation or be valid or obligatory for
any purpose.

         IN WITNESS WHEREOF, the Corporation has executed this certificate this
____ day of __________, 2003.

                                      CMS ENERGY CORPORATION

                                      By: __________________________________
                                          Name:
                                          Title:

                                      By: __________________________________
                                          Name:
                                          Title:

                                       32

<PAGE>

     TRANSFER AGENT'S AND SECURITY REGISTRAR'S CERTIFICATE OF AUTHENTICATION

         These are shares of the Preferred Stock referred to in the
within-mentioned Certificate of Designation.

         Dated: ______________, 2003

                                      CMS Energy Corporation, as Transfer Agent
                                      and Security Registrar

                                      By: __________________________________
                                          Authorized Signatory

                               REVERSE OF SECURITY

         Cash dividends on each share of Preferred Stock shall be payable at a
rate per annum set forth on the face hereof or as provided in the Certificate of
Designation.

         The shares of Preferred Stock shall be convertible into the
Corporation's Common Stock in the manner and according to the terms set forth in
the Certificate of Designation.

         The Corporation will furnish without charge to each holder who so
requests the powers, designations, preferences and relative, participating,
optional or other rights of each class of stock and the qualifications,
limitations or restrictions of such preferences and/or rights.

                                   ASSIGNMENT

         FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Preferred Stock evidenced hereby to:

         (Insert assignee's social security or tax identification number)

         (Insert address and zip code of assignee)

         and irrevocably appoints ____________ agent to transfer the shares of
Preferred Stock evidenced hereby on the books of the Transfer Agent. The agent
may substitute another to act for him or her.

         Date: _____________________________________________________________

         Signature: ________________________________________________________

         (Sign exactly as your name appears on the other side of this Preferred
         Stock certificate)

         Signature Guarantee: (1) __________________________________________

(1)      (Signature must be guaranteed by an "eligible guarantor institution"
         that is a bank, stockbroker, savings and loan association or credit
         union meeting the requirements of the Transfer Agent, which
         requirements include membership or participation in the Securities
         Transfer Agents Medallion Program ("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
         Securities Exchange Act of 1934, as amended.)

                                       33

<PAGE>

                                                                       EXHIBIT D

                  CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
                   REGISTRATION OF TRANSFER OF PREFERRED STOCK

         Re:      4.50% Cumulative Convertible Preferred Stock (the "Preferred
                  Stock") of CMS Energy Corporation (the "Corporation")

         This Certificate relates to ____ shares of Preferred Stock held in [ ]
*/ book-entry or [ ] */ definitive form by __________________ (the
"Transferor").

         The Transferor*:

         [ ] has requested the Transfer Agent by written order to deliver in
exchange for its beneficial interest in the Preferred Stock held by the
Depository shares of Preferred Stock in definitive, registered form equal to its
beneficial interest in such Preferred Stock (or the portion thereof indicated
above); or

         [ ] has requested the Transfer Agent by written order to exchange or
register the transfer of Preferred Stock.

         In connection with such request and in respect of such Preferred Stock,
the Transferor does hereby certify that the Transferor is familiar with the
Certificate of Designation relating to the above-captioned Preferred Stock and
that the transfer of this Preferred Stock does not require registration under
the Securities Act of 1933, as amended (the "Securities Act") because */:

         [ ] Such Preferred Stock is being acquired for the Transferor's own
account without transfer.

         [ ] Such Preferred Stock is being transferred to the Corporation.

         [ ] Such Preferred Stock is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A.

         [ ] Such Preferred Stock is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an Opinion of Counsel if the Corporation so
requests).

- --------
* /Please check applicable box.

                                            [NAME OF TRANFEROR]

                                            ____________________________________
                                            By:
                                            Its:
Date: ________________

                                       34

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(J)
<SEQUENCE>7
<FILENAME>k82154aexv4wxjy.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT DATED JULY 16, 2003
<TEXT>
<PAGE>

                                                                    EXHIBIT 4(j)

                          REGISTRATION RIGHTS AGREEMENT

                            Dated as of July 16, 2003

                                       by

                             CMS Energy Corporation

                                       and

                         Citigroup Global Markets Inc.,
                      Merrill Lynch, Pierce, Fenner & Smith
                                  Incorporated
                                      and
                          Deutsche Bank Securities Inc.

<PAGE>

         This Registration Rights Agreement (this "Agreement") is made and
entered into this 16th day of July, 2003 among CMS Energy Corporation, a
Michigan corporation (the "Company"), and Citigroup Global Markets Inc., as
representative (the "Representative") of the Initial Purchasers (the "Initial
Purchasers") listed on Schedule I to the Purchase Agreement (as defined below).

         This Agreement is made pursuant to the Purchase Agreement dated July 9,
2003, among the Company and the Representative on behalf of the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of an aggregate of $150,000,000 principal
amount of the Company's 3.375% Convertible Senior Notes due 2023 (the "Firm
Notes") and the granting by the Company to the Initial Purchasers of the option
to purchase $50,000,000 additional principal amount of such Convertible Senior
Notes (the "Option Notes" and, together with the Firm Notes, the "Notes"). The
Notes are convertible into shares of common stock, par value $0.01 per share, of
the Company at the initial conversion price set forth in the Offering Memorandum
dated July 10, 2003, subject to adjustment in accordance with the Indenture (as
defined below). In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchasers
and their direct and indirect transferees the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the closing under the Purchase Agreement.

         In consideration of the foregoing, the parties hereto agree as follows:

         1.       Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:

                  "Additional Amounts" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Additional Amounts Payment Date" shall have the meaning set
forth in Section 2(c)(ii) hereof.

                  "Agreement" shall have the meaning set forth in the preamble.

                  "Applicable Conversion Price" shall mean, as of any date of
determination, $1,000 principal amount of Notes as of such date of determination
divided by the Conversion Rate (as defined below) in effect as of such date of
determination or, if no Notes are then outstanding, the Conversion Rate that
would be in effect were Notes then outstanding.

                  "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in The City
of New York are authorized or obligated by law or executive order to close.

                  "Closing Date" shall mean the later of (i) the date on which
the Firm Notes are issued and (ii) the date on which the Option Notes are
issued.

                  "Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.

                                        1

<PAGE>

                  "Conversion Rate" shall have the meaning assigned to such term
in the Supplemental Indenture.

                  "Depositary" shall mean The Depository Trust Company, or any
other depositary for the Securities (as defined below) appointed by the Company;
provided, however, that such depositary must have an address in the Borough of
Manhattan, in The City of New York.

                  "Firm Closing Date" shall mean the date on which the Firm
Notes are issued.

                  "Firm Notes" shall have the meaning set forth in the preamble.

                  "Holder" shall mean an Initial Purchaser, for so long as it
owns any Registrable Securities (as defined below), and each of its successors,
assigns and direct and indirect transferees who become owners of Registrable
Securities.

                  "Indemnified Holder" shall have the meaning set forth in
Section 4(a) hereof.

                  "Indemnified Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Indemnifying Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Initial Purchasers" shall have the meaning set forth in the
preamble.

                  "Majority Holders" shall mean, on any date, Holders of a
majority of the outstanding Shares (as defined below) constituting Registrable
Securities; provided, that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company and other obligors on the Securities
or any Affiliate (as defined in the Indenture) of the Company or other obligor
shall be disregarded in determining whether such consent or approval was given
by the Holders of such required percentage amount. For the purposes of this
definition, Holders of Notes constituting Registrable Securities shall be deemed
to be Holders of the number of Shares into which such Notes are or would be
convertible as of such date.

                  "Material Event" shall have the meaning set forth in Section
3(f) hereof.

                  "Notes" shall have the meaning set forth in the preamble.

                  "Notice and Questionnaire" shall mean a written notice
delivered to the Company substantially in the form attached as Appendix I to the
Offering Memorandum.

                  "Notice Holder" shall mean, on any date, any Holder that has
delivered a Notice and Questionnaire to the Company on or prior to such date.

                  "Option Notes" shall have the meaning set forth in the
preamble.

                  "Person" shall mean any individual, corporation, partnership,
joint venture, trust, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.

                                        2

<PAGE>

                  "Prospectus" shall mean the prospectus included in the Shelf
Registration Statement (as defined below), including any preliminary prospectus,
and any such prospectus as amended or supplemented by any prospectus supplement,
including any such prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to a
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.

                  "Purchase Agreement" shall have the meaning set forth in the
preamble.

                  "Registrable Securities" shall mean the Securities; provided,
however, that Securities shall cease to be Registrable Securities when (i) a
Shelf Registration Statement with respect to such Securities shall have been
declared effective under the Act and such Securities shall have been disposed of
pursuant to such Shelf Registration Statement, (ii) such Securities have been
sold to the public pursuant to Rule 144 under the Act or may be sold pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A) under
the Act or (iii) such Securities shall have ceased to be outstanding.

                  "Registration Default" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this Agreement,
including, without limitation: (i) all Commission, stock exchange or NASD
registration and filing fees, including, if applicable, the reasonable fees and
expenses of any "qualified independent underwriter" (and its counsel) that is
required to be retained by any Holder of Registrable Securities in accordance
with the rules and regulations of the NASD; (ii) all fees and expenses incurred
in connection with compliance with state securities or blue sky laws and
compliance with the rules of the NASD (including reasonable fees and
disbursements of one counsel for the placement agent or underwriters, if any, in
connection with blue sky qualification of any of the Registrable Securities and
any filings with the NASD); (iii) all expenses of any Persons in preparing or
assisting in preparing word processing, printing and distributing any Shelf
Registration Statement, any Prospectus, any amendments or supplements thereto,
any underwriting agreements, any securities sales agreements and any other
documents relating to the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges; (v)
all rating agency fees; (vi) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance; (vii) the fees and expenses of the Trustee,
and any escrow agent or custodian; (viii) the reasonable fees and disbursements
of one firm, at any one time, of legal counsel selected by the Representative
(subject to the reasonable approval of the Company) to represent the Holders of
Registrable Securities, which firm shall be PW unless otherwise requested in
writing by the Majority Holders; and (ix) any reasonable fees and disbursements
of the underwriters customarily required to be paid by issuers or sellers of
securities and the fees and expenses of any special experts retained by the
Company in connection with any Shelf Registration Statement, but excluding
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of Registrable Securities by a Holder.

                                        3

<PAGE>

                  "Representative" shall have the meaning set forth in the
preamble.

                  "Securities" shall mean collectively the Notes and the Shares.

                  "Shares" shall mean the shares of common stock of the Company,
par value $0.01 per share, into which the Notes are convertible or that have
been issued upon any conversion of the Notes into common stock of the Company.

                  "Shelf Registration" shall mean a registration effected
pursuant to Section 2(a) hereof.

                  "Shelf Registration Filing Date" shall have the meaning set
forth in Section 2(a)(i) hereof.

                  "Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of Section 2(a)
hereof which covers all of the Registrable Securities on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.

                  "Suspension Period" shall have the meaning set forth in
Section 2(a)(i) hereof.

         2.       Registration Under the Act.

                  (a) Shelf Registration.

                           (i) The Company agrees to use reasonable commercial
         efforts to file under the Act as promptly as practicable after the time
         that the Company becomes eligible to file registration statements on
         Form S-3 under the Act but in any event within 15 months after the Firm
         Closing Date (the "Shelf Registration Filing Date") a Shelf
         Registration Statement providing for the registration of, and the sale
         on a continuous or delayed basis by the Holders of, all of the
         Registrable Securities, pursuant to Rule 415 under the Act or any
         similar rule that may be adopted by the Commission. If the Company is
         not eligible to file registration statements on Form S-3 under the Act
         before the Shelf Registration Filing Date, then the Company shall file
         a Shelf Registration Statement on whatever form is then available for
         the Company to use. The Company agrees to use its reasonable commercial
         efforts to cause the Shelf Registration Statement to become or be
         declared effective within 120 days after the Shelf Registration Filing
         Date and to keep such Shelf Registration Statement continuously
         effective until the earliest of (i) the date on which all Registrable
         Securities covered by the Shelf Registration Statement have been sold
         pursuant to such Shelf Registration Statement, (ii) the date on which
         all Registrable Securities have been sold pursuant to Rule 144 under
         the Act, (iii) such time as there are no longer any Registrable
         Securities outstanding and (iv) the second anniversary of the Closing
         Date (plus, in each case, the number of days in any Suspension Period);
         provided, however, that upon the occurrence of any event or the
         discovery of any facts as contemplated by Section 3(f)(iv) hereof, the
         Company shall not be obligated to keep the Shelf Registration Statement
         effective or to permit the use of any

                                        4

<PAGE>

         Prospectus forming a part of the Shelf Registration Statement if the
         Company promptly thereafter complies with the requirements of Section
         3(k) hereof; provided, further, that the failure to keep the Shelf
         Registration Statement effective and usable for offers and sales of
         Registrable Securities for such reason shall last no longer than 45
         consecutive calendar days or no more than an aggregate of 90 calendar
         days during any consecutive twelve-month period (whereafter a
         Registration Default shall occur and Additional Amounts shall accrue as
         set forth in Section 2.4(A)(v) hereof); any such period during which
         the Company is so excused from keeping the Shelf Registration Statement
         effective and usable for offers and sales of Registrable Securities is
         referred to herein as a "Suspension Period"; a Suspension Period shall
         commence on and include the date that the Company gives notice to the
         Holders that the Shelf Registration Statement is no longer effective or
         the Prospectus included therein is no longer usable for offers and
         sales of Registrable Securities as a result of the application of the
         proviso of the foregoing sentence, stating the reason therefor, and
         shall end on the earlier to occur of the date on which each seller of
         Registrable Securities covered by the Shelf Registration Statement
         either receives the copies of the supplemented or amended Prospectus or
         is advised in writing by the Company that use of the Prospectus may be
         resumed.

                           (ii) Each Holder of Registrable Securities agrees
         that if such Holder wishes to sell Registrable Securities pursuant to
         the Shelf Registration Statement and related Prospectus, it will do so
         only in accordance with this Section 2(a)(ii) and the last paragraph of
         Section 3 hereof. To be named a selling holder in the Shelf
         Registration Statement when it first becomes effective, Holders must
         deliver a Notice and Questionnaire to the Company at least five (5)
         Business Days prior to the effectiveness of the Shelf Registration
         Statement. From and after the date the Shelf Registration Statement is
         declared effective, the Company shall, as promptly as is practicable
         after the date a Notice and Questionnaire is delivered, and in any
         event within five (5) Business Days after such date, (1) if required by
         applicable law, file with the Commission a post-effective amendment to
         the Shelf Registration Statement or prepare and, if required by
         applicable law, file a supplement to the related Prospectus or an
         amendment or supplement to any document incorporated therein by
         reference or file any other required document (including, if required,
         a new or amended Shelf Registration Statement) so that the Holder
         delivering such Notice and Questionnaire is named as a selling holder
         in the Shelf Registration Statement and the related Prospectus and so
         that such Holder is permitted to deliver such Prospectus to purchasers
         of the Registrable Securities in accordance with applicable law and, if
         the Company shall file a post-effective amendment to the Shelf
         Registration Statement, use commercially reasonable efforts to cause
         such post-effective amendment to be declared effective under the Act as
         promptly as is practicable, (2) provide such Holder copies of any
         documents filed pursuant to Section 2(a)(ii)(1) hereof and (3) notify
         such Holder as promptly as practicable after the effectiveness under
         the Act of any post-effective amendment filed pursuant to Section
         2(a)(ii)(1) hereof; provided, that if such Notice and Questionnaire is
         delivered during a Suspension Period, the Company shall so inform the
         Holder delivering such Notice and Questionnaire and shall take the
         actions set forth in clauses (1), (2) and (3) above upon expiration of
         the Suspension Period. Notwithstanding anything contained herein to the
         contrary, the Company shall be under no obligation to name any Holder
         that is not a Notice Holder as a selling holder in the Shelf
         Registration Statement or related

                                        5

<PAGE>

         Prospectus; provided, however, that any Holder that becomes a Notice
         Holder pursuant to the provisions of this Section 2(a)(ii) (whether or
         not such Holder was a Notice Holder at the time the Shelf Registration
         Statement was declared effective) shall be named as a selling holder in
         the Shelf Registration Statement or related Prospectus in accordance
         with the requirements of this Section 2(a)(ii).

                           (iii) The Company shall not permit any securities
         other than Registrable Securities to be included in the Shelf
         Registration Statement. The Company further agrees, if necessary, to
         supplement or amend the Shelf Registration Statement, as required by
         Section 3(b) hereof, and to furnish to the Holders of Registrable
         Securities copies of any such supplement or amendment promptly after
         its being used or filed with the Commission.

                  (b) Expenses. The Company shall pay all Registration Expenses
in connection with the registration pursuant to Section 2(a) hereof and the
performance of its obligations under Section 2(a) and Section 3 hereof. Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.

                  (c) Interest.

                           (i) If any of the following events (any such event a
         "Registration Default") shall occur, then additional amounts (the
         "Additional Amounts") shall become payable to Holders in respect of the
         Securities as follows:

                           (1)      if the Shelf Registration Statement is not
                  filed with the Commission by the Shelf Registration Filing
                  Date, then commencing on the day immediately after the Shelf
                  Registration Filing Date, Additional Amounts shall accrue on
                  the principal amount of the outstanding Notes that are
                  Registrable Securities and on the Applicable Conversion Price
                  of any outstanding Shares that are Registrable Securities at a
                  rate of 0.25% per annum for the first 90 days following such
                  day immediately after the Shelf Registration Filing Date and
                  at a rate of 0.50% per annum thereafter;

                           (2)      if the Shelf Registration Statement is not
                  declared effective by the Commission within 120 days following
                  the Shelf Registration Filing Date, then commencing on the
                  121st day after the Shelf Registration Filing Date, Additional
                  Amounts shall accrue on the principal amount of the
                  outstanding Notes that are Registrable Securities and on the
                  Applicable Conversion Price of any outstanding Shares that are
                  Registrable Securities at a rate of 0.25% per annum for the
                  first 90 days following such 121st day after the Shelf
                  Registration Filing Date and at a rate of 0.50% per annum
                  thereafter;

                           (3)      if the Company has failed to perform its
                  obligations set forth in Section 2(a)(ii) hereof within the
                  time periods required therein, then commencing on the first
                  day after the date by which the Company was required to
                  perform such obligations, Additional Amounts shall accrue on
                  the principal

                                       6

<PAGE>

                  amount of the outstanding Notes that are Registrable
                  Securities and on the Applicable Conversion Price of any
                  outstanding Shares that are Registrable Securities at a rate
                  of 0.25% per annum for the first 90 days and at a rate of
                  0.50% per annum thereafter;

                           (4)      if the Shelf Registration Statement has been
                  declared effective but such Shelf Registration Statement
                  ceases to be effective at any time (other than as specifically
                  permitted in Section 2(a)(i) hereof) without being succeeded
                  within 30 days by an amendment thereto or an additional
                  registration statement filed and declared effective, then
                  commencing on the day such Shelf Registration Statement ceases
                  to be effective, Additional Amounts shall accrue on the
                  principal amount of the outstanding Notes that are Registrable
                  Securities and on the Applicable Conversion Price of any
                  outstanding Shares that are Registrable Securities at a rate
                  of 0.25% per annum for the first 90 days following such date
                  on which the Shelf Registration Statement ceases to be
                  effective and at a rate of 0.50% per annum thereafter; or

                           (5)      if the aggregate duration of Suspension
                  Periods in any period exceeds the number of days permitted in
                  respect of such period pursuant to Section 2(a)(i) hereof,
                  then commencing on the day the aggregate duration of
                  Suspension Periods in any period exceeds the number of days
                  permitted in respect of such period, Additional Amounts shall
                  accrue on the principal amount of the outstanding Notes that
                  are Registrable Securities and on the Applicable Conversion
                  Price of any outstanding Shares that are Registrable
                  Securities at a rate of 0.25% per annum for the first 90 days
                  and at a rate of 0.50% per annum thereafter;

         provided, however, that the Additional Amounts on the Securities shall
         not exceed in the aggregate 0.50% per annum and shall not be payable
         under more than one clause above for any given period of time, except
         that if Additional Amounts would be payable under more than one clause
         above, but at a rate of 0.25% per annum under one clause and at a rate
         of 0.50% per annum under the other, then the Additional Amounts rate
         shall be the higher rate of 0.50% per annum; provided, further,
         however, that (1) upon the filing of the Shelf Registration Statement
         (in the case of Section 2(c)(i)(1) hereof), (2) upon the effectiveness
         of the Shelf Registration Statement (in the case of Section 2(c)(i)(2)
         hereof), (3) upon the Company's performing its obligations set forth in
         Section 2(a)(ii) hereof (in the case of Section 2(c)(i)(3) hereof), (4)
         upon the effectiveness of the Shelf Registration Statement which had
         ceased to remain effective (in the case of Section 2(c)(i)(4) hereof)
         or (5) upon the termination of the Suspension Period that caused the
         limit on the aggregate duration of Suspension Periods in a period set
         forth in Section 2(a)(i) hereof to be exceeded (in the case of Section
         2(c)(i)(5) hereof), Additional Amounts on the Securities as a result of
         such Section, as the case may be, shall cease to accrue.

                           (ii) Additional Amounts on the Securities, if any,
         will be payable in cash on January 15 and July 15 of each year (the
         "Additional Amounts Payment Date") to holders of record of outstanding
         Registrable Securities on each preceding January 1 and

                                        7

<PAGE>
         July 1, respectively. The date of determination of the Applicable
         Conversion Price of any outstanding Shares that are Registrable
         Securities shall be the Business Day immediately preceding the
         Additional Amounts Payment Date; provided, that in the case of an event
         of the type described in Section 2(c)(i)(3) hereof, such Additional
         Amounts shall be paid only to the Holders that have delivered Notice
         and Questionnaires that caused the Company to incur the obligations set
         forth in Section 2(a)(ii) hereof, the non-performance of which is the
         basis of such Registration Default; provided, further, that any
         Additional Amounts accrued with respect to any Notes or portion thereof
         called for redemption on a redemption date or purchased on a purchase
         date or converted into Shares on a conversion date prior to the
         Registration Default shall, in any such event, be paid instead to the
         Holder who submitted such Notes or portion thereof for redemption,
         purchase or conversion on the applicable redemption date, purchase date
         or conversion date, as the case may be, on such date (or promptly
         following the conversion date, in the case of conversion), and shall
         continue to accrue on the Shares issuable upon conversion of any Notes
         to the extent any Registration Default has not yet been cured.
         Following the cure of all Registration Defaults requiring the payment
         of Additional Amounts by the Company to the Holders of Registrable
         Securities pursuant to Section 2(c)(i) hereof, the accrual of
         Additional Amounts will cease without in any way limiting the effect of
         any subsequent Registration Default requiring the payment of Additional
         Amounts by the Company.

         The Trustee shall be entitled, on behalf of Holders of Securities, to
seek any available remedy for the enforcement of this Agreement, including for
the payment of any Additional Amounts. Notwithstanding the foregoing, the
parties agree that the sole monetary damages payable for a violation of the
terms of this Agreement with respect to which Additional Amounts are expressly
provided shall be as set forth in this Section 2(c) in addition to any remedies
available to the Holders of the Securities under the Indenture. Nothing shall
preclude a Notice Holder or Holder of Registrable Securities from pursuing or
obtaining specific performance or other equitable relief with respect to this
Agreement.

         3.       Registration Procedures. In connection with the obligations of
the Company with respect to Shelf Registration Statements pursuant to Section
2(a) hereof, the Company shall:

                  (a) use reasonable commercial efforts to prepare and file with
the Commission a Shelf Registration Statement, within the relevant time period
specified in Section 2 hereof, on the appropriate form under the Act, which form
shall (i) be selected by the Company, (ii) be available for the sale of the
Registrable Securities by the selling Holders thereof and (iii) comply as to
form in all material respects with the requirements of the applicable form and
include or incorporate by reference all financial statements required by the
Commission to be filed therewith or incorporated by reference therein, and use
its reasonable commercial efforts to cause such Shelf Registration Statement to
become effective and remain effective in accordance with Section 2 hereof;

                  (b) use reasonable commercial efforts to cause (i) any Shelf
Registration Statement and any amendment thereto, when it becomes effective, not
to 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 and (ii) subject to Section 2(a)(iii)

                                        8

<PAGE>

hereof, any Prospectus forming part of any Shelf Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from time to time),
not to include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

                  (c) use reasonable commercial efforts to prepare and file with
the Commission such amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary under applicable law to keep such
Shelf Registration Statement effective for the applicable period; and cause each
Prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provision then in
force) under the Act and comply with the provisions of the Act, the Exchange Act
and the rules and regulations thereunder applicable to them with respect to the
disposition of all securities covered by the Shelf Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution reasonably requested by the selling Holders thereof;

                  (d) (i) notify each Holder of Registrable Securities, at least
fifteen (15) calendar days prior to filing, that a Shelf Registration Statement
with respect to the Registrable Securities is being filed and advising such
Holders that the distribution of Registrable Securities will be made in
accordance with the methods reasonably requested by the Majority Holders
participating in the Shelf Registration and as set forth in the Notices and
Questionnaires, (ii) furnish to each Notice Holder of Registrable Securities and
to each underwriter of an underwritten offering of Registrable Securities, if
any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto, and such other
documents as such Notice Holder or underwriter may reasonably request, including
financial statements and schedules and, if the Notice Holder so requests, all
exhibits in order to facilitate the public sale or other disposition of the
Registrable Securities and (iii) hereby consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Notice Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto, save and except during any Suspension Period;

                  (e) use its reasonable commercial efforts to register or
qualify the Registrable Securities under such state securities or blue sky laws
of such jurisdictions as any Notice Holder of Registrable Securities covered by
a Shelf Registration Statement and each underwriter of an underwritten offering
of Registrable Securities shall reasonably request in writing (which request
shall be included in the Notice and Questionnaire) by the time such Shelf
Registration Statement is declared effective by the Commission, and do any and
all other acts and things which may be reasonably necessary or advisable to
enable each such Notice Holder and underwriter to consummate the disposition in
each such jurisdiction of such Registrable Securities owned by such Notice
Holder; provided, however, that the Company shall not be required to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(e) or (ii)
take any action which would require it to file general consent to service of
process or taxation or file annual reports or comply with any other requirement
deemed by the Company in its reasonable judgment to be unduly burdensome;

                                        9

<PAGE>

                  (f) notify promptly each Notice Holder of Registrable
Securities under a Shelf Registration and, if requested by such Notice Holder,
confirm such advice in writing promptly (i) when such Shelf Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the Commission or
any state securities authority for post-effective amendments and supplements to
such Shelf Registration Statement and Prospectus or for additional information
after such Shelf Registration Statement has become effective, (iii) of the
issuance by the Commission or any state securities authority of any stop order
suspending the effectiveness of such Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the happening of any
event (but not the nature of the details concerning the same) or the discovery
of any facts during the period the Shelf Registration Statement is effective
which makes any statement made in such Shelf Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Shelf Registration Statement or Prospectus in order to
make the statements therein not misleading (a "Material Event"); provided,
however, that no notice by the Company shall be required pursuant to this clause
(iv) in the event that the Company either promptly files a Prospectus supplement
to update the Prospectus or a Form 8-K or other appropriate Exchange Act report
that is incorporated by reference into the Shelf Registration Statement, which,
in either case, contains the requisite information with respect to such Material
Event that results in such Shelf Registration Statement no longer containing any
untrue statement of material fact or omitting to state a material fact necessary
to make the statements contained therein not misleading, (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities, as the case may be, for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose
and (vi) of any determination by the Company that a post-effective amendment to
the Shelf Registration Statement would be appropriate other than post-effective
amendments prepared and filed in accordance with Section 2(a)(ii) hereof;

                  (g) furnish counsel for the Holders of Registrable Securities
copies of any comment letters received from the Commission or any other request
by the Commission or any state securities authority for amendments or
supplements to a Shelf Registration Statement and Prospectus or for additional
information;

                  (h) use its reasonable commercial efforts to obtain the
withdrawal of any order suspending the effectiveness of the Shelf Registration
Statement as soon as practicable and provide prompt notice to legal counsel for
the Holders of the withdrawal of any such order;

                  (i) furnish to each Notice Holder of Registrable Securities,
and each underwriter, if any, without charge, at least one conformed copy of
each Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules (without documents incorporated
therein by reference or all exhibits thereto, unless requested);

                  (j) use its reasonable commercial efforts to cooperate with
the selling Notice Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold to the extent not held with the Depositary through Cede & Co., to remove
any restrictive legends, and to enable such Registrable Securities to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such

                                       10

<PAGE>

names as the selling Notice Holders or the underwriters, if any, may reasonably
request at least three (3) Business Days prior to the closing of any sale of
Registrable Securities;

                  (k) upon the occurrence of any event or the discovery of any
facts, each as contemplated by Section 3(f)(ii), Section 3(f)(iii), Section
3(f)(iv), Section 3(f)(v) and Section 3(f)(vi) hereof and subject to the
provisions of the first paragraph immediately following Section 3(t) hereof, as
promptly as practicable after the occurrence of such an event, use its
reasonable commercial efforts to prepare a supplement or post-effective
amendment to the Shelf Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain at the time of such delivery any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. At such time as such public disclosure is otherwise
made or the Company determines that such disclosure is not necessary, in each
case to correct any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Notice Holder of such
determination and to furnish each Notice Holder such number of copies of the
Prospectus, as amended or supplemented, as such Notice Holder may reasonably
request;

                  (l) obtain a CUSIP number for all Registrable Securities
covered by the Shelf Registration Statement not later than the effective date of
such Shelf Registration Statement, and provide the Trustee for the Notes and the
transfer agent for the Shares with printed certificates for the Registrable
Securities that are in a form eligible for deposit with the Depositary;

                  (m) unless the Indenture, as its relates to the Registrable
Securities, has already been so qualified, use its reasonable commercial efforts
to (i) cause the Indenture to be qualified under the Trust Indenture Act in
connection with the registration of the Registrable Securities, as the case may
be, (ii) cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the Trust Indenture Act and (iii) execute, and use
its reasonable commercial efforts to cause the Trustee to execute, all documents
as may be required to effect such changes, and all other forms and documents
required to be filed with the Commission to enable the Indenture to be so
qualified in a timely manner;

                  (n) enter into such customary agreements (including an
underwriting or similar agreement) and make such representations and warranties
and take all such other actions in connection therewith (including, without
limitation, furnishing customary comfort letters and legal opinions pursuant to
the terms of such agreement) in order to expedite or facilitate the disposition
of the Registrable Securities pursuant to any Shelf Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder of
Registrable Securities or underwriter in connection with any sale or resale
pursuant to any Shelf Registration Statement contemplated by this Agreement;

                  (o) upon reasonable notice, for a reasonable period prior to
the filing of the Shelf Registration Statement and until the time at which there
are no Registrable Securities, make available at reasonable times at the
Company's principal place of business or such other reasonable place for
inspection by a representative appointed by the Notice Holders in

                                       11

<PAGE>

connection with an underwritten offering (or any underwriter, placement agent or
counsel acting on their behalf), who shall certify to the Company that they have
a current intention to sell their Registrable Securities pursuant to the Shelf
Registration Statement, such financial and other information and books and
records of the Company, and cause the officers, directors, employees and
independent certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the counsel to
such Notice Holders, to conduct a reasonable "due diligence" investigation;
provided, however, that such persons shall first agree in writing with the
Company that any information that is reasonably and in good faith designated by
the Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless (i) disclosure of
such information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements pursuant
to federal securities laws in connection with the filing of the Shelf
Registration Statement or the use of any Prospectus), (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard such information by such persons or (iv) such
information becomes available to such persons from a source other than the
Company and its subsidiaries and such source is not known by such persons to be
bound by a confidentiality agreement; provided, further, that the foregoing
inspection and information gathering shall be coordinated by (x) the managing
underwriter in connection with any underwritten offering pursuant to a Shelf
Registration and (y) the Holder or Holders designated by the participating
Majority Holders in connection with any non-underwritten offering pursuant to a
Shelf Registration, together with one counsel designated by and on behalf of
such persons;

                  (p) if reasonably requested by the Initial Purchasers or any
Notice Holder, promptly incorporate in a Prospectus supplement or post-effective
amendment to the Shelf Registration Statement such information as the Initial
Purchasers or such Notice Holder shall, on the basis of a written opinion of
nationally-recognized counsel experienced in such matters, determine to be
required to be included therein by applicable law and make any required filings
of such Prospectus supplement or such post-effective amendment; provided, that
the Company shall not be required to take any actions under this Section 3(p)
that are not, in the reasonable opinion of counsel for the Company, in
compliance with applicable law;

                  (q) use its reasonable commercial efforts to (i) confirm that
the ratings of the Notes will apply to the Notes covered by the Shelf
Registration Statement or (ii) if the Notes were not previously rated, cause the
Notes covered by the Shelf Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Majority Holders of
Securities covered by such Shelf Registration Statement, or by the managing
underwriters, if any;

                  (r) otherwise comply with all applicable rules and regulations
of the Commission and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering at least 12 months which
shall satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder;

                  (s) use its reasonable commercial efforts to cause the Shares
to remain listed on the New York Stock Exchange; and

                                       12

<PAGE>

                  (t) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
underwriter and its counsel (including any "qualified independent underwriter"
that is required to be retained in accordance with the rules and regulations of
the NASD).

         Each Holder agrees that upon receipt of any notice from the Company of
the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to such Shelf Registration
Statement or Prospectus until the receipt by such Holder of either copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice, or notice
in writing from the Company that such Holder may resume disposition of
Registrable Securities pursuant to such Shelf Registration Statement or
Prospectus. If the Company shall give any such notice to suspend the disposition
of Registrable Securities pursuant to a Shelf Registration Statement as a result
of the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, the Company shall be deemed to have used its
reasonable commercial efforts to keep such Shelf Registration Statement
effective during such Suspension Period; provided, that the Company shall use
its reasonable commercial efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to such Shelf
Registration Statement. The Company shall extend the period during which such
Shelf Registration Statement shall be maintained effective or the Prospectus
shall be used pursuant to this Agreement by the number of days during the period
from and including the date of the giving of the notice described above to and
including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such dispositions or
notification that they may resume such disposition under an existing Prospectus.

         If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be reasonably acceptable to the Company. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.

         The Company may require each Holder of Registrable Securities as to
which any registration pursuant to Section 2(a) is being effected to furnish to
the Company such information regarding such Holder and such Holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Act. Each such Holder agrees
to notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Company or of the
occurrence of any event in either case as a result of which any Prospectus
relating to such registration contains or

                                       13

<PAGE>

would contain an untrue statement of a material fact regarding such Holder or
such Holder's intended method of disposition of such Registrable Securities or
omits to state any material fact regarding such Holder or such Holder's intended
method of disposition of such Registrable Securities required to be stated
therein or necessary to make the statements therein not misleading, and promptly
to furnish to the Company any additional information required to correct and
update any previously furnished information or required so that such Prospectus
shall not contain, with respect to such Holder or the disposition of such
Registrable Securities, 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.

         Each Holder agrees, by acquisition of the Registrable Securities, that
such Holder shall not be entitled to sell any of such Registrable Securities
pursuant to the Shelf Registration Statement or to receive a Prospectus related
thereto, unless such Holder has furnished the Company with a Notice and
Questionnaire. Each Notice Holder agrees to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as may be required to be disclosed in the Shelf Registration Statement under
applicable law or pursuant to the Commission's comments. Each Holder further
agrees not to sell any Registrable Securities pursuant to the Shelf Registration
Statement without delivering or causing to be delivered a Prospectus to the
purchaser thereof and, following the time at which there are no Registrable
Securities, to notify the Company, within 10 business days of a request by the
Company of the amount of Registrable Securities sold pursuant to the Shelf
Registration Statement and, in the absence of a response, the Company may assume
that all of the Holder's Registrable Securities were so sold.

         4.       Indemnification; Contribution.

         (a)      The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each Holder and each Person, if any, who controls
any Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or
otherwise ("Indemnified Holder"), and to reimburse the Holders and such
controlling Person or Persons, if any, for any legal or other expenses incurred
by them in connection with defending any action, suit or proceeding (including
governmental investigations) as provided in Section 4(c) hereof, insofar as such
losses, claims, damages, liabilities or actions, suits or proceedings (including
governmental investigations) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Shelf
Registration Statement, or, if any Shelf Registration Statement shall be amended
or supplemented, in the Shelf Registration Statement as so amended or
supplemented, or arise out of or are based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
which was made in the Shelf Registration Statement or in the Shelf Registration
Statement as so amended or supplemented, in reliance upon and in conformity with
information furnished in writing to the Company by any Holder expressly for use
therein.

                                       14

<PAGE>

         The Company's indemnity agreement contained in this Section 4(a), and
the covenants, representations and warranties of the Company contained in this
Agreement, shall remain in full force and effect regardless of any investigation
made by or on behalf of any Person, and the indemnity agreement contained in
this Section 4 shall survive any termination of this Agreement. The liabilities
of the Company in this Section 4 are in addition to any other liabilities of the
Company under this Agreement or otherwise.

         (b)      Each Holder agrees, severally and not jointly, to the extent
permitted by law, to indemnify, hold harmless and reimburse the Company and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Company set forth in Section 4(a)
hereof, but only with respect to alleged untrue statements or omissions made in
the Shelf Registration Statement or in the Shelf Registration Statement, as
amended or supplemented (if applicable), in reliance upon and in conformity with
information furnished in writing to the Company by such Holder expressly for use
therein.

         The indemnity agreement on the part of each Holder contained in this
Section 4(b) shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any other Person, and the
indemnity agreement contained in this Section 4(b) shall survive any termination
of this Agreement.

         (c)      If a claim is made or an action, suit or proceeding (including
governmental investigations) is commenced or threatened against any person as to
which indemnity may be sought under Section 4(a) or 4(b) hereof, such Person
(the "Indemnified Person") shall notify the Person against whom such indemnity
may be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or, if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 4(a) or 4(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by a majority in
principal amount of the Holders in the case of parties indemnified pursuant to
Section 4(b) hereof and by the Company in the case of parties indemnified
pursuant to Section 4(a) hereof. Any Indemnified Person shall have the right to
participate in such litigation or proceeding and to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or likely conflicts of
interest between them, in either of which cases the reasonable fees and expenses
of counsel (including disbursements) for such Indemnified Person shall be
reimbursed by the Indemnifying Person to the Indemnified Person. If there is a
conflict as described in clause (ii) above, and the

                                       15

<PAGE>

Indemnified Persons have participated in the litigation or proceeding utilizing
separate counsel whose fees and expenses have been reimbursed by the
Indemnifying Person, and the Indemnified Persons, or any of them, are found to
be solely liable, such Indemnified Person shall repay to the Indemnifying
Parties such fees and expenses of such separate counsel as the Indemnifying
Person shall have reimbursed. It is understood that the Indemnifying Person
shall not, in connection with any litigation or proceeding or related litigation
or proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for the
reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.

         In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the Holders
and the Company agree that the Indemnifying Person's obligations to pay such
fees and expenses shall be conditioned upon the following:

                           (1)      in case separate counsel is proposed to be
                  retained by the Indemnified Persons pursuant to clause (ii) of
                  the preceding paragraph, the Indemnified Persons shall in good
                  faith fully consult with the Indemnifying Person in advance as
                  to the selection of such counsel;

                           (2)      reimbursable fees and expenses of such
                  separate counsel shall be detailed and supported in a manner
                  reasonably acceptable to the Indemnifying Person (but nothing
                  herein shall be deemed to require the furnishing to the
                  Indemnifying Person of any information, including, without
                  limitation, computer print-outs of lawyers' daily time
                  entries, to the extent that, in the judgment of such counsel,
                  furnishing such information might reasonably be expected to
                  result in a waiver of any attorney-client privilege); and

                           (3)      the Company and the Holders shall cooperate
                  in monitoring and controlling the fees and expenses of
                  separate counsel for Indemnified Persons for which the
                  Indemnifying Person is liable hereunder, and the Indemnified
                  Person shall use every reasonable effort to cause such
                  separate counsel to minimize the duplication of activities as
                  between themselves and counsel to the Indemnifying Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment against the Indemnified Person, the Indemnifying Person agrees, subject
to the provisions of this Section 4, to indemnify the Indemnified Person from
and against any loss, damage, liability or expenses by reason of such settlement
or judgment. The Indemnifying Person shall not, without the prior written
consent of the Indemnified Persons, effect any settlement of any pending or
threatened litigation, proceeding or claim in respect of which indemnity has
been properly sought by the Indemnified Persons hereunder, unless such
settlement includes an unconditional release by the claimant of all

                                       16

<PAGE>

Indemnified Persons from all liability with respect to claims which are the
subject matter of such litigation, proceeding or claim.

         (d)      If the indemnification provided for in this Section 4 is
unavailable to or insufficient to hold harmless an Indemnified Person under this
Section 4 in respect of any losses, claims, damages or liabilities (or actions,
suits or proceedings (including governmental investigations) in respect thereof)
referred to therein, then each Indemnifying Person under this Section 4 shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Person on the one hand and the Indemnified Person on the
other from the sale of the Registrable Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each Indemnifying Person shall contribute to such amount paid or
payable by such Indemnified Person in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Holders on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
(even if the Holders 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 in this Section 4. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages or liabilities (or
actions, suits or proceedings (including governmental proceedings) in respect
thereof) referred to in this Section 4 shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such actions, suits or proceedings (including
governmental proceedings) or claims, provided that the provisions of this
Section 4 have been complied with (in all material respects) in respect of any
separate counsel for such Indemnified Person. Notwithstanding the provisions of
this Section 4, no Holder shall be required to contribute any amount greater
than the excess of the amount by which the total received by such Holder with
respect to the sale of its Registrable Securities pursuant to a Shelf
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Registrable Securities plus (B) the amount of any damages which such Holder
has otherwise been required to pay by reason of 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section 4 to contribute are
several in proportion to their respective obligations and not joint.

         The agreement with respect to contribution contained in this Section 4
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any Holder, and shall survive any termination of
this Agreement.

                                       17

<PAGE>

         5.       Miscellaneous.

                  (a) Rule 144 and Rule 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act,
the Company covenants that it will file the reports required to be filed by it
under the Act and Section 13(a) or 15(d) of the Exchange Act and the rules and
regulations adopted by the Commission thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will, upon the
request of any Holder of Registrable Securities, (i) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
Act, (ii) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the Act and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the Act within the limitation of the
exemptions provided by (A) Rule 144 under the Act, as such Rule may be amended
from time to time, (B) Rule 144A under the Act, as such Rule may be amended from
time to time or (C) any similar rules or regulations hereafter adopted by the
Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.

                  (b) No Inconsistent Agreements. The Company has not entered
into and the Company will not after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not and will
not for the term of this Agreement in any way conflict with the rights granted
to the holders of the Company's other issued and outstanding securities under
any such agreements.

                  (c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders of the Registrable Securities affected by such amendment,
modification, supplement, waiver or departure. Without the consent of the Holder
of each Security, however, no modification may change the provisions relating to
the payment of Additional Amounts.

                  (d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier or any courier guaranteeing overnight delivery: (a)
if to a Holder, at the most current address given by such Holder to the Company
by means of a notice given in accordance with the provisions of this Section
5(d), which address initially is the address set forth in the Purchase Agreement
with respect to the Initial Purchasers; and (b) if to the Company, initially at
the Company's address set forth in the Purchase Agreement, and thereafter at
such other address of which notice is given in accordance with the provisions of
this Section 5(d).

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two (2) Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged, if telecopied; and on the next Business Day if timely delivered
to an air courier guaranteeing overnight delivery.

                                       18

<PAGE>

         Copies of all such notices, demands or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in the Indenture.

                  (e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.

                  (f) Third Party Beneficiaries. The Initial Purchasers (even if
the Initial Purchasers are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.

                  (g) Specific Performance. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section 2
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2 hereof.

                  (h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

                  (i) Headings. The headings in this Agreement are for the
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

                                       19

<PAGE>

                  (k) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

                  (l) Entire Agreement. This Agreement and other writings
referred to herein (including the Indenture and the Purchase Agreement)
represent the entire agreement among the parties hereto with respect to the
subject matter hereof and supercedes and replaces any and all prior agreements
and understandings, whether oral or written, with respect thereto.

                                       20

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                           CMS ENERGY CORPORATION

                                           By:/s/ Thomas J. Webb
                                              -------------------------------
                                              Name: Thomas J. Webb
                                              Title: Executive Vice President
                                                     and Chief Financial Officer
CONFIRMED AND ACCEPTED
AS OF THE DATE FIRST ABOVE WRITTEN:

CITIGROUP GLOBAL MARKETS INC.,
for itself and as Representative
of the Initial Purchasers

By:/s/ Jane Sadowsky
   --------------------------------
   Name: Jane Sadowsky
   Title: Managing Director

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(K)
<SEQUENCE>8
<FILENAME>k82154aexv4wxky.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT DATED JULY 17, 2003
<TEXT>
<PAGE>
                                                                    EXHIBIT 4(k)

                          REGISTRATION RIGHTS AGREEMENT

                            Dated as of July 17, 2003

                                       by

                             CMS Energy Corporation

                                       and

                         Citigroup Global Markets Inc.,
                      Merrill Lynch, Pierce, Fenner & Smith
                                  Incorporated
                                       and
                          Deutsche Bank Securities Inc.

<PAGE>

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of July 17, 2003, by CMS Energy Corporation, a Michigan
corporation (the "Company"), and Citigroup Global Markets Inc., as
representative of the Initial Purchasers (the "Initial Purchasers") listed on
Schedule I to the Purchase Agreement (as defined below), pursuant to which the
Initial Purchasers have agreed to purchase the Company's $300,000,000 7.75%
Senior Notes due 2010 (the "Restricted Notes").

         This Agreement is made pursuant to the Purchase Agreement, dated July
9, 2003 (the "Purchase Agreement"), between the Company and Citigroup Global
Markets Inc., as representative of the Initial Purchasers. In order to induce
the Initial Purchasers to purchase the Restricted Notes, the Company has agreed
to provide the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 5(f) of the Purchase Agreement.

         The parties hereby agree as follows:

SECTION 1. DEFINITIONS

         Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Purchase Agreement. As used in this Agreement, the
following capitalized terms shall have the following meanings:

         Act: The Securities Act of 1933, as amended.

         Advice: As defined in Section 6(d) hereof.

         Agreement: As defined in the first paragraph hereof.

         Broker-Dealer: Any broker or dealer registered under the Exchange Act.

         Broker-Dealer Transfer Restricted Securities: Exchange Notes that are
acquired by a Broker-Dealer in the Exchange Offer in exchange for Restricted
Notes that such Broker-Dealer acquired for its own account as a result of
market-making activities or other trading activities (other than Restricted
Notes acquired directly from the Company or any of its affiliates).

         Business Day: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the primary corporate trust office of the
Trustee, on which banks are authorized to close.

         Certificated Securities: Notes that are not in Global Note form.

         Closing Date: The date hereof.

         Commission: The Securities and Exchange Commission.

         Company: As defined in the first paragraph hereof.

                                        1

<PAGE>

         Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the
minimum period required pursuant to Section 3(b) hereof and (c) the delivery by
the Company to the Security Registrar of the Exchange Notes in the same
aggregate principal amount as the aggregate principal amount of the Restricted
Notes tendered by Holders thereof pursuant to the Exchange Offer.

         Damages Payment Date: With respect to the Restricted Notes, each
Interest Payment Date.

         Exchange Act: The Securities Exchange Act of 1934, as amended.

         Exchange Notes: The Company's 7.75% Senior Notes due 2010, to be issued
pursuant to the Indenture (i) in the Exchange Offer or (ii) upon the request of
any Holder of Restricted Notes covered by a Shelf Registration Statement, in
exchange for such Restricted Notes.

         Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities relating to Restricted Notes the opportunity to exchange all such
outstanding Transfer Restricted Securities relating to Restricted Notes for
Exchange Notes in an aggregate principal amount equal to the aggregate principal
amount of the Transfer Restricted Securities relating to Restricted Notes
tendered in such exchange offer by such Holders.

         Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.

         Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Restricted Notes to certain "qualified institutional
buyers", as such term is defined in Rule 144A under the Act, or to persons who
are not "U.S. persons", as such term is defined in Regulation S under the Act.

         Global Note: As defined in the Notes.

         Holder: As defined in Section 2 hereof.

         Indemnified Holder: As defined in Section 8(a) hereof.

         Indemnified Person: As defined in Section 8(c) hereof.

         Indemnifying Person: As defined in Section 8(c) hereof.

         Indenture: Indenture dated as of September 15, 1992, between the
Company and the Trustee, as supplemented by various supplemental indentures.

         Initial Purchasers: As defined in the first paragraph hereof.

                                        2

<PAGE>

         Interest Payment Date: As defined in the Notes.

         NASD: National Association of Securities Dealers, Inc.

         Notes: The Restricted Notes and the Exchange Notes.

         Person: An individual, partnership, corporation, trust, limited
liability company, unincorporated organization, or a government or agency or
political subdivision thereof.

         Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.

         Purchase Agreement: As defined in the second paragraph hereof.

         Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.

         Registration Default: As defined in Section 5 hereof.

         Registration Statement: Any registration statement of the Company
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) which is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.

         Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.

         Restricted Notes: As defined in the first paragraph hereof.

         S-3 Ineligibility Date: As defined in Section 12(l) hereof.

         Security Registrar: As defined in the Indenture.

         Shelf Registration Statement: As defined in Section 4(a) hereof.

         TIA: The Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
as in effect on the date of the Indenture.

         Transfer Restricted Securities: Each Note, until the earliest to occur
of (a) the date on which such Restricted Note is exchanged in the Exchange Offer
and entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which such
Restricted Note has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Restricted Note is disposed of by a
Broker-

                                        3

<PAGE>

Dealer pursuant to the "Plan of Distribution" contemplated by the
Exchange Offer Registration Statement (including delivery of the Prospectus
contained therein) or (d) the date on which such Restricted Note is distributed
to the public pursuant to Rule 144 under the Act.

         Trustee: Bank One Trust Company, N.A. (ultimate successor to NBD Bank,
National Association), as trustee under the Indenture.

         Underwritten Offering or Underwritten Registration: An offering or
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.

SECTION 2. HOLDERS

         A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.

SECTION  3. REGISTERED EXCHANGE OFFER

         (a)      Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) hereof have been
complied with), the Company shall (i) cause to be filed with the Commission as
soon as practicable after the Closing Date, but in no event later than 240 days
after the Closing Date, the Exchange Offer Registration Statement, (ii) use its
reasonable best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 330
days after the Closing Date, (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause such Exchange Offer Registration Statement to
become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Exchange Notes to be made under the blue sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Exchange Notes to be offered in
exchange for the Restricted Notes that are Transfer Restricted Securities and to
permit sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) hereof.

         (b)      The Company shall use its reasonable best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Company shall cause the Exchange Offer to comply with
all applicable federal and state securities laws. No securities other than the
Notes shall be included in the Exchange Offer Registration Statement. The
Company shall use its best efforts to cause the Exchange Offer to be Consummated
on the earliest practicable date after the Exchange Offer Registration Statement
has become effective, but in no event later than 30 days thereafter.

                                        4

<PAGE>

         (c)      The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Restricted Broker-Dealer who holds Restricted Notes
that are Transfer Restricted Securities and that were acquired for the account
of such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Restricted Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Exchange Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.

         The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) hereof to the extent necessary to
ensure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer is
Consummated.

         The Company shall promptly provide sufficient copies of the latest
version of such Prospectus to such Restricted Broker-Dealers promptly upon
request, and in no event later than one day after such request, at any time
during such one-year period in order to facilitate such sales.

SECTION 4. SHELF REGISTRATION

         (a)      Shelf Registration. If (i) the Company is not required to file
an Exchange Offer Registration Statement with respect to the Exchange Notes
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a)(i) hereof have been
complied with) or (ii) any Holder of Transfer Restricted Securities shall notify
the Company within 20 Business Days following the Consummation of the Exchange
Offer that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, the Company shall, if, and when, the Company is eligible to use Act Form
S-3, (x) cause to be filed on or prior to 180 days after the date on which the
Company determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above or 180 days after the date
on which the Company receives the notice specified in clause (ii) above a shelf
registration statement pursuant to Rule 415 under the Act (which may be an
amendment to

                                        5

<PAGE>

the Exchange Offer Registration Statement (in either event, the "Shelf
Registration Statement")), relating to all Transfer Restricted Securities the
Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and (y) use its best efforts to cause such Shelf
Registration Statement to become effective on or prior to 270 days after the
date on which the Company becomes obligated to file such Shelf Registration
Statement. If, after the Company has filed an Exchange Offer Registration
Statement which satisfies the requirements of Section 3(a) hereof, the Company
is required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer shall not be permitted under applicable federal law,
then the filing of the Exchange Offer Registration Statement shall be deemed to
satisfy the requirements of clause (x) above. Such an event shall have no effect
on the requirements of clause (y) above. The Company shall use its reasonable
best efforts to keep the Shelf Registration Statement discussed in this Section
4(a) continuously effective, supplemented and amended as required by and subject
to the provisions of Sections 6(b) and (c) hereof to the extent necessary to
ensure that it is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a), and to ensure that
it conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i) hereof)
following the date on which such Shelf Registration Statement first becomes
effective under the Act.

         (b)      Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information specified in Item 507 of Regulation S-K for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such information. Each Holder as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.

SECTION 5. LIQUIDATED DAMAGES

         If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 calendar days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded within 15 Business Days by a post-effective amendment to
such Registration Statement that cures such failure and that is itself declared
effective within five Business Days (each such event referred to in clauses (i)
through (iv), a "Registration Default"), then the Company agrees to pay
liquidated damages in the form of additional interest on the Transfer Restricted

                                        6

<PAGE>

Securities to each Holder of Transfer Restricted Securities, from and including
the date on which any Registration Default shall occur to, but excluding, the
date on which such Registration Default has been cured, at a rate of 0.25% per
annum during the 90-day period immediately following the occurrence of such
Registration Default and shall increase by 0.25% per annum at the end of each
subsequent 90-day period, but in no event shall such rate exceed 0.50% per
annum. Notwithstanding anything to the contrary set forth herein, (1) upon
filing of the Exchange Offer Registration Statement (and/or, if applicable, the
Shelf Registration Statement), in the case of clause (i) above, (2) upon the
effectiveness of the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement), in the case of clause (ii) above,
(3) upon Consummation of the Exchange Offer, in the case of clause (iii) above,
or (4) upon the filing of a post-effective amendment to the Registration
Statement or an additional Registration Statement that causes the Exchange Offer
Registration Statement (and/or, if applicable, the Shelf Registration Statement)
to again be declared effective or made usable, in the case of clause (iv) above,
the liquidated damages payable with respect to the Transfer Restricted
Securities as a result of such clause (i), (ii), (iii) or (iv), as applicable,
shall cease.

         All additional interest shall be paid on each payment date to the
Holder of Global Notes by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Securities by mailing checks
to their registered addresses on the books of the Company or the Trustee for
such payment. All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.

SECTION 6. REGISTRATION PROCEDURES

         (a)      Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) hereof, shall use its reasonable best efforts to effect such
exchange and to permit the sale of Broker-Dealer Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions:

                  (i)      If, following the date hereof, there has been
         published a change in Commission policy with respect to exchange offers
         such as the Exchange Offer, such that in the reasonable opinion of
         counsel to the Company there is a substantial question as to whether
         the Exchange Offer is permitted by applicable federal law, the Company
         hereby agrees to seek a no-action letter or other favorable decision
         from the Commission allowing the Company to Consummate an Exchange
         Offer for the Restricted Notes. The Company hereby agrees to pursue the
         issuance of such a decision to the Commission staff level. In
         connection with the foregoing, the Company hereby agrees to take all
         such other actions as are reasonably requested by the Commission or
         otherwise required in connection with the issuance of such decision,
         including without limitation (A) participating in telephonic
         conferences with the Commission, (B) delivering to the Commission staff
         an analysis prepared by counsel to the Company setting forth the legal
         bases, if any, upon which such counsel has concluded that such an

                                        7

<PAGE>

         Exchange Offer should be permitted and (C) diligently pursuing a
         resolution (which need not be favorable) by the Commission staff of
         such submission.

                  (ii)     As a condition to its participation in the Exchange
         Offer pursuant to the terms of this Agreement, each Holder of Transfer
         Restricted Securities shall furnish upon the request of the Company,
         prior to the Consummation of the Exchange Offer, a written
         representation to the Company (which may be contained in the letter of
         transmittal contemplated by the Exchange Offer Registration Statement)
         to the effect that (A) it is not an affiliate of the Company, (B) it is
         not engaged in, and does not intend to engage in, and has no
         arrangement or understanding with any Person to participate in, a
         distribution of the Exchange Notes to be issued in the Exchange Offer
         and (C) it is acquiring the Exchange Notes in its ordinary course of
         business. Each Holder hereby acknowledges and agrees that any
         Broker-Dealer and any such Holder using the Exchange Offer to
         participate in a distribution of the securities to be acquired in the
         Exchange Offer (1) could not under Commission policy as in effect on
         the date of this Agreement rely on the position of the Commission
         enunciated in Morgan Stanley and Co. Inc. (available June 5, 1991) and
         Exxon Capital Holdings Corp. (available May 13, 1988), as interpreted
         in the Commission's letter to Shearman & Sterling (available July 2,
         1993), and similar no-action letters (including, if applicable, any
         no-action letter obtained pursuant to clause (i) above), and (2) must
         comply with the registration and prospectus delivery requirements of
         the Act in connection with a secondary resale transaction and that such
         a secondary resale transaction must be covered by an effective
         registration statement containing the selling security holder
         information required by Item 507 or 508, as applicable, of Regulation
         S-K if the resales are of Exchange Notes obtained by such Holder in
         exchange for Restricted Notes acquired by such Holder directly from the
         Company or an affiliate thereof.

                  (iii)    Prior to effectiveness of the Exchange Offer
         Registration Statement, the Company shall provide a supplemental letter
         to the Commission (A) stating that the Company is registering the
         Exchange Offer in reliance on the position of the Commission enunciated
         in Exxon Capital Holdings Corp. (available May 13, 1988), Morgan
         Stanley and Co. Inc. (available June 5, 1991) and, if applicable, any
         no-action letter obtained pursuant to clause (i) above, (B) including a
         representation that the Company has not entered into any arrangement or
         understanding with any Person to distribute the Exchange Notes to be
         received in the Exchange Offer and that, to the best of the Company's
         information and belief, each Holder participating in the Exchange Offer
         is acquiring the Exchange Notes in its ordinary course of business and
         has no arrangement or understanding with any Person to participate in
         the distribution of the Exchange Notes received in the Exchange Offer
         and (C) any other undertaking or representation required by the
         Commission as set forth in any no-action letter obtained pursuant to
         clause (i) above.

         (b)      Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) hereof and shall use its best

                                        8

<PAGE>

efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
will prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof.

         (c)      General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company shall:

                  (i)      use its best efforts to keep such Registration
         Statement continuously effective and provide all requisite financial
         statements for the period specified in Section 3 or 4 hereof, as
         applicable. Upon the occurrence of any event that would cause any such
         Registration Statement or the Prospectus contained therein (A) to
         contain a material misstatement or omission or (B) not to be effective
         and usable for resale of Transfer Restricted Securities during the
         period required by this Agreement, the Company shall file promptly an
         appropriate amendment to such Registration Statement, (1) in the case
         of clause (A), correcting any such misstatement or omission, and (2) in
         the case of clauses (A) and (B), using its best efforts to cause such
         amendment to be declared effective and such Registration Statement and
         the related Prospectus to become usable for their intended purpose(s)
         as soon as practicable thereafter;

                  (ii)     prepare and file with the Commission such amendments
         and post-effective amendments to the Registration Statement as may be
         necessary to keep the Registration Statement effective for the
         applicable period set forth in Section 3 or 4 hereof, or such shorter
         period as will terminate when all Transfer Restricted Securities
         covered by such Registration Statement have been sold; cause the
         Prospectus to be supplemented by any required Prospectus supplement,
         and as so supplemented to be filed pursuant to Rule 424 under the Act,
         and to comply fully with Rules 424, 430A and 462, as applicable, under
         the Act in a timely manner; and comply with the provisions of the Act
         with respect to the disposition of all securities covered by such
         Registration Statement during the applicable period in accordance with
         the intended method or methods of distribution by the sellers thereof
         set forth in such Registration Statement or supplement to the
         Prospectus;

                  (iii)    advise the underwriter(s), if any, and selling
         Holders promptly and, if requested by such Persons, confirm such advice
         in writing, (A) when the Prospectus or any Prospectus supplement or
         post-effective amendment has been filed, and, with respect to any
         Registration Statement or any post-effective amendment thereto, when
         the same has become effective, (B) of any request by the Commission for
         amendments to the Registration Statement or amendments or

                                        9

<PAGE>

         supplements to the Prospectus or for additional information relating
         thereto, (C) of the issuance by the Commission of any stop order
         suspending the effectiveness of the Registration Statement under the
         Act or of the suspension by any state securities commission of the
         qualification of the Transfer Restricted Securities for offering or
         sale in any jurisdiction, or the initiation of any proceeding for any
         of the preceding purposes, (D) of the existence of any fact or the
         happening of any event that makes any statement of a material fact made
         in the Registration Statement, the Prospectus, any amendment or
         supplement thereto or any document incorporated by reference therein
         untrue, or that requires the making of any additions to or changes in
         the Registration Statement in order to make the statements therein not
         misleading, or that requires the making of any additions to or changes
         in the Prospectus in order to make the statements therein, in the light
         of the circumstances under which they were made, not misleading. If at
         any time the Commission shall issue any stop order suspending the
         effectiveness of the Registration Statement, or any state securities
         commission or other regulatory authority shall issue an order
         suspending the qualification or exemption from qualification of the
         Transfer Restricted Securities under state securities or blue sky laws,
         the Company shall use its best efforts to obtain the withdrawal or
         lifting of such order at the earliest possible time;

                  (iv)     furnish to the Initial Purchaser(s), each selling
         Holder named in any Registration Statement or Prospectus and each of
         the underwriter(s) in connection with such sale, if any, before filing
         with the Commission, copies of any Registration Statement or any
         Prospectus included therein or any amendments or supplements to any
         such Registration Statement or Prospectus (including all documents
         incorporated by reference after the initial filing of such Registration
         Statement), which documents will be subject to the review and comment
         of such Holders and underwriter(s) in connection with such sale, if
         any, for a period of at least five Business Days, and the Company will
         not file any such Registration Statement or Prospectus or any amendment
         or supplement to any such Registration Statement or Prospectus
         (including all such documents incorporated by reference) to which the
         selling Holders of the Transfer Restricted Securities covered by such
         Registration Statement or the underwriter(s) in connection with such
         sale, if any, shall reasonably object within five Business Days after
         the receipt thereof;

                  (v)      promptly prior to the filing of any document that is
         to be incorporated by reference into a Registration Statement or
         Prospectus, provide copies of such document to the selling Holders and
         to the underwriter(s) in connection with such sale, if any, make the
         Company's representatives available for discussion of such document and
         other customary due diligence matters, and include such information in
         such document prior to the filing thereof as such selling Holders or
         underwriter(s), if any, reasonably may request;

                  (vi)     make available at reasonable times for inspection by
         the selling Holders, any managing underwriter participating in any
         disposition pursuant to such Registration Statement and any attorney or
         accountant retained by such

                                       10

<PAGE>

         selling Holders or any of such underwriter(s), all financial and other
         records, material corporate documents and properties of the Company and
         cause the Company's officers, directors and employees to supply all
         information reasonably requested by any such Holder, underwriter,
         attorney or accountant in connection with such Registration Statement
         or any post-effective amendment thereto subsequent to the filing
         thereof and prior to its effectiveness;

                  (vii)    if requested by any selling Holders or the
         underwriter(s) in connection with such sale, if any, promptly include
         in any Registration Statement or Prospectus, pursuant to a supplement
         or post-effective amendment if necessary, such information as such
         selling Holders and underwriter(s), if any, may reasonably request to
         have included therein, including, without limitation, information
         relating to the "Plan of Distribution" of the Transfer Restricted
         Securities, information with respect to the principal amount of
         Transfer Restricted Securities being sold to such underwriter(s), the
         purchase price being paid therefor and any other terms of the offering
         of the Transfer Restricted Securities to be sold in such offering; and
         make all required filings of such Prospectus supplement or
         post-effective amendment as soon as practicable after the Company is
         notified of the matters to be included in such Prospectus supplement or
         post-effective amendment;

                  (viii)   if requested in writing by any selling Holder and
         each of the underwriter(s) in connection with such sale, if any,
         furnish, without charge, at least one copy of the Registration
         Statement, as first filed with the Commission, and of each amendment
         thereto, including all documents incorporated by reference therein and
         all exhibits (including exhibits incorporated therein by reference);

                  (ix)     if requested in writing by any selling Holder and
         each of the underwriter(s), if any, deliver, without charge, as many
         copies of the Prospectus (including each preliminary Prospectus) and
         any amendment or supplement thereto as such Persons reasonably may
         request; the Company hereby consents to the use (in accordance with
         law) of the Prospectus and any amendment or supplement thereto by each
         of the selling Holders and each of the underwriter(s), if any, in
         connection with the offering and the sale of the Transfer Restricted
         Securities covered by the Prospectus or any amendment or supplement
         thereto;

                  (x)      enter into such agreements (including an underwriting
         or similar agreement) and make such representations and warranties and
         take all such other actions in connection therewith in order to
         expedite or facilitate the disposition of the Transfer Restricted
         Securities pursuant to any Registration Statement contemplated by this
         Agreement as may be reasonably requested by any Holder of Transfer
         Restricted Securities or underwriter in connection with any sale or
         resale pursuant to any Registration Statement contemplated by this
         Agreement, and in such connection, whether or not an underwriting or
         similar agreement is entered into and whether or not the registration
         is an Underwritten Registration, the Company shall:

                                       11

<PAGE>

                           (A)      furnish (or in the case of clauses (2) and
                  (3) below, use its best efforts to furnish) to each selling
                  Holder and each underwriter, if any, upon the effectiveness of
                  the Shelf Registration Statement and to each Restricted
                  Broker-Dealer upon Consummation of the Exchange Offer:

                                    (1)      a certificate, dated the date of
                           Consummation of the Exchange Offer or the date of
                           effectiveness of the Shelf Registration Statement, as
                           the case may be, signed on behalf of the Company by
                           (x) the President or any Vice President and (y) a
                           principal financial or accounting officer of the
                           Company, confirming, as of the date thereof, the
                           matters set forth in Sections 5(d) and 5(e) of the
                           Purchase Agreement and such other similar matters as
                           the Holders, underwriter(s) and/or Restricted
                           Broker-Dealers may reasonably request;

                                    (2)      an opinion, dated the date of
                           Consummation of the Exchange Offer or the date of
                           effectiveness of the Shelf Registration Statement, as
                           the case may be, of counsel for the Company covering
                           matters similar to those set forth in Section 5(b)(i)
                           of the Purchase Agreement and such other matters as
                           the Holders, underwriter(s) and/or Restricted
                           Broker-Dealers may reasonably request, and in any
                           event including a statement to the effect that such
                           counsel has participated in conferences with officers
                           and other representatives of the Company,
                           representatives of the independent public accountants
                           for the Company and have considered the matters
                           required to be stated therein and the statements
                           contained therein, although such counsel has not
                           independently verified the accuracy, completeness or
                           fairness of such statements; and that such counsel
                           advises that, on the basis of the foregoing (relying
                           as to materiality to a large extent upon facts
                           provided to such counsel by officers and other
                           representatives of the Company and without
                           independent check or verification), no facts came to
                           such counsel's attention that caused such counsel to
                           believe that the applicable Registration Statement,
                           at the time such Registration Statement or any
                           post-effective amendment thereto became effective
                           and, in the case of the Exchange Offer Registration
                           Statement, as of the date of Consummation of the
                           Exchange Offer, 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 contained in such Registration Statement
                           as of its date and, in the case of the opinion dated
                           the date of Consummation of the Exchange Offer, as of
                           the date of Consummation,

                                       12

<PAGE>

                           contained an untrue statement of a material fact or
                           omitted 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. Without limiting the foregoing, such
                           counsel may state further that such counsel assumes
                           no responsibility for, and has not independently
                           verified, the accuracy, completeness or fairness of
                           the financial statements, Notes and schedules and
                           other financial data included in any Registration
                           Statement contemplated by this Agreement or the
                           related Prospectus; and

                                    (3)      a customary comfort letter, dated
                           as of the date of effectiveness of the Shelf
                           Registration Statement or the date of Consummation of
                           the Exchange Offer, as the case may be, from the
                           Company's independent accountants, in the customary
                           form and covering matters of the type customarily
                           covered in comfort letters to underwriters in
                           connection with primary underwritten offerings, and
                           affirming the matters set forth in the comfort
                           letters delivered pursuant to Section 5(c)(i) and
                           Section 5(c)(ii) of the Purchase Agreement, without
                           exception;

                           (B)      set forth in full or incorporate by
                  reference in the underwriting or similar agreement, if any, in
                  connection with any sale or resale pursuant to any Shelf
                  Registration Statement, the indemnification provisions and
                  procedures of Section 8 hereof with respect to all parties to
                  be indemnified pursuant to said Section 8; and

                           (C)      deliver such other documents and
                  certificates as may be reasonably requested by the selling
                  Holders, the underwriter(s), if any, and Restricted
                  Broker-Dealers, if any, to evidence compliance with clause (A)
                  above and with any customary conditions contained in the
                  underwriting agreement or other agreement entered into by the
                  Company pursuant to this clause (C);

the above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Company contemplated in clause (A)(1)
above cease to be true and correct, the Company shall so advise the
underwriter(s), if any, the selling Holders and each Restricted Broker-Dealer
promptly and, if requested by such Persons, shall confirm such advice in
writing;

                  (xi)     prior to any public offering of Transfer Restricted
         Securities, cooperate with the selling Holders, the underwriter(s), if
         any, and their respective counsel in connection with the registration
         and qualification of the Transfer Restricted Securities under the
         securities or blue sky laws of such jurisdictions as the selling
         Holders or underwriter(s), if any, may request and do any and all other

                                       13

<PAGE>

         acts or things necessary or advisable to enable the disposition in such
         jurisdictions of the Transfer Restricted Securities covered by the
         applicable Registration Statement; provided, however, that the Company
         shall not be required to register or qualify as a foreign corporation
         where it is not now so qualified or to take any action that would
         subject it to the service of process in suits or to taxation, other
         than as to matters and transactions relating to the Registration
         Statement, in any jurisdiction where it is not now so subject;

                  (xii)    issue, upon the request of any Holder of Restricted
         Notes covered by any Shelf Registration Statement contemplated by this
         Agreement, Exchange Notes having an aggregate principal amount equal to
         the aggregate principal amount of Restricted Notes surrendered to the
         Company by such Holder in exchange therefor or being sold by such
         Holder; such Exchange Notes to be registered in the name of such Holder
         or in the name of the purchaser(s) of such Notes, as the case may be;
         in return, the Restricted Notes held by such Holder shall be
         surrendered to the Company for cancellation;

                  (xiii)   in connection with any sale of Transfer Restricted
         Securities that will result in such securities no longer being Transfer
         Restricted Securities, cooperate with the selling Holders and the
         underwriter(s), if any, to facilitate the timely preparation and
         delivery of certificates representing Transfer Restricted Securities to
         be sold and not bearing any restrictive legends; and to register such
         Transfer Restricted Securities in such denominations and such names as
         the Holders or the underwriter(s), if any, may request at least two
         Business Days prior to such sale of Transfer Restricted Securities;

                  (xiv)    use its best efforts to cause the disposition of the
         Transfer Restricted Securities covered by the Registration Statement to
         be registered with or approved by such other governmental agencies or
         authorities as may be necessary to enable the seller or sellers thereof
         or the underwriter(s), if any, to consummate the disposition of such
         Transfer Restricted Securities, subject to the proviso contained in
         clause (xi) above;

                  (xv)     subject to clause (i) above, if any fact or event
         contemplated by clause (iii)(D) above shall exist or have occurred,
         prepare a supplement or post-effective amendment to the Registration
         Statement or related Prospectus or any document incorporated therein by
         reference or file any other required document so that, as thereafter
         delivered to the purchasers of Transfer Restricted Securities, the
         Prospectus will not contain an untrue statement of a material fact or
         omit to state any material fact necessary to make the statements
         therein, in the light of the circumstances under which they were made,
         not misleading;

                  (xvi)    provide CUSIP numbers for all Transfer Restricted
         Securities not later than the effective date of a Registration
         Statement covering such Transfer Restricted Securities and provide the
         Trustee with printed certificates for the Transfer Restricted
         Securities which are in a form eligible for deposit with The Depository
         Trust Company;

                                       14

<PAGE>

                  (xvii)   cooperate and assist in any filings required to be
         made with the NASD and in the performance of any due diligence
         investigation by any underwriter (including any "qualified independent
         underwriter") that is required to be retained in accordance with the
         rules and regulations of the NASD, and use its best efforts to cause
         such Registration Statement to become effective and approved by such
         governmental agencies or authorities as may be necessary to enable the
         Holders selling Transfer Restricted Securities to consummate the
         disposition of such Transfer Restricted Securities;

                  (xviii)  otherwise use its best efforts to comply with all
         applicable rules and regulations of the Commission, and make generally
         available to its security holders with regard to any applicable
         Registration Statement, as soon as practicable, a consolidated earning
         statement meeting the requirements of Rule 158 under the Act (which
         need not be audited) covering a twelve-month period beginning after the
         effective date of the Registration Statement (as such term is defined
         in paragraph (c) of Rule 158 under the Act);

                  (xix)    cause the Indenture to be qualified under the TIA not
         later than the effective date of the first Registration Statement
         required by this Agreement and, in connection therewith, cooperate with
         the Trustee and the Holders of Notes to effect such changes to the
         Indenture as may be required for such Indenture to be so qualified in
         accordance with the terms of the TIA; and execute and use its best
         efforts to cause the Trustee to execute all documents that may be
         required to effect such changes and all other forms and documents
         required to be filed with the Commission to enable such Indenture to be
         so qualified in a timely manner; and

                  (xx)     provide promptly to each Holder upon request each
         document filed with the Commission pursuant to the requirements of
         Section 13 or Section 15(d) of the Exchange Act.

         (d)      Restrictions on Holders. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of a notice of actions to be
taken as referred to in Section 6(c)(i) hereof or any notice from the Company of
the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof,
such Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xv) hereof, or until it is advised in writing by the Company that
the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus (the "Advice"). If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of either such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder

                                       15

<PAGE>

covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or
shall have received the Advice.

SECTION 7. REGISTRATION EXPENSES

         (a)      All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees; (ii) all fees and expenses of
compliance with federal securities and state blue sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Exchange Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and (other than in connection with the Exchange Offer) the Holders
of Transfer Restricted Securities; (v) all application and filing fees, if any,
in connection with listing the Notes on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).

         The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.

         (b)      In connection with the Shelf Registration Statement, the
Company will reimburse the Holders of Transfer Restricted Securities registered
pursuant to the Shelf Registration Statement for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit the Shelf Registration Statement is being prepared in consultation
with the Company.

SECTION 8. INDEMNIFICATION AND CONTRIBUTION

         (a)      The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each Holder and each Person, if any, who controls
any Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or
otherwise ("Indemnified Holder"), and to reimburse the Holders and such
controlling Person or Persons, if any, for any legal or other expenses incurred
by them in connection with defending any action, suit or proceeding (including
governmental investigations) as provided in Section 8(c) hereof, insofar as such
losses, claims, damages, liabilities or actions, suits or proceedings (including
governmental investigations) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement, or, if any Registration Statement shall be amended or supplemented,
in the Registration Statement as so amended or supplemented, or arise out of or
are based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any such untrue statement or
alleged untrue statement or

                                       16

<PAGE>

omission or alleged omission which was made in the Registration Statement or in
the Registration Statement as so amended or supplemented, in reliance upon and
in conformity with information furnished in writing to the Company by any Holder
expressly for use therein.

         The Company's indemnity agreement contained in this Section 8(a), and
the covenants, representations and warranties of the Company contained in this
Agreement, shall remain in full force and effect regardless of any investigation
made by or on behalf of any Person, and the indemnity agreement contained in
this Section 8 shall survive any termination of this Agreement. The liabilities
of the Company in this Section 8 are in addition to any other liabilities of the
Company under this Agreement or otherwise.

         (b)      Each Holder agrees, severally and not jointly, to the extent
permitted by law, to indemnify, hold harmless and reimburse the Company and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Company set forth in Section 8(a)
hereof, but only with respect to alleged untrue statements or omissions made in
the Registration Statement or in the Registration Statement, as amended or
supplemented (if applicable), in reliance upon and in conformity with
information furnished in writing to the Company by such Holder expressly for use
therein.

         The indemnity agreement on the part of each Holder contained in this
Section 8(b) shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any other Person, and the
indemnity agreement contained in this Section 8(b) shall survive any termination
of this Agreement.

         (c)      If a claim is made or an action, suit or proceeding (including
governmental investigations) is commenced or threatened against any person as to
which indemnity may be sought under Section 8(a) or 8(b) hereof, such Person
(the "Indemnified Person") shall notify the Person against whom such indemnity
may be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or, if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 8(a) or 8(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by a majority in
principal amount of the Holders in the case of parties indemnified pursuant to
Section 8(b) hereof and by the Company in the case of parties indemnified
pursuant to Section 8(a) hereof. Any Indemnified Person shall have the right to
participate in such litigation or proceeding and to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both

                                       17

<PAGE>

parties by the same counsel would be inappropriate due to actual or likely
conflicts of interest between them, in either of which cases the reasonable fees
and expenses of counsel (including disbursements) for such Indemnified Person
shall be reimbursed by the Indemnifying Person to the Indemnified Person. If
there is a conflict as described in clause (ii) above, and the Indemnified
Persons have participated in the litigation or proceeding utilizing separate
counsel whose fees and expenses have been reimbursed by the Indemnifying Person,
and the Indemnified Persons, or any of them, are found to be solely liable, such
Indemnified Person shall repay to the Indemnifying Parties such fees and
expenses of such separate counsel as the Indemnifying Person shall have
reimbursed. It is understood that the Indemnifying Person shall not, in
connection with any litigation or proceeding or related litigation or
proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for the
reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.

         In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the Holders
and the Company agree that the Indemnifying Person's obligations to pay such
fees and expenses shall be conditioned upon the following:

                           in case separate counsel is proposed to be
         retained by the Indemnified Persons pursuant to clause (ii) of the
         preceding paragraph, the Indemnified Persons shall in good faith fully
         consult with the Indemnifying Person in advance as to the selection of
         such counsel;

                           reimbursable fees and expenses of such separate
         counsel shall be detailed and supported in a manner reasonably
         acceptable to the Indemnifying Person (but nothing herein shall be
         deemed to require the furnishing to the Indemnifying Person of any
         information, including, without limitation, computer print-outs of
         lawyers' daily time entries, to the extent that, in the judgment of
         such counsel, furnishing such information might reasonably be expected
         to result in a waiver of any attorney-client privilege); and

                           the Company and the Holders shall cooperate in
         monitoring and controlling the fees and expenses of separate counsel
         for Indemnified Persons for which the Indemnifying Person is liable
         hereunder, and the Indemnified Person shall use every reasonable effort
         to cause such separate counsel to minimize the duplication of
         activities as between themselves and counsel to the Indemnifying
         Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment against the Indemnified Person, the Indemnifying Person agrees, subject
to the provisions of this Section 8, to indemnify the Indemnified Person from
and against any loss, damage, liability or expenses by reason of such settlement
or judgment. The Indemnifying Person shall not, without the prior written
consent of the Indemnified Persons, effect any settlement of any pending or
threatened litigation, proceeding or

                                       18

<PAGE>

claim in respect of which indemnity has been properly sought by the Indemnified
Persons hereunder, unless such settlement includes an unconditional release by
the claimant of all Indemnified Persons from all liability with respect to
claims which are the subject matter of such litigation, proceeding or claim.

         (d)      If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an Indemnified Person under this
Section 8 in respect of any losses, claims, damages or liabilities (or actions,
suits or proceedings (including governmental investigations) in respect thereof)
referred to therein, then each Indemnifying Person under this Section 8 shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Person on the one hand and the Indemnified Person on the
other from the sale of the Transfer Restricted Securities. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each Indemnifying Person shall contribute to such amount
paid or payable by such Indemnified Person in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Holders on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Holders 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 in this Section 8. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages or liabilities (or
actions, suits or proceedings (including governmental proceedings) in respect
thereof) referred to in this Section 8 shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such actions, suits or proceedings (including
governmental proceedings) or claims, provided that the provisions of this
Section 8 have been complied with (in all material respects) in respect of any
separate counsel for such Indemnified Person. Notwithstanding the provisions of
this Section 8, no Holder shall be required to contribute any amount greater
than the excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations in this Section 8 to
contribute are several in proportion to their respective obligations and not
joint.

                                       19

<PAGE>

         The agreement with respect to contribution contained in this Section 8
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any Holder, and shall survive any termination of
this Agreement.

SECTION 9. RULE 144A

         The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.

SECTION 10. UNDERWRITTEN REGISTRATIONS

         No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.

SECTION 11. SELECTION OF UNDERWRITERS

         For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company. The Holders of Transfer Restricted
Securities included in any such Underwritten Offering shall be responsible for
paying all underwriting or placement fees charged, or costs or expenses
incurred, by such investment bankers and managers in connection with such
Underwritten Offering. Such investment bankers and managers are referred to
herein as the "underwriters".

SECTION 12. MISCELLANEOUS

         (a)      Remedies. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture, in the Purchase Agreement
or granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by the Company of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.

         (b)      No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof.

                                       20

<PAGE>

The Company has not previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.

         (c)      Adjustments Affecting the Notes. The Company will not take any
action, or voluntarily permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.

         (d)      Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given, unless (i) in the case
of Section 5 hereof and this Section 12(d)(i), the Company has obtained the
written consent of Holders of all outstanding Transfer Restricted Securities and
(ii) in the case of all other provisions hereof, the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to or departure from the provisions hereof that relates exclusively to
the rights of Holders whose securities are being tendered pursuant to the
Exchange Offer and that does not affect directly or indirectly the rights of
other Holders whose securities are not being tendered pursuant to such Exchange
Offer may be given by the Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities subject to such Exchange Offer.

         (e)      Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:

                  (i)      if to a Holder, at the address set forth on the
         records of the Security Registrar under the Indenture, with a copy to
         the Security Registrar; and

                  (ii)     if to the Company:

                           CMS Energy Corporation
                           One Energy Plaza
                           Jackson, Michigan 49201
                           Telecopier No.: (517) 788-2186, Attention: Executive
                           Vice President and Chief Financial Officer

                  With a copy at the same address to:

                           Robert C. Shrosbree, Esq.
                           Telecopier No.: (313) 436-9225

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.

                                       21

<PAGE>

         Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.

         (f)      Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.

         (g)      Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         (h)      Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

         (i)      Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.

         (j)      Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

         (k)      Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.

         (l)      S-3 Ineligibility. If the Company is not eligible to use Act
Form S-3 by the 270th day after the date on which it determines that it is not
required to file the Exchange Offer Registration Statement pursuant to Section
4(a)(i) hereof or the 270th day after the date on which it receives the notice
specified in Section 4(a)(ii) hereof (either, the "S-3 Ineligibility Date"), the
Company shall (A) cause to be filed as soon as practicable after the S-3
Ineligibility Date a registration statement containing a resale prospectus on
whatever Act form the Company is then eligible to use relating to all Transfer
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof and (B) use its best efforts to cause
such shelf registration statement to become effective as soon as practicable.

                                       22

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                         CMS ENERGY CORPORATION

                                         By: /s/ Thomas J. Webb
                                            ----------------------------
                                            Name: Thomas J. Webb
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

CONFIRMED AND ACCEPTED
AS OF THE DATE FIRST ABOVE WRITTEN:

CITIGROUP GLOBAL MARKETS INC.,
for itself and as Representative
of the Initial Purchasers

By:/s/ Jane Sadowsky
   ----------------------------------
   Name: Jane Sadowsky
   Title: Managing Director

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(L)
<SEQUENCE>9
<FILENAME>k82154aexv4wxly.txt
<DESCRIPTION>REGISTRATION RIGHTS AGREEMENT DATED 12/05/2003
<TEXT>
<PAGE>

                                                                    EXHIBIT 4(L)

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

                          REGISTRATION RIGHTS AGREEMENT

                          Dated as of December 5, 2003

                                       by

                             CMS Energy Corporation

                                       and

                         Citigroup Global Markets Inc.,
               Merrill Lynch, Pierce, Fenner & Smith Incorporated,
                          J.P. Morgan Securities, Inc.,
                         Deutsche Bank Securities Inc.,
                          Wachovia Capital Markets, LLC
                                       and
                         Banc One Capital Markets, Inc.

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

<PAGE>

         This Registration Rights Agreement (this "Agreement") is made and
entered into this 5th day of December, 2003 among CMS Energy Corporation, a
Michigan corporation (the "Company"), and Citigroup Global Markets Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives (the
"Representatives") of the Initial Purchasers (the "Initial Purchasers") listed
on Schedule I to the Purchase Agreement (as defined below).

         This Agreement is made pursuant to the Purchase Agreement dated
December 1, 2003, among the Company and the Representatives on behalf of the
Initial Purchasers (the "Purchase Agreement"), which provides for the sale by
the Company to the Initial Purchasers of an aggregate of 4,500,000 shares of the
Company's 4.50% Cumulative Convertible Preferred Stock (the "Firm Shares") and
the granting by the Company to the Initial Purchasers of the option to purchase
an additional 500,000 shares of such Cumulative Convertible Preferred Stock to
cover over-allotments, if any (the "Option Shares" and, together with the Firm
Shares, the "Shares"). The Shares are convertible into shares of common stock,
par value $0.01 per share, of the Company at the initial conversion price set
forth in the Offering Memorandum dated December 1, 2003. In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide to the Initial Purchasers and their direct and indirect transferees
the registration rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the closing under the Purchase Agreement.

         In consideration of the foregoing, the parties hereto agree as follows:

         1.       Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:

                  "Additional Dividends" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Additional Dividends Payment Date" shall have the meaning set
forth in Section 2(c)(ii) hereof.

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

                  "Agreement" shall have the meaning set forth in the preamble.

                  "Applicable Conversion Price" shall mean, as of any date of
determination, the number of Shares as of such date of determination divided by
the Conversion Rate (as defined below) in effect as of such date of
determination or, if no Shares are then outstanding, the Conversion Rate that
would be in effect were Shares then outstanding.

                  "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in The City
of New York are authorized or obligated by law or executive order to close.

                                       1

<PAGE>

                  "Closing Date" shall mean the later of (i) the date on which
the Firm Shares are issued and (ii) the date on which the Option Shares are
issued.

                  "Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.

                  "Conversion Rate" shall mean 5.0541 shares of common stock,
par value $0.01 per share, of the Company per share of Preferred Stock.

                  "Depositary" shall mean The Depository Trust Company, or any
other depositary for the Securities (as defined below) appointed by the Company;
provided, however, that such depositary must have an address in the Borough of
Manhattan, in The City of New York.

                  "Firm Closing Date" shall mean the date on which the Firm
Shares are issued.

                  "Firm Shares" shall have the meaning set forth in the
preamble.

                  "Holder" shall mean an Initial Purchaser, for so long as it
owns any Registrable Securities (as defined below), and each of its successors,
assigns and direct and indirect transferees who become owners of Registrable
Securities.

                  "Indemnified Holder" shall have the meaning set forth in
Section 4(a) hereof.

                  "Indemnified Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Indemnifying Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Initial Purchasers" shall have the meaning set forth in the
preamble.

                  "Majority Holders" shall mean, on any date, Holders of a
majority of the outstanding shares of Stock (as defined below) constituting
Registrable Securities; provided, that whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company and other obligors on the
Securities or any Affiliate of the Company or other obligor shall be disregarded
in determining whether such consent or approval was given by the Holders of such
required percentage amount. For the purposes of this definition, Holders of
Shares constituting Registrable Securities shall be deemed to be Holders of the
number of shares of Stock into which such Shares are or would be convertible as
of such date.

                  "Material Event" shall have the meaning set forth in Section
3(f) hereof.

                  "Notice and Questionnaire" shall mean a written notice
delivered to the Company substantially in the form attached as Appendix I to the
Offering Memorandum.

                  "Notice Holder" shall mean, on any date, any Holder that has
delivered a Notice and Questionnaire to the Company on or prior to such date.

                  "Option Shares" shall have the meaning set forth in the
preamble.

                                       2

<PAGE>

                  "Person" shall mean any individual, corporation, partnership,
joint venture, trust, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.

                  "Prospectus" shall mean the prospectus included in the Shelf
Registration Statement (as defined below), including any preliminary prospectus,
and any such prospectus as amended or supplemented by any prospectus supplement,
including any such prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to a
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.

                  "Purchase Agreement" shall have the meaning set forth in the
preamble.

                  "Registrable Securities" shall mean the Securities; provided,
however, that Securities shall cease to be Registrable Securities when (i) a
Shelf Registration Statement with respect to such Securities shall have been
declared effective under the Act and such Securities shall have been disposed of
pursuant to such Shelf Registration Statement, (ii) such Securities have been
sold to the public pursuant to Rule 144 under the Act or may be sold pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A) under
the Act or (iii) such Securities shall have ceased to be outstanding.

                  "Registration Default" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this Agreement,
including, without limitation: (i) all Commission, stock exchange or NASD
registration and filing fees, including, if applicable, the reasonable fees and
expenses of any "qualified independent underwriter" (and its counsel) that is
required to be retained by any Holder of Registrable Securities in accordance
with the rules and regulations of the NASD; (ii) all fees and expenses incurred
in connection with compliance with state securities or blue sky laws and
compliance with the rules of the NASD (including reasonable fees and
disbursements of one counsel for the placement agent or underwriters, if any, in
connection with blue sky qualification of any of the Registrable Securities and
any filings with the NASD); (iii) all expenses of any Persons in preparing or
assisting in preparing word processing, printing and distributing any Shelf
Registration Statement, any Prospectus, any amendments or supplements thereto,
any underwriting agreements, any securities sales agreements and any other
documents relating to the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges; (v)
all rating agency fees; (vi) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance; (vii) the fees and expenses of the transfer
agent (if not the Company) and any escrow agent or custodian; (viii) the
reasonable fees and disbursements of one firm, at any one time, of legal counsel
selected by the Representatives (subject to the reasonable approval of the
Company) to represent the Holders of Registrable Securities, which firm shall be
PW unless otherwise requested in writing by the Majority Holders; and (ix) any
reasonable fees and disbursements of the underwriters

                                       3

<PAGE>

customarily required to be paid by issuers or sellers of securities and the fees
and expenses of any special experts retained by the Company in connection with
any Shelf Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.

                  "Representatives" shall have the meaning set forth in the
preamble.

                  "Securities" shall mean collectively the Shares and the Stock.

                  "Shares" shall have the meaning set forth in the preamble.

                  "Shelf Registration" shall mean a registration effected
pursuant to Section 2(a) hereof.

                  "Shelf Registration Filing Date" shall have the meaning set
forth in Section 2(a)(i) hereof.

                  "Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of Section 2(a)
hereof which covers all of the Registrable Securities on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.

                  "Stock" shall mean the shares of common stock of the Company,
par value $0.01 per share, into which the Shares are convertible or that have
been issued upon any conversion of the Shares into common stock of the Company.

                  "Suspension Period" shall have the meaning set forth in
Section 2(a)(i) hereof.

         2.       Registration Under the Act.

                  (a)      Shelf Registration.

                             (i)      The Company agrees to use reasonable
         commercial efforts to file under the Act as promptly as practicable
         after the time that the Company becomes eligible to file registration
         statements on Form S-3 under the Act but in any event within 11 months
         after the Firm Closing Date (the "Shelf Registration Filing Date") a
         Shelf Registration Statement providing for the registration of, and the
         sale on a continuous or delayed basis by the Holders of, all of the
         Registrable Securities, pursuant to Rule 415 under the Act or any
         similar rule that may be adopted by the Commission. If the Company is
         not eligible to file registration statements on Form S-3 under the Act
         before the Shelf Registration Filing Date, then the Company shall file
         a Shelf Registration Statement on whatever form is then available for
         the Company to use. The Company agrees to use its reasonable commercial
         efforts to cause the Shelf Registration Statement to become or be
         declared effective within 120 days after the Shelf Registration Filing
         Date and to keep such Shelf Registration Statement continuously
         effective until the earliest of (i) the date on which all Registrable
         Securities covered by the Shelf

                                       4

<PAGE>
         Registration Statement have been sold pursuant to such Shelf
         Registration Statement, (ii) the date on which all Registrable
         Securities have been sold pursuant to Rule 144 under the Act, (iii)
         such time as there are no longer any Registrable Securities outstanding
         and (iv) the second anniversary of the Closing Date (plus, in each
         case, the number of days in any Suspension Period); provided, however,
         that upon the occurrence of any event or the discovery of any facts as
         contemplated by Section 3(f)(iv) hereof, the Company shall not be
         obligated to keep the Shelf Registration Statement effective or to
         permit the use of any Prospectus forming a part of the Shelf
         Registration Statement if the Company promptly thereafter complies with
         the requirements of Section 3(k) hereof; provided, further, that the
         failure to keep the Shelf Registration Statement effective and usable
         for offers and sales of Registrable Securities for such reason shall
         last no longer than 45 consecutive calendar days or no more than an
         aggregate of 90 calendar days during any consecutive twelve-month
         period (whereafter a Registration Default shall occur and Additional
         Dividends shall accumulate as set forth in Section 2.4(A)(v) hereof);
         any such period during which the Company is so excused from keeping the
         Shelf Registration Statement effective and usable for offers and sales
         of Registrable Securities is referred to herein as a "Suspension
         Period"; a Suspension Period shall commence on and include the date
         that the Company gives notice to the Holders that the Shelf
         Registration Statement is no longer effective or the Prospectus
         included therein is no longer usable for offers and sales of
         Registrable Securities as a result of the application of the proviso of
         the foregoing sentence, stating the reason therefor, and shall end on
         the earlier to occur of the date on which each seller of Registrable
         Securities covered by the Shelf Registration Statement either receives
         the copies of the supplemented or amended Prospectus or is advised in
         writing by the Company that use of the Prospectus may be resumed.

                             (ii)     Each Holder of Registrable Securities
         agrees that if such Holder wishes to sell Registrable Securities
         pursuant to the Shelf Registration Statement and related Prospectus, it
         will do so only in accordance with this Section 2(a)(ii) and the last
         paragraph of Section 3 hereof. To be named a selling holder in the
         Shelf Registration Statement when it first becomes effective, Holders
         must deliver a Notice and Questionnaire to the Company at least five
         (5) Business Days prior to the effectiveness of the Shelf Registration
         Statement. From and after the date the Shelf Registration Statement is
         declared effective, the Company shall, as promptly as is practicable
         after the date a Notice and Questionnaire is delivered, and in any
         event within five (5) Business Days after such date, (1) if required by
         applicable law, file with the Commission a post-effective amendment to
         the Shelf Registration Statement or prepare and, if required by
         applicable law, file a supplement to the related Prospectus or an
         amendment or supplement to any document incorporated therein by
         reference or file any other required document (including, if required,
         a new or amended Shelf Registration Statement) so that the Holder
         delivering such Notice and Questionnaire is named as a selling holder
         in the Shelf Registration Statement and the related Prospectus and so
         that such Holder is permitted to deliver such Prospectus to purchasers
         of the Registrable Securities in accordance with applicable law and, if
         the Company shall file a post-effective amendment to the Shelf
         Registration Statement, use commercially reasonable efforts to cause
         such post-effective amendment to be declared effective under the Act as
         promptly as is practicable, (2) provide such Holder copies of any
         documents filed pursuant to Section 2(a)(ii)(1) hereof and (3) notify
         such Holder as promptly as practicable after the

                                       5

<PAGE>

         effectiveness under the Act of any post-effective amendment filed
         pursuant to Section 2(a)(ii)(1) hereof; provided, that if such Notice
         and Questionnaire is delivered during a Suspension Period, the Company
         shall so inform the Holder delivering such Notice and Questionnaire and
         shall take the actions set forth in clauses (1), (2) and (3) above upon
         expiration of the Suspension Period. Notwithstanding anything contained
         herein to the contrary, the Company shall be under no obligation to
         name any Holder that is not a Notice Holder as a selling holder in the
         Shelf Registration Statement or related Prospectus; provided, however,
         that any Holder that becomes a Notice Holder pursuant to the provisions
         of this Section 2(a)(ii) (whether or not such Holder was a Notice
         Holder at the time the Shelf Registration Statement was declared
         effective) shall be named as a selling holder in the Shelf Registration
         Statement or related Prospectus in accordance with the requirements of
         this Section 2(a)(ii).

                             (iii)    The Company shall not permit any
         securities other than Registrable Securities to be included in the
         Shelf Registration Statement. The Company further agrees, if necessary,
         to supplement or amend the Shelf Registration Statement, as required by
         Section 3(b) hereof, and to furnish to the Holders of Registrable
         Securities copies of any such supplement or amendment promptly after
         its being used or filed with the Commission.

                  (b)      Expenses. The Company shall pay all Registration
Expenses in connection with the registration pursuant to Section 2(a) hereof and
the performance of its obligations under Section 2(a) and Section 3 hereof. Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.

                  (c)      Interest.

                             (i)    If any of the following events (any such
         event a "Registration Default") shall occur, then additional dividends
         (the "Additional Dividends") shall become payable to Holders in respect
         of the Securities as follows:

                             (1)      if the Shelf Registration Statement is not
                  filed with the Commission by the Shelf Registration Filing
                  Date, then commencing on the day immediately after the Shelf
                  Registration Filing Date, Additional Dividends shall
                  accumulate on the outstanding Shares that are Registrable
                  Securities and on the Applicable Conversion Price of any
                  outstanding Stock that are Registrable Securities at a rate of
                  0.25% per annum for the first 90 days following such day
                  immediately after the Shelf Registration Filing Date and at a
                  rate of 0.50% per annum thereafter;

                             (2)      if the Shelf Registration Statement is not
                  declared effective by the Commission within 120 days following
                  the Shelf Registration Filing Date, then commencing on the
                  121st day after the Shelf Registration Filing Date, Additional
                  Dividends shall accumulate on the outstanding Shares that are
                  Registrable Securities and on the Applicable Conversion Price
                  of any outstanding Stock that are Registrable Securities at a
                  rate of 0.25% per annum for the first 90

                                       6

<PAGE>

                  days following such 121st day after the Shelf Registration
                  Filing Date and at a rate of 0.50% per annum thereafter;

                             (3)      if the Company has failed to perform its
                  obligations set forth in Section 2(a)(ii) hereof within the
                  time periods required therein, then commencing on the first
                  day after the date by which the Company was required to
                  perform such obligations, Additional Dividends shall
                  accumulate on the outstanding Shares that are Registrable
                  Securities and on the Applicable Conversion Price of any
                  outstanding Stock that are Registrable Securities at a rate of
                  0.25% per annum for the first 90 days and at a rate of 0.50%
                  per annum thereafter;

                             (4)      if the Shelf Registration Statement has
                  been declared effective but such Shelf Registration Statement
                  ceases to be effective at any time (other than as specifically
                  permitted in Section 2(a)(i) hereof) without being succeeded
                  within 30 days by an amendment thereto or an additional
                  registration statement filed and declared effective, then
                  commencing on the day such Shelf Registration Statement ceases
                  to be effective, Additional Dividends shall accumulate on the
                  outstanding Shares that are Registrable Securities and on the
                  Applicable Conversion Price of any outstanding Stock that are
                  Registrable Securities at a rate of 0.25% per annum for the
                  first 90 days following such date on which the Shelf
                  Registration Statement ceases to be effective and at a rate of
                  0.50% per annum thereafter; or

                             (5)      if the aggregate duration of Suspension
                  Periods in any period exceeds the number of days permitted in
                  respect of such period pursuant to Section 2(a)(i) hereof,
                  then commencing on the day the aggregate duration of
                  Suspension Periods in any period exceeds the number of days
                  permitted in respect of such period, Additional Dividends
                  shall accumulate on the outstanding Shares that are
                  Registrable Securities and on the Applicable Conversion Price
                  of any outstanding Stock that are Registrable Securities at a
                  rate of 0.25% per annum for the first 90 days and at a rate of
                  0.50% per annum thereafter;

         provided, however, that the Additional Dividends on the Securities
         shall not exceed in the aggregate 0.50% per annum and shall not be
         payable under more than one clause above for any given period of time,
         except that if Additional Dividends would be payable under more than
         one clause above, but at a rate of 0.25% per annum under one clause and
         at a rate of 0.50% per annum under the other, then the Additional
         Dividends rate shall be the higher rate of 0.50% per annum; provided,
         further, however, that (1) upon the filing of the Shelf Registration
         Statement (in the case of Section 2(c)(i)(1) hereof), (2) upon the
         effectiveness of the Shelf Registration Statement (in the case of
         Section 2(c)(i)(2) hereof), (3) upon the Company's performing its
         obligations set forth in Section 2(a)(ii) hereof (in the case of
         Section 2(c)(i)(3) hereof), (4) upon the effectiveness of the Shelf
         Registration Statement which had ceased to remain effective (in the
         case of Section 2(c)(i)(4) hereof) or (5) upon the termination of the
         Suspension Period that caused the limit on the aggregate duration of
         Suspension Periods in a period set forth in Section 2(a)(i) hereof to
         be exceeded (in the case of Section 2(c)(i)(5) hereof), Additional

                                       7

<PAGE>

         Dividends on the Securities as a result of such Section, as the case
         may be, shall cease to accumulate.

                             (ii)     Additional Dividends on the Securities, if
         any, will be payable in cash on March 1, June 1, September 1 and
         December 1 of each year (the "Additional Dividends Payment Date") to
         holders of record of outstanding Registrable Securities on each
         preceding February 15, May 15, August 15 and November 15, respectively.
         The date of determination of the Applicable Conversion Price of any
         outstanding Stock that are Registrable Securities shall be the Business
         Day immediately preceding the Additional Dividends Payment Date;
         provided, that in the case of an event of the type described in Section
         2(c)(i)(3) hereof, such Additional Dividends shall be paid only to the
         Holders that have delivered Notice and Questionnaires that caused the
         Company to incur the obligations set forth in Section 2(a)(ii) hereof,
         the non-performance of which is the basis of such Registration Default;
         provided, further, that any Additional Dividends accumulated with
         respect to any Shares or portion thereof called for redemption on a
         redemption date or purchased on a purchase date or converted into Stock
         on a conversion date prior to the Registration Default shall, in any
         such event, be paid instead to the Holder who submitted such Shares or
         portion thereof for redemption, purchase or conversion on the
         applicable redemption date, purchase date or conversion date, as the
         case may be, on such date (or promptly following the conversion date,
         in the case of conversion), and shall continue to accumulate on the
         Stock issuable upon conversion of any Shares to the extent any
         Registration Default has not yet been cured. Following the cure of all
         Registration Defaults requiring the payment of Additional Dividends by
         the Company to the Holders of Registrable Securities pursuant to
         Section 2(c)(i) hereof, the accumulation of Additional Dividends will
         cease without in any way limiting the effect of any subsequent
         Registration Default requiring the payment of Additional Dividends by
         the Company.

         Notwithstanding the foregoing, the parties agree that the sole monetary
damages payable for a violation of the terms of this Agreement with respect to
which Additional Dividends are expressly provided shall be as set forth in this
Section 2(c). Nothing shall preclude a Notice Holder or Holder of Registrable
Securities from pursuing or obtaining specific performance or other equitable
relief with respect to this Agreement.

         3.       Registration Procedures. In connection with the obligations of
the Company with respect to Shelf Registration Statements pursuant to Section
2(a) hereof, the Company shall:

                  (a)      use reasonable commercial efforts to prepare and file
with the Commission a Shelf Registration Statement, within the relevant time
period specified in Section 2 hereof, on the appropriate form under the Act,
which form shall (i) be selected by the Company, (ii) be available for the sale
of the Registrable Securities by the selling Holders thereof and (iii) comply as
to form in all material respects with the requirements of the applicable form
and include or incorporate by reference all financial statements required by the
Commission to be filed therewith or incorporated by reference therein, and use
its reasonable commercial efforts to cause such Shelf Registration Statement to
become effective and remain effective in accordance with Section 2 hereof;

                                       8

<PAGE>

                  (b)      use reasonable commercial efforts to cause (i) any
Shelf Registration Statement and any amendment thereto, when it becomes
effective, not to 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 and (ii) subject to Section 2(a)(iii) hereof,
any Prospectus forming part of any Shelf Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from time to time),
not to include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

                  (c)      use reasonable commercial efforts to prepare and file
with the Commission such amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary under applicable law to keep such
Shelf Registration Statement effective for the applicable period; and cause each
Prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provision then in
force) under the Act and comply with the provisions of the Act, the Exchange Act
and the rules and regulations thereunder applicable to them with respect to the
disposition of all securities covered by the Shelf Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution reasonably requested by the selling Holders thereof;

                  (d)      (i) notify each Holder of Registrable Securities, at
least fifteen (15) calendar days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Securities is being filed and advising
such Holders that the distribution of Registrable Securities will be made in
accordance with the methods reasonably requested by the Majority Holders
participating in the Shelf Registration and as set forth in the Notices and
Questionnaires, (ii) furnish to each Notice Holder of Registrable Securities and
to each underwriter of an underwritten offering of Registrable Securities, if
any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto, and such other
documents as such Notice Holder or underwriter may reasonably request, including
financial statements and schedules and, if the Notice Holder so requests, all
exhibits in order to facilitate the public sale or other disposition of the
Registrable Securities and (iii) hereby consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Notice Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto, save and except during any Suspension Period;

                  (e)      use its reasonable commercial efforts to register or
qualify the Registrable Securities under such state securities or blue sky laws
of such jurisdictions as any Notice Holder of Registrable Securities covered by
a Shelf Registration Statement and each underwriter of an underwritten offering
of Registrable Securities shall reasonably request in writing (which request
shall be included in the Notice and Questionnaire) by the time such Shelf
Registration Statement is declared effective by the Commission, and do any and
all other acts and things which may be reasonably necessary or advisable to
enable each such Notice Holder and underwriter to consummate the disposition in
each such jurisdiction of such Registrable Securities owned by such Notice
Holder; provided, however, that the Company shall not be required to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be

                                       9

<PAGE>

required to qualify but for this Section 3(e) or (ii) take any action which
would require it to file general consent to service of process or taxation or
file annual reports or comply with any other requirement deemed by the Company
in its reasonable judgment to be unduly burdensome;

                  (f)      notify promptly each Notice Holder of Registrable
Securities under a Shelf Registration and, if requested by such Notice Holder,
confirm such advice in writing promptly (i) when such Shelf Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the Commission or
any state securities authority for post-effective amendments and supplements to
such Shelf Registration Statement and Prospectus or for additional information
after such Shelf Registration Statement has become effective, (iii) of the
issuance by the Commission or any state securities authority of any stop order
suspending the effectiveness of such Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the happening of any
event (but not the nature of the details concerning the same) or the discovery
of any facts during the period the Shelf Registration Statement is effective
which makes any statement made in such Shelf Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Shelf Registration Statement or Prospectus in order to
make the statements therein not misleading (a "Material Event"); provided,
however, that no notice by the Company shall be required pursuant to this clause
(iv) in the event that the Company either promptly files a Prospectus supplement
to update the Prospectus or a Form 8-K or other appropriate Exchange Act report
that is incorporated by reference into the Shelf Registration Statement, which,
in either case, contains the requisite information with respect to such Material
Event that results in such Shelf Registration Statement no longer containing any
untrue statement of material fact or omitting to state a material fact necessary
to make the statements contained therein not misleading, (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities, as the case may be, for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose
and (vi) of any determination by the Company that a post-effective amendment to
the Shelf Registration Statement would be appropriate other than post-effective
amendments prepared and filed in accordance with Section 2(a)(ii) hereof;

                  (g)      furnish counsel for the Holders of Registrable
Securities copies of any comment letters received from the Commission or any
other request by the Commission or any state securities authority for amendments
or supplements to a Shelf Registration Statement and Prospectus or for
additional information;

                  (h)      use its reasonable commercial efforts to obtain the
withdrawal of any order suspending the effectiveness of the Shelf Registration
Statement as soon as practicable and provide prompt notice to legal counsel for
the Holders of the withdrawal of any such order;

                  (i)      furnish to each Notice Holder of Registrable
Securities, and each underwriter, if any, without charge, at least one conformed
copy of each Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules (without documents
incorporated therein by reference or all exhibits thereto, unless requested);

                                       10

<PAGE>

                  (j)      use its reasonable commercial efforts to cooperate
with the selling Notice Holders of Registrable Securities to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold to the extent not held with the Depositary through Cede &
Co., to remove any restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as the
selling Notice Holders or the underwriters, if any, may reasonably request at
least three (3) Business Days prior to the closing of any sale of Registrable
Securities;

                  (k)      upon the occurrence of any event or the discovery of
any facts, each as contemplated by Section 3(f)(ii), Section 3(f)(iii), Section
3(f)(iv), Section 3(f)(v) and Section 3(f)(vi) hereof and subject to the
provisions of the first paragraph immediately following Section 3(s) hereof, as
promptly as practicable after the occurrence of such an event, use its
reasonable commercial efforts to prepare a supplement or post-effective
amendment to the Shelf Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain at the time of such delivery any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. At such time as such public disclosure is otherwise
made or the Company determines that such disclosure is not necessary, in each
case to correct any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Notice Holder of such
determination and to furnish each Notice Holder such number of copies of the
Prospectus, as amended or supplemented, as such Notice Holder may reasonably
request;

                  (l)      obtain a CUSIP number for all Registrable Securities
covered by the Shelf Registration Statement not later than the effective date of
such Shelf Registration Statement, and provide the transfer agent for the Shares
and the Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with the Depositary;

                  (m)      enter into such customary agreements (including an
underwriting or similar agreement) and make such representations and warranties
and take all such other actions in connection therewith (including, without
limitation, furnishing customary comfort letters and legal opinions pursuant to
the terms of such agreement) in order to expedite or facilitate the disposition
of the Registrable Securities pursuant to any Shelf Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder of
Registrable Securities or underwriter in connection with any sale or resale
pursuant to any Shelf Registration Statement contemplated by this Agreement;

                  (n)      upon reasonable notice, for a reasonable period prior
to the filing of the Shelf Registration Statement and until the time at which
there are no Registrable Securities, make available at reasonable times at the
Company's principal place of business or such other reasonable place for
inspection by a representative appointed by the Notice Holders in connection
with an underwritten offering (or any underwriter, placement agent or counsel
acting on their behalf), who shall certify to the Company that they have a
current intention to sell their Registrable Securities pursuant to the Shelf
Registration Statement, such financial and other information and books and
records of the Company, and cause the officers, directors, employees and
independent certified public accountants of the Company to respond to such
inquiries, as

                                       11

<PAGE>

shall be reasonably necessary, in the judgment of the counsel to such Notice
Holders, to conduct a reasonable "due diligence" investigation; provided,
however, that such persons shall first agree in writing with the Company that
any information that is reasonably and in good faith designated by the Company
in writing as confidential at the time of delivery of such information shall be
kept confidential by such persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to federal
securities laws in connection with the filing of the Shelf Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure or
failure to safeguard such information by such persons or (iv) such information
becomes available to such persons from a source other than the Company and its
subsidiaries and such source is not known by such persons to be bound by a
confidentiality agreement; provided, further, that the foregoing inspection and
information gathering shall be coordinated by (x) the managing underwriter in
connection with any underwritten offering pursuant to a Shelf Registration and
(y) the Holder or Holders designated by the participating Majority Holders in
connection with any non-underwritten offering pursuant to a Shelf Registration,
together with one counsel designated by and on behalf of such persons;

                  (o)      if reasonably requested by the Initial Purchasers or
any Notice Holder, promptly incorporate in a Prospectus supplement or
post-effective amendment to the Shelf Registration Statement such information as
the Initial Purchasers or such Notice Holder shall, on the basis of a written
opinion of nationally-recognized counsel experienced in such matters, determine
to be required to be included therein by applicable law and make any required
filings of such Prospectus supplement or such post-effective amendment;
provided, that the Company shall not be required to take any actions under this
Section 3(o) that are not, in the reasonable opinion of counsel for the Company,
in compliance with applicable law;

                  (p)      use its reasonable commercial efforts to (i) confirm
that the ratings of the Shares will apply to the Shares covered by the Shelf
Registration Statement or (ii) if the Shares were not previously rated, cause
the Shares covered by the Shelf Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Majority Holders of
Securities covered by such Shelf Registration Statement, or by the managing
underwriters, if any;

                  (q)      otherwise comply with all applicable rules and
regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the Act and Rule
158 thereunder;

                  (r)      use its reasonable commercial efforts to cause the
Stock to remain listed on the New York Stock Exchange; and

                  (s)      cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence investigation by
any underwriter and its counsel (including any "qualified independent
underwriter" that is required to be retained in accordance with the rules and
regulations of the NASD).

                                       12

<PAGE>

         Each Holder agrees that upon receipt of any notice from the Company of
the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to such Shelf Registration
Statement or Prospectus until the receipt by such Holder of either copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice, or notice
in writing from the Company that such Holder may resume disposition of
Registrable Securities pursuant to such Shelf Registration Statement or
Prospectus. If the Company shall give any such notice to suspend the disposition
of Registrable Securities pursuant to a Shelf Registration Statement as a result
of the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, the Company shall be deemed to have used its
reasonable commercial efforts to keep such Shelf Registration Statement
effective during such Suspension Period; provided, that the Company shall use
its reasonable commercial efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to such Shelf
Registration Statement. The Company shall extend the period during which such
Shelf Registration Statement shall be maintained effective or the Prospectus
shall be used pursuant to this Agreement by the number of days during the period
from and including the date of the giving of the notice described above to and
including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such dispositions or
notification that they may resume such disposition under an existing Prospectus.

         If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be reasonably acceptable to the Company. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.

         The Company may require each Holder of Registrable Securities as to
which any registration pursuant to Section 2(a) is being effected to furnish to
the Company such information regarding such Holder and such Holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Act. Each such Holder agrees
to notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Company or of the
occurrence of any event in either case as a result of which any Prospectus
relating to such registration contains or would contain an untrue statement of a
material fact regarding such Holder or such Holder's intended method of
disposition of such Registrable Securities or omits to state any material fact
regarding such Holder or such Holder's intended method of disposition of such
Registrable Securities required to be stated therein or necessary to make the
statements therein not misleading, and promptly to furnish to the Company any
additional information required to

                                       13

<PAGE>

correct and update any previously furnished information or required so that such
Prospectus shall not contain, with respect to such Holder or the disposition of
such Registrable Securities, 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.

         Each Holder agrees, by acquisition of the Registrable Securities, that
such Holder shall not be entitled to sell any of such Registrable Securities
pursuant to the Shelf Registration Statement or to receive a Prospectus related
thereto, unless such Holder has furnished the Company with a Notice and
Questionnaire. Each Notice Holder agrees to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as may be required to be disclosed in the Shelf Registration Statement under
applicable law or pursuant to the Commission's comments. Each Holder further
agrees not to sell any Registrable Securities pursuant to the Shelf Registration
Statement without delivering or causing to be delivered a Prospectus to the
purchaser thereof and, following the time at which there are no Registrable
Securities, to notify the Company, within 10 business days of a request by the
Company of the amount of Registrable Securities sold pursuant to the Shelf
Registration Statement and, in the absence of a response, the Company may assume
that all of the Holder's Registrable Securities were so sold.

         4.       Indemnification; Contribution.

         (a)      The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each Holder and each Person, if any, who controls
any Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or
otherwise ("Indemnified Holder"), and to reimburse the Holders and such
controlling Person or Persons, if any, for any legal or other expenses incurred
by them in connection with defending any action, suit or proceeding (including
governmental investigations) as provided in Section 4(c) hereof, insofar as such
losses, claims, damages, liabilities or actions, suits or proceedings (including
governmental investigations) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Shelf
Registration Statement, or, if any Shelf Registration Statement shall be amended
or supplemented, in the Shelf Registration Statement as so amended or
supplemented, or arise out of or are based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
which was made in the Shelf Registration Statement or in the Shelf Registration
Statement as so amended or supplemented, in reliance upon and in conformity with
information furnished in writing to the Company by any Holder expressly for use
therein.

         The Company's indemnity agreement contained in this Section 4(a), and
the covenants, representations and warranties of the Company contained in this
Agreement, shall remain in full force and effect regardless of any investigation
made by or on behalf of any Person, and the indemnity agreement contained in
this Section 4 shall survive any termination of this Agreement.

                                       14

<PAGE>

The liabilities of the Company in this Section 4 are in addition to any other
liabilities of the Company under this Agreement or otherwise.

         (b)      Each Holder agrees, severally and not jointly, to the extent
permitted by law, to indemnify, hold harmless and reimburse the Company and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Company set forth in Section 4(a)
hereof, but only with respect to alleged untrue statements or omissions made in
the Shelf Registration Statement or in the Shelf Registration Statement, as
amended or supplemented (if applicable), in reliance upon and in conformity with
information furnished in writing to the Company by such Holder expressly for use
therein.

         The indemnity agreement on the part of each Holder contained in this
Section 4(b) shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any other Person, and the
indemnity agreement contained in this Section 4(b) shall survive any termination
of this Agreement.

         (c)      If a claim is made or an action, suit or proceeding (including
governmental investigations) is commenced or threatened against any person as to
which indemnity may be sought under Section 4(a) or 4(b) hereof, such Person
(the "Indemnified Person") shall notify the Person against whom such indemnity
may be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or, if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 4(a) or 4(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by a majority in
interest of the Holders in the case of parties indemnified pursuant to Section
4(b) hereof and by the Company in the case of parties indemnified pursuant to
Section 4(a) hereof. Any Indemnified Person shall have the right to participate
in such litigation or proceeding and to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or likely conflicts of
interest between them, in either of which cases the reasonable fees and expenses
of counsel (including disbursements) for such Indemnified Person shall be
reimbursed by the Indemnifying Person to the Indemnified Person. If there is a
conflict as described in clause (ii) above, and the Indemnified Persons have
participated in the litigation or proceeding utilizing separate counsel whose
fees and expenses have been reimbursed by the Indemnifying Person, and the
Indemnified Persons, or any of them, are found to be solely liable, such
Indemnified Person shall repay to the Indemnifying Parties such fees and
expenses of such separate counsel as the Indemnifying

                                       15

<PAGE>

Person shall have reimbursed. It is understood that the Indemnifying Person
shall not, in connection with any litigation or proceeding or related litigation
or proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for the
reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.

         In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the Holders
and the Company agree that the Indemnifying Person's obligations to pay such
fees and expenses shall be conditioned upon the following:

                           (1)      in case separate counsel is proposed to be
                  retained by the Indemnified Persons pursuant to clause (ii) of
                  the preceding paragraph, the Indemnified Persons shall in good
                  faith fully consult with the Indemnifying Person in advance as
                  to the selection of such counsel;

                           (2)      reimbursable fees and expenses of such
                  separate counsel shall be detailed and supported in a manner
                  reasonably acceptable to the Indemnifying Person (but nothing
                  herein shall be deemed to require the furnishing to the
                  Indemnifying Person of any information, including, without
                  limitation, computer print-outs of lawyers' daily time
                  entries, to the extent that, in the judgment of such counsel,
                  furnishing such information might reasonably be expected to
                  result in a waiver of any attorney-client privilege); and

                           (3)      the Company and the Holders shall cooperate
                  in monitoring and controlling the fees and expenses of
                  separate counsel for Indemnified Persons for which the
                  Indemnifying Person is liable hereunder, and the Indemnified
                  Person shall use every reasonable effort to cause such
                  separate counsel to minimize the duplication of activities as
                  between themselves and counsel to the Indemnifying Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment against the Indemnified Person, the Indemnifying Person agrees, subject
to the provisions of this Section 4, to indemnify the Indemnified Person from
and against any loss, damage, liability or expenses by reason of such settlement
or judgment. The Indemnifying Person shall not, without the prior written
consent of the Indemnified Persons, effect any settlement of any pending or
threatened litigation, proceeding or claim in respect of which indemnity has
been properly sought by the Indemnified Persons hereunder, unless such
settlement includes an unconditional release by the claimant of all Indemnified
Persons from all liability with respect to claims which are the subject matter
of such litigation, proceeding or claim.

                                       16

<PAGE>

         (d)      If the indemnification provided for in this Section 4 is
unavailable to or insufficient to hold harmless an Indemnified Person under this
Section 4 in respect of any losses, claims, damages or liabilities (or actions,
suits or proceedings (including governmental investigations) in respect thereof)
referred to therein, then each Indemnifying Person under this Section 4 shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Person on the one hand and the Indemnified Person on the
other from the sale of the Registrable Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each Indemnifying Person shall contribute to such amount paid or
payable by such Indemnified Person in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Holders on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
(even if the Holders 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 in this Section 4. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages or liabilities (or
actions, suits or proceedings (including governmental proceedings) in respect
thereof) referred to in this Section 4 shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such actions, suits or proceedings (including
governmental proceedings) or claims, provided that the provisions of this
Section 4 have been complied with (in all material respects) in respect of any
separate counsel for such Indemnified Person. Notwithstanding the provisions of
this Section 4, no Holder shall be required to contribute any amount greater
than the excess of the amount by which the total received by such Holder with
respect to the sale of its Registrable Securities pursuant to a Shelf
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Registrable Securities plus (B) the amount of any damages which such Holder
has otherwise been required to pay by reason of 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section 4 to contribute are
several in proportion to their respective obligations and not joint.

         The agreement with respect to contribution contained in this Section 4
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any Holder, and shall survive any termination of
this Agreement.

         5.       Miscellaneous.

                                       17

<PAGE>

                  (a)      Rule 144 and Rule 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act,
the Company covenants that it will file the reports required to be filed by it
under the Act and Section 13(a) or 15(d) of the Exchange Act and the rules and
regulations adopted by the Commission thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will, upon the
request of any Holder of Registrable Securities, (i) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
Act, (ii) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the Act and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the Act within the limitation of the
exemptions provided by (A) Rule 144 under the Act, as such Rule may be amended
from time to time, (B) Rule 144A under the Act, as such Rule may be amended from
time to time or (C) any similar rules or regulations hereafter adopted by the
Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.

                  (b)      No Inconsistent Agreements. The Company has not
entered into and the Company will not after the date of this Agreement enter
into any agreement which is inconsistent with the rights granted to the Holders
of Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not and will
not for the term of this Agreement in any way conflict with the rights granted
to the holders of the Company's other issued and outstanding securities under
any such agreements.

                  (c)      Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Majority Holders of the Registrable Securities affected by such
amendment, modification, supplement, waiver or departure. Without the consent of
the Holder of each Security, however, no modification may change the provisions
relating to the payment of Additional Dividends.

                  (d)      Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telecopier or any courier guaranteeing overnight
delivery: (a) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 5(d), which address initially is the address set forth in the
Purchase Agreement with respect to the Initial Purchasers; and (b) if to the
Company, initially at the Company's address set forth in the Purchase Agreement,
and thereafter at such other address of which notice is given in accordance with
the provisions of this Section 5(d).

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two (2) Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged, if telecopied; and on the next Business Day if timely delivered
to an air courier guaranteeing overnight delivery.

                                       18

<PAGE>

                  (e)      Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.

                  (f)      Third Party Beneficiaries. The Initial Purchasers
(even if the Initial Purchasers are not Holders of Registrable Securities) shall
be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Holders, on the other hand, and shall have the
right to enforce such agreements directly to the extent they deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.

                  (g)      Specific Performance. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section 2
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2 hereof.

                  (h)      Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

                  (i)      Headings. The headings in this Agreement are for the
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (j)      GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

                  (k)      Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

                                       19

<PAGE>

                  (l)      Entire Agreement. This Agreement and other writings
referred to herein (including the Purchase Agreement) represent the entire
agreement among the parties hereto with respect to the subject matter hereof and
supercedes and replaces any and all prior agreements and understandings, whether
oral or written, with respect thereto.

                                       20

<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                       CMS ENERGY CORPORATION

                                       By: /s/ Thomas J. Webb
                                           ----------------------
                                           Name:  Thomas J. Webb
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

CONFIRMED AND ACCEPTED
AS OF THE DATE FIRST ABOVE WRITTEN:

CITIGROUP GLOBAL MARKETS INC.,
for itself and as Representative
of the Initial Purchasers

By: /s/ Jane Sadowsky
    -------------------
    Name:  Jane Sadowsky
    Title: Managing Director

MERRILL LYNCH, PIERCE, FENNER & SMITH
                  INCORPORATED,
for itself and as Representative
of the Initial Purchasers

By: /s/ Jeff Kulik
    ----------------------
    Name:  Jeff Kulik
    Title: Vice President

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(M)
<SEQUENCE>10
<FILENAME>k82154aexv4wxmy.txt
<DESCRIPTION>FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
<TEXT>
<PAGE>

                                                                    EXHIBIT 4(m)

                                                                  EXECUTION COPY

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

                                  $190,000,000

                       FOURTH AMENDED AND RESTATED CREDIT
                                    AGREEMENT

                          Dated as of December 8, 2003,

                                      Among

                             CMS ENERGY CORPORATION
                                  as a Borrower

                             CMS ENTERPRISES COMPANY
                                  as a Borrower

                             THE BANKS NAMED HEREIN
                                    as Banks

                               CITICORP USA, INC.
                  as Administrative Agent and Collateral Agent

                               JPMORGAN CHASE BANK
                              as Syndication Agent

                                       and

                                  BANK ONE, NA,
                       UNION BANK OF CALIFORNIA, N.A. AND
                       WACHOVIA BANK, NATIONAL ASSOCIATION
                             as Documentation Agents

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

              CITIGROUP GLOBAL MARKETS INC. AND JPMORGAN CHASE BANK
                 as Joint Book Managers and Joint Lead Arrangers

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
Section                                                                              Page
<S>                                                                                  <C>
                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

SECTION 1.01.  Certain Defined Terms..............................................     2
SECTION 1.02.  Computation of Time Periods; Construction..........................    21
SECTION 1.03.  Accounting Terms...................................................    21

                                   ARTICLE II
             COMMITMENTS, LOANS, FEES, PREPAYMENTS AND OUTSTANDINGS

SECTION 2.01.  Making Loans.......................................................    22
SECTION 2.02.  Fees...............................................................    22
SECTION 2.03.  Commitments; Mandatory Prepayments.................................    23
SECTION 2.04.  Computations of Outstandings.......................................    23

                                   ARTICLE III
                                      LOANS

SECTION 3.01.  Loans..............................................................    24
SECTION 3.02.  Conversion of Loans................................................    25
SECTION 3.03.  Interest Periods...................................................    25
SECTION 3.04.  Other Terms Relating to the Making and Conversion of Loans.........    25
SECTION 3.05.  Repayment of Loans; Interest.......................................    27

                                   ARTICLE IV
                   PAYMENTS, COMPUTATIONS AND YIELD PROTECTION

SECTION 4.01.  Payments and Computations..........................................    28
SECTION 4.02.  Interest Rate Determination........................................    30
SECTION 4.03.  Prepayments........................................................    30
SECTION 4.04.  Yield Protection...................................................    30
SECTION 4.05.  Sharing of Payments, Etc...........................................    32
SECTION 4.06.  Taxes..............................................................    32
SECTION 4.07.  Apportionment of Payments..........................................    34
SECTION 4.08.  Proceeds of Collateral.............................................    35

                                    ARTICLE V
                              CONDITIONS PRECEDENT

SECTION 5.01.  Conditions Precedent to the Effectiveness of this Agreement........    35
SECTION 5.02.  Conditions Precedent to Each Extension of Credit...................    38
SECTION 5.03.  Conditions Precedent to Certain Extensions of Credit...............    38
SECTION 5.04.  Reliance on Certificates...........................................    39
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                                   <C>
                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

SECTION 6.01.  Representations and Warranties of the Borrowers....................    39

                                   ARTICLE VII
                           COVENANTS OF THE BORROWERS

SECTION 7.01.  Affirmative Covenants..............................................    43
SECTION 7.02.  Negative Covenants.................................................    46
SECTION 7.03.  Reporting Obligations..............................................    54

                                  ARTICLE VIII
                                    DEFAULTS

SECTION 8.01.  Events of Default..................................................    58
SECTION 8.02.  Remedies...........................................................    60

                                   ARTICLE IX
                                   THE AGENTS

SECTION 9.01.  Authorization and Action...........................................    60
SECTION 9.02.  Indemnification....................................................    62
SECTION 9.03.  Concerning the Collateral and the Loan Documents...................    62
SECTION 9.04.  Release of Guarantors..............................................    64

                                    ARTICLE X
                                  MISCELLANEOUS

SECTION 10.01.  Amendments, Etc...................................................    64
SECTION 10.02.  Notices, Etc......................................................    65
SECTION 10.03.  No Waiver of Remedies.............................................    65
SECTION 10.04.  Costs, Expenses and Indemnification...............................    65
SECTION 10.05.  Right of Set-off..................................................    66
SECTION 10.06.  Binding Effect....................................................    67
SECTION 10.07.  Assignments and Participation.....................................    67
SECTION 10.08.  Confidentiality...................................................    70
SECTION 10.09.  Waiver of Jury Trial..............................................    71
SECTION 10.10.  GOVERNING LAW; SUBMISSION TO JURISDICTION.........................    71
SECTION 10.11.  Relation of the Parties; No Beneficiary...........................    71
SECTION 10.12.  Execution in Counterparts.........................................    72
SECTION 10.13.  Survival of Agreement.............................................    72
SECTION 10.14.  Platform..........................................................    72

                                   ARTICLE XI
                             CO-BORROWER PROVISIONS

SECTION 11.01.  Appointment.......................................................    73
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                   <C>
SECTION 11.02.  Separate Actions..................................................    74
SECTION 11.03.  Obligations Absolute and Unconditional............................    74
SECTION 11.04.  Waivers and Acknowledgements......................................    74
SECTION 11.05.  Contribution Among Borrowers......................................    75
SECTION 11.06.  Subrogation.......................................................    76
SECTION 11.07.  Subordination.....................................................    76

                                   ARTICLE XII
           NO NOVATION; REFERENCES TO THIS AGREEMENT IN LOAN DOCUMENTS

SECTION 12.01.  No Novation.......................................................    77
SECTION 12.02.  References to This Agreement In Loan Documents....................    77
</TABLE>

                                      iii

<PAGE>

Exhibits

EXHIBIT A         -  Form of Notice of Borrowing
EXHIBIT B         -  Form of Notice of Conversion
EXHIBIT C         -  Form of Opinion of Belinda Foxworth, Esq., counsel to the
                     Borrowers
EXHIBIT D         -  Form of Opinion of Skadden, Arps, Slate, Meagher & Flom
                     LLP, special counsel to the Borrowers
EXHIBIT E         -  Form of Compliance Schedule
EXHIBIT F         -  Form of Lender Assignment
EXHIBIT G         -  Terms of Subordination (Junior Subordinated Debt)
EXHIBIT H         -  Terms of Subordination (Guaranty of Hybrid Preferred
                     Securities)
EXHIBIT I         -  Form of Amended and Restated Guaranty
EXHIBIT J         -  Form of Third Amended and Restated Pledge and Security
                     Agreement (Company)
EXHIBIT K         -  Form of Pledge and Security Agreement (Enterprises and
                     Grantors)
EXHIBIT L         -  AIG Pledge Agreement
EXHIBIT M         -  Intercreditor Agreement

Schedules

COMMITMENT
SCHEDULE
SCHEDULE I           Certain Debt
SCHEDULE II          Pledged Ownership Interests
SCHEDULE III         Notice Addresses

ATTACHMENT A         Reaffirmation

                                       iv

<PAGE>

                  FOURTH AMENDED AND RESTATED CREDIT AGREEMENT

                          Dated as of December 8, 2003

         THIS FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (the "AGREEMENT") is
made by and among:

         (i)      CMS Energy Corporation, a Michigan corporation (the
                  "COMPANY"),

         (ii)     CMS Enterprises Company, a Michigan corporation ("ENTERPRISES"
                  and, together with the Company, the "BORROWERS"),

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

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

         (v)      JPMorgan Chase Bank ("JPMORGAN CHASE"), as syndication agent
                  (the "SYNDICATION AGENT"), and Bank One, NA, Union Bank of
                  California, N.A. and Wachovia Bank, National Association, as
                  documentation agents (the "DOCUMENTATION AGENTS").

                             PRELIMINARY STATEMENTS

         The Company has requested that the Banks amend and restate the Existing
Credit Agreement (as hereafter defined) to provide the credit facility
hereinafter described in the amount and on the terms and conditions set forth
herein and to add Enterprises as a "Borrower" under the credit facility provided
herein. The Banks have so agreed on the terms and conditions set forth herein,
and the Agents have agreed to act as agents for the Lenders on such terms and
conditions.

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

         Accordingly, the parties hereto agree as follows:

                                       1

<PAGE>

                                   ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

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

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

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

                  "ACCOUNTING CHANGE" is defined in Section 1.03.

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

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

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

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

                  "AIG PLEDGE AGREEMENT" means that certain Pledge and Security
         Agreement, dated as of January 8, 2003, by and among Enterprises and
         the other grantors parties thereto in favor of American Home Assurance
         Company, as collateral agent, a copy of which is attached hereto as
         Exhibit L, as amended, restated, supplemented or otherwise modified
         from time to time.

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

                  "APPLICABLE LENDING OFFICE" means, with respect to each
         Lender, at the address specified for such Lender on its signature page
         to this Agreement or in the Lender

                                       2

<PAGE>

         Assignment pursuant to which it became a Lender, as applicable, or at
         any office, branch, subsidiary or affiliate of such Lender specified in
         a notice received by the Administrative Agent and the Borrowers from
         such Lender.

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

<TABLE>
<CAPTION>
                    Applicable Margin
- -------------------------------------
<S>                 <C>
ABR Loans                 2.25%

Eurodollar
Rate Loans                3.25%
</TABLE>

                  "APPLICABLE RATE" means:

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

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

                  "ARRANGERS" means Citigroup Global Markets Inc. and JPMorgan
         Chase.

                  "AVAILABLE COMMITMENT" means, for each Lender on any day, the
         unused portion of such Lender's Commitment, computed after giving
         effect to all Extensions of Credit or prepayments to be made on such
         day and the application of proceeds therefrom. "AVAILABLE COMMITMENTS"
         means the aggregate of the Lenders' Available Commitments.

                  "BANKRUPTCY CODE" means Title 11 of the United States Code (11
         U.S.C. Sections 101 et seq.), as amended from time to time, and any
         successor statute.

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

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

                  "BUSINESS DAY" means a day of the year on which banks are not
         required or authorized to close in New York City or Detroit, Michigan,
         and, if the applicable

                                       3

<PAGE>

         Business Day relates to any Eurodollar Rate Loan, on which dealings are
         carried on in the London interbank market.

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

                  "CD RATE" means the latest three-week moving average of
         secondary market morning offering rates in the United States for
         three-month certificates of deposit of major United States money market
         banks, such three-week moving average being determined weekly on each
         Monday (or, if such day is not a Business Day, on the next succeeding
         Business Day) for the three-week period ending on the previous Friday
         by Citibank on the basis of such rates reported by certificate of
         deposit dealers to and published by the Federal Reserve Bank of New
         York or, if such publication shall be suspended or terminated, on the
         basis of quotations for such rates received by Citibank from three New
         York certificate of deposit dealers of recognized standing selected by
         Citibank, in either case, adjusted to the nearest 1/16 of one percent
         or, if there is no nearest 1/16 of one percent, to the next higher 1/16
         of one percent.

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

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

                  "CITIGROUP PARTIES" means Citibank, CUSA, Citigroup Global
         Markets Inc. and each of their respective Affiliates, and each of their
         respective officers, directors, employees, agents, advisors, and
         representatives.

                  "CLOSING DATE" means December 8, 2003.

                  "CMS GENERATION" means CMS Generation Co., a Michigan
         corporation, all of whose common stock is on the Closing Date owned by
         Enterprises and its permitted successors.

                                       4

<PAGE>

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

                  "COMMITMENT" means, for each Lender, the obligation of such
         Lender to make Loans to the Borrowers in an aggregate amount no greater
         than the amount set forth opposite such Lender's name on the Commitment
         Schedule under the heading "Commitment" or, if such Lender has entered
         into one or more Lender Assignments, set forth for such Lender in the
         Register maintained by the Administrative Agent pursuant to Section
         10.07(h), in each case as such amount may be modified from time to time
         pursuant to Section 2.03. "COMMITMENTS" means the total of the Lenders'
         Commitments hereunder. As of the Closing Date the aggregate of all of
         the Lenders' Commitments equals $190,000,000.

                  "COMMITMENT FEE MARGIN" means a per annum rate equal to 0.50%.

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

                  "COMMITMENT TERMINATION DATE" means the earlier of (i) the
         Maturity Date, and (iii) the date of termination or reduction in whole
         of the Commitments pursuant to Section 2.03 or 8.02.

                  "COMMUNICATIONS" is defined in Section 10.14.

                  "COMPANY INTEREST EXPENSE" means at any date, the total
         interest expense in respect of Debt of the Company for the four
         calendar quarters immediately preceding such date, including, without
         duplication, (i) interest expense attributable to capital leases, (ii)
         amortization of debt discount, (iii) capitalized interest, (iv) cash
         and noncash payments, (v) commissions, discounts and other fees and
         charges owed with respect to letters of credit and bankers' acceptance
         financing, (vi) net costs under interest rate swap, "cap", "collar" or
         other hedging agreements (including amortization of discount) and (vii)
         interest expense in respect of obligations of Persons deemed to be Debt
         of the Company under clause (ix) of the definition of Debt, provided,
         however that Company Interest Expense shall exclude (1) any costs
         (including, without limitation, any prepayment or option premium or
         expenses incurred in connection with the Company's reset put securities
         due July 1, 2003) otherwise included in interest expense recognized on
         early retirement of debt and (2) any interest or dividends paid on
         Hybrid Preferred Securities.

                  "CONFIDENTIAL INFORMATION" has the meaning assigned to that
         term in Section 10.08.

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

                                       5

<PAGE>

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

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

                           (c)      Consolidated Debt shall not include any debt
                  issued by the Company that shall be (i) subordinated to the
                  Obligations of the Loan Parties on terms acceptable to the
                  Administrative Agent and (ii) required to be converted only
                  into non-redeemable common stock of the Company;

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

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

                                       6

<PAGE>

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

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

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

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

                  "CONSUMERS CREDIT FACILITY" means, collectively, Consumer's
         existing (i) $140,000,000 term loan facility and (ii) $400,000,000
         revolving loan facility, as in effect on the date hereof.

                  "CONSUMERS DIVIDEND RESTRICTION" means any restriction enacted
         or imposed after October 1, 1992 upon the ability of Consumers to pay
         cash dividends to the Company in respect of Consumers' capital stock,
         whether such restriction is imposed by statute, regulation, decisions
         or rulings by the Michigan Public Service Commission or the Federal
         Energy Regulatory Commission (or any successor agency or agencies),
         final judgments of any court of competent jurisdiction, indentures,
         agreements, contracts or restrictions to which Consumers is a party or
         by which it is bound or otherwise; provided, that no restriction on
         such dividends existing on October 1, 1992 shall be a Consumers
         Dividend Restriction at any time; provided, further, that any such
         restriction enacted or imposed by the Michigan Public Service
         Commission limiting such dividends to an amount not less than
         $190,000,000 during any twelve-month period shall not be a Consumers
         Dividend Restriction at any time.

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

                                       7

<PAGE>

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

                  "DEBT" means, for any Person, without duplication, any and all
         indebtedness, liabilities and other monetary obligations of such Person
         (whether for principal, interest, fees, costs, expenses or otherwise,
         and whether contingent or otherwise) (i) for borrowed money or
         evidenced by bonds, debentures, notes or other similar instruments,
         (ii) to pay the deferred purchase price of property or services (except
         trade accounts payable arising in the ordinary course of business which
         are not overdue), (iii) as lessee under leases which shall have been or
         should be, in accordance with GAAP, recorded as capital leases, (iv)
         under reimbursement or similar agreements with respect to letters of
         credit issued thereunder (except reimbursement obligations and letters
         of credit that are cash collateralized), (v) under any interest rate
         swap, "cap", "collar" or other hedging agreements; provided, however,
         for purposes of the calculation of Debt for this clause (v) only, the
         actual amount of Debt of such Person shall be determined on a net basis
         to the extent such agreements permit such amounts to be calculated on a
         net basis, (vi) to pay rent or other amounts under leases entered into
         in connection with sale and leaseback transactions involving assets of
         such Person being sold in connection therewith, (vii) arising from any
         accumulated funding deficiency (as defined in Section 412(a) of the
         Internal Revenue Code of 1986, as amended) for a Plan, (viii) arising
         in connection with any withdrawal liability under ERISA to any
         Multiemployer Plan and (ix) arising from (A) direct or indirect
         guaranties in respect of, and obligations to purchase or otherwise
         acquire, or otherwise to warrant or hold harmless, pursuant to a
         legally binding agreement, a creditor against loss in respect of, Debt
         of others referred to in clauses (i) through (viii) above and (B) other
         guaranty or similar financial obligations in respect of the performance
         of others, including Support Obligations. Notwithstanding the
         foregoing, solely for purposes of the calculation required under
         Section 7.01(j)(ii), Debt shall not include any Junior Subordinated
         Debt issued by the Company and owned by any Hybrid Preferred Securities
         Subsidiary.

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

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

                  "DISCLOSED MATTERS" is defined in Section 6.01(f).

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

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

                                       8

<PAGE>

                  "ELIGIBLE BANK" means any state or federally chartered bank or
         any state-licensed foreign bank branch or agency.

                  "ENTERPRISES" means CMS Enterprises Company, a Michigan
         corporation, all of whose common stock is on the Closing Date owned by
         the Company and its permitted successors.

                  "ENTERPRISES CREDIT AGREEMENT" means that certain $150,000,000
         Credit Agreement, dated as of July 12, 2002, by and among Enterprises,
         as borrower, the Borrower, the lenders from time to time parties
         thereto, and Citicorp USA, Inc., as administrative agent and as
         collateral agent, which agreement has been paid in full and terminated.

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

                  "ENVIRONMENTAL LIABILITY" means any liability, contingent or
         otherwise (including any liability for damages, costs of environmental
         remediation, fines, penalties or indemnities), of the Company or any of
         its Subsidiaries directly or indirectly resulting from or based upon
         (a) violation of any Environmental Law, (b) the generation, use,
         handling, transportation, storage, treatment or disposal of any
         Hazardous Substances, (c) exposure to any Hazardous Substances, (d) the
         release or threatened release of any Hazardous Substances into the
         environment or (e) any contract, agreement or other consensual
         arrangement pursuant to which liability is assumed or imposed with
         respect to any of the foregoing.

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

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

                  "ERISA AFFILIATE" means, with respect to any Person, any trade
         or business (whether or not incorporated) that is a member of a
         commonly controlled trade or business under Sections 414(b), (c), (m)
         and (o) of the Internal Revenue Code of 1986, as amended.

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

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

                                       9

<PAGE>

                  "EVENT OF DEFAULT" is defined in Section 8.01.

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

                  "EXISTING CREDIT AGREEMENT" means that certain $5,000,000
         Third Amended and Restated Credit Agreement, dated as of September 12,
         2003, among the Company, the lenders from time to time parties thereto,
         and CUSA, as administrative agent, as the same may have been amended,
         restated, supplemented or otherwise modified from time to time.

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

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

                  "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the
         weighted average (rounded upwards, if necessary, to the next 1/100 of
         1%) of the rates on overnight Federal funds transactions with members
         of the Federal Reserve System arranged by Federal funds brokers, as
         published on the next succeeding Business Day by the Federal Reserve
         Bank of New York, or, if such rate is not so published for any day that
         is a Business Day, the average (rounded upwards, if necessary, to the
         next 1/100 of 1%) of the quotations for such day for such transactions
         received by the Administrative Agent from three Federal funds brokers
         of recognized standing selected by it.

                  "FEE LETTER" is defined in Section 2.02(b).

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

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

                  "FOREIGN SUBSIDIARY" is defined in Section 7.01(l).

                  "GAAP" is defined in Section 1.03.

                  "GOVERNMENTAL APPROVAL" means any authorization, consent,
         approval, license, permit, certificate, exemption of, or filing or
         registration with, any governmental authority or other legal or
         regulatory body, required in connection with (i) the execution,
         delivery, or performance of any Loan Document by any Loan Party, (ii)
         the grant and perfection of any Lien in favor of the Collateral Agent
         contemplated by the Loan

                                       10

<PAGE>

         Documents, or (iii) the exercise by any Agent (on behalf of the
         Lenders) of any right or remedy provided for under the Loan Documents.

                  "GRANTING LENDER" is defined in Section 10.07(f).

                  "GRANTOR(S)" means each Guarantor and each of the following
         Subsidiaries of Enterprises: CMS Capital, L.L.C., a Michigan limited
         liability company, CMS Electric & Gas, L.L.C. (formerly known as CMS
         Electric and Gas Company), a Michigan limited liability company, MS&T,
         CMS International Ventures, L.L.C., a Michigan limited liability
         company, Dearborn Industrial Energy, L.L.C., a Michigan limited
         liability company, Dearborn Industrial Generation, L.L.C., a Michigan
         limited liability company, and CMS Generation Michigan Power L.L.C., a
         Michigan limited liability company.

                  "GUARANTOR" means CMS Generation, CMS Gas Transmission
         Company, a Michigan corporation, and each other Restricted Subsidiary
         that has delivered, or shall be obligated to deliver, a guaranty under
         and pursuant to the terms of Section 7.01(l).

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

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

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

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

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

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

                                       11

<PAGE>

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

                  "INDEMNIFIED PERSON" is defined in Section 10.04(b).

                  "INDENTURE" means that certain Indenture, dated as of
         September 15, 1992, between the Company and the Trustee, as
         supplemented by the First Supplemental Indenture, dated as of October
         1, 1992, the Second Supplemental Indenture, dated as of October 1,
         1992, the Third Supplemental Indenture, dated as of May 6, 1997, the
         Fourth Supplemental Indenture, dated as of September 26, 1997, the
         Fifth Supplemental Indenture, dated as of November 4, 1997, the Sixth
         Supplemental Indenture, dated as of January 13, 1998, the Seventh
         Supplemental Indenture, dated as of January 25, 1999, the Eighth
         Supplemental Indenture, dated as of February 3, 1999, the Ninth
         Supplemental Indenture, dated as of June 22, 1999, the Tenth
         Supplemental Indenture, dated as of October 12, 2000, the Eleventh
         Supplemental Indenture, dated as of March 29, 2001, and the Twelfth
         Supplemental Indenture, dated as of July 2, 2001, as said Indenture may
         be further amended or otherwise modified from time to time in
         accordance with its terms.

                  "INTER-BORROWER DEBT" is defined in Section 11.07.

                  "INTERCREDITOR AGREEMENT" means that certain Intercreditor and
         Lien Subordination Agreement, dated as of January 8, 2003, by and among
         Citicorp USA, Inc., as senior collateral agent, American Home Assurance
         Company, individually and as junior collateral agent, and St. Paul Fire
         and Marine Insurance Company, individually, a copy of which is attached
         hereto as Exhibit M, as amended, restated, supplemented or otherwise
         modified from time to time.

                  "INTEREST PERIOD" is defined in Section 3.03.

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

                  "LENDER ASSIGNMENT" is defined in Section 10.07(e).

                  "LENDERS" means the Banks listed on the signature pages
         hereof, together with their successors and permitted assigns.

                                       12

<PAGE>

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

                  "LIEN" means any lien, security interest, or other charge or
         encumbrance (including the lien or retained security title of a
         conditional vendor) of any kind, or any other type of arrangement
         intended or having the effect of conferring upon a creditor a
         preferential interest upon or with respect to any of its properties of
         any character (including capital stock and other equity interests,
         intercompany obligations and accounts).

                  "LOAN" means a loan by a Lender to a Borrower pursuant to
         Section 2.01, and refers to an ABR Loan or a Eurodollar Rate Loan (each
         of which shall be a "TYPE" of Loan). All Loans by a Lender to the same
         Borrower of the same Type having the same Interest Period and made or
         Converted on the same day shall be deemed to be a single Loan by such
         Lender until repaid or next Converted.

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

                  "LOAN PARTY" is defined in Section 5.01(a)(i).

                  "MATERIAL ADVERSE CHANGE" means any event, development or
         circumstance that has had or could reasonably be expected to have a
         material adverse effect on (a) the business, assets, property,
         financial condition, results of operations or prospects of the Company
         and its Subsidiaries, considered as a whole, (b) the Borrowers' and the
         Guarantors' ability, taken as a whole, to perform their obligations
         under this Agreement or any other Loan Document to which it is or will
         be a party or (c) the validity or enforceability of any Loan Document
         or the rights or remedies of any Agent or the Lenders thereunder;
         provided that the occurrence of any Restatement Event shall not
         constitute a Material Adverse Change.

                                       13

<PAGE>

                  "MATURITY DATE" means the earlier to occur of (i) November 14,
         2004, if the Company shall not have refinanced the Company's
         $175,800,000 senior notes due November 2004 on or prior to November 14,
         2004 (provided that any refinancing indebtedness in respect thereof (or
         any subsequent refinancing thereof) shall have a maturity not earlier
         than December 3, 2004)) and (ii) December 3, 2004.

                  "MEASUREMENT QUARTER" is defined in Section 7.01(i).

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

                  "MONETIZATION ENTITY" is defined in the definition of
         "Monetization Transaction".

                  "MONETIZATION TRANSACTION" means a series of interrelated
         steps by which (i) all or any portion of CMS Generation's ownership
         interest in certain wholly-owned Delaware limited liability companies
         which own, directly or indirectly, interests in the Loy Yang project
         consisting of the 2,000-megawatt Loy Yang power plant and adjacent coal
         mine in Australia and related assets and (ii) all or any portion of CMS
         Gas Transmission Company's ownership interests in CMS Antrim Gas LLC,
         CMS Grand Lacs LLC, CMS Bay Area Pipeline LLC, CMS Jackson Pipeline
         Company and its interests in the Litchfield Lateral Gas pipeline and
         related assets are transferred to a limited liability company owned,
         directly or indirectly, by the Company (such special purpose entity the
         "MONETIZATION ENTITY"), and (iii) non-voting preferred interests in the
         Monetization Entity are acquired directly or indirectly by any Person
         (other than an Affiliate of the Company) for cash consideration not
         less than the Fair Market Value thereof.

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

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

                  "NET PROCEEDS" means, with respect to any sale, assignment or
         other disposition of (but not the lease or license of) any property, or
         with respect to any sale or issuance of securities or incurrence of
         Debt, by any Person, gross cash proceeds received by such Person or any
         Subsidiary of such Person from such sale, assignment, disposition,
         issuance or incurrence (including cash received as consideration for
         the assumption or incurrence of liabilities incurred in connection with
         or in anticipation of such transaction) after (i) provision for all
         income or other taxes measured by or resulting from such transaction,
         (ii) payment of all customary underwriting commissions, auditing and
         legal fees, printing costs, rating agency fees and other customary and
         reasonable fees and expenses incurred by such Person in connection with
         such transaction, (iii) all amounts used to repay Debt (and any premium
         or penalty thereon) secured by a Lien on any asset disposed of in such
         sale, assignment or other disposition or which is or may be required
         (by the express terms of the instrument governing such Debt or by
         applicable law) to be repaid in connection with such sale, assignment,
         or other disposition, and (iv) deduction of appropriate amounts to be
         provided by such Person or a Subsidiary of such Person as a

                                       14

<PAGE>

         reserve, in accordance with GAAP consistently applied, against any
         liabilities associated with the assets sold, transferred or disposed of
         in such transaction and retained by such Person or a Subsidiary of such
         Person after such transaction, provided that "Net Proceeds" shall
         include on a dollar-for-dollar basis all amounts remaining in such
         reserve after such liability shall have been satisfied in full or
         terminated; provided, however, that notwithstanding the foregoing, "Net
         Proceeds" shall exclude (a) any amounts received or deemed to be
         received by the Company for the purchase of the Company's capital stock
         in connection with the Company's dividend reinvestment program and (b)
         amounts received by the Company or any Subsidiary of the Company
         pursuant to any transaction with the Company or any Subsidiary of the
         Company otherwise permitted hereunder.

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

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

                  "NOTICE OF CONVERSION" is defined in Section 3.02.

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

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

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

                  "OTHER TAXES" is defined in Section 4.06(b).

                  "OWNERSHIP INTEREST" of the Company in any Consolidated
         Subsidiary means, at any date of determination, the percentage
         determined by dividing (i) the aggregate amount of Project Finance
         Equity in such Consolidated Subsidiary owned or controlled, directly or
         indirectly, by the Company and any other Consolidated Subsidiary on
         such date, by (ii) the aggregate amount of Project Finance Equity in
         such Consolidated

                                       15

<PAGE>

         Subsidiary owned or controlled, directly or indirectly, by all Persons
         (including the Company and the Consolidated Subsidiaries) on such date.
         Notwithstanding anything to the contrary set forth above, if the
         "Ownership Interest," calculated as set forth above, is 50% or less,
         such percentage shall be deemed to equal 0%.

                  "PANHANDLE" means Panhandle Eastern Pipe Line Company, a
         Delaware corporation, all of whose capital stock has been, prior to the
         Closing Date, sold by Enterprises.

                  "PARTICIPANT" is defined in Section 10.07(b).

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

                  "PERCENTAGE" means, for any Lender on any date of
         determination (a) prior to the Commitment Termination Date, the
         percentage obtained by dividing such Lender's Commitment on such day by
         the total of the Lenders' Commitments on such date, and multiplying the
         quotient so obtained by 100%, and (b) from and after the Commitment
         Termination Date, the percentage obtained by dividing the aggregate
         outstanding principal amount of such Lender's Loans on such day by the
         total of the Lenders' Loans on such date, and multiplying the quotient
         so obtained by 100%.

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

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

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

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

                                       16
<PAGE>

                  transferred to, and segregated from other obligations owned
                  by, such Lender, such other bank or trust company or such
                  securities dealer;

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

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

                           (vi)     interests in any money market mutual fund
                  which at the date of investment in such fund has the highest
                  fund rating by each of Moody's and S&P which has issued a
                  rating for such fund (which, for S&P, shall mean a rating of
                  AAAm or AAAmg).

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

                  "PLAN" means, with respect to any Person, an "employee benefit
         plan" as defined in Section 3(3) of ERISA (other than a Multiemployer
         Plan) maintained for employees of such Person or any ERISA Affiliate of
         such Person that is subject to Title IV of ERISA and has "unfunded
         benefit liabilities" as determined under Section 4001(a)(18) of ERISA.

                  "PLAN TERMINATION EVENT" means, (i) with respect to any Plan,
         a "reportable event" within the meaning of Section 4043 of ERISA and
         the regulations issued thereunder (other than a "reportable event" not
         subject to the provision for 30-day notice to the PBGC under such
         regulations or a "reportable event" for which the provision for the
         30-day notice to the PBGC under such regulations has been waived), or
         (ii) the withdrawal by the Company or any of its ERISA Affiliates from
         a Plan during a plan year in which it was a "substantial employer" as
         defined in Section 4001(a)(2) of ERISA resulting in liability to the
         Company or any of its ERISA Affiliates under Section 4063 or 4064 of
         ERISA, or (iii) the filing of a notice of intent to terminate a Plan or
         the termination of a Plan under Section 4041 of ERISA, or (iv) the
         institution of proceedings to terminate a Plan by the PBGC, or (v) any
         other event or condition which is reasonably likely to constitute
         grounds under Section 4042 of ERISA for the termination of, or the
         appointment of a trustee to administer, any Plan.

                                       17

<PAGE>

                  "PLATFORM" is defined in Section 10.14

                  "PLEDGE AGREEMENTS" means each of (i) that certain Third
         Amended and Restated Pledge and Security Agreement, dated as of
         December 8, 2003, by and between the Company and the Collateral Agent,
         in substantially the form of Exhibit J attached hereto, and (ii) that
         certain Pledge and Security Agreement, dated as of July 12, 2002, by
         and among Enterprises, the Grantors and the Collateral Agent in
         substantially the form of Exhibit K hereto, in each case as the same
         may be amended, restated, supplemented or otherwise modified from time
         to time.

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

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

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

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

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

                  "PROSPECTIVE LENDER" is defined in Section 3.04(d).

                  "RECIPIENT" is defined in Section 10.08.

                  "REGISTER" is defined in Section 10.07(h).

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

                  "REQUIRED LENDERS" means, on any date of determination,
         Lenders that, collectively, on such date hold more than 50% of the then
         aggregate unpaid principal amount of the Loans owing to Lenders or, if
         no Loans shall be outstanding as of such

                                       18
<PAGE>

         date, Lenders that, collectively, hold more than 50% of the aggregate
         Commitments. Any determination of those Lenders constituting the
         Required Lenders shall be made by the Administrative Agent and shall be
         conclusive and binding on all parties absent manifest error.

                  "RESTATEMENT" means the restatement of the financial
         statements of the Company or its Subsidiaries for any fiscal quarter of
         2001, as well as any adjustment of previously announced quarterly
         results, but only if made to reflect the restatement of such quarters.

                  "RESTATEMENT EVENT" means (i) the Restatement, (ii) any
         lawsuit or other action previously or hereafter brought against the
         Company, any of its Subsidiaries or any of their Affiliates or any
         present or former officer or director of the Company, any of its
         Subsidiaries or any of their Affiliates involving or arising out of the
         Restatement, and any settlement thereof, or other development with
         respect thereto, or (iii) the occurrence of any default or event of
         default under any indenture, instrument or other agreement or contract,
         or the exercise of any remedy in respect thereof, that arises directly
         or indirectly as a result of any of the matters described in any of the
         foregoing clauses (i) or (ii) or this clause (iii); provided, however,
         that, for purposes of the definition of "MATERIAL ADVERSE CHANGE", (a)
         the foregoing clause (ii) shall be inapplicable if such lawsuit or
         other action, settlement (in an amount in the aggregate together with
         all other settlements of such lawsuits or actions) or other development
         described in such clause (ii) could reasonably be expected, in each
         case, to result in liability to such Person in excess of $10,000,000
         and (b) the foregoing clause (iii) shall be inapplicable if any such
         event described in such clause (iii) would constitute an Event of
         Default under Section 8.01(e).

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

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

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

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

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

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

                                       19

<PAGE>

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

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

                  "SPC" is defined in Section 10.07(f).

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

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

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

                                       20

<PAGE>

                  "TAKORADI PROJECT" means the construction and operation of
Takoradi 2, a power plant currently consisting of two 110 megawatt simple-cycle
units built near Aboadze, Ghana by one or more Subsidiaries of the Company and
the government of Ghana's Volta River Authority.

                  "TAX SHARING AGREEMENT" means the Amended and Restated
Agreement for the Allocation of Income Tax Liabilities and Benefits, dated as of
January 1, 1994, by and among the Company, each of the members of the
Consolidated Group (as defined therein), and each of the corporations that
become members of the Consolidated Group.

                  "TAXES" is defined in Section 4.06(a).

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

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

         SECTION 1.02. COMPUTATION OF TIME PERIODS; CONSTRUCTION.

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

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

         SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 6.01(e) ("GAAP"), it being
understood that (i) such financial statements do not give effect to any
Restatement Event other than the Restatement itself, and (ii) financial
covenants set forth in

                                       21

<PAGE>

Sections 7.01(i) and (j) shall be calculated exclusive of all debt of any
Affiliate of the Borrowers (other than a Subsidiary) that is (a) consolidated on
the financial statements of the Company solely as a result of the effect and
application of Financial Accounting Standards Board Interpretation No. 46 and of
Accounting Research Bulletin No. 51, Consolidated Financial Statements, as
modified by Statement of Financial Accounting Standards No. 94, and (b)
non-recourse to any Borrower or any Guarantor. If any changes in generally
accepted accounting principles are hereafter required or permitted and are
adopted by the Company or any of its Subsidiaries, or the Company or any of its
Subsidiaries shall change its application of generally accepted accounting
principles with respect to any Off-Balance Sheet Liabilities, including, but not
limited to, the application of Financial Accounting Standards Board
Interpretation Nos. 45 and 46 and Financial Accounting Standards Board (FASB)
Statement No. 150, in each case, with the agreement of its independent certified
public accountants, and such changes result in a change in the method of
calculation or the results of any of the financial covenants, tests,
restrictions or standards herein or in the related definitions or terms used
therein ("ACCOUNTING CHANGES"), the parties hereto agree, at the Borrowers'
request, to enter into negotiations, in good faith, in order to amend such
provisions in a credit neutral manner so as to reflect equitably such changes
with the desired result that the criteria for evaluating the Company's and its
Subsidiaries' financial condition shall be the same after such changes as if
such changes had not been made; provided, however, until such provisions are
amended in a manner reasonably satisfactory to the Administrative Agent and the
Required Lenders, no Accounting Change shall be given effect in such
calculations. In the event such amendment is entered into, all references in
this Agreement to GAAP shall mean generally accepted accounting principles as of
the date of such amendment. Notwithstanding the foregoing, all financial
statements to be delivered by the Company pursuant to Section 7.03 shall be
prepared in accordance with generally accepted accounting principles in effect
at such time.

                                   ARTICLE II
             COMMITMENTS, LOANS, FEES, PREPAYMENTS AND OUTSTANDINGS

         SECTION 2.01. MAKING LOANS. Each Lender severally agrees, on the terms
and conditions hereinafter set forth, to make revolving loans to the Borrowers
during the period from the Closing Date until the Commitment Termination Date in
an aggregate outstanding amount not to exceed on any day such Lender's Available
Commitment (after giving effect to all Extensions of Credit to be made on such
day and the application of the proceeds thereof). Within the limits hereinafter
set forth, the Borrowers may request Extensions of Credit hereunder, prepay
Loans, and use the resulting increase in the Available Commitments for further
Extensions of Credit in accordance with the terms hereof.

         SECTION 2.02. FEES.

                  (a)      The Borrowers jointly and severally agree to pay to
the Administrative Agent for the account of each Lender a commitment fee equal
to the product of (i) the average daily amount of such Lender's Available
Commitment from the Closing Date, in the case of each Bank, and from the
effective date specified in the Lender Assignment pursuant to which it became a
Lender, in the case of each other Lender, until the Commitment Termination Date
multiplied by (ii) the Commitment Fee Margin. Such fees shall be payable
quarterly in arrears

                                       22

<PAGE>

on the last day of each March, June, September and December, commencing the
first such date to occur following the Closing Date, and on the Commitment
Termination Date.

                  (b)      In addition to the fees provided for in subsection
(a) above, the Borrowers shall pay to the Administrative Agent, for the account
of CUSA and the other Persons entitled thereto, such other fees as are provided
for in that certain letter agreement, dated November 6, 2003 among the
Borrowers, the Agents, the Arrangers and the other parties thereto (the "FEE
LETTER"), in the amounts and at the times specified therein.

         SECTION 2.03. COMMITMENTS; MANDATORY PREPAYMENTS.

                  (a)      Reduction of Commitments. The Borrowers may (and
shall provide notice thereof to the Administrative Agent not later than 10:00
a.m. (New York City time) on the date of termination or reduction, and the
Administrative Agent shall promptly distribute copies thereof to the Lenders)
terminate in whole or reduce ratably in part the unused portions of the
Commitments; provided that any such partial reduction shall be in the aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof.

                  (b)      Change of Control. Upon the occurrence of a Change of
Control the Commitments shall be reduced to zero and the principal amount
outstanding hereunder, all interest thereon and all other amounts payable under
this Agreement and the other Loan Documents shall become and be forthwith due
and payable, without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Borrowers.

                  (c)      Prepayment upon Issuance or Sale of Consumers Stock.
The Company shall make a mandatory prepayment promptly and in any event within 3
Business Days after the Company's receipt of any Net Proceeds from the issuance,
sale, assignment or other disposition of any capital stock or other equity
interest in Consumers (other than the issuance of preferred securities of
Consumers in respect of which the Net Proceeds received by Consumers for all
such securities do not exceed $200,000,000 in the aggregate and such Net
Proceeds shall not be distributed to the Company), together with (i) accrued
interest to the date of such prepayment on the principal amount prepaid and (ii)
in the case of Eurodollar Rate Loans, any amount payable to the Lenders pursuant
to Section 4.04(b), and the Commitments shall be reduced, pro rata, in an
aggregate amount equal to such Net Proceeds. Nothing in this Section 2.03(c)
shall be construed to constitute the Lenders' consent to any transaction
referenced in this clause (c) which is not expressly permitted by Article VII.
The Company shall give the Administrative Agent prior written notice or
telephonic notice promptly confirmed in writing (each of which the
Administrative Agent shall promptly transmit to each Lender) of when a
prepayment required by this Section 2.03(c) will be made (which date of
prepayment shall be no later than the date on which such prepayment becomes due
and payable pursuant to this Section 2.03(c)). All such prepayments shall be
applied first to repay outstanding ABR Loans and then to repay outstanding
Eurodollar Rate Loans with those Eurodollar Rate Loans which have earlier
expiring Interest Periods being repaid prior to those which have later expiring
Interest Periods.

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

                                       23

<PAGE>

Agreement after giving effect to all Extensions of Credit to be made on such
date and the application of the proceeds thereof. At no time shall the
outstanding principal amount of the Loans exceed the aggregate amount of the
Commitments hereunder. References to the unused portion of the Commitments shall
refer to the excess, if any, of the Commitments hereunder over the outstanding
principal amount of the Loans; and references to the unused portion of any
Lender's Commitment shall refer to such Lender's Percentage of the unused
Commitments.

                                  ARTICLE III
                                      LOANS

         SECTION 3.01. LOANS.

                  (a)      A Borrower may request a Borrowing (other than a
Conversion) by delivering a notice (a "NOTICE OF BORROWING") to the
Administrative Agent no later than 12:00 noon (New York City time) on the third
Business Day or, in the case of ABR Loans, on the first Business Day, prior to
the date of the proposed Borrowing. The Administrative Agent shall give each
Lender prompt notice of each Notice of Borrowing. Each Notice of Borrowing shall
be in substantially the form of Exhibit A and shall specify the requested (i)
date of such Borrowing, (ii) Type of Loans to be made in connection with such
Borrowing, (iii) Interest Period, if any, for such Loans, (iv) amount of such
Borrowing and (v) identity of the applicable Borrower. Each proposed Borrowing
shall conform to the requirements of Sections 3.03 and 3.04.

                  (b)      Each Lender shall, before 12:00 noon (New York City
time) on the date of such Borrowing, make available for the account of its
Applicable Lending Office to the Administrative Agent at the Administrative
Agent's offices at 2 Penns Way, Suite 200, New Castle, DE 19270, in same day
funds, such Lender's Percentage of such Borrowing. After the Administrative
Agent's receipt of such funds and upon fulfillment of the applicable conditions
set forth in Article V, the Administrative Agent will make such funds available
to the applicable Borrower at the Administrative Agent's aforesaid address.
Notwithstanding the foregoing, unless the Administrative Agent shall have
received notice from a Lender prior to the date of any Borrowing that such
Lender will not make available to the Administrative Agent such Lender's
Percentage of such Borrowing, the Administrative Agent may assume that such
Lender has made such Percentage available to the Administrative Agent on the
date of such Borrowing in accordance with the first sentence of this subsection
(b), and the Administrative Agent may, in reliance upon such assumption, make
available to the applicable Borrower on such date a corresponding amount.

                  (c)      Any Lender may request that Loans made by it be
evidenced by a Promissory Note. In such event, the Borrowers shall prepare,
execute and deliver to such Lender a Promissory Note payable to the order of
such Lender (or, if requested by such Lender, to such Lender and its registered
assigns) and in a form approved by the Administrative Agent. Thereafter, the
Loans evidenced by such Promissory Note and interest thereon shall at all times
(including after assignment pursuant to Section 10.07) be represented by one or
more Promissory Notes in such form payable to the order of the payee named
therein (or, if such Promissory Note is a registered note, to such payee and its
registered assigns).

                                       24

<PAGE>

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

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

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

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

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

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

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

                  (i)      each Borrowing shall be in an aggregate amount not
         less than $5,000,000, or an integral multiple of $1,000,000 in excess
         thereof (or such lesser amount as shall be equal to the total amount of
         the Available Commitments on such date, after giving effect to all
         other Extensions of Credit to be made on such date), and shall consist
         of Loans to the same Borrower of the same Type, having the same
         Interest Period and made or

                                       25

<PAGE>

         Converted on the same day by the Lenders ratably according to their
         respective Percentages;

                  (ii)     at no time shall the number of Borrowings comprising
         Eurodollar Rate Loans outstanding hereunder be greater than ten (10);

                  (iii)    no Eurodollar Rate Loan may be Converted on a date
         other than the last day of the Interest Period applicable to such Loan
         unless the corresponding amounts, if any, payable to the Lenders
         pursuant to Section 4.04(b) are paid contemporaneously with such
         Conversion;

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

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

                  (b)      If any Lender shall notify the Administrative Agent
that the introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Applicable Lending
Office to perform its obligations hereunder to make, or to fund or maintain,
Eurodollar Rate Loans hereunder, (i) the obligation of such Lender to make, or
to Convert Loans into, Eurodollar Rate Loans for any Borrowing from such Lender
shall be forthwith suspended until the earlier to occur of the date upon which
(A) such Lender shall cease to be a party hereto and (B) it is no longer
unlawful for such Lender to make, fund or maintain Eurodollar Rate Loans, and
(ii) if the maintenance of Eurodollar Rate Loans then outstanding through the
last day of the Interest Period therefor would cause such Lender to be in
violation of such law, regulation or assertion, the Borrowers shall either
prepay or Convert all Eurodollar Rate Loans from such Lender within five days
after such notice. Promptly upon becoming aware that the circumstances that
caused such Lender to deliver such notice no longer exist, such Lender shall
deliver notice thereof to the Administrative Agent (but the failure to do so
shall impose no liability upon such Lender). Promptly upon receipt of such
notice from such Lender (or upon such Lender's assigning all of its Commitment,
Loans, participation and other rights and obligations hereunder pursuant to
Section 10.07), the Administrative Agent shall deliver notice thereof to the
Borrowers and the Lenders and such suspension shall terminate.

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

                                       26
<PAGE>

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

                  (d)      If any Lender shall have delivered a notice to the
Administrative Agent described in Section 3.04(b), and if and so long as such
Lender shall not have withdrawn such notice in accordance with said Section
3.04(b), the Borrowers or the Administrative Agent may demand that such Lender
assign in accordance with Section 10.07, to one or more Eligible Banks
designated by the Borrowers or the Administrative Agent (each a "PROSPECTIVE
LENDER"), all (but not less than all) of such Lender's Commitment, Loans,
participation and other rights and obligations hereunder; provided, that any
such demand by the Borrowers during the continuance of an Event of Default or
Default shall be ineffective without the consent of the Required Lenders. If,
within 30 days following any such demand by the Administrative Agent or the
Borrowers, any such Prospective Lender so designated shall fail to consummate
such assignment on terms reasonably satisfactory to such Lender, or the
Borrowers and the Administrative Agent shall have failed to designate any such
Prospective Lender, then such demand by the Borrowers or the Administrative
Agent shall become ineffective, it being understood for purposes of this
provision that such assignment shall be conclusively deemed to be on terms
reasonably satisfactory to such Lender, and such Lender shall be compelled to
consummate such assignment forthwith, if such Prospective Lender (i) shall agree
to such assignment in substantially the form of the Lender Assignment attached
hereto as Exhibit F and (ii) shall tender payment to such Lender in an amount
equal to the full outstanding dollar amount accrued in favor of such Lender
hereunder (as computed in accordance with the records of the Administrative
Agent), including, without limitation, all accrued interest and fees and, to the
extent not paid by the Borrowers, any payments required pursuant to Section
4.04(b).

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

         SECTION 3.05. REPAYMENT OF LOANS; INTEREST

                  (a)      Principal. Each Borrower shall repay the outstanding
principal amount of its Loans on the Maturity Date (or such earlier date as may
be required pursuant to Section 2.03 or 8.02).

                                       27

<PAGE>

                  (b)      Interest. All Loans shall bear interest on the unpaid
principal amount thereof from the date of such Loan until such principal amount
shall be paid in full, at the Applicable Rate for such Loan (except as otherwise
provided in this subsection (b)), payable as follows:

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

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

                                   ARTICLE IV
                   PAYMENTS, COMPUTATIONS AND YIELD PROTECTION

         SECTION 4.01. PAYMENTS AND COMPUTATIONS.

                  (a)      Each Borrower shall make each payment hereunder and
under the other Loan Documents not later than 2:00 p.m. (New York City time) on
the day when due in Dollars to the Administrative Agent at its offices at 2
Penns Way, Suite 200, New Castle, DE 19270, in same day funds; any payment
received after 3:00 p.m. (New York City time) shall be deemed to have been
received at the start of business on the next succeeding Business Day, unless
the Administrative Agent shall have received from, or on behalf of, the
applicable Borrower a Federal Reserve reference number with respect to such
payment before 4:00 p.m. (New York City time). The Administrative Agent will
promptly thereafter cause to be distributed like funds relating to the payment
of principal, interest, fees or other amounts payable to the Lenders, to the
respective Lenders to which the same are payable, for the account of their
respective Applicable Lending Offices, in each case to be applied in accordance
with the terms of this Agreement. If and to the extent that any distribution of
any payment from a Borrower required to be made to any Lender pursuant to the
preceding sentence shall not be made in full by the Administrative Agent on the
date such payment was received by the Administrative Agent, the Administrative
Agent shall pay to such Lender, upon demand, interest on the unpaid amount of
such distribution, at a rate per annum equal to the Federal Funds Effective
Rate, from the date of such payment by the applicable Borrower to the
Administrative Agent to the date of payment in full by the Administrative Agent
to such Lender of such unpaid amount. Upon the Administrative

                                       28

<PAGE>

Agent's acceptance of a Lender Assignment and recording of the information
contained therein in the Register pursuant to Section 10.07, from and after the
effective date specified in such Lender Assignment, the Administrative Agent
shall make all payments hereunder and under any Promissory Notes in respect of
the interest assigned thereby to the Lender assignee thereunder, and the parties
to such Lender Assignment shall make all appropriate adjustments in such
payments for periods prior to such effective date directly between themselves.

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

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

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

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

                  (f)      Any amount payable by any Borrower hereunder or under
any of the Promissory Notes that is not paid when due (whether at stated
maturity, by acceleration or

                                       29

<PAGE>

otherwise) shall (to the fullest extent permitted by law) bear interest, from
the date when due until paid in full, at a rate per annum equal at all times to
the Default Rate, payable on demand.

                  (g)      If at any time insufficient funds are received by and
available to the Administrative Agent to pay fully all amounts of principal,
interest and fees then due hereunder, such funds shall be applied, subject to
Section 4.07, (i) first, toward payment of interest and fees then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
interest and fees then due to such parties, and (ii) second, toward payment of
principal then due hereunder, ratably among the parties entitled thereto.

         SECTION 4.02. INTEREST RATE DETERMINATION. The Administrative Agent
shall give prompt notice to the Borrowers and the Lenders of the applicable
interest rate determined by the Administrative Agent for purposes of Section
3.05(b)(i) or (ii).

         SECTION 4.03. PREPAYMENTS. The Borrowers shall have no right to prepay
any principal amount of any Loans other than as follows:

                  (a)      A Borrower may (and shall provide notice thereof to
the Administrative Agent not later than 10:00 a.m. (New York City time) on the
date of prepayment, and the Administrative Agent shall promptly distribute
copies thereof to the Lenders), and if such notice is given, such Borrower
shall, prepay the outstanding principal amounts of its Loans made as part of the
same Borrowing, in whole or ratably in part, together with (i) accrued interest
to the date of such prepayment on the principal amount prepaid and (ii) in the
case of Eurodollar Rate Loans, any amount payable to the Lenders pursuant to
Section 4.04(b); provided, however, that each partial prepayment shall be in an
aggregate principal amount of not less than $5,000,000 or an integral multiple
of $1,000,000 in excess thereof (or such lesser amount as shall be equal to the
total amount of Loans outstanding to such Borrower).

                  (b)      On the date of any termination or optional or
mandatory reduction of the Commitments pursuant to Section 2.03, the Borrowers
shall pay or prepay the principal outstanding on the Loans in full in cash in an
amount equal to the excess of (i) the sum of the aggregate principal amount of
the Loans outstanding (after giving effect to all Extensions of Credit to be
made on such date and the application of the proceeds thereof) over (ii) the
aggregate amount of the Commitments (following such termination or reduction, if
any), together with (x) accrued interest to the date of such prepayment on the
principal amount repaid and (y) in the case of prepayments of Eurodollar Rate
Loans, any amount payable to the Lenders pursuant to Section 4.04(b). Any
payments and prepayments required by this subsection (b) shall be applied to
outstanding ABR Loans up to the full amount thereof before they are applied to
outstanding Eurodollar Rate Loans.

         SECTION 4.04. YIELD PROTECTION.

                  (a)      Increased Costs. If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation after the Closing Date, or (ii) the compliance with any guideline or
request from any central bank or other governmental authority (whether or not
having the force of law) issued or made after the Closing Date, there shall be
reasonably incurred any increase in the cost to any Lender of agreeing to make
or making, funding or

                                       30

<PAGE>

maintaining Eurodollar Rate Loans, then the Borrowers shall from time to time,
upon demand by such Lender (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender
additional amounts sufficient to compensate such Lender for such increased cost.
A certificate as to the amount of such increased cost and giving a reasonable
explanation thereof, submitted to the Borrowers and the Administrative Agent by
such Lender, shall constitute such demand and shall be conclusive and binding
for all purposes, absent manifest error.

                  (b)      Breakage. If, due to any prepayment pursuant to
Section 4.03, an acceleration of maturity of the Loans pursuant to Section 8.02,
or any other reason, any Lender receives payments of principal of any Eurodollar
Rate Loan other than on the last day of the Interest Period relating to such
Loan or if any Borrower shall Convert any Eurodollar Rate Loans on any day other
than the last day of the Interest Period therefor, or if any Borrower shall fail
to prepay a Eurodollar Rate Loan on the date specified in a notice of
prepayment, the Borrowers shall, promptly after demand by such Lender (with a
copy of such demand to the Administrative Agent), pay to the Administrative
Agent for the account of such Lender any amounts required to compensate such
Lender for additional losses, costs, or expenses (including anticipated lost
profits) that such Lender may reasonably incur as a result of such payment,
Conversion or failure to prepay, including any loss, cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund or maintain such Loan. For purposes of this subsection (b),
a certificate setting forth the amount of such additional losses, costs, or
expenses and giving a reasonable explanation thereof, submitted to the Borrowers
and the Administrative Agent by such Lender, shall constitute such demand and
shall be conclusive and binding for all purposes, absent manifest error.

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

                  (d)      Notices. Each Lender hereby agrees to use its best
efforts to notify the Borrowers of the occurrence of any event referred to in
subsection (a), (b) or (c) of this Section 4.04 promptly after becoming aware of
the occurrence thereof. The failure of any Lender to provide such notice or to
make demand for payment under said subsection shall not constitute a waiver of
such Lender's rights hereunder; provided that, notwithstanding any provision to
the contrary contained in this Section 4.04, the Borrowers shall not be required
to reimburse any

                                       31

<PAGE>

Lender for any amounts or costs incurred under subsection (a), (b) or (c) above,
more than 90 days prior to the date that such Lender notifies the Borrowers in
writing thereof, in each case unless, and to the extent that, any such amounts
or costs so incurred shall relate to the retroactive application of any event
notified to the Borrowers which entitles such Lender to such compensation. If
any Lender shall subsequently determine that any amount demanded and collected
under this Section 4.04 was done so in error, such Lender will promptly return
such amount to the Borrowers.

                  (e)      Survival of Obligations. Subject to subsection (d)
above, the Borrowers' obligations under this Section 4.04 shall survive the
repayment of all other amounts owing to the Lenders and the Agents under the
Loan Documents and the termination of the Commitments. If and to the extent that
the obligations of the Borrowers under this Section 4.04 are unenforceable for
any reason, the Borrowers agree to make the maximum contribution to the payment
and satisfaction thereof which is permissible under applicable law.

         SECTION 4.05. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loans owing to it (other than pursuant
to Section 4.04 or Section 4.06) in excess of its ratable share of payments
obtained by all the Lenders on account of the Loans of such Lenders, such Lender
shall forthwith purchase from the other Lenders such participation in the Loans
owing to them as shall be necessary to cause such purchasing Lender to share the
excess payment ratably with each of them; provided, however, that if all or any
portion of such excess payment is thereafter recovered from such purchasing
Lender, such purchase from each Lender shall be rescinded and such Lender shall
repay to the purchasing Lender the purchase price to the extent of such recovery
together with an amount equal to such Lender's ratable share (according to the
proportion of (i) the amount of such Lender's required repayment to (ii) the
total amount so recovered from the purchasing Lender) of any interest or other
amount paid or payable by the purchasing Lender in respect of the total amount
so recovered. The Borrowers agree that any Lender so purchasing a participation
from another Lender pursuant to this Section 4.05 may, to the fullest extent
permitted by law, exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such Lender were the
direct creditor of the Borrowers in the amount of such participation.
Notwithstanding the foregoing, if any Lender shall obtain any such excess
payment involuntarily, such Lender may, in lieu of purchasing participations
from the other Lenders in accordance with this Section 4.05, on the date of
receipt of such excess payment, return such excess payment to the Administrative
Agent for distribution in accordance with Section 4.01(a).

         SECTION 4.06. TAXES.

                  (a)      All payments by the Borrowers hereunder and under the
other Loan Documents shall be made in accordance with Section 4.01, free and
clear of and without deduction for all present or future taxes, levies, imposts,
deductions, charges or withholdings, and all liabilities with respect thereto,
excluding, in the case of each Lender and each Agent, taxes imposed on its
overall net income, and franchise taxes imposed on it by the jurisdiction under
the laws of which such Lender or Agent (as the case may be) is organized or any
political subdivision thereof and, in the case of each Lender, taxes imposed on
its overall net income, and franchise taxes imposed on it by the jurisdiction of
such Lender's Applicable Lending Office or

                                       32

<PAGE>

any political subdivision thereof (all such non-excluded taxes, levies, imposts,
deductions, charges, withholdings and liabilities being hereinafter referred to
as "TAXES"). If any Borrower shall be required by law to deduct any Taxes from
or in respect of any sum payable hereunder or under any other Loan Document to
any Lender or Agent, (i) the sum payable shall be increased as may be necessary
so that after making all required deductions (including deductions applicable to
additional sums payable under this Section 4.06) such Lender or Agent (as the
case may be) receives an amount equal to the sum it would have received had no
such deductions been made, (ii) such Borrower shall make such deductions and
(iii) such Borrower shall pay the full amount deducted to the relevant taxation
authority or other authority in accordance with applicable law.

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

                  (c)      Each Borrower jointly and severally agrees to
indemnify each Lender and Agent for the full amount of Taxes and Other Taxes
(including any Taxes and any Other Taxes imposed by any jurisdiction on amounts
payable under this Section 4.06) paid by such Lender or Agent (as the case may
be) and any liability (including penalties, interest and expenses) arising
therefrom or with respect thereto, whether or not such Taxes or Other Taxes were
correctly or legally asserted. This indemnification shall be made within thirty
(30) days from the date such Lender or Agent (as the case may be) makes written
demand therefor; provided, that such Lender or Agent (as the case may be) shall
not be entitled to demand payment under this Section 4.06 for an amount if such
demand is not made within one year following the date upon which such Lender or
Agent (as the case may be) shall have been required to pay such amount.

                  (d)      Within thirty (30) days after the date of any payment
of Taxes, the applicable Borrower will furnish to the Administrative Agent, at
its address referred to in Section 10.02, the original or a certified copy of a
receipt evidencing payment thereof.

                  (e)      Each Bank represents and warrants that either (i) it
is organized under the laws of a jurisdiction within the United States or (ii)
it has delivered to the Borrowers or the Administrative Agent duly completed
copies of such form or forms prescribed by the United States Internal Revenue
Service indicating that such Bank is entitled to receive payments without
deduction or withholding of any United States federal income taxes, as permitted
by the Internal Revenue Code of 1986, as amended. Each other Lender agrees that,
on or prior to the date upon which it shall become a party hereto, and upon the
reasonable request from time to time of a Borrower or the Administrative Agent,
such Lender will deliver to the Borrowers and the Administrative Agent (to the
extent that it is not prohibited by law from doing so) either (A) a statement
that it is organized under the laws of a jurisdiction within the United States
or (B) duly completed copies of such form or forms as may from time to time be
prescribed by the United States Internal Revenue Service, indicating that such
Lender is entitled to receive payments without deduction or withholding of any
United States federal income taxes, as permitted by the Internal Revenue Code of
1986, as amended. Each Bank that has delivered, and each other Lender that
hereafter delivers, to the Borrowers and the Administrative Agent the form or
forms

                                       33

<PAGE>

referred to in the two preceding sentences further undertakes to deliver to the
Borrowers and the Administrative Agent, to the extent that it is not prohibited
by law from doing so, further copies of such form or forms, or successor
applicable form or forms, as the case may be, as and when any previous form
filed by it hereunder shall expire or shall become incomplete or inaccurate in
any respect. Each Lender represents and warrants that each such form supplied by
it to the Administrative Agent and the Borrowers pursuant to this subsection
(e), and not superseded by another form supplied by it, is or will be, as the
case may be, complete and accurate.

         SECTION 4.07. APPORTIONMENT OF PAYMENTS.

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

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

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

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

                  (iv)     fourth, as the Borrowers so designate.

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

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

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

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

                                       34

<PAGE>

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

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

                  (v)      fifth, to the ratable payment or prepayment of
         principal outstanding on all Loans, in accordance with the Lenders'
         respective Percentages;

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

The order of priority set forth in this Section 4.07(b) and the related
provisions of this Agreement are set forth solely to determine the rights and
priorities of the Agents and the Lenders as among themselves.

         SECTION 4.08. Proceeds of Collateral. During the continuance of an
Event of Default and after declaration thereof by written notice from the
Administrative Agent to the Borrowers, the Borrowers shall cause all proceeds of
Collateral (other than Collateral in respect of which the Collateral Agent
and/or the Administrative Agent shall have a prior security interest on behalf
of the Lenders hereunder) to be deposited pursuant to arrangements for the
collection of such amounts established by the Borrowers and the Administrative
Agent (or the Collateral Agent, as applicable) for application pursuant to
Section 4.07. All collections of proceeds of Collateral which are received
directly by the Company or any Subsidiary of the Company shall be deemed to have
been received by the Company or such Subsidiary of the Company as the Collateral
Agent's trustee and, during the continuance of an Event of Default and after
declaration thereof by written notice from the Administrative Agent to the
Borrowers, upon the Company's or such Subsidiary's receipt thereof, the
Borrowers shall immediately transfer or cause to be transferred all such amounts
to the Administrative Agent for application pursuant to Section 4.07. All other
proceeds of Collateral received by the Collateral Agent and/or the
Administrative Agent, whether through direct payment or otherwise, will be
deemed received by such Agent, will be the sole property of such Agent, and will
be held by such Agent, for the benefit of the Lenders for application pursuant
to Section 4.07.

                                   ARTICLE V
                              CONDITIONS PRECEDENT

         SECTION 5.01. CONDITIONS PRECEDENT TO THE EFFECTIVENESS OF THIS
AGREEMENT. The effectiveness of this Agreement is subject to the fulfillment of
the following conditions precedent:

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

                  (i)      Certified copies of the resolutions of the Board of
         Directors, or of the Executive Committee of the Board of Directors (or
         persons performing similar functions), of each Borrower, each Guarantor
         and each other Grantor (each a "LOAN

                                       35

<PAGE>

         PARTY") authorizing each such Loan Party to enter into each Loan
         Document to which it is, or is to be, a party, and of all documents
         evidencing other necessary corporate or other action and Governmental
         Approvals, if any, with respect to each such Loan Document.

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

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

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

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

                  (vi)     The Pledge Agreements, duly executed by the Borrowers
         and each Grantor, as applicable.

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

                           (A)      all Project Finance Debt of the Company and
                  the Consolidated Subsidiaries, as of September 30, 2003; and

                           (B)      debt (as such term is construed in
                  accordance with GAAP) of the Loan Parties as of September 30,
                  2003.

                  (viii)   A certificate, executed by a duly authorized officer
         of the Company, certifying that as of September 30, 2003 the Company
         was in compliance with the requirements of Section 4.4 of the AIG
         Pledge Agreement (which certificate shall set forth in reasonable
         detail the calculations upon which the Company determined such
         compliance).

                  (ix)     Favorable opinions of: (A) Belinda Foxworth, Esq.,
         Deputy General Counsel of the Company and counsel for the other Loan
         Parties, in substantially the form of Exhibit C and as to such other
         matters as the Required Lenders, through the Administrative Agent, may
         reasonably request and (B) Skadden, Arps, Slate, Meagher & Flom LLP,
         special counsel to the Loan Parties, in substantially the form of
         Exhibit D and as to such other matters as the Required Lenders, through
         the Administrative Agent, may reasonably request.

                                       36

<PAGE>

                  (x)      Duly executed copies of a Reaffirmation in the form
         of Attachment A attached hereto from each of the Company's Subsidiaries
         identified thereon.

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

                  (i)      the representations and warranties set forth in
         Section 6.01 of this Agreement are true and correct with respect to
         such Borrower on and as of the Closing Date as though made on and as of
         such date,

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

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

                  (c)      The Administrative Agent shall have received evidence
satisfactory to it that all financing statements relating to the Collateral have
been completed for filing or recording and/or filed, and all certificates
representing capital stock or other ownership interests included in the
Collateral (including, without limitation, certificates, if any, representing
the capital stock or other ownership interests identified on Schedule II hereto)
have been delivered to the Collateral Agent (with duly executed stock powers).

                  (d)      The Borrowers shall have paid, on or before the
Closing Date, all fees under or referenced in Section 2.02(b) and all expenses
referenced in Section 10.04(a), in each case to the extent due and payable as of
the Closing Date.

                  (e)      The Administrative Agent shall have received each of
the following on or before the Closing Date, in each case in form and substance
satisfactory to it with sufficient copies for each Lender:

                  (i)      A certificate, executed by the chief executive
         officer and the chief financial officer of the Company and Consumers,
         as applicable, in favor of the Agents and the Lenders with respect to
         the financial statements described in Sections 6.01(e)(i), (ii), (iii)
         and (iv) certifying that such financial statements have been prepared
         in accordance with GAAP (except for changes resulting from any
         Restatement Event other than the Restatement itself) and are true and
         correct as of the date of such certificate;

                  (ii)     Copies of the financial statements described in
         Sections 6.01(e)(i), (ii), (iii) and (iv); and

                                       37

<PAGE>

                  (iii)    Copies of the Company's Annual Report on Form 10-K/A
         for the fiscal year ended December 31, 2002.

                  (f)      The Administrative Agent shall have received evidence
satisfactory to it that on the Closing Date all "Loans" under (and as defined
in) the Existing Credit Agreement and all other amounts due under the Existing
Credit Agreement have been paid in full by the Company.

         SECTION 5.02. CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. The
obligation of each Lender to make an Extension of Credit (including the initial
Extension of Credit, but excluding the Conversion of a Eurodollar Rate Loan into
an ABR Loan) shall be subject to the further conditions precedent that, on the
date of such Extension of Credit and after giving effect thereto:

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

                  (i)      the representations and warranties contained in
         Section 6.01 of this Agreement (other than those contained in
         subsections (e)(v) and (f) thereof) are correct on and as of the date
         of such Extension of Credit, before and after giving effect to such
         Extension of Credit and to the application of the proceeds thereof, as
         though made on and as of such date; and

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

                  (b)      The Administrative Agent shall have received such
other approvals, opinions and documents as any Lender, through the
Administrative Agent, may reasonably request as to the legality, validity,
binding effect or enforceability of the Loan Documents or the business, assets,
property, financial condition, results of operations or prospects of the Company
and its Consolidated Subsidiaries.

         SECTION 5.03. CONDITIONS PRECEDENT TO CERTAIN EXTENSIONS OF CREDIT. The
obligation of each Lender to make an Extension of Credit (including the initial
Extension of Credit) that would (after giving effect to all Extensions of Credit
on such date and the application of proceeds thereof) increase the principal
amount outstanding hereunder, shall be subject to the further conditions
precedent that, on the date of such Extension of Credit and after giving effect
thereto:

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

                                       38

<PAGE>

                  (i)      the representations and warranties contained in
         subsections (e)(v) and (f) of Section 6.01 of this Agreement are
         correct on and as of the date of such Extension of Credit, before and
         after giving effect to such Extension of Credit and to the application
         of the proceeds thereof, as though made on and as of such date; and

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

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

         SECTION 5.04. RELIANCE ON CERTIFICATES. The Lenders and each Agent
shall be entitled to rely conclusively upon the certificates delivered from time
to time by officers of the Loan Parties as to the names, incumbency, authority
and signatures of the respective persons named therein until such time as the
Administrative Agent may receive a replacement certificate, in form acceptable
to the Administrative Agent, from an officer of such Person identified to the
Administrative Agent as having authority to deliver such certificate, setting
forth the names and true signatures of the officers and other representatives of
such Person thereafter authorized to act on behalf of such Person.

                                   ARTICLE VI
                         REPRESENTATIONS AND WARRANTIES

         SECTION 6.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWERS. Each
Borrower represents and warrants as follows:

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

                  (b)      Authorization; No Conflicts. The execution, delivery
and performance by each Loan Party of each Loan Document to which it is or will
be a party (i) are within such Loan Party's powers, (ii) have been duly
authorized by all necessary corporate or other organizational action or
proceedings and (iii) do not and will not (A) require any consent or approval of
the stockholders (or other applicable holder of equity) of such Loan Party
(other than such consents and approvals which have been obtained and are in full
force and effect), (B) violate any provision of the charter or by-laws (or other
comparable constitutive documents) of such Loan Party or of law, (C) violate any
legal restriction binding on or affecting such Loan Party, (D) result in a
breach of, or constitute a default under, any indenture or loan or credit
agreement or any other agreement, lease or instrument to which such Loan Party
is a party or by which it or its properties may be bound or affected, or (E)
result in or require the creation of any Lien (other than pursuant to the Loan
Documents) upon or with respect to any of its respective properties.

                  (c)      Government Consent. No Governmental Approval is
required, other than filings necessary to create or perfect security interests
in the Collateral or as may be required

                                       39

<PAGE>

under applicable energy, antitrust or securities laws in connection with the
exercise of remedies with respect to certain Collateral.

                  (d)      Security Interests; Enforceability. Each Loan
Document executed on the Closing Date is, and each other Loan Document to which
any Loan Party will be a party when executed and delivered hereunder will (i)
where applicable, create valid and, upon filing of the financing statements
delivered on the Closing Date and described in Section 5.01(c), perfected
security interests in the Collateral covered thereby securing the payment of all
of the Loans purported to be secured thereby, which security interests shall be
first priority perfected security interests, subject to Liens permitted under
Section 7.02(a), and (ii) be the legal, valid and binding obligation of such
Loan Party enforceable against such Loan Party in accordance with its terms;
subject to the qualification, however, that the enforcement of the rights and
remedies herein and therein is subject to bankruptcy and other similar laws of
general application affecting rights and remedies of creditors and the
application of general principles of equity (regardless of whether considered in
a proceeding in equity or at law).

                  (e)      Financial Statements; Material Adverse Change. (i)
The consolidated balance sheets of the Company and its Consolidated Subsidiaries
as at December 31, 2001 and December 31, 2002, and the related consolidated
statements of income, retained earnings and cash flows of the Company and its
Consolidated Subsidiaries for the fiscal years then ended, included in the
Company's Annual Report on Form 10-K/A for the fiscal year ended December 31,
2002, in each case as such financial statements have been restated in connection
with the Restatement, copies of each of which have been furnished to the
Administrative Agent for distribution to each Lender, fairly present the
financial condition of the Company and its Consolidated Subsidiaries as at such
dates and the results of operations of the Company and its Consolidated
Subsidiaries for the periods ended on such dates (it being understood that such
financial statements do not give effect to any Restatement Event other than the
Restatement itself), all in accordance with generally accepted accounting
principles consistently applied (except for changes resulting from any
Restatement Event other than the Restatement itself); (ii) the consolidated
balance sheets of Consumers and its consolidated Subsidiaries as at December 31,
2001 and December 31, 2002, and the related consolidated statements of income,
retained earnings and cash flows of Consumers and its consolidated Subsidiaries
for the fiscal years then ended, included in the Company's Annual Report on Form
10-K/A for the fiscal year ended December 31, 2002, in each case as such
financial statements have been restated in connection with the Restatement,
copies of each of which have been furnished to the Administrative Agent for
distribution to each Lender, fairly present the financial condition of Consumers
and its consolidated Subsidiaries as at such dates and the results of operations
of Consumers and its consolidated Subsidiaries for the periods ended on such
dates (it being understood that such financial statements do not give effect to
any Restatement Event other than the Restatement itself), all in accordance with
generally accepted accounting principles consistently applied (except for
changes resulting from any Restatement Event other than the Restatement itself);
(iii) the consolidated balance sheets of the Company and its Consolidated
Subsidiaries as at March 31, 2003, June 30, 2003 and September 30, 2003 and the
related consolidated statements of income, retained earnings and cash flows of
the Company and its Consolidated Subsidiaries for the fiscal quarter ending on
each such date and for the period beginning January 1, 2003 and ending September
30, 2003, in each case as such financial statements have been restated in
connection with the Restatement, copies of each of which have

                                       40

<PAGE>

been furnished to the Administrative Agent for distribution to each Lender,
fairly present (subject to year-end audit adjustments) the financial condition
of the Company and its Consolidated Subsidiaries as at each such date and the
results of the Company and its Consolidated Subsidiaries for such periods (it
being understood that such financial statements do not give effect to any
Restatement Event other than the Restatement itself), all in accordance with
generally accepted accounting principles consistently applied (except for
changes resulting from any Restatement Event other than the Restatement itself);
(iv) the consolidated balance sheets of Consumers and its Consolidated
Subsidiaries as at March 31, 2003, June 30, 2003 and September 30, 2003 and the
related consolidated statements of income, retained earnings and cash flows of
Consumers and its Consolidated Subsidiaries for the fiscal quarter ending on
each such date and for the period beginning January 1, 2003 and ending September
30, 2003, in each case as such financial statements have been restated in
connection with the Restatement, copies of each of which have been furnished to
the Administrative Agent for distribution to each Lender, fairly present
(subject to year-end audit adjustments) the financial condition of Consumers and
its Consolidated Subsidiaries as at each such date and the results of Consumers
and its Consolidated Subsidiaries for such periods (it being understood that
such financial statements do not give effect to any Restatement Event other than
the Restatement), all in accordance with generally accepted accounting
principles consistently applied (except for changes resulting from any
Restatement Event other than the Restatement itself); (v) since December 31,
2002, except as disclosed in the Company's Annual Report on Form 10-K/A for the
fiscal year ended December 31, 2002 and the Company's Quarterly Reports on Form
10-Q for the quarters ending March 31, 2003, June 30, 2003 and September 30,
2003 and Reports on Form 8-K filed with the Securities and Exchange Commission
since December 31, 2002 but prior to the Closing Date, there has been no
Material Adverse Change; and (vi) except as a result of any Restatement Event
(other than the Restatement itself), no Loan Party has any material liabilities
or obligations except as reflected in the foregoing financial statements and in
Schedule I, as evidenced by the Loan Documents and as may be incurred, in
accordance with the terms of this Agreement, in the ordinary course of business
(as presently conducted) following the Closing Date.

                  (f)      Litigation. Except (i) as disclosed in the Company's
Annual Report on Form 10-K/A for the fiscal year ended December 31, 2002 and the
Company's Quarterly Reports on Form 10-Q for the quarters ending March 31, 2003,
June 30, 2003 and September 30, 2003 and Reports on Form 8-K filed with the
Securities and Exchange Commission since December 31, 2002 but prior to the
Closing Date, and (ii) such other similar actions, suits and proceedings
predicated on the occurrence of the same events giving rise to any actions,
suits and proceedings described in the Reports filed with the Securities and
Exchange Commission set forth in clause (i) above (all such matters in clauses
(i) and (ii) being the "DISCLOSED MATTERS") and (iii) any Restatement Event,
there are no pending or threatened actions, suits, investigations or proceedings
against or, to the knowledge of such Borrower, affecting the Company or any of
its Subsidiaries or the properties of the Company or any of its Subsidiaries
before any court, governmental agency or arbitrator, that would, if adversely
determined, reasonably be expected to materially adversely affect the financial
condition, properties, business or operations of the Company and its
Subsidiaries, considered as a whole, or affect the legality, validity or
enforceability of this Agreement or any other Loan Document. There have been no
material adverse developments with respect to the Disclosed Matters that have
had or could reasonably be expected to result in a Material Adverse Change.

                                       41

<PAGE>

                  (g)      Insurance. All insurance required by Section 7.01(b)
is in full force and effect.

                  (h)      ERISA. No Plan Termination Event has occurred nor is
reasonably expected to occur with respect to any Plan of the Company or any of
its ERISA Affiliates which would result in a material liability to the Company,
except as disclosed and consented to by the Required Lenders in writing from
time to time. Except as disclosed in the Company's Annual Report on Form 10-K/A
for the period ended December 31, 2002, since the date of the most recent
Schedule B (Actuarial Information) to the annual report of the Company (Form
5500 Series), if any, there has been no material adverse change in the funding
status of the Plans referred therein and no "prohibited transaction" has
occurred with respect thereto which is reasonably expected to result in a
material liability to the Company. Neither the Company nor any of its ERISA
Affiliates has incurred nor reasonably expects to incur any material withdrawal
liability under ERISA to any Multiemployer Plan, except as disclosed and
consented to by the Required Lenders in writing from time to time.

                  (i)      Casualty. No fire, explosion, accident, strike,
lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act
of God or of the public enemy or other casualty (except for any such
circumstance, if any, which is covered by insurance which coverage has been
confirmed and not disputed by the relevant insurer) affecting the properties,
business or operations of any Borrower, Consumers or any Restricted Subsidiary
has occurred that could reasonably be expected to have a material adverse effect
on the business, assets, property, financial condition, results of operations or
prospects of (A) the Company and its Subsidiaries, considered as a whole, or (B)
Consumers and its Subsidiaries, considered as a whole.

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

                  (k)      Legal Constraints on Dividends. No extraordinary
judicial, regulatory or other legal constraints exist which limit or restrict
Consumers' ability to declare or pay cash dividends with respect to its capital
stock, other than (i) pursuant to the Consumers Credit Facility and (ii) any
such restriction enacted or imposed by the Michigan Public Service Commission
limiting such dividends to an amount not less than $190,000,000 during any
twelve-month period.

                  (l)      Ownership of Certain Subsidiaries. The Company owns
(i) not less than 80% of the outstanding shares of common stock of Enterprises
and (ii) not less than 80% of the outstanding shares of common stock of
Consumers.

                  (m)      Accuracy of Disclosures. The Consolidated 2003-2008
Projections of Consumers and the Borrowers (the "PROJECTIONS") are based upon
assumptions that the Borrowers believed were reasonable at the time the
Projections were delivered, and all other financial information delivered by the
Borrowers to the Administrative Agent and the Banks on

                                       42

<PAGE>

and after December 8, 2003 is true and correct in all material respects as at
the dates and for the periods indicated therein (it being understood that such
Projections and financial information included therein do not give effect to any
Restatement Event other than the Restatement itself).

                  (n)      Regulation U. (i) No Loan Party is engaged in the
business of extending credit for the purpose of buying or carrying "margin
stock" (within the meaning of Regulation U issued by the Board), (ii) and no
proceeds of any Loan will be used to buy or carry any margin stock or to extend
credit to others for the purpose of buying or carrying any margin stock and
(iii) following application of the proceeds of each Extension of Credit, not
more than 25 percent of the value of the assets of the Company and its
Subsidiaries on a consolidated basis will be margin stock.

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

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

                  (q)      PUHCA. No Loan Party is a registered "holding
company" or a "subsidiary" or an "affiliate" of a registered "holding company,"
as such terms are defined in the Public Utility Holding Company Act of 1935, as
amended, 15 USC 79 et seq.

                  (r)      Material Adverse Change Information. The Borrowers
have not withheld any fact from the Administrative Agent or the Lenders in
regard to the occurrence of any Material Adverse Change.

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

                  (t)      Project Finance Debt. Schedule I sets forth as of
September 30, 2003 (i) all Project Finance Debt of the Company and the
Consolidated Subsidiaries, and (ii) all debt (as such term is construed in
accordance with GAAP) of the Loan Parties, and, as of the Closing Date, there
are no defaults in the payment of principal or interest on any such Debt and no
payments thereunder have been deferred or extended beyond their stated maturity
(except as disclosed on such Schedule).

                                  ARTICLE VII
                           COVENANTS OF THE BORROWERS

         SECTION 7.01. AFFIRMATIVE COVENANTS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid, or
any Lender shall have any Commitment:

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<PAGE>

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

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

                  (c)      Preservation of Existence, Etc. Except as otherwise
permitted by Section 7.02, each Borrower shall preserve and maintain, and shall
cause each of the Restricted Subsidiaries and, in the case of the Company,
Consumers to preserve and maintain, its corporate or limited liability company
existence, material rights (statutory and otherwise) and franchises, and take
such other action as may be necessary or advisable to preserve and maintain its
right to conduct its business in the states where it shall be conducting its
business.

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

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

                  (f)      Keeping of Books. From and after December 31, 2002,
each Borrower shall keep, and shall cause each of its Subsidiaries to keep,
proper records and books of account, in which full and correct entries shall be
made of all financial transactions of such Borrower and its Subsidiaries and the
assets and business of such Borrower and its Subsidiaries, in accordance with
GAAP (except as related to the Restatement).

                                       44

<PAGE>

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

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

                  (i)      Consolidated Leverage Ratio. The Company shall
maintain, as of the last day of each fiscal quarter (in each case, the
"MEASUREMENT QUARTER"), a maximum ratio of (i) Consolidated Debt as of such day
(calculated exclusive of Panhandle and its Subsidiaries), to (ii) Consolidated
EBITDA for the immediately preceding four-fiscal-quarter period ending on such
day (calculated exclusive of Panhandle and its Subsidiaries), of not more than
7.00 to 1.00, commencing with the Measurement Quarter ending December 31, 2003.

                  (j)      Cash Coverage Ratio. The Company shall maintain, as
of the last day of each Measurement Quarter, a minimum ratio of (i) the sum of
(A) Cash Dividend Income for the four-fiscal-quarter period ending on such day,
plus (B) the lesser of (x) 25% of the Net Proceeds received by the Company from
the sale, assignment or other disposition (but not the lease or license) of any
property, including without limitation, any sale of capital stock or other
equity interest in any of the Company's direct or indirect Subsidiaries during
such period and (y) $50,000,000 to (ii) an amount equal to (A) interest expense
(excluding (1) all arrangement, underwriting and other similar fees payable in
connection with this Agreement, (2) all arrangement, underwriting and upfront
fees paid in connection with the Borrowers' senior secured credit facilities
dated March 30, 2003 and April 21, 2003 and (3) all interest or dividends paid
on Hybrid Preferred Securities) accrued by the Company in respect of all Debt
during such period, minus (B) cash interest income received by the Company from
Persons other than any Subsidiary of the Company, during such period, minus (C)
all amounts received by the Company from its Subsidiaries and Affiliates during
such period constituting reimbursement of interest expense and commitment,
guaranty and letter of credit charges of the Company to such Subsidiary or
Affiliate, of not less than 1.20 to 1.00, commencing with the Measurement
Quarter ending on December 31, 2003; provided, that the Company shall be deemed
not to be in breach of the foregoing covenant if, during the Measurement
Quarter, the Borrowers have permanently reduced the principal amount outstanding
under this Agreement and the Promissory Notes, such that the amount determined
pursuant to clause (ii) above, when recalculated on a pro forma basis assuming
that the amount of such reduced principal amount outstanding under this
Agreement and the Promissory Notes were in effect at all times during such
four-fiscal-quarter period, would result in the Company being in compliance with
such ratio.

                  (k)      Further Assurances. The Borrowers shall promptly
execute and deliver all further instruments and documents, and take all further
action, that may be necessary or that

                                       45

<PAGE>

any Lender through the Administrative Agent may reasonably request in order to
give effect to the transactions contemplated by this Agreement and the other
Loan Documents. In addition, the Borrowers will use all reasonable efforts to
duly obtain or make Governmental Approvals required from time to time on or
prior to such date as the same may become legally required.

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

                  (m)      Compliance with Fee Letter. The Borrowers shall
comply with all of their respective obligations under the Fee Letter.

                  (n)      Payment of Declared Dividend. Each Borrower shall
cause each of its direct Subsidiaries to, and Enterprises shall, pay all
dividends within 30 days after declaration thereof.

                  (o)      Collateral. Each Borrower will cause, and will cause
each of the other Loan Parties to cause, all of such Person's right, title and
interest in, to and under the Collateral owned by it to be subject at all times
to first priority, perfected security interests in favor of the Collateral Agent
for the benefit of the Lenders to secure its respective Obligations, subject in
any case to Liens permitted under Section 7.02(a).

         SECTION 7.02. NEGATIVE COVENANTS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid or any
Lender shall have any Commitment, each Borrower agrees that it shall not,
without the written consent of the Required Lenders:

                  (a)      Liens, Etc. (1) Create, incur, assume or suffer to
exist, or permit any of the Loan Parties to create, incur, assume or suffer to
exist, any Lien upon or with respect to any of its properties of any character
(including capital stock and other ownership interests of the Borrowers'
directly-owned Subsidiaries, intercompany obligations and accounts), whether now
owned or hereafter acquired, or (2) file, or permit any of the other Loan
Parties to file, under the Uniform Commercial Code of any jurisdiction a
financing statement which names either Borrower or any other Loan Party as
debtor (other than financing statements that do not evidence a Lien), or (3)
sign, or permit any of the other Loan Parties to sign, any security agreement or
other document authorizing any secured party thereunder to file any such
financing statement, or (4) assign, or permit any of the other Loan Parties to
assign, accounts, excluding, however, from the operation of the foregoing
restrictions the Liens created under the Loan Documents and the following:

                                       46

<PAGE>

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

                  (ii)     cash pledges or deposits to secure (A) obligations
         under workmen's compensation laws or similar legislation, (B) public or
         statutory obligations of any of the other Loan Parties, (C)
         reimbursement obligations of Enterprises, CMS Generation or MS&T with
         respect to letters of credit issued by Bank of America, N.A. (or any of
         its affiliates), in connection with the settlement of claims related to
         MS&T's energy trading operations in an aggregate amount not to exceed
         $58,000,000, (D) Support Obligations of any Borrower or any Loan Party,
         or (E) obligations of Enterprises or MS&T in respect of hedging
         arrangements and commodity purchases and sales (including any cash
         margins with respect thereto); provided that with respect to clauses
         (D) and (E) above the aggregate amount of cash pledges or deposits
         securing such Support Obligations and such obligations of Enterprises
         or MS&T shall not exceed $400,000,000 at any one time outstanding;

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

                  (iv)     Liens securing the obligations under the Loan
         Documents;

                  (v)      Liens securing Off-Balance Sheet Liabilities (and all
         refinancings and recharacterizations thereof permitted under Section
         7.02(b)(iv)) in an aggregate amount not to exceed $775,000,000;

                  (vi)     purchase money Liens or purchase money security
         interests upon or in property acquired or held by any Borrower or any
         other Loan Party in the ordinary course of business to secure the
         purchase price of such property or to secure indebtedness incurred
         solely for the purpose of financing the acquisition of any such
         property to be subject to such Liens or security interests, or Liens or
         security interests existing on any such property at the time of
         acquisition, or extensions, renewals or replacements of any of the
         foregoing for the same or a lesser amount, provided that no such Lien
         or security interest shall extend to or cover any property other than
         the property being acquired and no such extension, renewal or
         replacement shall extend to or cover property not theretofore subject
         to the Lien or security interest being extended, renewed or replaced,
         and provided, further, that the aggregate principal amount of the Debt
         at any one time outstanding secured by Liens permitted by this clause
         (vi) shall not exceed $15,000,000;

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

                                       47

<PAGE>

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

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

                  (x)      Liens existing as of the Closing Date;

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

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

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

                  (xiv)    Liens on accounts receivable (other than intercompany
         receivables) of MS&T in favor of Bank of America, N.A. (or any of its
         affiliates) to secure the reimbursement obligations of Enterprises, CMS
         Generation and MS&T with respect to letters of credit issued by Bank of
         America, N.A. (or any of its affiliates) in connection with the
         settlement of claims related to MS&T's energy trading obligations in an
         aggregate amount not to exceed $58,000,000;

                  (xv)     subordinated Liens granted pursuant to the terms of
         the AIG Pledge Agreement, which Liens shall be subordinated pursuant to
         the terms of the Intercreditor Agreement, to secure certain surety bond
         obligations as described in the AIG Pledge Agreement;

                  (xvi)    assignment by MS&T of its rights under that certain
         Gas Purchase Agreement dated as of April 1, 1999 between MS&T and
         Quicksilver Resources, Inc. to Bank of America, N.A. (or any of its
         affiliates) in connection with the settlement of claims related to
         MS&T's energy trading operations; and

                  (xvii)   assignment of accounts constituting any portion of
         the assets transferred in connection with the Monetization Transaction.

                                       48

<PAGE>

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

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

                  (ii)     in the form of indemnities in respect of unfiled
         mechanics' liens and Liens affecting Enterprises' or its Subsidiaries'
         properties permitted under Section 7.02(a)(iii);

                  (iii)    debt arising under the Loan Documents;

                  (iv)     debt constituting Off-Balance Sheet Liabilities
         (including any recharacterization thereof as debt pursuant to any
         changes in generally accepted accounting principles hereafter required
         or permitted and which are adopted by the Company or any of its
         Subsidiaries with the agreement of its independent certified public
         accountants) to the extent permitted by Section 7.02(o), and any
         extensions, renewals, refundings or replacements thereof, provided that
         any such extension, renewal, refunding or replacement is in an
         aggregate principal amount not greater than the principal amount of, is
         an obligation of the same Person that is the obligor in respect of, and
         has a weighted average life to maturity not less than the weighted
         average life to maturity of, the debt so extended, renewed, refunded or
         replaced;

                  (v)      other debt of Enterprises and its Subsidiaries
         outstanding on the Closing Date (including the debt of the Loan Parties
         as of September 30, 2003 as set forth on Schedule I), and any
         extensions, renewals, refundings or replacements thereof, provided that
         any such extension, renewal, refunding or replacement is in an
         aggregate principal amount not greater than the principal amount of, is
         an obligation of the same Person that is the obligor in respect of, and
         has a weighted average life to maturity not less than the weighted
         average life to maturity of, the debt so extended, renewed, refunded or
         replaced;

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

                  (vii)    Project Finance Debt of any Loan Party or any of its
         Subsidiaries incurred for working capital purposes (including
         construction) on or after the Closing Date;

                  (viii)   capital lease obligations and other Debt secured by
         purchase money Liens to the extent such Liens shall be permitted under
         Section 7.02(a)(vi);

                  (ix)     (a) Project Finance Debt incurred by Takoradi
         International Company in respect of the Takoradi Project (other than
         Project Finance Debt permitted to be incurred

                                       49

<PAGE>

         pursuant to clause (vii) above) in an aggregate principal amount not to
         exceed $52,000,000 minus the Net Proceeds received by Takoradi
         International Company from the sale of accounts receivable; provided,
         that Takoradi International Company shall make a distribution of the
         Net Proceeds therefrom and the Company shall receive not less than its
         ratable share of such Net Proceeds;

                  (x)      reimbursement obligations of Enterprises, CMS
         Generation or MS&T with respect to letters of credit issued by Bank of
         America, N.A. (or any of its affiliates), in connection with the
         settlement of claims related to MS&T's energy trading operations in an
         aggregate amount not to exceed $58,000,000;

                  (xi)     Support Obligations of Enterprises or any Guarantor
         incurred in connection with the Takoradi Project, in an aggregate
         amount not to exceed $15,000,000; and

                  (xii)    preferred interests in the Monetization Entity
         acquired as part of the Monetization Transaction, even if classified as
         debt for GAAP purposes.

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

                  (d)      Investments in Other Persons. Make, or permit any of
the other Loan Parties to make, any loan or advance to any Person, or purchase
or otherwise acquire any capital stock, obligations or other securities of, make
any capital contribution to, or otherwise invest in, any Person, other than (i)
Permitted Investments, (ii) pursuant to the contractual or contingent
obligations of such Borrower or any other Loan Party as in effect as of the
Closing Date and in amounts not to exceed the estimated amounts as set forth on
Schedule I hereto (whether such obligation is conditioned upon a change in the
ratings of the securities issued by such Person or otherwise) and, in each case,
in an amount not to exceed such contractual or contingent obligation as in
effect on the Closing Date, (iii) investments, directly or indirectly, by any
Loan Party (x) in the capital of any Subsidiary of the Company that is a Loan
Party and (y) in assets contributed to such Loan Party, provided that if any
such assets constitute Collateral prior to such contribution, such assets shall
remain Collateral after giving effect to such contribution and prior to such
contribution such Borrower shall, and shall cause each applicable Subsidiary to,
execute and deliver to the Administrative Agent all agreements, instruments and
documents as may be necessary or reasonably requested by the Administrative
Agent to perfect its security interest in such Collateral, (iv) investments in
the capital stock or other ownership interests of any of the Company's
Subsidiaries arising from the conversion of intercompany indebtedness to equity,
(v) intercompany loans and advances to the extent the corresponding debt is
permitted under Section 7.02(b)(vi), (vi) investments constituting non-cash
consideration received in connection with the sale of any asset not otherwise
prohibited under this Agreement, (vii) investments constituting the contribution
of certain assets in connection with the initial capitalization of the
Monetization

                                       50

<PAGE>

Entity within the scope of the definition of "Monetization Transaction", and
(viii) additional loans, advances, purchases, contributions and other
investments in an amount not to exceed $340,000,000 in the aggregate at any
time; provided, however, that investments described in clauses (iv) (solely with
respect to investments made in any Subsidiary that is not a Loan Party) and
(vii) above shall not be permitted to be made at a time when either a Default or
an Event of Default shall be continuing or would result therefrom; provided,
further, that, notwithstanding the foregoing, neither such Borrower nor any Loan
Party shall make any loans or advances to any of the Company's Subsidiaries
other than, to the extent otherwise permitted hereunder, Enterprises or any
Subsidiary of Enterprises.

                  (e)      Restricted Payments. Declare or pay, or permit any
other Loan Party to declare or pay, directly or indirectly, any dividend,
payment or other distribution of assets, properties, cash, rights, obligations
or securities on account of any share of any class of common stock of the
Company or any share of any class of capital stock or other ownership interests
of any of the other Loan Parties (other than (1) stock splits and dividends
payable solely in nonconvertible equity securities of the Company (other than
Redeemable Stock or Exchangeable Stock (as such terms are defined in the
Indenture on the Closing Date)) and (2) dividends and distributions made to such
Borrower or a Loan Party), or purchase, redeem, retire, or otherwise acquire for
value, or permit any of the other Loan Parties to purchase, redeem, retire, or
otherwise acquire for value, any shares of any class of common stock of the
Company or any share of any class of capital stock or other ownership interests
of any of the other Loan Parties or any warrants, rights, or options to acquire
any such shares, now or hereafter outstanding, or make, or permit any of the
other Loan Parties to make, any distribution of assets to any of its
shareholders (other than distributions to such Borrower or any other Loan Party)
(any such dividend, payment, distribution, purchase, redemption, retirement or
acquisition being hereinafter referred to as a "RESTRICTED PAYMENT") other than
(i) pursuant to the terms of any class of capital stock of the Company issued
and outstanding (and as in effect on) the Closing Date, any purchase or
redemption of capital stock of the Company made by exchange for, or out of the
proceeds of the substantially concurrent sale of, capital stock of the Company
(other than Redeemable Stock or Exchangeable Stock (as such terms are defined in
the Indenture on the Closing Date)); and (ii) payments made by such Borrower or
any other Loan Party pursuant to the Tax Sharing Agreement.

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

                  (g)      Transactions with Affiliates. Enter into, or permit
any of its Subsidiaries to enter into, any transaction with any of its
Affiliates unless such transaction is on terms no less favorable to such
Borrower or such Subsidiary than if the transaction had been negotiated in

                                       51

<PAGE>

good faith on an arm's-length basis with a non-Affiliate; provided that the
Monetization Transaction and any transaction permitted under Sections 7.02(b),
7.02(e) or 7.02(h) shall be permitted hereunder.

                  (h)      Mergers, Etc. Merge with or into or consolidate with
or into, or permit any of the other Loan Parties or Consumers to merge with or
into or consolidate with or into, any other Person, except that (i) (x) any Loan
Party may merge with or into any other Loan Party, (y) any Subsidiary of a Loan
Party that is not a Loan Party may merge into such Loan Party or with or into
any other Subsidiary of any Loan Party, provided that (a) in any such merger
with or into a Borrower, such Borrower (or, in the case of a merger of the
Company and Enterprises, the Company) is the surviving corporation, (b) in any
such merger into a Loan Party under clause (y) above, the Loan Party is the
survivor thereof, (c) no Default or Event of Default shall be continuing or
result therefrom and (d) such Loan Party shall not be liable with respect to any
Debt or allow its property to be subject to any Lien which it could not become
liable with respect to or allow its property to become subject to under this
Agreement or any other Loan Document on the date of such transaction, and (ii)
any Loan Party may merge with or into any other Person, provided that (a) (x)
such Loan Party is the survivor thereof, or (y) in the case of any Loan Party
that is a corporation reconstituting itself as limited liability company, such
limited liability company shall be the survivor thereof and shall confirm its
obligations as successor to such Loan Party under the Loan Documents to which
such Loan Party is a party in form and substance reasonably acceptable to the
Administrative Agent (and any Loan Party that shall have pledged the capital
stock of such predecessor Loan Party shall reconfirm the pledge of such
survivor's ownership interests as Collateral under the Loan Documents) and such
survivor shall be thereafter deemed to be a Loan Party hereunder, (b) no Default
or Event of Default shall be continuing or result therefrom, (c) such Loan Party
shall not be liable with respect to any Debt or allow its property to be subject
to any Lien which it could not become liable with respect to or allow its
property to become subject to under this Agreement or any other Loan Document on
the date of such transaction, and (d) immediately after giving effect to such
merger, the Net Worth of such Loan Party shall be equal to or greater than the
Net Worth of such Loan Party as of the last day of the fiscal quarter
immediately preceding the date of such merger.

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

                  (A)      the sale of property for consideration not less than
         the Fair Market Value thereof so long as (i) any non-cash consideration
         resulting from such sale shall be pledged or assigned to the Collateral
         Agent, for the benefit of the Lenders, pursuant to an instrument in
         form and substance reasonably acceptable to the Collateral Agent, (ii)
         cash consideration resulting from such sale shall be (x) in an amount
         determined by such Borrower for any sale the consideration of which is
         $10,000,000 or less, or, together with all other such sales under this
         clause (x), $25,000,000 or less, or (y) for all other sales, not

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<PAGE>

         less than 90% of the aggregate consideration resulting from such sale,
         and (iii) such Borrower complies with the mandatory prepayment
         provisions set forth in Section 2.03(c);

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

                  (C)      the transfer of property constituting an investment
         otherwise permitted under Section 7.02(d);

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

                  (E)      any transfer of an interest in receivables and
         related security, accounts or notes receivable on a limited recourse
         basis in connection with the incurrence of Off-Balance Sheet
         Liabilities, provided that such transfer qualifies as a legal sale and
         as a sale under GAAP and the incurrence of such Off-Balance Sheet
         Liabilities is permitted under Section 7.02(o);

                  (F)      a sale within the scope of the definition of
         "Monetization Transaction";

                  (G)      the transfer of property constituting not more than
         two percent (2%) of the ownership interests held by the Company and its
         Subsidiaries as of the Closing Date in CMS International Ventures,
         L.L.C. to CMS Energy Foundation and/or Consumers Foundation and/or any
         other third-party 501(c)(3) charitable organization; and

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

                  (j)      Maintenance of Ownership of Subsidiaries. Sell,
transfer, assign or otherwise dispose of any shares of capital stock or other
ownership interests of any of the Loan Parties or any warrants, rights or
options to acquire such capital stock or other ownership interests, or permit
any other Loan Party to issue, sell, transfer, assign or otherwise dispose of
any shares of its capital stock or other ownership interests or the capital
stock or other ownership interests of any other Loan Party or any warrants,
rights or options to acquire such capital stock or other ownership interests,
except (i) to give effect to a transaction permitted by subsection (d), (h) or
(i) above, and (ii) in connection with the foreclosure of any Liens permitted
under Section 7.02(a)(iv).

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

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<PAGE>

                  (l)      Prepayments of Indebtedness. Make or agree to pay or
make, or permit any of the other Loan Parties to make or agree to pay or make,
directly or indirectly, any payment or other distribution (whether in cash,
securities or other property) of or in respect of principal of or interest on
any Debt (other than the obligations of the Loan Parties under the Loan
Documents), or any payment or other distribution (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any Debt (other than the obligations of the Loan Parties under the Loan
Documents), other than (i) any payments on account of (a) any Debt when and as
such payment was due (including at the maturity thereof if the initial stated
maturity thereof is on or prior to the Maturity Date) pursuant to the mandatory
payment provisions applicable to such Debt at the time it was incurred
(including, without limitation, regularly scheduled payment dates for principal,
interest, fees and other amounts due thereon) or any extension thereof
thereafter granted by the holder of such Debt, (b) refinancings of Debt
otherwise permitted under this Agreement, (c) any Debt owed to the Company or
any of its Subsidiaries, (d) Debt secured by a Lien on assets subject to an
asset sale not otherwise prohibited under this Agreement and (e) the
extinguishment of any intercompany Debt in connection with a dividend or
distributions permitted under Section 7.02(e), (ii) payments constituting the
exchange of the Company's common stock (other than Redeemable Stock or
Exchangeable Stock (as such terms are defined in the Indenture on the Closing
Date)) for the Company's outstanding Debt (and any cash payments made in lieu of
the issuance of fractional shares) to the extent such exchange is permitted
under the Exchange Act, and (iii) so long as no Loans or other Obligations shall
be outstanding hereunder and the Company shall have Cash and Permitted
Investments in an aggregate amount not less than $100,000,000 after giving
effect thereto, any payment in respect of any other Debt.

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

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

                  (o)      Off-Balance Sheet Liabilities. Create, incur, assume
or suffer to exist, or permit any of its Subsidiaries (other than, in the case
of the Company, Consumers and its Subsidiaries) to create, incur, assume or
suffer to exist, Off-Balance Sheet Liabilities (exclusive of lease obligations
otherwise permitted under Section 7.02(c)) in the aggregate in excess of
$775,000,000 at any time.

         SECTION 7.03. REPORTING OBLIGATIONS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid or any
Lender shall have any Commitment, the Company will, unless the Required Lenders
shall otherwise consent in writing, furnish to the Administrative Agent (for
delivery to each Lender), the following:

                                       54

<PAGE>

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

                  (b)      as soon as available and in any event within 60 days
after the end of each of the first three quarters of each fiscal year of the
Company, commencing with the fiscal quarter ending on March 31, 2004, (i) a
consolidated balance sheet and consolidated statements of income and retained
earnings and of cash flows of the Company and its Subsidiaries as at the end of
such quarter and for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter (which requirement shall be deemed
satisfied by the delivery of the Company's quarterly report on Form 10-Q for
such quarter), all in reasonable detail and duly certified (subject to year-end
audit adjustments) by the chief financial officer or chief accounting officer of
the Company as having been prepared in accordance with GAAP, (ii) a consolidated
balance sheet and consolidated statements of income and retained earnings and of
cash flows of Consumers and its Subsidiaries as at the end of such quarter and
for the period commencing at the end of the previous fiscal year and ending with
the end of such quarter (which requirement shall be deemed satisfied by the
delivery of the Company's quarterly report on Form 10-Q for such quarter), all
in reasonable detail and duly certified (subject to year-end audit adjustments)
by the chief financial officer or chief accounting officer of Consumers as
having been prepared in accordance with GAAP, (iii) a schedule (substantially in
the form of Exhibit E appropriately completed) of (1) for the periods ending
March 31, 2004 and thereafter, the computations used by the Company in
determining compliance with the covenants contained in Sections 7.01(i) and
7.01(j) and the ratio set forth in Section 8.01(j), (2) all Project Finance Debt
of the Company and the Consolidated Subsidiaries, together with the Company's
Ownership Interest in each such Consolidated Subsidiary and (3) all Support
Obligations of the Borrowers of the types described in clauses (iv) and (v) of
the definition of Support Obligations (whether or not each such Support
Obligation or the primary obligation so supported is fixed, conclusively
determined or reasonably quantifiable), to the extent such Support Obligations
have not been previously disclosed as "Consolidated Debt" pursuant to clause (1)
above, and (iv) a certificate of the chief financial officer or chief accounting
officer of each Borrower stating that no Default or Event of Default has
occurred and is continuing or, if a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof and the action that the
Borrowers propose to take with respect thereto;

                  (c)      as soon as available and in any event within 120 days
after the end of each fiscal year of the Company and its Subsidiaries,
commencing with the fiscal year ending on December 31, 2003, a copy of the
Annual Report on Form 10-K (or any successor form) for the Company and its
Subsidiaries for such year, including therein (i) a consolidated balance sheet
of the Company and its Subsidiaries as of the end of such fiscal year and
consolidated statements of income and retained earnings and of cash flows of the
Company and its Subsidiaries for such fiscal year, accompanied by a report
thereon of a nationally-recognized independent public accounting firm, and (ii)
a consolidated balance sheet of Consumers and its Subsidiaries as of the end of
such fiscal year and consolidated statements of income and retained earnings and
of cash flows of Consumers and its Subsidiaries for such fiscal year,
accompanied by a report thereon of a nationally-recognized independent public
accounting firm, together with (iii) a schedule in

                                       55

<PAGE>

form satisfactory to the Required Lenders of (1) the computations used by such
accounting firm in determining, as of the end of such fiscal year, compliance
with the covenants contained in Sections 7.01(i) and 7.01(j) and the ratio set
forth in Section 8.01(j), (2) all Project Finance Debt of the Company and the
Consolidated Subsidiaries, together with the Company's Ownership Interest in
each such Consolidated Subsidiary and (3) all Support Obligations of the
Borrowers of the types described in clauses (iv) and (v) of the definition of
Support Obligations (whether or not each such Support Obligation or the primary
obligation so supported is fixed, conclusively determined or reasonably
quantifiable), to the extent such Support Obligations have not been previously
disclosed as "Consolidated Debt" pursuant to clause (1) above, and (iv) a
certificate of the chief financial officer or chief accounting officer of each
Borrower stating that no Default or Event of Default has occurred and is
continuing or, if a Default or Event of Default has occurred and is continuing,
a statement as to the nature thereof and the action that the Borrowers propose
to take with respect thereto;

                  (d)      as soon as available and in any event within 60 days
after the end of each of each fiscal quarter of Enterprises, commencing with the
fiscal quarter ending on March 31, 2004, a consolidated balance sheet and
consolidated statements of income and retained earnings and of cash flows of
Enterprises and its Subsidiaries as at the end of such quarter and for the
period commencing at the end of the previous fiscal year and ending with the end
of such quarter, all in reasonable detail and duly certified (subject to
year-end audit adjustments) by the chief financial officer or chief accounting
officer of Enterprises as having been prepared in accordance with GAAP;

                  (e)      as soon as available and in any event within 120 days
after the end of each fiscal year of Enterprises and its Subsidiaries,
commencing with the fiscal year ending on December 31, 2003, a consolidated
balance sheet of Enterprises and its Subsidiaries as of the end of such fiscal
year and consolidated statements of income and retained earnings and of cash
flows of Enterprises and its Subsidiaries for such fiscal year, all in
reasonable detail and duly certified by the chief financial officer or chief
accounting officer of Enterprises as having been prepared in accordance with
GAAP;

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

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

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<PAGE>

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

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

                  (j)      promptly after the Company becomes aware of the
occurrence thereof, notice of all actions, suits, proceedings or other events of
the type described in Section 6.01(f);

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

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

                  (m)      concurrently with the closing of the transaction
described in clause (iii) of the definition of "Monetization Transaction", a
certificate from the chief financial officer or chief accounting officer of the
Company certifying that, as of the date thereof, no Default or Event of Default
shall be continuing or result therefrom;

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

The Company shall be deemed to have fulfilled its obligations pursuant to
clauses (b), (c), (d), (e), (j) and (k) above to the extent the Administrative
Agent (and the Lenders, if applicable) receives an electronic copy of the
requisite document or documents in a format reasonably acceptable to the
Administrative Agent, provided that a tangible copy of each requisite document
delivered electronically is made available by the Company promptly upon request
by any Agent or Lender.

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<PAGE>

                                  ARTICLE VIII
                                    DEFAULTS

         SECTION 8.01. EVENTS OF DEFAULT. If any of the following events (each
an "EVENT OF DEFAULT") shall occur and be continuing, the Administrative Agent
and the Lenders shall be entitled to exercise the remedies set forth in Section
8.02:

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

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

                  (c)      Any Borrower or any of its Subsidiaries shall fail to
perform or observe any term or covenant on its part to be performed or observed
contained in Section 7.01(c), (h), (i), (j), (l) or (n) or in Section 7.02
hereof (and the Borrowers, each Lender and each Agent hereby agrees that an
Event of Default under this subsection (c) shall be given effect as if the
defaulting Subsidiary were a party to this Agreement); or

                  (d)      Any Borrower or any of its Subsidiaries shall fail to
perform or observe any other term or covenant on its part to be performed or
observed contained in any Loan Document and any such failure shall remain
unremedied, after written notice thereof shall have been given to the Borrowers
by the Administrative Agent, for a period of 10 Business Days (and the
Borrowers, each Lender and each Agent hereby agrees that an Event of Default
under this subsection (d) shall be given effect as if the defaulting Subsidiary
were a party to this Agreement); or

                  (e)      Any Borrower, any Restricted Subsidiary or Consumers
shall fail to pay any of its Debt (including any interest or premium thereon but
excluding Debt incurred under this Agreement) aggregating, in the case of the
Borrowers and each Restricted Subsidiary, $10,000,000 or more or, in the case of
Consumers, $25,000,000 or more, when due (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise) and such failure shall
continue after the applicable grace period, if any, specified in any agreement
or instrument relating to such Debt; or any other default under any agreement or
instrument relating to any such Debt (including any "amortization event" or
event of like import in connection with any Off-Balance Sheet Liabilities), or
any other event, shall occur and shall continue after the applicable grace
period, if any, specified in such agreement or instrument, if the effect of such
default or event is (i) to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; unless in each such case the
obligee under or holder of such Debt shall have waived in writing such
circumstance so that such circumstance is no longer continuing, or (ii) with
respect to any such event occurring in connection with any Off-Balance Sheet
Liabilities aggregating $10,000,000 or more, to terminate the reinvestment of
collections or proceeds of receivables and related security under any

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<PAGE>

agreements or instruments related thereto (other than a termination resulting
solely from the request of the Company or its Subsidiaries); or

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

                  (g)      Any judgment or order for the payment of money in
excess of $10,000,000 shall be rendered against any Borrower, any Guarantor or
any of their respective properties and either (i) enforcement proceedings shall
have been commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 30 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall not be
in effect; or

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

                  (i)      Any "Event of Default" shall occur under and as
defined in the AIG Pledge Agreement, as the same may be amended, restated,
supplemented or otherwise modified from time to time; or

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

                  (k)      At any time, for any reason (except to the extent
permitted by the terms of the Loan Documents or due to any failure by the
Collateral Agent to take any action on its part to be performed under applicable
law in order to maintain the perfection or priority of any such Liens), (i) the
Liens intended to be created under any of the Loan Documents with respect to
Collateral having a Fair Market Value of $10,000,000 or more become, or the
Company or any of its Subsidiaries seeks to render such Liens, invalid or
unperfected, or (ii) Liens in favor of the Collateral Agent for the benefit of
the Lenders contemplated by the Loan Documents with

                                       59

<PAGE>

respect to Collateral having a Fair Market Value of $10,000,000 or more shall,
at any time, for any reason, be invalidated or otherwise cease to be in full
force and effect, or such Liens shall not have the priority contemplated by this
Agreement or the Loan Documents.

         SECTION 8.02. REMEDIES. If any Event of Default has occurred and is
continuing, then the Administrative Agent or the Collateral Agent, as
applicable, shall at the request, or may with the consent, of the Required
Lenders, upon notice to the Borrowers (i) declare the Commitments and the
obligation of each Lender to make or Convert Loans to be terminated, whereupon
the same shall forthwith terminate, (ii) declare the principal amount
outstanding hereunder, all interest thereon and all other amounts payable under
this Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the principal amount outstanding hereunder, all such interest and all
such amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by each Borrower, and (iii) exercise in respect of any and all
Collateral, in addition to the other rights and remedies provided for herein or
otherwise available to the Administrative Agent, the Collateral Agent or the
Lenders, all the rights and remedies of a secured party on default under the
Uniform Commercial Code in effect in the State of New York and in effect in any
other jurisdiction in which Collateral is located at that time; provided,
however, that in the event of an actual or deemed entry of an order for relief
with respect to any Borrower or any Guarantor under the Bankruptcy Code, (A) the
Commitments and the obligation of each Lender to make or Convert Loans shall
automatically be terminated and (B) the principal amount outstanding hereunder,
all such interest and all such amounts shall automatically become and be due and
payable, without presentment, demand, protest or any notice of any kind, all of
which are hereby expressly waived by each Borrower.

                                   ARTICLE IX
                                   THE AGENTS

         SECTION 9.01. AUTHORIZATION AND ACTION.

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

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

                  (c)      No Agent shall have any duties or obligations except
those expressly set forth in the Loan Documents. Without limiting the generality
of the foregoing, (i) no Agent shall be subject to any fiduciary or other
implied duties, regardless of whether a Default or an Event of Default has
occurred and is continuing, (ii) no Agent shall have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers

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<PAGE>

expressly contemplated by the Loan Documents that such Agent is required to
exercise in writing by the Required Lenders (or such other number or percentage
of the Lenders as shall be necessary under the circumstances as provided in
Section 10.01), and (iii) except as expressly set forth in the Loan Documents,
no Agent shall have any duty to disclose, or shall be liable for the failure to
disclose, any information relating to the Company or any of its Subsidiaries or
Affiliates that is communicated to or obtained by the Lender serving as such
Agent or any of its Affiliates in any capacity. No Agent shall be liable for any
action taken or not taken by it with the consent or at the request of the
Required Lenders (or such other number or percentage of the Lenders as shall be
necessary under the circumstances as provided in Section 10.01 or any other
provision of this Agreement) or in the absence of its own gross negligence or
willful misconduct. Each Agent shall be deemed not to have knowledge of any
Default or Event of Default unless and until written notice thereof is given to
such Agent by a Borrower or a Lender (in which case such Agent shall promptly
give a copy of such written notice to the Lenders and the other Agents). No
Agent shall be responsible for or have any duty to ascertain or inquire into (A)
any statement, warranty or representation made in or in connection with any Loan
Document, (B) the contents of any certificate, report or other document
delivered thereunder or in connection therewith, (C) the performance or
observance of any of the covenants, agreements or other terms or conditions set
forth in any Loan Document, (D) the validity, enforceability, effectiveness or
genuineness of any Loan Document or any other agreement, instrument or document,
or (E) the satisfaction of any condition set forth in Article V or elsewhere in
any Loan Document, other than to confirm receipt of items expressly required to
be delivered to such Agent. Neither the Syndication Agent nor the Documentation
Agents shall have any duties or obligations in such capacity under any of the
Loan Documents.

                  (d)      Each Agent shall be entitled to rely upon, and shall
not incur any liability for relying upon, any notice, request, certificate,
consent, statement, instrument, document or other writing believed by it to be
genuine and to have been signed or sent by the proper Person. Each Agent also
may rely upon any statement made to it orally or by telephone and believed by it
to be made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrowers), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

                  (e)      Each Agent may perform any and all its duties and
exercise its rights and powers by or through one or more sub-agents appointed by
such Agent. Each Agent and any such sub-agent may perform any and all its duties
and exercise its rights and powers through their respective Related Parties. The
exculpatory provisions of the preceding subsections of this Section 9.01 shall
apply to any such sub-agent and to the Related Parties of each Agent and any
such sub-agent, and shall apply to their respective activities in connection
with the syndication of the credit facilities provided for herein as well as
activities as an Agent.

                  (f)      Subject to the appointment and acceptance of a
successor Agent as provided in this subsection (f), any Agent may resign at any
time by notifying the Lenders and the Borrowers. Upon any such resignation, the
Required Lenders shall have the right, in consultation with the Borrowers, to
appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of

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the Lenders, appoint a successor Agent which shall be a Lender with an office in
New York, New York, or an Affiliate of any such Lender. Upon the acceptance of
its appointment as an Agent hereunder by a successor, such successor shall
succeed to and become vested with all the rights, powers, privileges and duties
of the retiring Agent, and the retiring Agent shall be discharged from its
duties and obligations hereunder. The fees payable by the Borrowers to a
successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between the Borrowers and such successor. After an Agent's
resignation hereunder, the provisions of this Article and Section 10.04 shall
continue in effect for the benefit of such retiring Agent, its sub-agents and
their respective Related Parties in respect of any actions taken or omitted to
be taken by any of them while it was acting as an Agent.

                  (g)      Each Lender acknowledges that it has independently
and without reliance upon any Agent or any other Lender and based on such
documents and information as it has deemed appropriate, made its own credit
analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender and based on such documents and information as it shall from
time to time deem appropriate, continue to make its own decisions in taking or
not taking action under or based upon this Agreement, any other Loan Document or
any related agreement or any document furnished hereunder or thereunder. Each
Lender agrees (except as provided in Section 10.05) that it will not take any
legal action, nor institute any actions or proceedings, against any Borrower or
any other obligor hereunder or with respect to any Collateral, without the prior
written consent of the Required Lenders. Without limiting the generality of the
foregoing, no Lender may accelerate or otherwise enforce its portion of the
Loans, or unilaterally terminate its Commitment except in accordance with
Section 8.02.

         SECTION 9.02. INDEMNIFICATION. The Lenders agree to indemnify each
Agent (to the extent not reimbursed by the Borrowers), ratably according to the
respective Percentages of the Lenders, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may be imposed
on, incurred by, or asserted against such Agent in any way relating to or
arising out of this Agreement or any action taken or omitted by such Agent under
this Agreement, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from such Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender agrees to
reimburse the Agents and the Arrangers promptly upon demand for its ratable
share of any out-of-pocket expenses (including counsel fees) incurred by the
Agents and the Arrangers in connection with the preparation, syndication,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement to the
extent that the Agents and the Arrangers are entitled to reimbursement for such
expenses pursuant to Section 10.04 but are not reimbursed for such expenses by
the Borrowers.

         SECTION 9.03. CONCERNING THE COLLATERAL AND THE LOAN DOCUMENTS.

                  (a)      Each Lender authorizes and directs the Collateral
Agent to enter into the Loan Documents relating to the Collateral for the
benefit of the Lenders. Each Lender agrees that any action taken by any Agent or
the Required Lenders (or, where required by the express

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

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

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

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

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

                  (iv)     against any of the Collateral and any Grantor upon
         the occurrence of any event described in Section 8.10 of the Pledge
         Agreement described in clause (i) of the definition of "Pledge
         Agreements" or in Section 9.10 of the Pledge Agreement described in
         clause (ii) of the definition of "Pledge Agreements".

The Administrative Agent and each Lender hereby directs the Collateral Agent to
execute and deliver or file such termination and partial release statements and
do such other things as are necessary to release Liens to be released pursuant
to this Section 9.03(b) promptly upon the effectiveness of any such release.

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         SECTION 9.04. RELEASE OF GUARANTORS. Upon (x) the liquidation or
dissolution of any Guarantor, or sale of all of the capital stock or other
ownership interests of any Guarantor, or the sale of assets of any Guarantor the
result of which is that such Guarantor no longer qualifies as a Restricted
Subsidiary, in each case which is permitted pursuant to the terms of any Loan
Document or consented to in writing by the Required Lenders or all of the
Lenders, as applicable, and upon at least five (5) Business Days' prior written
request by the Borrowers or (y) the occurrence of any event described in Section
11 of the Guaranty, the Collateral Agent shall (and is hereby irrevocably
authorized by the Lenders to) execute such documents as may be necessary to
evidence the release of the applicable Guarantor from its obligations under the
Guaranty; provided, however, that (i) the Collateral Agent shall not be required
to execute any such document on terms which, in the Collateral Agent's opinion,
would expose the Collateral Agent to liability or create any obligation or
entail any consequence other than the release of such Guarantor without recourse
or warranty, and (ii) such release shall not in any manner discharge, affect or
impair the Loans, any other Guarantor's obligations under the Guaranty, or, if
applicable, any obligations of any Borrower or any Subsidiary of any Borrower in
respect of the proceeds of any such sale retained by any Borrower or any
Subsidiary of any Borrower.

                                   ARTICLE X
                                  MISCELLANEOUS

         SECTION 10.01. AMENDMENTS, ETC. No amendment or waiver of any provision
of any Loan Document, nor consent to any departure by any Borrower or any other
Loan Party therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Required Lenders, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given; provided, however, that no amendment, waiver or consent shall,
unless in writing and signed by all the Lenders, do any of the following: (i)
waive, modify or eliminate any of the conditions specified in Article V, (ii)
increase the Commitments of the Lenders that may be maintained hereunder, (iii)
reduce or forgive the principal of, or interest on, any Loan, any Applicable
Margin, any Commitment Fee Margin or any fees or other amounts payable hereunder
(other than fees payable to the Administrative Agent pursuant to Section
2.02(b)), (iv) postpone any date fixed for any payment of principal of, or
interest on, any Loan or any fees or other amounts payable hereunder (other than
fees payable to the Administrative Agent pursuant to Section 2.02(b)) (except
with respect to any modifications of the provisions relating to amounts, timing
or application of prepayments of Loans and other Obligations which modification
shall require only the approval of the Required Lenders), (v) change the
definition of "Required Lenders" contained in Section 1.01 or change any other
provision that specifies the percentage of the Commitments or of the aggregate
unpaid principal amount of the Loans or the number of Lenders which shall be
required for the Lenders or any of them to take any action hereunder, (vi)
amend, waive or modify Section 2.03(b) or this Section 10.01, (vii) release the
Collateral Agent's Lien on all of the Collateral or any portion of the
Collateral in excess of $50,000,000 (except as provided in Section 9.03(b)),
(viii) extend the Commitment Termination Date or the Maturity Date or (ix)
amend, waive or modify any provision of Section 4.01(g), 4.05 or 4.07 that
provides for or ensures ratable distributions to the Lenders; and provided,
further, that no amendment, waiver or consent shall, unless in writing and
signed by each affected Agent in addition to the Lenders required above to take
such action, affect the rights or duties of any Agent under this Agreement or
any other Loan Document. Any

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request from the Borrowers for any amendment, waiver or consent under this
Section 10.01 shall be addressed to the Administrative Agent.

         SECTION 10.02. NOTICES, ETC. Subject to Section 10.14, all notices and
other communications provided for hereunder and under the other Loan Documents
shall be in writing and mailed, sent by courier service, telecopied or
delivered, (i) if to either Borrower, at its address at One Energy Plaza,
Jackson, Michigan 49201, Attention: S. Kinnie Smith, Jr., General Counsel, with
a copy to Laura L. Mountcastle, Vice President, Investor Relations and
Treasurer, One Energy Plaza, Jackson, Michigan 49201; (ii) if to any Bank, at
the address set forth on Schedule III hereto with respect to such Bank; (iii) if
to any Lender other than a Bank, at its Applicable Lending Office specified in
the Lender Assignment pursuant to which it became a Lender; (iv) if to the
Administrative Agent with respect to funding or payment of any amounts
hereunder, at its address at 2 Penns Way, Suite 200, New Castle, DE 19270, Attn:
Dawn Conover, Telephone No. (302) 894-6063, Telecopy No. (302) 894-6120; (v) if
to the Administrative Agent for any other reason or to the Collateral Agent, at
its address at 388 Greenwich Street, New York, New York 10003, Attn: Nick McKee,
Telephone No. (212) 816-8592, Telecopy No. (212) 816-8098; or, as to each party,
at such other address as shall be designated by such party in a written notice
to the other parties. Each such notice or other communication shall be effective
(i) if given by telecopy transmission, when transmitted to the telecopy number
specified in this Section 10.02 and confirmation of receipt is received, (ii) if
given by mail, 5 days after such communication is deposited in the mails with
first class postage prepaid, addressed as aforesaid, or (iii) if given by any
other means, when delivered at the address specified in this Section 10.02,
except that notices and communications to any Agent pursuant to Article II, III,
or IX shall not be effective until received by such Agent.

         SECTION 10.03. NO WAIVER OF REMEDIES. No failure on the part of any
Borrower, any Lender or any Agent to exercise, and no delay in exercising, any
right hereunder or under any other Loan Document shall operate as a waiver
thereof; nor shall any single or partial exercise of any such right preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.

         SECTION 10.04. COSTS, EXPENSES AND INDEMNIFICATION.

                  (a)      The Borrowers jointly and severally agree to (i)
reimburse on demand all reasonable costs and expenses of each Agent and each
Arranger (including reasonable fees and expenses of counsel to the Agents) in
connection with (A) the preparation, syndication, negotiation, execution and
delivery of the Loan Documents and (B) the care and custody of any and all
collateral, and any proposed modification, amendment, or consent relating to any
Loan Document, and (ii) to pay on demand all reasonable costs and expenses of
each Agent and, on and after the date upon which the principal amount
outstanding hereunder becomes or is declared to be due and payable pursuant to
Section 8.02 or an Event of Default specified in Section 8.01(a) shall have
occurred and be continuing, each Lender (including fees and expenses of counsel
to the Agents, special Michigan counsel to the Lenders and, from and after such
date, counsel for each Lender (including the allocated costs and expenses of
in-house counsel)) in connection with the workout, restructuring or enforcement
(whether through negotiations, legal

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proceedings or otherwise) of this Agreement, the other Loan Documents and the
other documents to be delivered hereunder.

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

                  (c)      The Borrowers' other obligations under this Section
10.04 shall survive the repayment of all amounts owing to the Lenders and the
Agents under the Loan Documents and the termination of the Commitments. If and
to the extent that the obligations of any Borrower under this Section 10.04 are
unenforceable for any reason, the Borrowers jointly and severally agree to make
the maximum contribution to the payment and satisfaction thereof which is
permissible under applicable law.

         SECTION 10.05. RIGHT OF SET-OFF.

                  (a)      Upon (i) the occurrence and during the continuance of
any Event of Default and (ii) the making of the request or the granting of the
consent specified by Section 8.02 to authorize the Administrative Agent to
declare the principal amount outstanding hereunder to be due and payable
pursuant to the provisions of Section 8.02, each Lender is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender to or for the credit or the account of any Borrower, against any
and all of the obligations of such Borrower now or hereafter existing under this
Agreement and the Promissory Notes held by such Lender, irrespective of whether
or not such Lender shall have made any demand under this Agreement or such
Promissory Notes, as the case may be, and although such obligations may be
unmatured. Each Lender agrees to notify promptly the applicable Borrower after
any such set-off and application made by such Lender, provided that the failure
to give such notice shall not affect the validity of such set-off

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and application. The rights of each Lender under this Section 10.05 are in
addition to other rights and remedies (including other rights of set-off) which
such Lender may have.

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

         SECTION 10.06. BINDING EFFECT. This Agreement shall become effective
when it shall have been executed by the Borrowers and the Agents and when the
Administrative Agent shall have been notified by each Bank that such Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrowers, the Agents and each Lender and their respective successors and
assigns, except that, other than in connection with Enterprises reconstituting
itself as a limited liability company as permitted under Section 7.02(h),
neither Borrower shall have the right to assign its rights hereunder or any
interest herein without the prior written consent of the Lenders.

         SECTION 10.07. ASSIGNMENTS AND PARTICIPATION.

                  (a)      Any Lender may sell participations in all or a
portion of its rights and obligations under this Agreement pursuant to
subsection (b) below and any Lender may assign all or any part of its rights and
obligations under this Agreement pursuant to subsection (c) below.

                  (b)      Any Lender may sell participations to one or more
banks or other entities (each a "PARTICIPANT") in all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment and its outstanding Loan), provided that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Commitment to the Borrowers hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Lender shall remain the holder of the Loans of
such Lender for all purposes of this Agreement and (iv) the Borrowers shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement. Each Lender shall retain
the sole right to approve, without the consent of any Participant, any
amendment, modification or waiver of any provision of the Loan Documents other
than any amendment, modification or waiver with respect to any Loan or
Commitment in which such Participant has an interest which would require consent
of all of the Lenders pursuant to the terms of Section 10.01 or of any other
Loan Document. The Borrowers agree that each Participant shall be deemed to have
the right of set-off provided in Section 10.05 in respect of its participating
interest in amounts owing under the Loan Documents to the same extent as if the
amount of its participating interest were owing directly to it as a Lender under
the Loan Documents, provided that each Lender shall retain the right of set-off
provided in Section 10.05 with respect to the amount of participating interests
sold to each Participant. The Lenders agree to share with each

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Participant, and each Participant, by exercising the right of set-off provided
in Section 10.05, agrees to share with each Lender, any amount received pursuant
to the exercise of its right of set-off, such amounts to be shared in accordance
with Section 10.05 as if each Participant were a Lender. The Borrowers further
agree that each Participant shall be entitled to the benefits of Sections 4.04
and 4.06 to the same extent as if it were a Lender and had acquired its interest
by assignment pursuant to Section 10.07(c); provided that (i) a Participant
shall not be entitled to receive any greater payment under Section 4.04 or 4.06
than the Lender who sold the participating interest to such Participant would
have received had it retained such interest for its own account, unless the sale
of such interest to such Participant is made with the prior written consent of
the Borrowers, and (ii) any Participant not incorporated under the laws of the
United States of America or any State thereof agrees to comply with the
provisions of Section 4.06 to the same extent as if it were a Lender.

                  (c)      Any Lender may, in the ordinary course of its
business and in accordance with applicable law, with the consent of the
Administrative Agent (such consent not to be unreasonably withheld or delayed),
at any time assign to any other Lender or to any Eligible Bank all or any part
of its rights and obligations under this Agreement, provided that the aggregate
of the Commitments and the principal amount the Loans subject to any such
assignment (other than assignments to a Federal Reserve Bank, or to any other
Lender, or to any direct or indirect contractual counterparties in swap
agreements relating to the Loans to the extent required in connection with the
physical settlement of any Lender's obligations pursuant thereto) shall be
$5,000,000 (or such lesser amount consented to by the Administrative Agent);
provided that, unless such Lender is assigning all of its rights and obligations
hereunder, after giving effect to such assignment the assigning Lender shall
have Commitments and Loans in the aggregate of not less than $5,000,000 (unless
otherwise consented to by the Administrative Agent).

                  (d)      Any Lender may, in connection with any sale or
participation or proposed sale or participation pursuant to this Section 10.07
disclose to the purchaser or Participant or proposed purchaser or Participant
any information relating to the Borrowers furnished to such Lender by or on
behalf of the Borrowers, provided that prior to any such disclosure of
non-public information, the purchaser or Participant or proposed purchaser or
Participant (which Participant is not an affiliate of a Lender) shall agree to
preserve the confidentiality of any confidential information (except any such
disclosure as may be required by law or regulatory process) relating to the
Borrowers received by it from such Lender.

                  (e)      Assignments under this Section 10.07 shall be made
pursuant to an agreement (a "LENDER ASSIGNMENT") substantially in the form of
Exhibit F hereto or in such other form as may be agreed to by the parties
thereto and shall not be effective until a $3,500 fee has been paid to the
Administrative Agent by the assignee, which fee shall cover the cost of
processing such assignment, provided, that such fee shall not be incurred in the
event of an assignment by any Lender of all or a portion of its rights under
this Agreement to (i) a Federal Reserve Bank, (ii) a Lender (iii) an affiliate
of the assigning Lender (which affiliate shall be an Eligible Bank) or (iv) to
any direct or indirect contractual counterparties in swap agreements relating to
the Loans to the extent required in connection with the physical settlement of
any Lender's obligations pursuant thereto.

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                  (f)      Notwithstanding anything to the contrary contained
herein, any Lender (a "GRANTING LENDER") may grant to a special purpose funding
vehicle (an "SPC"), identified as such in writing from time to time by the
Granting Lender to the Administrative Agent and the Borrowers, the option to
provide to the Borrowers all or any part of any Loan that such Granting Lender
is obligated to make to the Borrowers pursuant to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to make any Loan,
(ii) if an SPC elects not to exercise such option or otherwise fails to provide
all or any part of such Loan, the Granting Lender shall remain obligated to make
such Loan pursuant to the terms hereof, (iii) the Borrowers shall not be
required to pay any amount under Section 4.06 that is greater than the amount
which it would have been required to pay had there been no grant to an SPC and
(iv) any SPC (or assignee of an SPC) will comply, if applicable, with the
provisions contained in Section 4.06. No grant by any Granting Lender to an SPC
agreeing to provide a Loan or the making of such Loan by such SPC shall operate
to relieve such Granting Lender of its liabilities and obligations hereunder,
except to the extent of the making of such Loan by such SPC. The making of a
Loan by an SPC hereunder shall utilize the Commitment of the Granting Lender to
the same extent, and as if, such Loan were made by such Granting Lender. Each
party hereto hereby agrees that no SPC shall be liable for any indemnity or
similar payment obligation under this Agreement (all liability for which shall
remain with the Granting Lender). In addition, each party hereto hereby agrees
(which agreement shall survive the termination of this Agreement) that any SPC
may (i) with notice to, but without the prior written consent of, the Borrowers
and the Administrative Agent and without paying any processing fee therefor,
assign all or a portion of its interests in any Loans to the Granting Lender or
to any financial institutions (consented to by the Administrative Agent in its
sole discretion) providing liquidity and/or credit support to or for the account
of such SPC to support the funding or maintenance of Loans and (ii) disclose on
a confidential basis any non-public information relating to its Loans to any
rating agency, commercial paper dealer or provider of any surety, guarantee or
credit or liquidity enhancement to such SPC. This Section 10.07(f) may not be
amended without the written consent of any SPC that holds an option to provide
Loans. No recourse under any obligation, covenant, or agreement of the SPC
contained in this Agreement shall be had against any shareholder, officer, agent
or director of the SPC as such, by the enforcement of any assessment or by any
proceeding, by virtue of any statute or otherwise; it being expressly agreed and
understood that this Agreement is a corporate obligation of the SPC and no
personal liability shall attach to or be incurred by any officer, agent or
member of the SPC as such, or any of them under or by reason of any of the
obligations, covenants or agreements of the SPC contained in this Agreement, or
implied therefrom, and that any and all personal liability for breaches by the
SPC of any such obligations, covenants or agreements, either at law or by
statute or constitution, of every such shareholder, officer, agent or director
is hereby expressly waived by all parties to this Agreement as a condition of
and consideration for the SPC entering into this Agreement; provided, however,
that the foregoing shall not relieve any such person or entity of any liability
they might otherwise have as a result of fraudulent actions or omissions taken
by them. All parties to this Agreement acknowledge and agree that the SPC shall
only be liable for any claims that each of them may have against the SPC only to
the extent of the SPC's assets. The provisions of this clause shall survive the
termination of this Agreement.

                  (g)      Any Lender may at any time pledge or assign a
security interest in all or any portion of its rights under this Agreement to
secure obligations of such Lender, including without limitation any pledge or
assignment to secure obligations to a Federal Reserve Bank;

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provided that no such pledge or assignment shall release such Lender from any of
its obligations hereunder or substitute any such pledgee or assignee for such
Lender as a party hereto.

                  (h)      The Administrative Agent shall maintain at its
address referred to in Section 10.02 a copy of each Lender Assignment delivered
to and accepted by it and a register for the recordation of the names and
addresses of the Lenders and the Commitment of, and principal amount of the
Loans owing to, each Lender from time to time (the "REGISTER"). The entries in
the Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrowers, the Agents and the Lenders may treat each Person whose
name is recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by any Borrower or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.

         SECTION 10.08. CONFIDENTIALITY. In connection with the negotiation and
administration of this Agreement and the other Loan Documents, the Borrowers
have furnished and will from time to time furnish to the Agents and the Lenders
(each, a "RECIPIENT") written information which is identified to the Recipient
when delivered as confidential (such information, other than any such
information which (i) was publicly available, or otherwise known to the
Recipient, at the time of disclosure, (ii) subsequently becomes publicly
available other than through any act or omission by the Recipient or (iii)
otherwise subsequently becomes known to the Recipient other than through a
Person whom the Recipient knows to be acting in violation of his or its
obligations to the Borrowers, being hereinafter referred to as "CONFIDENTIAL
INFORMATION"). The Recipient will not knowingly disclose any such Confidential
Information to any third party (other than to those persons who have a
confidential relationship with the Recipient), and will take all reasonable
steps to restrict access to such information in a manner designed to maintain
the confidential nature of such information, in each case until such time as the
same ceases to be Confidential Information or as the Borrowers may otherwise
instruct. It is understood, however, that the foregoing will not restrict the
Recipient's ability to freely exchange such Confidential Information with its
Affiliates or with prospective Participants in or assignees of the Recipient's
position herein, but the Recipient's ability to so exchange Confidential
Information shall be conditioned upon any such Affiliate's or prospective
Participant's (as the case may be) entering into an agreement as to
confidentiality similar to this Section 10.08. It is further understood that the
foregoing will not prohibit the disclosure of any or all Confidential
Information if and to the extent that such disclosure may be required (1) by a
regulatory agency, self-regulatory body or otherwise in connection with an
examination of the Recipient's records by appropriate authorities, (2) pursuant
to court order, subpoena or other legal process or in connection with any
proceeding, suit or other action relating to any Loan Document or (3) otherwise,
as required by law; in the event of any required disclosure under clause (2) or
(3), above, the Recipient agrees to use reasonable efforts to inform the
Borrowers as promptly as practicable to the extent not prohibited by law.
Notwithstanding any other provision of this Agreement, each party (and each
Participant pursuant to Section 10.07) (and each employee, representative or
other agent of such party (or Participant)) may disclose to any and all persons,
without limitation of any kind, the U.S. tax treatment and U.S. tax structure of
the transactions contemplated by the Loan Documents and all materials of any
kind (including opinions or other tax analyses) that are provided to such party
relating to such U.S. tax treatment and U.S. tax structure, other than any
information for which nondisclosure is reasonably necessary in order to comply
with applicable securities laws.

                                       70

<PAGE>

         SECTION 10.09. Waiver of Jury Trial. THE BORROWERS, THE AGENTS AND THE
LENDERS EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR
THEREUNDER.

         SECTION 10.10. GOVERNING LAW; SUBMISSION TO JURISDICTION. THIS
AGREEMENT AND THE PROMISSORY NOTES SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 OF
THE GENERAL OBLIGATIONS LAWS OF THE STATE OF NEW YORK, BUT OTHERWISE WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES). THE BORROWERS, THE LENDERS AND THE
AGENTS, EACH (I) IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT OR FEDERAL COURT SITTING IN NEW YORK CITY IN ANY ACTION ARISING OUT OF ANY
LOAN DOCUMENT, (II) AGREES THAT ALL CLAIMS IN SUCH ACTION MAY BE DECIDED IN SUCH
COURT, (III) WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO, THE DEFENSE
OF AN INCONVENIENT FORUM AND (IV) CONSENTS TO THE SERVICE OF PROCESS BY MAIL. A
FINAL JUDGMENT IN ANY SUCH ACTION SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN
OTHER JURISDICTIONS. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PARTY TO SERVE
LEGAL PROCESS IN ANY MANNER PERMITTED BY LAW OR AFFECT ITS RIGHT TO BRING ANY
ACTION IN ANY OTHER COURT. EACH BORROWER AGREES THAT THE AGENTS SHALL HAVE THE
RIGHT TO PROCEED AGAINST SUCH BORROWER OR ITS PROPERTY IN A COURT IN ANY
LOCATION TO ENABLE THE AGENTS AND THE LENDERS TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT
ORDER ENTERED IN FAVOR OF ANY AGENT OR ANY LENDER. EACH BORROWER AGREES THAT IT
WILL NOT ASSERT ANY PERMISSIVE COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY ANY
AGENT OR ANY LENDER TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE
OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF ANY AGENT
OR ANY LENDER. EACH BORROWER WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE
LOCATION OF THE COURT IN WHICH ANY AGENT OR ANY LENDER MAY COMMENCE A PROCEEDING
DESCRIBED IN THIS SECTION.

         SECTION 10.11. RELATION OF THE PARTIES; NO BENEFICIARY. No term,
provision or requirement, whether express or implied, of any Loan Document, or
actions taken or to be taken by any party thereunder, shall be construed to
create a partnership, association, or joint venture between such parties or any
of them. No term or provision of this Agreement or any other Loan Document shall
be construed to confer a benefit upon, or grant a right or privilege to, any
Person other than the parties hereto or thereto. Each Borrower hereby
acknowledges that neither any Agent nor any Lender has any fiduciary
relationship with or fiduciary duty to such Borrower arising out of or in
connection with this Agreement or any of the other Loan Documents, and the
relationship between the Agents and the Lenders, on the one hand, and such
Borrower, on the other hand, in connection herewith or therewith is solely that
of debtor and creditor.

                                       71

<PAGE>

         SECTION 10.12. EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
Agreement.

         SECTION 10.13. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made herein and in the certificates pursuant
hereto shall be considered to have been relied upon by the Agents and the
Lenders and shall survive the making by the Lenders of the Extensions of Credit
and the execution and delivery to the Lenders of any Promissory Notes evidencing
the Extensions of Credit and shall continue in full force and effect so long as
any Promissory Note or any amount due hereunder is outstanding and unpaid or any
Commitment of any Lender has not been terminated.

         SECTION 10.14. PLATFORM.

                  (a)      Each Borrower shall use its commercially reasonable
best efforts to transmit to the Administrative Agent all information, documents
and other materials that it is obligated to furnish to the Administrative Agent
pursuant to this Agreement and the other Loan Documents, including, without
limitation, all notices, requests, financial statements, financial and other
reports, certificates and other information materials, but excluding any such
communication that (i) relates to a notice of borrowing or other extension of
credit or a conversion of an existing interest rate on any Loan or Borrowing
(including, without limitation, any Notice of Conversion), (ii) relates to the
payment of any principal or other amount due hereunder prior to the scheduled
date therefor, (iii) provides notice of any Default or Event of Default
hereunder or (iv) is required to be delivered to satisfy any condition precedent
to the effectiveness of this Agreement and/or any Extension of Credit hereunder
(all such non-excluded communications being referred to herein collectively as
"COMMUNICATIONS"), in an electronic/soft medium in a format reasonably
acceptable to the Administrative Agent to oploanswebadmin@citigroup.com (or such
other e-mail address designated by the Administrative Agent from time to time).
In addition, each Borrower shall continue to provide the Communications to the
Administrative Agent in the manner specified in this Agreement but only to the
extent requested by the Administrative Agent. Each Lender and the Borrowers
further agree that the Administrative Agent may make the Communications
available to the Lenders by posting the Communications on IntraLinks or a
substantially similar electronic transmission system (the "PLATFORM"); provided,
however, that upon written notice to the Administrative Agent and the Company,
any Lender (such lender a "DECLINING LENDER") may decline to receive
Communications via the Platform and shall direct the Company to provide, and the
Company shall so provide, such Communications to such Declining Lender by
delivery to such Declining Lender's address set forth on Schedule III hereto, or
as specified in the Lender Assignment pursuant to which it become a Lender or as
otherwise directed in such notice. Subject to the conditions set forth in the
proviso in the immediately preceding sentence, nothing in this Section 10.14
shall prejudice the right of the Administrative Agent to make the Communications
available to the Lenders in any other manner specified herein.

                  (b)      Each Lender (other than a Declining Lender) agrees
that e-mail notice to it (at the address provided pursuant to the next sentence
and deemed delivered as provided in the next paragraph) specifying that
Communications have been posted to the Platform shall

                                       72

<PAGE>

constitute effective delivery of such Communications to such Lender for purposes
of this Agreement. Each Lender (other than a Declining Lender) agrees (i) to
notify the Administrative Agent in writing (including by electronic
communication) from time to time to ensure that the Administrative Agent has on
record an effective e-mail address for such Lender to which the foregoing notice
may be sent by electronic transmission and (ii) that the foregoing notice may be
sent to such e-mail address.

                  (c)      Each party hereto (other than a Declining Lender)
agrees that any electronic communication referred to in this Section 10.14 shall
be deemed delivered upon the posting of a record of such communication as "sent"
in the e-mail system of the sending party or, in the case of any such
communication to the Administrative Agent, upon the posting of a record of such
communication as "received" in the e-mail system of the Administrative Agent,
provided that if such communication is not so received by the Administrative
Agent during the normal business hours of the Administrative Agent, such
communication shall be deemed delivered at the opening of business on the next
business day for the Administrative Agent.

                  (d)      Each party hereto acknowledges that the distribution
of material through an electronic medium is not necessarily secure and there are
confidentiality and other risks associated with such distribution.

                  (e)      EACH PARTY HERETO FURTHER ACKNOWLEDGES AND AGREES
THAT:

                  (i)      NONE OF THE ADMINISTRATIVE AGENT, ITS AFFILIATES NOR
         ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, AGENTS,
         ADVISORS OR REPRESENTATIVES (COLLECTIVELY, THE "CITIGROUP PARTIES")
         WARRANTS THE ADEQUACY OF THE PLATFORM OR THE ACCURACY OR COMPLETENESS
         OF ANY COMMUNICATIONS, AND EACH CITIGROUP PARTY EXPRESSLY DISCLAIMS
         LIABILITY FOR ERRORS OR OMISSIONS IN ANY COMMUNICATIONS, AND

                  (ii)     NO WARRANTY OF ANY KIND, EXPRESS, IMPLIED OR
         STATUTORY, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF
         MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, NON-INFRINGEMENT OF
         THIRD PARTY RIGHTS OR FREEDOM FROM VIRUSES OR OTHER CODE DEFECTS, IS
         MADE BY ANY CITIGROUP PARTY IN CONNECTION WITH ANY COMMUNICATIONS OR
         THE PLATFORM.

                  (f)      This Section 10.14 shall terminate on the date that
neither CUSA nor any of the Citigroup Parties is the Administrative Agent under
this Agreement.

                                   ARTICLE XI
                             CO-BORROWER PROVISIONS

         SECTION 11.01. APPOINTMENT. Each of the Borrowers hereby irrevocably
designates, appoints and authorizes the other Borrower as its agent and
attorney-in-fact to take actions under this Agreement and the other Loan
Documents, together with such powers as are reasonably incidental thereto. The
Agents and the Lenders shall be entitled to rely, and shall be fully

                                       73

<PAGE>

protected in relying, upon any communication from or to any Borrower as having
been delivered by or to all Borrowers. Any action taken by one Borrower under
this Agreement and the other Loan Documents shall be binding upon the other
Borrower. Each Borrower agrees that it is jointly and severally liable to the
Agents and the Lenders for the payment of the Obligations and that such
liability is independent of the Obligations of the other Borrower and whether
such Obligations become unenforceable against the other Borrower.

         SECTION 11.02. SEPARATE ACTIONS. A separate action or actions may be
brought and prosecuted against any Borrower whether such action is brought
against the other Borrower or whether the other Borrower is joined in such
action or actions. Each Borrower authorizes the Administrative Agent and the
Lenders to release the other Borrower without in any manner or to any extent
affecting the liability of such Borrower hereunder or under the Loan Documents.
Each Borrower waives any defense arising by reason of any disability or other
defense of the other Borrower, or the cessation for any reason whatsoever of the
liability of the other Borrower with respect to any of the Obligations, or any
claim that such Borrower's liability hereunder exceeds or is more burdensome
than the liability of the other Borrower.

         SECTION 11.03. OBLIGATIONS ABSOLUTE AND UNCONDITIONAL. Each Borrower
hereby agrees that its Obligations hereunder and under the Loan Documents shall
be unconditional, irrespective of:

                  (a)      the validity, enforceability, avoidance or
subordination of any of the Obligations or any of the Loan Documents as to the
other Borrower;

                  (b)      the absence of any attempt by, or on behalf of, any
Agent or any Lender to collect, or to take any other action to enforce, all or
any part of the Obligations whether from or against the other Borrower;

                  (c)      any borrowing or grant of a security interest by the
other Borrower or any receiver or assignee in relation to the other Borrower
following the occurrence of any event described in Section 8.01(f), pursuant to
any provision of applicable law comparable to Section 364 of the Bankruptcy
Code;

                  (d)      the disallowance, under any provision of applicable
law comparable to Section 502 of the Bankruptcy Code, of all or any portion of
the claims against the other Borrower held by any Lender or any Agent, for
repayment of all or any part of the Obligations;

                  (e)      the insolvency of the other Borrower; and

                  (f)      any other circumstance which might otherwise
constitute a legal or equitable discharge or defense of the other Borrower
(other than payment in full in cash of the Obligations and the termination of
the Commitments).

         SECTION 11.04. WAIVERS AND ACKNOWLEDGEMENTS.

                  (a)      Except as otherwise expressly provided under any
provision of the Loan Documents or as required by any mandatory provision of
applicable law, each Borrower hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of

                                       74

<PAGE>

receivership, insolvency or bankruptcy of any Borrower or any other Person,
protest or notice with respect to the Obligations, all setoffs and counterclaims
and all presentments, demands for performance, notices of nonperformance,
protests, notices of protest, notices of dishonor and notices of acceptance of
this Agreement and the other Loan Documents, and all other demands whatsoever
(and shall not require that the same be made on the other Borrower as a
condition precedent to the other Borrower's Obligations hereunder), and
covenants that this Agreement (and the joint and several liability of each
Borrower under Section 11.01) will not be discharged, except by payment in full
in cash of the Obligations and the termination of the Commitments. Each Borrower
further waives all notices of the existence, creation or incurrence of new or
additional Debt, arising either from additional loans extended to the other
Borrower or otherwise, and also waives all notices that the principal amount, or
any portion thereof, and/or any interest on any instrument or document
evidencing all or any part of the Obligations is due, notices of any and all
proceedings to collect from the maker, any endorser or any other guarantor of
all or any part of the Obligations, or from any other Person, and, to the extent
permitted by law, notices of exchange, sale, surrender or other handling of any
security or Collateral given to any Agent or any Lender to secure payment of all
or any part of the Obligations.

                  (b)      The Agents and/or the Lenders are hereby authorized,
without notice or demand and without affecting the liability of the Borrowers
hereunder, from time to time, (i) to accept partial payments on all or any part
of the Obligations; (ii) to take and hold security or Collateral for the payment
of all or any part of the Obligations, this Agreement, or any other guaranties
of all or any part of the Obligations or other liabilities of the Borrowers, and
(iii) to settle, release, exchange, enforce, waive, compromise or collect or
otherwise liquidate all or any part of the Obligations, this Agreement, any
guaranty of all or any part of the Obligations, and, subject to the terms of the
Pledge Agreements, any security or Collateral for the Obligations or for any
such guaranty, irrespective of the effect on the contribution or subrogation
rights of the Borrowers. Any of the foregoing may be done in any manner, without
affecting or impairing the obligations of each Borrower hereunder.

         SECTION 11.05. CONTRIBUTION AMONG BORROWERS.

                  (a)      To the extent that any payment is made on the
Obligations by or on behalf of any Borrower under or pursuant to this Article 11
(a "Borrower Payment") which, taking into account all other Borrower Payments
then previously or concurrently made by any other Borrower, exceeds the amount
which otherwise would have been paid by or attributable to such Borrower if each
Borrower had paid the aggregate Obligations satisfied by such Borrower Payment
in the same proportion as such Borrower's "Allocable Amount" (as defined below)
(as determined immediately prior to such Borrower Payment) bore to the aggregate
Allocable Amounts of each of the Borrower as determined immediately prior to the
making of such Borrower Payment, then, following payment in full in cash of the
Obligations and the termination or expiration of all Commitments, such Borrower
shall be entitled to receive contribution and indemnification payments from, and
be reimbursed by, the other Borrower for the amount of such excess, pro rata
based upon their respective Allocable Amounts in effect immediately prior to
such Borrower Payment.

                  (b)      As of any date of determination, the "Allocable
Amount" of any Borrower shall be equal to the maximum amount of the claim which
could then be recovered from such

                                       75

<PAGE>

Borrower with respect to the Obligations without rendering such claim voidable
or avoidable under Section 548 of Chapter 11 of the Bankruptcy Code or under any
applicable state Uniform Fraudulent Transfer Act, Uniform Fraudulent Conveyance
Act or similar statute or common law.

                  (c)      This Section 11.05 is intended only to define the
relative rights of the Borrowers, and nothing set forth in this Section 11.05 is
intended to or shall impair the obligations of the Borrowers to pay any amounts
as and when the same shall become due and payable in accordance with the terms
of this Agreement.

                  (d)      The parties hereto acknowledge that the rights of
contribution and indemnification hereunder shall constitute assets of the
Borrower to which such contribution and indemnification is owing.

                  (e)      The rights of the indemnifying Borrower against the
other Borrower with respect to any payments on the Obligations shall be
exercisable upon the full payment of the Obligations in cash and the termination
or expiry of the Commitments.

         SECTION 11.06. SUBROGATION; REINSTATEMENT. Until the Obligations shall
have been paid in full in cash and the Commitments shall have been terminated,
each Borrower hereby agrees that it (i) shall have no right of subrogation with
respect to such Obligations (under contract, Section 509 of the Bankruptcy Code
or any comparable provision of any other applicable law, or otherwise) or any
other right of indemnity, reimbursement or contribution, and (ii) hereby waives
any right to enforce any remedy which any Agent or any Lender may now have or
may hereafter have against the other Borrower. The provisions of this Article XI
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment of any of the Obligations is rescinded or must otherwise be
returned by the Collateral Agent, the Administrative Agent or any Lender upon
the insolvency, bankruptcy or reorganization of either Borrower or otherwise,
all as though such payment had not been made.

         SECTION 11.07. SUBORDINATION. Each Borrower agrees that any and all
claims of such Borrower against the other Borrower, the Guarantors or any
endorser or other guarantor of all or any part of the Obligations, or against
any of their respective properties, shall be subordinated to all of the
Obligations; provided, that, for the avoidance of doubt, so long as no Event of
Default shall be continuing, each Borrower may make loans to and receive
payments in the ordinary course with respect to Inter-Borrower Debt (as
hereinafter defined) from the other Borrower to the extent not prohibited by the
terms of this Agreement and the other Loan Documents. Notwithstanding any right
of any Borrower to ask for, demand, sue for, take or receive any payment from
the other Borrower, all rights and Liens of such Borrower, whether now or
hereafter arising and howsoever existing, in any assets of the other Borrower
(whether constituting part of the Collateral or otherwise) shall be and hereby
are subordinated to the rights of the Agents or the Lenders in those assets.
Such Borrower shall have no right to possession of any such asset or to
foreclose upon any such asset, whether by judicial action or otherwise, unless
and until all of the Obligations shall have been paid in full in cash and the
Commitments shall have been terminated. If all or any part of the assets of any
Borrower, or the proceeds thereof, are subject to any distribution, division or
application to the creditors of such Borrower, whether partial or complete,
voluntary or involuntary, and whether by reason of liquidation, bankruptcy,
arrangement, receivership, assignment for the benefit of creditors or any other
action

                                       76
<PAGE>

or proceeding, or if the business of any Borrower is dissolved or if
substantially all of the assets of any Borrower are sold, then, and in any such
event, any payment or distribution of any kind or character, either in cash,
securities or other property, which shall be payable or deliverable upon or with
respect to any Debt of any Borrower to the other Borrower ("INTER-BORROWER
DEBT") shall be paid or delivered directly to the Administrative Agent for
application to the Obligations, due or to become due, until such Obligations
shall have been paid in full in cash. Each Borrower irrevocably authorizes and
empowers the Administrative Agent and each of the Lenders to demand, sue for,
collect and receive every such payment or distribution and give acquittance
therefor and to make and present for and on behalf of such Borrower such proofs
of claim and take such other action, in the Administrative Agent's or such
Lender's own name or in the name of such Borrower or otherwise, as the
Administrative Agent or any Lender may deem reasonably necessary or reasonably
advisable for the enforcement of this Agreement. After the occurrence and during
the continuance of a Default or an Event of Default, each Lender may vote, with
respect to the Obligations owed to it, such proofs of claim in any such
proceeding, receive and collect any and all dividends or other payments or
disbursements made thereon in whatever form the same may be paid or issued and
apply the same on account of any of the Obligations. Except as permitted under
Sections 7.02(d) and (e), should any payment, distribution, security or
instrument or proceeds thereof be received by any Borrower upon or with respect
to the Inter-Borrower Debt during the continuance of any Event of Default and
prior to the payment in full in cash of all of the Obligations and the
termination of the Commitments, such Borrower shall receive and hold the same in
trust, as trustee, for the benefit of the Agents and the Lenders and shall
forthwith deliver the same to the Administrative Agent in precisely the form
received (accompanied by the endorsement or assignment of such Borrower where
necessary), for application to the Obligations, due or not due, and, until so
delivered, the same shall be held in trust by such Borrower as the property of
the Agents and the Lenders. After the occurrence and during the continuance of a
Default or an Event of Default, if any Borrower fails to make any such
endorsement or assignment to the Agents or the Lenders, the Agents or the
Lenders (or any of their respective officers or employees) are hereby
irrevocably authorized to make the same. Each Borrower agrees that until the
Obligations have been paid in full in cash and the Commitments have been
terminated, such Borrower will not assign or transfer to any Person any claim
such Borrower has or may have against any other Borrower (other than in favor of
the Administrative Agent pursuant to the Loan Documents).

                                  ARTICLE XII
           NO NOVATION; REFERENCES TO THIS AGREEMENT IN LOAN DOCUMENTS

         SECTION 12.01. NO NOVATION. It is the express intent of the parties
hereto that this Agreement (i) shall re-evidence, in part, the Company's
indebtedness under the Existing Credit Agreement, (ii) is entered into in
substitution for, and not in payment of, the obligations of the Company under
the Existing Credit Agreement, and (iii) is in no way intended to constitute a
novation of any of the Company's indebtedness which was evidenced by the
Existing Credit Agreement or any of the other Loan Documents.

         SECTION 12.02. REFERENCES TO THIS AGREEMENT IN LOAN DOCUMENTS. Upon the
effectiveness of this Agreement, on and after the date hereof, each reference in
any other Loan Document to the Existing Credit Agreement (including any
reference therein to "the Credit

                                       77

<PAGE>

Agreement," "thereunder," "thereof," "therein" or words of like import referring
thereto) shall mean and be a reference to this Agreement.

                            [Signature pages follow.]

                                       78
<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                                        CMS ENERGY CORPORATION

                                        By: /s/ Laura L. Mountcastle
                                            ------------------------------------
                                            Name:  Laura L. Mountcastle
                                            Title: Vice President and Treasurer

                                        CMS ENTERPRISES COMPANY

                                        By: /s/ Laura L. Mountcastle
                                            ------------------------------------
                                            Name:  Laura L. Mountcastle
                                            Title: Vice President and Treasurer

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

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

                                  By: /s/ DHAYA RANGANATHAN
                                      ------------------------------------------
                                      Name:  DHAYA RANGANATHAN
                                      Title: Vice President

                                  CITIBANK, N.A., as a Lender

                                  By: /s/ DHAYA RANGANATHAN
                                      ------------------------------------------
                                      Name:  DHAYA RANGANATHAN
                                      Title: Vice President

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

                               JPMORGAN CHASE BANK, individually as a Lender and
                               as Syndication Agent

                               By: /s/ Thomas L. Casey
                                   ---------------------------------------------
                                   Name:  Thomas L. Casey
                                   Title: Vice President

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

                                 BANK ONE, NA, individually as a Lender and as a
                                 Documentation Agent

                                 By: /s/ Michael K. Murphy
                                     -------------------------------------------
                                     Name:  Michael K. Murphy
                                     Title: Managing Director

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

                               UNION BANK OF CALIFORNIA, N.A., individually as a
                               Lender and as a Documentation Agent

                               By: /s/ Kevin M. Zitar
                                   ---------------------------------------------
                                   Name:  Kevin M. Zitar
                                   Title: Vice President

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

                           WACHOVIA BANK, NATIONAL ASSOCIATION,
                           individually as a Lender and as a Documentation Agent

                           By: /s/ D. Mitch Wilson
                               -------------------------------------------------
                               Name:  D. Mitch Wilson
                               Title: Vice President

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

                                                  BARCLAYS BANK PLC, as a Lender

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

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

                                           DEUTSCHE BANK TRUST COMPANY AMERICAS,
                                           as a Lender

                                           By: /s/ Marcus M. Tarkington
                                               ---------------------------------
                                               Name:  Marcus M. Tarkington
                                               Title: Director

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement

<PAGE>

                                             MERRILL LYNCH BANK USA, as a Lender

                                             By: /s/ Louis Alder
                                                 -------------------------------
                                                 Name:  Louis Alder
                                                 Title: Vice President

                                Signature Page to
                  Fourth Amended and Restated Credit Agreement
<PAGE>

                               COMMITMENT SCHEDULE

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
LENDER                                                      Commitment
- -----------------------------------------------------------------------
<S>                                                        <C>
CITIBANK, N.A.                                             $ 25,000,000
- -----------------------------------------------------------------------
JPMORGAN CHASE BANK                                        $ 25,000,000
- -----------------------------------------------------------------------
BANK ONE, NA                                               $ 25,000,000
- -----------------------------------------------------------------------
UNION BANK OF CALIFORNIA, N.A.                             $ 25,000,000
- -----------------------------------------------------------------------
WACHOVIA BANK, NATIONAL ASSOCIATION                        $ 25,000,000
- -----------------------------------------------------------------------
DEUTSCHE BANK TRUST COMPANY AMERICAS                       $ 25,000,000
- -----------------------------------------------------------------------
MERRILL LYNCH BANK USA                                     $ 25,000,000
- -----------------------------------------------------------------------
BARCLAYS BANK PLC                                          $ 15,000,000
- -----------------------------------------------------------------------
Total Commitments:                                         $190,000,000
- ------------------------------------------------------------------------
</TABLE>

<PAGE>

                                   SCHEDULE II

                           Pledged Ownership Interests

<TABLE>
<CAPTION>
         GRANTOR                                          PLEDGED SUBSIDIARIES
         -------                                          --------------------
<S>                                              <C>
CMS Energy Corporation                           CMS Enterprises Company (100%)

                                                 Consumers Energy Company (100%)

CMS Enterprises Company                          CMS Generation Co. (100%)

                                                 CMS Gas Transmission Company (100%)

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

                                                 CMS Marketing, Services and Trading Company (100%)

                                                 CMS International Ventures, L.L.C. (40.47%)

CMS International Ventures, L.L.C.               CMS Electric & Gas, L.L.C. (100%)

CMS Generation Co.                               CMS International Ventures, L.L.C. (21.02%)

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

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

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

CMS Gas Transmission Company                     CMS International Ventures, L.L.C. (37.01%)
</TABLE>

<PAGE>

                                  SCHEDULE III

                                Notice Addresses

Citibank, N.A.

Address:        388 Greenwich St.
                New York, NY 10013
Attn:           Nicholas McKee
Telephone:      (212) 816-8592
Fax:            (212) 816-8098

JPMorgan Chase Bank
[to be completed]

<PAGE>

                                                                    ATTACHMENT A

                                  REAFFIRMATION

                  Each of the undersigned hereby acknowledges receipt of a copy
of the foregoing Fourth Amended and Restated Credit Agreement dated as of
December 8, 2003 by and among CMS ENERGY CORPORATION and CMS ENTERPRISES COMPANY
(collectively, the "Borrowers"), the financial institutions from time to time
party thereto (the "Lenders"), and CITICORP USA, INC., in its capacity as
contractual representative (the "Administrative Agent") (as amended, restated,
supplemented or otherwise modified from time to time, the "Credit Agreement").
Capitalized terms used in this Reaffirmation and not defined herein shall have
the meanings given to them in the Credit Agreement. Without in any way
establishing a course of dealing by any Agent or any Lender, each of the
undersigned reaffirms the grant of a security interest pursuant to the Pledge
Agreement executed by it and acknowledges and agrees that each such Loan
Document executed by the undersigned in connection with the Credit Agreement
remains in full force and effect and is hereby reaffirmed, ratified and
confirmed. All references to the Credit Agreement contained in the
above-referenced documents shall be a reference to the Credit Agreement as the
same may from time to time hereafter be amended, modified or restated.

Dated as of December 8, 2003

CMS ENTERPRISES COMPANY                       CMS GENERATION CO.

By:__________________________                 By:__________________________
   Its:                                          Its:

CMS GAS TRANSMISSION COMPANY                  CMS CAPITAL, L.L.C.

By:__________________________                 By:__________________________
   Its:                                          Its:


CMS ELECTRIC & GAS, L.L.C. (formerly          CMS INTERNATIONAL
known as CMS Electric and Gas Company)        VENTURES, L.L.C.

                                              By:__________________________
By:__________________________                    Its:
   Its:

<PAGE>

CMS MARKETING, SERVICES
AND TRADING COMPANY

By:__________________________
   Its:

CMS GENERATION MICHIGAN                      DEARBORN INDUSTRIAL
POWER L.L.C.                                 ENERGY, L.L.C.

By:__________________________                By:__________________________
   Its:                                         Its:

DEARBORN INDUSTRIAL
GENERATION, L.L.C.

By:__________________________
   Its:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(O)
<SEQUENCE>11
<FILENAME>k82154aexv4wxoy.txt
<DESCRIPTION>3RD AMENDED AND RESTATED PLEDGE AND SECURITY AGRMT
<TEXT>
<PAGE>

                                                                    EXHIBIT 4(o)

                                                                  EXECUTION COPY

                                   CMS ENERGY

            THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT

         THIS THIRD AMENDED AND RESTATED PLEDGE AND SECURITY AGREEMENT (this
"Security Agreement"), dated as of December 8, 2003, is made by CMS ENERGY
CORPORATION, a corporation organized and existing under the laws of the State of
Michigan (the "Grantor"), to CITICORP USA, INC. ("CUSA"), as Collateral Agent
(the "Collateral Agent") for the lenders (the "Lenders") parties to the Credit
Agreement (as hereinafter defined).

                             PRELIMINARY STATEMENTS

         (1)      The Grantor has previously entered into that certain Second
Amended and Restated Pledge and Security Agreement, dated as of September 12,
2003 (said Agreement, as amended or otherwise modified from time to time prior
to the date hereof, being the "Existing Security Agreement") in connection with
that certain Third Amended and Restated Credit Agreement, dated as of September
12, 2003, among the Grantor, CUSA, as Administrative Agent and as Collateral
Agent, and the Lenders named therein (said Agreement, as amended or otherwise
modified from time to time prior to the date hereof, being the "Existing Credit
Agreement").

         (2)      The Grantor, CMS Enterprises Company, a Michigan corporation,
CUSA, as Administrative Agent and as Collateral Agent, and the Lenders have
agreed to amend and restate the Existing Credit Agreement pursuant to that
certain Fourth Amended and Restated Credit Agreement, dated as of December 8,
2003 (said Agreement, as it may hereafter be amended or otherwise modified from
time to time, being the "Credit Agreement").

         (3)      The Grantor is the owner of the Collateral described in
Exhibit "A" hereto.

         (4)      It is a condition precedent to the effectiveness of the Credit
Agreement that the Grantor shall have made the pledge contemplated by this
Agreement.

         (5)      It is the intention of the parties hereto that this Security
Agreement be merely an amendment and restatement of the Existing Security
Agreement and not constitute a novation of the grants of security or the
obligations thereunder.

         NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Extensions of Credit under the Credit Agreement, the Grantor
hereby agrees with the Collateral Agent, for its benefit and the ratable benefit
of the other Secured Parties, that the Existing Security Agreement is amended
and restated in its entirety as follows:

                                   ARTICLE I
                                   DEFINITIONS

         1.1. Terms Defined in Credit Agreement. All capitalized terms used
herein and not otherwise defined shall have the meanings assigned to such terms
in the Credit Agreement.

                                       1
<PAGE>

         1.2. Terms Defined in New York Uniform Commercial Code. Terms defined
in the New York UCC which are not otherwise defined in this Security Agreement
are used herein as defined in the New York UCC.

         1.3. Definitions of Certain Terms Used Herein. As used in this Security
Agreement, in addition to the terms defined in the Preliminary Statements, the
following terms shall have the following meanings:

         "Accounts" shall have the meaning set forth in Article 9 of the New
York UCC.

         "Article" means a numbered article of this Security Agreement, unless
another document is specifically referenced.

         "Collateral" means all Accounts and Instruments payable to the Grantor
by Enterprises or any of its Subsidiaries (including, without limitation, the
Instruments described on Exhibit "A"), the Investment Property described on
Exhibit "A", all General Intangibles constituting payment obligations of
Enterprises or any of its Subsidiaries to the Grantor and the Equity General
Intangibles in which the Grantor now has or hereafter acquires any right or
interest, and the proceeds (including Stock Rights) and products thereof,
together with records related thereto.

         "Control" shall have the meaning set forth in Article 8 or, if
applicable, in Section 9-104, 9-105, 9-106 or 9-107 of Article 9 of the New York
UCC.

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

         "Equity General Intangibles" shall mean any General Intangible
constituting the Grantor's right, title and interest in any limited liability
company or partnership described on Exhibit "A" in which the Grantor now has or
hereafter acquires any right or interest.

         "Event of Default" means an event described in Section 5.1.

         "Exhibit" refers to a specific exhibit to this Security Agreement,
unless another document is specifically referenced.

         "General Intangibles" shall have the meaning set forth in Article 9 of
the New York UCC.

         "Instruments" shall have the meaning set forth in Article 9 of the New
York UCC.

         "Investment Property" shall have the meaning set forth in Article 9 of
the New York UCC.

         "Lenders" means the lenders party to the Credit Agreement and their
successors and assigns.

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

                                       2
<PAGE>

         "Permitted Liens" means the Liens permitted to be created, incurred or
assumed or otherwise to exist pursuant to Section 7.02(a) of the Credit
Agreement.

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

         "Secured Obligations" means any and all existing and future
indebtedness, obligations and liabilities of every kind, nature and character,
direct or indirect, absolute or contingent (including all renewals, extensions
and modifications thereof and all reasonable and reimbursable fees, costs and
expenses incurred by any Secured Party in connection with the preparation,
administration, collection or enforcement thereof), of the Grantor to any
Secured Party, arising under or pursuant to this Security Agreement, the Credit
Agreement and any other Loan Document.

         "Secured Parties" means the Collateral Agent, the Administrative Agent
and each Lender.

         "Security" has the meaning set forth in Article 8 of the New York UCC.

         "Stock Rights" means any securities, dividends or other distributions
and any other right or property which the Grantor shall receive or shall become
entitled to receive for any reason whatsoever with respect to, in substitution
for or in exchange for any securities or other ownership interests in a
corporation, partnership, joint venture or limited liability company
constituting Collateral and any securities, any right to receive securities and
any right to receive earnings, in which the Grantor now has or hereafter
acquires any right, issued by an issuer of such securities.

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

                                   ARTICLE II
                           GRANT OF SECURITY INTEREST

         2.1. The Grantor hereby pledges, assigns and grants to the Collateral
Agent, on behalf of and for the ratable benefit of the Secured Parties, a
security interest in all of the Grantor's right, title and interest, whether now
owned or hereafter acquired, in and to the Collateral to secure the prompt and
complete payment and performance of the Secured Obligations, provided, however,
that the principal amount of the Secured Obligations secured by the security
interests granted pursuant to this Security Agreement shall not exceed the
lesser of (x) an amount that would cause all secured Indebtedness of Grantor
outstanding on the date hereof to exceed 5% of the "Consolidated Net Tangible
Assets" (as defined in the Twelfth Supplemental Indenture dated as of July 2,
2001 between the Grantor and Bank One Trust Company, N.A. (successor to NBD
Bank) with respect to the Grantor's original Indenture dated as of September 15,
1992) as of the date hereof and (y) an amount that would cause all secured
Indebtedness of Grantor outstanding on the date hereof to exceed 10% of
"Consolidated Assets" (as defined in the Sixth Supplemental Indenture dated as
of March 19, 1996 between the Grantor and The Chase Manhattan Bank (National
Association) with respect to the Grantor's original Indenture dated as of
January 15, 1994) of Grantor at such date.

                                       3
<PAGE>

                                  ARTICLE III
                         REPRESENTATIONS AND WARRANTIES

         The Grantor represents and warrants to the Collateral Agent and the
other Secured Parties that:

         3.1. Title, Authorization, Validity and Enforceability. The Grantor has
good and valid rights in or the power to transfer the Collateral and title to
the Collateral with respect to which it has purported to grant a security
interest hereunder, free and clear of all Liens (other than Permitted Liens),
and has full power and authority to grant to the Collateral Agent the security
interest in such Collateral pursuant hereto. The execution and delivery by the
Grantor of this Security Agreement has been duly authorized by proper corporate
or other proceedings, and this Security Agreement constitutes a legal, valid and
binding obligation of the Grantor and creates a security interest which is
enforceable against the Grantor in all now owned and hereafter acquired
Collateral. When financing statements (or appropriate amendments to existing
filings) have been filed in the appropriate offices against the Grantor in the
locations listed on Exhibit "B", the Collateral Agent will have a fully
perfected first priority security interest in the Collateral in which a security
interest may be perfected by filing.

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

         3.3. Type and Jurisdiction of Organization. The Grantor is a
corporation organized under the laws of the State of Michigan.

         3.4. Pledged Securities and Certain Pledged General Intangibles.
Exhibit "A" sets forth a complete and accurate list of the Instruments,
Securities and Equity General Intangibles delivered to the Collateral Agent. The
Grantor is the direct and beneficial owner of each Instrument, Security and
Equity General Intangible listed on Exhibit "A" as being owned by it, free and
clear of any Liens, except for the security interest granted to the Collateral
Agent for the benefit of the Secured Parties hereunder and other Permitted
Liens. The Grantor further represents and warrants that (i) all such Securities
or Equity General Intangibles which are shares of stock in a corporation or
ownership interests in a partnership or limited liability company and in which
the Grantor is granting a security interest pursuant to this Security Agreement
have been (to the extent such concepts are relevant with respect to such
Security or Equity General Intangible) duly and validly issued, are fully paid
and non-assessable and constitute the percentage of the issued and outstanding
shares of stock (or other equity interests) of the

                                       4
<PAGE>

respective issuers thereof indicated on Exhibit "A" hereto and (ii) with respect
to any certificates delivered to the Collateral Agent representing an ownership
interest in a partnership or limited liability company and in which the Grantor
is granting a security interest pursuant to this Security Agreement, either such
certificates are Securities as defined in Article 8 of the Uniform Commercial
Code of the applicable jurisdiction as a result of actions by the issuer or
otherwise, or, if such certificates are not Securities, the Grantor has so
informed the Collateral Agent so that the Collateral Agent may take steps to
perfect its security interest therein as a General Intangible.

                                   ARTICLE IV
                                    COVENANTS

         From the date of this Security Agreement, and thereafter until this
Security Agreement is terminated:

         4.1. General.

                  4.1.1 Inspection. The Grantor will permit the Collateral Agent
or any Lender, by its representatives and agents (i) to inspect the Collateral,
(ii) to examine and make copies of the records of the Grantor relating to the
Collateral and (iii) to discuss the Collateral and the related records of the
Grantor with, and to be advised as to the same by, the Grantor's officers and
employees all at such reasonable times and intervals as the Collateral Agent or
such Lender may determine.

                  4.1.2 Records and Reports. The Grantor will maintain complete
and accurate books and records with respect to the Collateral, and furnish to
the Collateral Agent, with sufficient copies for each of the Lenders, such
reports relating to the Collateral as the Collateral Agent shall from time to
time reasonably request.

                  4.1.3 Financing Statements and Other Actions; Defense of
Title. The Grantor hereby authorizes the Collateral Agent to file, and if
requested will execute and deliver to the Collateral Agent, all financing
statements describing the Collateral and other documents and take such other
actions as may from time to time be reasonably requested by the Collateral Agent
in order to maintain a perfected security interest in and, if applicable,
Control of, the Collateral. The Grantor will take any and all actions necessary
to defend title to the Collateral against all persons and to defend the security
interest of the Collateral Agent in the Collateral and the priority thereof
against any Lien not expressly permitted hereunder.

                  4.1.4 Change in Corporate Existence, Type or Jurisdiction of
Organization, Location, Name. The Grantor will preserve its existence as a
corporation, not change its state of organization, and not change its mailing
address, unless, in each such case, the Grantor shall have given the Collateral
Agent not less than 10 days' prior written notice of such event or occurrence
and the Collateral Agent shall have either (x) determined that such event or
occurrence will not adversely affect the validity, perfection or priority of the
Collateral Agent's security interest in the Collateral, or (y) taken such steps
(with the cooperation of the Grantor to the extent necessary or advisable) as
are necessary or advisable to properly maintain the validity, perfection and
priority of the Collateral Agent's security interest in the Collateral.

                                       5
<PAGE>

         4.2. Instruments and Securities. The Grantor will (i) deliver to the
Collateral Agent immediately upon execution of this Security Agreement the
originals of all Securities constituting Collateral (if any then exist), (ii)
deliver to the Collateral Agent within thirty days after execution of this
Security Agreement the originals of all Instruments constituting Collateral
owned by the Grantor (if any then exist) and (iii) hold in trust for the
Collateral Agent upon receipt and immediately thereafter deliver to the
Collateral Agent any additional Securities and Instruments constituting
Collateral, in each case together with a stock power or endorsement therefor
executed in blank.

         4.3. Uncertificated Securities and Equity General Intangibles. The
Grantor will permit the Collateral Agent from time to time to cause the
appropriate issuers (and, if held with a securities intermediary, such
securities intermediary) of uncertificated Securities or Equity General
Intangibles not represented by certificates which are Collateral to mark their
books and records with the numbers and face amounts of all such uncertificated
Securities or Equity General Intangibles not represented by certificates and all
rollovers and replacements therefor to reflect the Lien of the Collateral Agent
granted pursuant to this Security Agreement. The Grantor will use all
commercially reasonable efforts, with respect to Investment Property
constituting Collateral held with a financial intermediary, to cause such
financial intermediary to enter into a control agreement with the Collateral
Agent in form and substance reasonably satisfactory to the Collateral Agent.

         4.4. Stock and Other Ownership Interests. The Grantor will permit any
registerable Collateral to be registered in the name of the Collateral Agent or
its nominee at any time at the option of the Required Lenders following the
occurrence and during the continuance of an Event of Default.

         4.5. Voting Rights and Dividends

         4.5.1    Rights Prior to Default. So long as no Event of Default, and
no Default under Section 8.01(f) of the Credit Agreement, shall have occurred
and be continuing:

                  (i)      Until the Collateral Agent shall have notified the
         Grantor in writing to the contrary, the Grantor shall be entitled to
         exercise or refrain from exercising any and all voting and other
         consensual rights pertaining to the Collateral or any part thereof for
         any purpose not inconsistent with the terms of this Security Agreement
         or the Credit Agreement; provided, however, that the Grantor shall not
         exercise or refrain from exercising any such right if such action would
         have a material adverse effect on the value of the Collateral.

                  (ii)     The Grantor shall be entitled to receive and retain
         any and all dividends and interest paid in respect of the Collateral,
         provided, however , that any and all (a) dividends and interest paid or
         payable other than in cash in respect of, and securities, instruments
         and other property received, receivable or otherwise distributed in
         respect of, or in exchange for, any Collateral, and (b) dividends,
         interest and other distributions paid or payable in cash in respect of
         any Collateral in connection with a partial or total liquidation or
         dissolution or in connection with a reduction of capital, capital
         surplus or paid-in-surplus, shall be, and shall be forthwith delivered
         to the Collateral Agent to hold

                                       6
<PAGE>

         as, Collateral and shall, if received by the Grantor, be received in
         trust for the benefit of the Collateral Agent, be segregated from the
         other property or funds of the Grantor, and be forthwith delivered to
         the Collateral Agent as Collateral in the same form as so received
         (with any necessary endorsement or assignment).

                  (iii)    The Collateral Agent shall execute and deliver (or
         cause to be executed and delivered) to the Grantor all such proxies and
         other instruments as the Grantor may reasonably request for the purpose
         of enabling the Grantor to exercise the voting and other rights which
         it is entitled to exercise pursuant to paragraph (i), above, and to
         receive the dividends and interest which it is authorized to receive
         and retain pursuant to paragraph (ii), above.

         4.5.2    Rights During Default. Upon the occurrence and during the
continuance of a Default under Section 8.01(f) of the Credit Agreement or an
Event of Default:

                  (i)      Upon written notice to the Grantor by the Collateral
         Agent, which notice can only be given by the Collateral Agent with
         respect to the Collateral consisting of the common stock of Consumers
         after the Grantor has filed an application with the Federal Energy
         Regulatory Commission seeking approval pursuant to Section 203 of the
         Federal Power Act, 16 U.S.C. 824b, to transfer the common stock of
         Consumers to the Collateral Agent and received such approval from the
         Federal Energy Regulatory Commission, all rights of the Grantor to
         exercise or refrain from exercising the voting and other consensual
         rights which it would otherwise be entitled to exercise pursuant to
         Section 4.5.1(i) and to receive the dividends and interest which it
         would otherwise be authorized to receive and retain pursuant to Section
         4.5.1(ii) shall cease, and all such rights shall thereupon become
         vested in the Collateral Agent who shall thereupon have the sole right
         to exercise or refrain from exercising such voting and other consensual
         rights and to receive and hold as Collateral such dividends and
         interest. The Grantor shall only file the application pursuant to
         Section 203 of the Federal Power Act referred to in the prior sentence
         if the Collateral Agent instructs it to do so in writing, and the
         Grantor shall have 10 days after receipt of such instruction in which
         to prepare and make the filing; provided, that the Collateral Agent can
         withdraw such instruction at any time before the expiration of the
         ninth day after its receipt.

                  (ii)     All dividends and interest and other property which
         are received by the Grantor after proper written notice has been
         received by the Grantor pursuant to paragraph (i) of this Section 4.5.2
         shall be received in trust for the benefit of the Collateral Agent,
         shall be segregated from other funds of the Grantor and shall be
         forthwith paid over to the Collateral Agent as Collateral in the same
         form as so received (with any necessary endorsement).

                                   ARTICLE V
                                     DEFAULT

         5.1. Default. The occurrence of any "Event of Default" under, and as
defined in, the Credit Agreement shall constitute an Event of Default hereunder.

                                       7
<PAGE>

         5.2. Acceleration and Remedies. Upon the acceleration of the
Obligations under the Credit Agreement pursuant to Section 8.02 thereof, the
Collateral Agent may, with the concurrence or at the direction of the Required
Lenders, exercise any or all of the following rights and remedies:

                  5.2.1 Those rights and remedies provided in this Security
Agreement, the Credit Agreement, or any other Loan Document, provided that this
Section 5.2.1 shall not be understood to limit any rights or remedies available
to the Collateral Agent and the other Secured Parties prior to an Event of
Default.

                  5.2.2 Those rights and remedies available to a secured party
under the New York UCC (whether or not the New York UCC applies to the affected
Collateral) or under any other applicable law (including, without limitation,
any law governing the exercise of a bank's right of setoff or bankers' lien)
when a debtor is in default under a security agreement.

                  5.2.3 Without notice except as specifically provided herein,
sell, lease, assign, grant an option or options to purchase or otherwise dispose
of the Collateral or any part thereof in one or more parcels at public or
private sale, for cash, on credit or for future delivery, and upon such other
terms as the Collateral Agent may deem commercially reasonable. The Collateral
Agent may comply with any applicable state or federal law requirements in
connection with a disposition of the Collateral and compliance will not be
considered to adversely affect the commercial reasonableness of any sale of the
Collateral.

                                   ARTICLE VI
                        WAIVERS, AMENDMENTS AND REMEDIES

         6.1. No delay or omission of the Collateral Agent or any other Secured
Party to exercise any right or remedy granted under this Security Agreement
shall impair such right or remedy or be construed to be a waiver of any Event of
Default or an acquiescence therein, and any single or partial exercise of any
such right or remedy shall not preclude any other or further exercise thereof or
the exercise of any other right or remedy. No waiver, amendment or other
variation of the terms, conditions or provisions of this Security Agreement
whatsoever shall be valid unless in writing signed by the Collateral Agent with
the concurrence or at the direction of the Lenders required under Section 10.01
of the Credit Agreement and the Grantor, and then only to the extent in such
writing specifically set forth. All rights and remedies contained in this
Security Agreement or by law afforded shall be cumulative and all shall be
available to the Collateral Agent and the other Secured Parties until the
Secured Obligations have been paid in full in cash and all of the Commitments
have been terminated.

                                  ARTICLE VII
                   SUBORDINATION OF INTERCOMPANY INDEBTEDNESS

         7.1. The Grantor agrees that any and all claims of the Grantor against
any other Loan Party with respect to any "Intercompany Indebtedness" (as
hereinafter defined), any endorser, obligor or any other guarantor of all or any
part of the Secured Obligations, or against any of its

                                       8
<PAGE>

properties shall be subordinate and subject in right of payment to the prior
payment, in full and in cash, of all Secured Obligations; provided, that, for
the avoidance of doubt, so long as no Event of Default shall be continuing, each
Guarantor may make loans to and receive payments in the ordinary course with
respect to Intercompany Indebtedness (as hereinafter defined) from any other
Loan Party to the extent not prohibited by the terms of the Credit Agreement and
the other Loan Documents. If all or any part of the assets of any Loan Party, or
the proceeds thereof, are subject to any distribution, division or application
to the creditors of such Loan Party, whether partial or complete, voluntary or
involuntary, and whether by reason of liquidation, bankruptcy, arrangement,
receivership, assignment for the benefit of creditors or any other action or
proceeding, or if the business of any such Loan Party is dissolved or if
substantially all of the assets of any such Loan Party are sold, then, and in
any such event (such events being herein referred to as an "Insolvency Event"),
any payment or distribution of any kind or character, either in cash, securities
or other property, which shall be payable or deliverable upon or with respect to
any indebtedness of any Loan Party to the Grantor ("Intercompany Indebtedness")
shall be paid or delivered directly to the Collateral Agent for application to
the Secured Obligations, due or to become due, until the Secured Obligations
shall have been fully paid and satisfied in cash. Should any payment,
distribution, security or instrument or proceeds thereof be received by the
Grantor upon or with respect to the Intercompany Indebtedness after any
Insolvency Event and prior to the satisfaction of all of the Secured
Obligations, the Grantor shall receive and hold the same in trust, as trustee,
for the benefit of the Secured Parties, and shall forthwith deliver the same to
the Collateral Agent, for the benefit of the Secured Parties, in precisely the
form received (except for any necessary endorsement or assignment of the
Grantor), for application to the Secured Obligations, due or to become due,
until the Secured Obligations shall have been fully paid and satisfied in cash,
and, until so delivered, the same shall be held in trust by the Grantor as the
property of the Secured Parties.

                                  ARTICLE VIII
                               GENERAL PROVISIONS

         8.1. Secured Party Performance of Grantor's Obligations. Without having
any obligation to do so, the Collateral Agent may perform or pay any obligation
which the Grantor has agreed to perform or pay in this Security Agreement and
the Grantor shall reimburse the Collateral Agent for any reasonable amounts paid
by the Collateral Agent pursuant to this Section 8.1. The Grantor's obligation
to reimburse the Collateral Agent pursuant to the preceding sentence shall be an
Obligation payable on demand.

         8.2. Authorization for Secured Party to Take Certain Action. The
Grantor irrevocably authorizes the Collateral Agent at any time and from time to
time in the sole discretion of the Collateral Agent and appoints the Collateral
Agent as its attorney in fact (i) to contact and enter into one or more
agreements with the issuers of uncertificated securities which are Collateral
and which are Securities or with financial intermediaries holding other
Investment Property as may be necessary or advisable solely to give the
Collateral Agent Control over such Securities or other Investment Property, (ii)
following the occurrence and during the continuance of an Event of Default, to
enforce payment of the Instruments, Accounts and General Intangibles (other than
Equity General Intangibles) which are Collateral in the name of the Collateral
Agent or the Grantor, (iii) following the occurrence and during the continuance
of an Event of Default, to apply the proceeds of any Collateral received by the
Collateral Agent to the Secured Obligations

                                       9
<PAGE>

and (iv) to discharge past due taxes, assessments, charges, fees or Liens on the
Collateral (except for such Liens as are specifically permitted hereunder or
under any other Loan Document), and the Grantor agrees to reimburse the
Collateral Agent on demand for any reasonable payment made or any reasonable
expense incurred by the Collateral Agent in connection therewith, provided that
this authorization shall not relieve the Grantor of any of its obligations under
this Security Agreement or under the Credit Agreement.

         8.3. Benefit of Agreement. The terms and provisions of this Security
Agreement shall be binding upon and inure to the benefit of the Grantor, the
Collateral Agent and the other Secured Parties and their respective successors
and assigns (including all persons who become bound as a debtor to this Security
Agreement), except that the Grantor shall not have the right to assign its
rights or delegate its obligations under this Security Agreement or any interest
herein, without the prior written consent of the Collateral Agent.

         8.4. Survival of Representations. All representations and warranties of
the Grantor contained in this Security Agreement shall survive the execution and
delivery of this Security Agreement.

         8.5. Taxes and Expenses. Any stamp, documentary or (to the extent
provided in the Credit Agreement) withholding taxes payable or ruled payable by
Federal or State authority in respect of this Security Agreement shall be paid
by the Grantor, together with interest and penalties, if any. The Grantor shall
reimburse the Collateral Agent for any and all reasonable out-of-pocket expenses
and internal charges (including reasonable attorneys', auditors' and
accountants' fees and reasonable time charges of attorneys, paralegals, auditors
and accountants who may be employees of the Collateral Agent) paid or incurred
by the Collateral Agent in connection with the preparation, execution, delivery,
administration, collection and enforcement of this Security Agreement and in the
audit, analysis, administration, collection, preservation or sale of the
Collateral (including the expenses and charges associated with any periodic or
special audit of the Collateral). Any and all costs and expenses incurred by the
Grantor in the performance of actions required pursuant to the terms hereof
shall be borne solely by the Grantor.

         8.6. Headings. The title of and section headings in this Security
Agreement are for convenience of reference only, and shall not govern the
interpretation of any of the terms and provisions of this Security Agreement.

         8.7. CHOICE OF LAW. SUBMISSION TO JURISDICTION. THIS SECURITY AGREEMENT
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE
OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES). EACH
OF THE GRANTOR AND THE COLLATERAL AGENT (I) IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK
CITY IN ANY ACTION ARISING OUT OF ANY LOAN DOCUMENT, (II) AGREES THAT ALL CLAIMS
IN SUCH ACTION MAY BE DECIDED IN SUCH COURT, (III) WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM AND (IV) CONSENTS
TO THE

                                       10
<PAGE>

SERVICE OF PROCESS BY MAIL. A FINAL JUDGMENT IN ANY SUCH ACTION SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY
LAW OR AFFECT ITS RIGHT TO BRING ANY ACTION IN ANY OTHER COURT. THE GRANTOR
AGREES THAT THE COLLATERAL AGENT SHALL HAVE THE RIGHT TO PROCEED AGAINST THE
GRANTOR OR ITS PROPERTY IN A COURT IN ANY LOCATION TO ENABLE THE LENDERS TO
REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE COLLATERAL AGENT
OR THE LENDERS. THE GRANTOR AGREES THAT IT WILL NOT ASSERT ANY PERMISSIVE
COUNTERCLAIMS IN ANY PROCEEDING BROUGHT BY THE COLLATERAL AGENT TO REALIZE ON
THE COLLATERAL OR ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A
JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE COLLATERAL AGENT. THE GRANTOR
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
COLLATERAL AGENT MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.

         8.8. Indemnity. The Grantor hereby agrees to indemnify the Collateral
Agent and its successors, assigns, agents and employees (each, an "indemnified
party"), from and against any and all liabilities, damages, penalties, suits,
costs, and expenses of any kind and nature (including, without limitation, all
expenses of litigation or preparation therefor whether or not the Collateral
Agent is a party thereto) imposed on, incurred by or asserted against the
Collateral Agent, or its successors, assigns, agents and employees, in any way
relating to or arising out of this Security Agreement, or the ownership,
delivery, possession, or other disposition of any Collateral except to the
extent that such liabilities, damages, penalties, costs or expenses were caused
by the gross negligence or willful misconduct of such indemnified party.

         8.9. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including facsimile communication)
and mailed, telegraphed, telecopied, telexed, cabled or delivered, if to the
Grantor, at its address at One Energy Plaza, Jackson, Michigan 49201, Attention:
S. Kinnie Smith, Jr., Attention: Laura L. Mountcastle, and if to the Collateral
Agent, at its address specified in the Credit Agreement, or, as to either party,
at such other address as shall be designated by such party in a written notice
to the other party. All such notices and other communications shall, when mailed
or telecopied, be effective five days after when deposited in the mails, or when
telecopied.

         8.10. Continuing Security Interest; Assignments under Credit Agreement.
This Security Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the earlier to
occur of (x) the payment in full of all Secured Obligations now or hereafter
existing under the Credit Agreement, whether for principal, interest, fees,
expenses or otherwise, and all other amounts payable under this Security
Agreement and the termination of all of the Commitments or (y) the release by
the Collateral Agent of its security interest in all of the Collateral, (ii) be
binding upon the Grantor, its successors and assigns, and (iii) inure, together
with the rights and remedies of the Collateral Agent hereunder, to the benefit
of, and be enforceable by, the Collateral Agent and its successors, transferees
and assigns. Without limiting the generality of the foregoing clause (iii) and
Section 8.3 above, any Lender

                                       11
<PAGE>

may assign or otherwise transfer all or any portion of its rights and
obligations under the Credit Agreement (including, without limitation, all or
any portion of its Commitment, the Loans owing to it and any Promissory Note
held by it) to any other Person, and such other Person shall thereupon become
vested with all the benefits in respect thereof granted to such Lender herein or
otherwise, subject, however to the provisions of Sections 9.03 and 10.07 of the
Credit Agreement. Upon the earlier to occur of (A) the payment in full of all
Secured Obligations now or hereafter existing under the Credit Agreement,
whether for principal, interest, fees, expenses or otherwise, and all other
amounts payable under this Security Agreement and the termination of all of the
Commitments or (B) the release by the Collateral Agent of its security interest
in all of the Collateral, the security interest granted hereby shall terminate
and all rights to the Collateral shall revert to the Grantor. In addition, the
Collateral Agent shall release any Collateral as permitted or required pursuant
to Section 9.03 of the Credit Agreement. Upon any such termination, the
Collateral Agent will, at the Grantor's expense, return to the Grantor such of
the Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof and execute and deliver to the Grantor such documents as the
Grantor shall reasonably request to evidence such termination.

         8.11. WAIVER OF JURY TRIAL. THE GRANTOR AND THE COLLATERAL AGENT EACH
HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS SECURITY AGREEMENT OR ANY
OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED HEREUNDER OR
THEREUNDER.

         8.12. No Novation. It is the intention of the parties hereto that this
Security Agreement be merely an amendment and restatement of the Existing
Security Agreement and not constitute a novation of the grants of security or
the obligations thereunder.

                    [Remainder of page intentionally blank.]

                                       12
<PAGE>

         IN WITNESS WHEREOF, the Grantor and the Collateral Agent have executed
this Security Agreement as of the date first above written.

                                        CMS ENERGY CORPORATION

                                        By: /s/ LAURA L. MOUNTCASTLE
                                            --------------------------------
                                             Title: Vice President and Treasurer

AGREED AND ACKNOWLEDGED:

CITICORP USA, INC., as Collateral Agent


By: /s/ Dhaya Ranganathan
    -------------------------------
    Title: Vice President

                               Signature Page to
                  Third Amended and Restated Pledge Agreement
                                  (CMS Energy)

<PAGE>

                                   EXHIBIT "A"

               List of Pledged Securities and Pledged Instruments
                     (See Section 3.4 of Security Agreement)

<TABLE>
<CAPTION>
                                        STOCK OWNED BY CMS ENERGY CORPORATION:

         Issuer                Certificate Number        Number of Shares          Percentage Ownership Interest
         ------                ------------------        ----------------          -----------------------------
<S>                            <C>                       <C>                       <C>
    CMS Enterprises                   01                           100                         100%
        Company

Consumers Energy Company              04                    84,108,789                         100%
</TABLE>

<TABLE>
<CAPTION>
                     INSTRUMENTS OWNED BY CMS ENERGY CORPORATION

Obligor                     Amount                    Interest Rate             Maturity
- -------                     ------                    -------------             --------
<S>                         <C>                       <C>                       <C>
None
</TABLE>

<TABLE>
<CAPTION>
          GENERAL INTANGIBLES AND OTHER SECURITIES OR OTHER INVESTMENT
                   PROPERTY (CERTIFICATED AND UNCERTIFICATED)
                        OWNED BY CMS ENERGY CORPORATION:

Issuer                   Description of Collateral                          Percentage Ownership Interest
- ------                   -------------------------                          -----------------------------
<S>                      <C>                                                <C>
None
</TABLE>

                                      A-1

<PAGE>

                                   EXHIBIT "B"
                     (See Section 3.1 of Security Agreement)

              OFFICES IN WHICH FINANCING STATEMENTS HAVE BEEN FILED

                         Secretary of State of Michigan

                                      B-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-4.(P)
<SEQUENCE>12
<FILENAME>k82154aexv4wxpy.txt
<DESCRIPTION>AMENDED AND RESTATED GUARANTY DATED 12/08/2003
<TEXT>
<PAGE>

                                                                    EXHIBIT 4(p)

                                                                  EXECUTION COPY

                          AMENDED AND RESTATED GUARANTY

                  THIS AMENDED AND RESTATED GUARANTY (this "GUARANTY"), dated as
of December 8, 2003, is made by CMS Gas Transmission Company, a Michigan
corporation, and CMS Generation Co., a Michigan corporation (together with its
permitted successors and assigns under the Credit Agreement, each individually a
"GUARANTOR" and collectively, together with any additional Subsidiaries of the
Company (as defined below) that become a party to this Guaranty by executing a
supplement hereto in the form attached hereto as Annex I, the "GUARANTORS"), in
favor of the Lenders (the "LENDERS") parties to the Credit Agreement (as defined
below) and Citicorp USA, Inc. ("CUSA"), as Collateral Agent (the "COLLATERAL
AGENT") for the Lenders.

                             PRELIMINARY STATEMENTS

         (1)      Barclays Bank PLC, as administrative agent, the Collateral
Agent and the lenders named therein were parties to two Amended and Restated
Credit Agreements, each dated as of July 12, 2002, one (as amended, restated,
supplemented or otherwise modified from time to time, the "SHORT TERM CREDIT
AGREEMENT") maturing March 31, 2003 and the other (as amended, restated,
supplemented or otherwise modified prior to September 12, 2003, the "LONG TERM
CREDIT AGREEMENT") maturing December 15, 2003, with CMS Energy Corporation, a
corporation organized and existing under the laws of the State of Michigan (the
"COMPANY").

         (2)      The Guarantors entered into that certain Guaranty, dated as of
July 12, 2002 (as amended or supplemented prior to the date hereof, the
"EXISTING GUARANTY"), in favor of such lenders and the Collateral Agent with
respect to the obligations of the Company under the Short Term Credit Agreement
and the Long Term Credit Agreement.

         (3)      The obligations of the Company under the Short Term Credit
Agreement have been paid in full prior to the date hereof.

         (4)      CUSA, as administrative agent (in such capacity, the
"ADMINISTRATIVE AGENT"), the Collateral Agent, the Lenders and the Company
amended and restated the Long Term Credit Agreement pursuant to that certain
Third Amended and Restated Credit Agreement, dated as of September 12, 2003 (as
amended prior to the date hereof, the "EXISTING CREDIT AGREEMENT").

         (5)      The Administrative Agent, the Collateral Agent, the Lenders,
the Company and CMS Enterprises Company, a Michigan corporation ("ENTERPRISES"
and, collectively with the Company, the "BORROWERS"), have agreed to amend and
restate the Existing Credit Agreement pursuant to that certain Fourth Amended
and Restated Credit Agreement, dated as of the date hereof (as amended,
restated, supplemented or otherwise modified from time to time, the "CREDIT

<PAGE>

AGREEMENT"; the terms defined therein and not otherwise defined herein being
used herein as therein defined).

         (7)      The Guarantors will derive substantial direct and indirect
benefit from the transactions contemplated by the Credit Agreement.

         (8)      Is the intention of the parties hereto that this Guaranty be
merely an amendment and restatement of the Existing Guaranty and not constitute
a novation of the obligations thereunder.

         (9)      It is a condition precedent to the effectiveness of the Credit
Agreement that the Guarantors shall have executed and delivered this Guaranty.

                  NOW, THEREFORE, in consideration of the premises and in order
to induce the Lenders to make Extensions of Credit under the Credit Agreement,
the Guarantors hereby agree that the Existing Guaranty is amended and restated
in its entirety as follows:

         SECTION 1. Guaranty. Each of the Guarantors hereby unconditionally
guarantees, jointly with the other Guarantors and severally, the punctual
payment when due, whether at stated maturity, by acceleration or otherwise, of
all obligations of the Borrowers now or hereafter existing under the Credit
Agreements and the Promissory Notes, whether for principal, interest, fees,
expenses or otherwise (such obligations being the "OBLIGATIONS"), and agrees to
pay any and all expenses (including reasonable fees and expenses of counsel)
incurred by the Agents or the Lenders in enforcing any rights under this
Guaranty. Without limiting the generality of the foregoing, the Guarantor's
liability shall extend to all amounts which constitute part of the Obligations
and would be owed by any Borrower to the Collateral Agent, the Administrative
Agent or the Lenders under the Credit Agreement and the Promissory Notes but for
the fact that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving such Borrower.

         SECTION 2. Guaranty Absolute. Each of the Guarantors guarantee, jointly
with the other Guarantors and severally, that the Obligations will be paid
strictly in accordance with the terms of the Credit Agreement and the Promissory
Notes, regardless of any law, regulation or order now or hereafter in effect in
any jurisdiction affecting any of such terms or the rights of the Collateral
Agent, the Administrative Agent or the Lenders with respect thereto against the
Borrowers. The obligations of the Guarantors under this Guaranty are independent
of the Obligations, and a separate action or actions may be brought and
prosecuted against any or all of the Guarantors to enforce this Guaranty,
irrespective of whether any action is brought against either Borrower or whether
either Borrower is joined in any such action or actions. The liability of each
of the Guarantors under this Guaranty shall be absolute and unconditional
irrespective of:

         (a)      any lack of validity or enforceability of the Credit
Agreement, the Promissory Notes, any other Loan Document, or any other agreement
or instrument relating thereto;

         (b)      any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations, or any other amendment or
waiver of or any consent to departure from the Credit Agreement, the Promissory
Notes, or any other Loan Document, including, without

                                       2

<PAGE>

limitation, any increase in the Obligations resulting from the extension of
additional credit to any Borrower or any of the Borrowers' Subsidiaries or
otherwise;

         (c)      any taking, exchange, release or non-perfection of any
collateral, or any taking, release or amendment or waiver of or consent to
departure from any other guaranty, for all or any of the Obligations;

         (d)      the existence of any claim, set-off, defense or other right
which any of the Guarantors may have at any time against the Collateral Agent,
the Administrative Agent, any Lender or any other Person, whether in connection
with this Guaranty, the transactions contemplated in any of the other Loan
Documents, or any unrelated transaction;

         (e)      any manner of application of collateral, or proceeds thereof,
to all or any of the Obligations, or any manner of sale or other disposition of
any collateral for all or any of the Obligations or any other assets of any
Borrower or any of the Borrowers' Subsidiaries;

         (f)      any change, restructuring or termination of the corporate
structure or existence of any Borrower or any of the Borrowers' Subsidiaries; or

         (g)      any other circumstance which might otherwise constitute a
defense available to, or a discharge of, either Borrower or a guarantor.

         This Guaranty shall continue to be effective or be reinstated, as the
case may be, if at any time any payment of any of the Obligations is rescinded
or must otherwise be returned by the Collateral Agent, the Administrative Agent
or any Lender upon the insolvency, bankruptcy or reorganization of either
Borrower or otherwise, all as though such payment had not been made.

         SECTION 3. Rights of Contribution with Respect to Obligations.

         (a)      To the extent that any payment is made on the Obligations by
or on behalf of any Guarantor or Grantor (each, an "OBLIGOR") under or pursuant
to this Guaranty or any Pledge Agreement (an "OBLIGOR PAYMENT") which, taking
into account all other Obligor Payments then previously or concurrently made by
any other Obligor, exceeds the amount which otherwise would have been paid by or
attributable to such Obligor if each Obligor had paid the aggregate Obligations
satisfied by such Obligor Payment in the same proportion as such Obligor's
"Allocable Amount" (as defined below) (as determined immediately prior to such
Obligor Payment) bore to the aggregate Allocable Amounts of each of the Obligors
as determined immediately prior to the making of such Obligor Payment, then,
following payment in full in cash of the Obligations and the termination or
expiration of all Commitments, such Obligor shall be entitled to receive
contribution and indemnification payments from, and be reimbursed by, each other
Obligor for the amount of such excess, pro rata based upon their respective
Allocable Amounts in effect immediately prior to such Obligor Payment.

         (b)      As of any date of determination, the "ALLOCABLE AMOUNT" of any
Obligor shall be equal to the maximum amount of the claim which could then be
recovered from such Obligor with respect to the Obligations without rendering
such claim voidable or avoidable under Section 548 of Chapter 11 of the
Bankruptcy Code or under any applicable state Uniform Fraudulent Transfer Act,
Uniform Fraudulent Conveyance Act or similar statute or common law.

                                       3
<PAGE>

         (c)      This Section 3 is intended only to define the relative rights
of the Obligors, and nothing set forth in this Section 3 is intended to or shall
impair the obligations of the Obligors to pay any amounts as and when the same
shall become due and payable in accordance with the terms of this Guaranty or
any Pledge Agreement.

         (d)      The parties hereto acknowledge that the rights of contribution
and indemnification hereunder shall constitute assets of the Guarantors and the
other Obligors to which such contribution and indemnification is owing.

         (e)      The rights of the indemnifying Obligors against other Obligors
with respect to any payments on the Obligations shall be exercisable upon the
full payment of the Obligations in cash and the termination or expiry of the
Commitments.

         SECTION 4. Waiver. Each of the Guarantors hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations and this Guaranty and any requirement that the Collateral Agent, the
Administrative Agent or any Lender protect, secure, perfect or insure any
security interest or lien or any property subject thereto or exhaust any right
or take any action against either Borrower or any other Person or any
collateral.

         SECTION 5. Subrogation; Subordination of Intercompany Indebtedness.

         (a)      Subrogation. Notwithstanding any payment or payments made by
any Guarantor hereunder, or any setoff or application of funds of any Guarantor
by the Collateral Agent, the Administrative Agent or any Lender, each Guarantor
hereby irrevocably waives any and all rights of subrogation to the rights of the
Collateral Agent, the Administrative Agent and the Lenders against the Borrowers
and any and all rights of reimbursement, assignment, indemnification or implied
contract or any similar rights against the Borrowers or against any endorser or
other guarantor of all or any part of the Obligations until the Lenders' claims
with respect to the Obligations have been paid in full and the Commitments
terminated. If, notwithstanding the foregoing, any amount shall be paid to any
Guarantor on account of such subrogation rights at any time when all of the
Obligations shall not have been paid in full, such amount shall be held by such
Guarantor in trust for the Collateral Agent, the Administrative Agent and the
Lenders, segregated from other funds of such Guarantor, and shall, forthwith
upon receipt by such Guarantor, be turned over to the Collateral Agent in the
exact form received by such Guarantor (duly endorsed by such Guarantor to the
Collateral Agent), to be applied against the Obligations, whether matured or
unmatured.

         (b)      Subordination of Intercompany Indebtedness. Each Guarantor
agrees that any and all claims of any Guarantor against any other Loan Party
with respect to any "Intercompany Indebtedness" (as hereinafter defined), any
endorser, obligor or any other guarantor of all or any part of the Obligations,
or against any of its properties shall be subordinate and subject in right of
payment to the prior payment, in full and in cash, of all Obligations; provided,
that, for the avoidance of doubt, so long as no Event of Default shall be
continuing, each Guarantor may make loans to and receive payments in the
ordinary course with respect to Intercompany Indebtedness (as hereinafter
defined) from any other Loan Party to the extent not prohibited by the terms of
the Credit Agreement and the other Loan Documents. If all or any part of the
assets

                                       4
<PAGE>

of any Loan Party, or the proceeds thereof, are subject to any distribution,
division or application to the creditors of such Loan Party, whether partial or
complete, voluntary or involuntary, and whether by reason of liquidation,
bankruptcy, arrangement, receivership, assignment for the benefit of creditors
or any other action or proceeding, or if the business of any such Loan Party is
dissolved or if substantially all of the assets of any such Loan Party are sold,
then, and in any such event (such events being herein referred to as an
"INSOLVENCY EVENT"), any payment or distribution of any kind or character,
either in cash, securities or other property, which shall be payable or
deliverable upon or with respect to any indebtedness of any Loan Party to any
Guarantor ("INTERCOMPANY INDEBTEDNESS") shall be paid or delivered directly to
the Collateral Agent for application to the Obligations, whether matured or
unmatured. Should any payment, distribution, security or instrument or proceeds
thereof be received by any Guarantor upon or with respect to the Intercompany
Indebtedness after any Insolvency Event and prior to the satisfaction of all of
the Obligations and the termination or expiration of all Commitments of the
Lenders, such Guarantor shall receive and hold the same in trust, as trustee,
for the benefit of the Lenders and shall forthwith deliver the same to the
Collateral Agent, for the benefit of the Collateral Agent, the Administrative
Agent and the Lenders, in precisely the form received (except for the
endorsement or assignment of such Guarantor where necessary), for application to
the Obligations, whether matured or unmatured, and, until so delivered, the same
shall be held in trust by such Guarantor as the property of the Lenders.

         SECTION 6. Representations and Warranties. Each Guarantor hereby
represents and warrants as follows:

         (a)      Such Guarantor is a corporation, limited liability company or
limited partnership, as applicable, duly organized, validly existing and in good
standing under the laws of the state of its organization and is duly qualified
to do business in, and is in good standing in, all other jurisdictions where the
nature of its business or the nature of property owned or used by it makes such
qualification necessary.

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

         (c)      This Guaranty constitutes the legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in accordance
with its terms; subject to the qualification, however, that the enforcement of
the rights and remedies herein is subject to bankruptcy and other similar laws
of general application affecting rights and remedies of creditors and the
application of general principles of equity (regardless of whether considered in
a proceeding in equity or at law).

                                       5
<PAGE>

         (d)      No authorization or approval or other action by, and no notice
to or filing with, any governmental authority or regulatory body is required for
the due execution, delivery and performance by such Guarantor of this Guaranty.

         SECTION 7. Amendments, Etc. No amendment or waiver of any provision of
this Guaranty, and no consent to any departure by any Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Collateral Agent and, in the case of amendments, the Guarantors, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given, provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders, (a) limit the
liability of any Guarantor hereunder, (b) postpone any date fixed for payment
hereunder, or (c) change the number of Lenders required to take any action
hereunder.

         SECTION 8. Addresses for Notices. All notices and other communications
provided for hereunder shall be in writing (including facsimile communication)
and mailed, telecopied or delivered, if to a Guarantor, to its address at One
Energy Plaza, Jackson, Michigan 49201, Attention: General Counsel, and if to the
Collateral Agent, the Administrative Agent or any Lender, at its address
specified in the Credit Agreement, or, as to any party, at such other address as
shall be designated by such party in a written notice to each other party. All
such notices and other communications shall, when mailed, be effective five days
after when deposited in the mails, or when telecopied or delivered.

         SECTION 9. No Waiver; Remedies. No failure on the part of the
Collateral Agent, the Administrative Agent or any Lender to exercise, and no
delay in exercising, any right hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise of any right hereunder preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.

         SECTION 10. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default under the Credit Agreement and (ii) the
declaration that the Obligations shall become and be forthwith due and payable
or the automatic acceleration of the Obligations, in either case pursuant to
Section 8.02 of the Credit Agreement, each Lender is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender to or for the credit or the account of the applicable Guarantor against
any and all of the obligations of such Guarantor now or hereafter existing under
this Guaranty, whether or not such Lender shall have made any demand under this
Guaranty and although such obligations may be contingent and unmatured. Each
Lender agrees to notify promptly such Guarantor after any such set-off and
application made by such Lender, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Lender under this Section 10 are in addition to other rights and remedies
(including, without limitation, other rights of set-off) which such Lender may
have.

         SECTION 11. Continuing Guaranty; Assignments under Credit Agreement.
This Guaranty is a continuing guaranty and shall (i) remain in full force and
effect until the later of (x) the payment in full of the Obligations and all
other amounts payable under this Guaranty and (y)

                                       6
<PAGE>

the expiration or termination of the Commitments, (ii) be binding upon each
Guarantor, its successors and assigns, and (iii) inure to the benefit of, and be
enforceable by, the Collateral Agent, the Administrative Agent, the Lenders and
their respective successors, transferees and assigns. Notwithstanding the
foregoing, if all or substantially all of the assets of any Guarantor or 100% of
the stock of any Guarantor is sold in a transaction permitted under the Credit
Agreement, such Guarantor shall automatically be released from its obligations
under this Guaranty. Without limiting the generality of the foregoing clause
(iii), any Lender may assign or otherwise transfer all or any portion of its
rights and obligations under the Credit Agreement (including, without
limitation, all or any portion of its Commitment, the Loans owing to it and any
Promissory Note held by it) to any other Person, and such other Person shall
thereupon become vested with all the benefits in respect thereof granted to such
Lender herein or otherwise subject, however, to the provisions of Sections 9.04
and 10.07 of the Credit Agreement.

         SECTION 12. Waiver of Jury Trial. EACH OF THE GUARANTORS AND THE
COLLATERAL AGENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS GUARANTY
OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT DELIVERED
HEREUNDER OR THEREUNDER.

         SECTION 13. Governing Law; Submission to Jurisdiction. THIS GUARANTY
SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK (INCLUDING SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAWS OF THE STATE
OF NEW YORK, BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES). EACH
OF THE GUARANTORS AND THE COLLATERAL AGENT (I) IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY NEW YORK STATE COURT OR FEDERAL COURT SITTING IN NEW YORK
CITY IN ANY ACTION ARISING OUT OF ANY LOAN DOCUMENT, (II) AGREES THAT ALL CLAIMS
IN SUCH ACTION MAY BE DECIDED IN SUCH COURT, (III) WAIVES, TO THE FULLEST EXTENT
IT MAY EFFECTIVELY DO SO, THE DEFENSE OF AN INCONVENIENT FORUM AND (IV) CONSENTS
TO THE SERVICE OF PROCESS BY MAIL. A FINAL JUDGMENT IN ANY SUCH ACTION SHALL BE
CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS. NOTHING HEREIN SHALL
AFFECT THE RIGHT OF ANY PARTY TO SERVE LEGAL PROCESS IN ANY MANNER PERMITTED BY
LAW OR AFFECT ITS RIGHT TO BRING ANY ACTION IN ANY OTHER COURT. EACH GUARANTOR
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN WHICH THE
COLLATERAL AGENT MAY COMMENCE A PROCEEDING DESCRIBED IN THIS SECTION.

         SECTION 14. no Novation. This Guaranty amends and restates in its
entirety the Existing Guaranty and this Guaranty is in no way intended to
constitute a novation of any obligations owed by the Guarantors to the
Collateral Agent under the Existing Guaranty.

                  [Remainder of page intentionally left blank.]

                                       7
<PAGE>

         IN WITNESS WHEREOF, each of the Guarantors has caused this Guaranty to
be duly executed and delivered by its officer thereunto duly authorized as of
the date first above written.

                                             CMS GAS TRANSMISSION COMPANY

                                             By /s/ LAURA L. MOUNTCASTLE
                                                --------------------------------
                                             Title: Vice President and Treasurer

                                             CMS GENERATION CO.

                                             By /s/ LAURA L. MOUNTCASTLE
                                                --------------------------------
                                             Title: Vice President and Treasurer

                                Signature Page to
                          Amended and Restated Guaranty

<PAGE>

Acknowledged and Agreed as of
the date first above written:

CITICORP USA, INC., as Collateral Agent

By /s/ DHAYA RANGANATHAN
   ---------------------------
Title: Vice President

                                Signature Page to
                          Amended and Restated Guaranty

<PAGE>

                                     ANNEX I
                                       TO
                          AMENDED AND RESTATED GUARANTY

         Reference is hereby made to the Amended and Restated Guaranty (the
"GUARANTY") made as of December 8, 2003 by and among CMS Gas Transmission
Company, a Michigan corporation, and CMS Generation Co., a Michigan corporation
(each a "GUARANTOR" and along with any additional Subsidiaries of the Borrower
that become parties to the Guaranty, including the undersigned by the execution
of this Annex I to Guaranty, the "GUARANTORS") in favor of the Collateral Agent
for the ratable benefits of the Lenders under the Credit Agreement. Capitalized
terms used herein and not defined herein shall have the meanings given to them
in the Guaranty. By its execution below, the undersigned [Name of New
Guarantor], a __________, agrees to become a Guarantor under the Guaranty and
agrees to be bound by such Guaranty as if originally a party thereto. By its
execution below, the undersigned represents and warrants as to itself that all
of the representations and warranties contained in the Guaranty are true and
correct as of the date hereof.

         In witness whereof [Name of New Guarantor], a ________, has executed
and delivered this ANNEX I counterpart to the Guaranty as of their _______,
_____.

                                                [Name of New Guarantor]

                                                By______________________________
                                                Title:

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(G)
<SEQUENCE>13
<FILENAME>k82154aexv10wxgy.txt
<DESCRIPTION>CMS ENERGY'S SALARIED EMPLOYEES MERIT PROGRAM
<TEXT>
<PAGE>
                                                                   EXHIBIT 10(g)


                    SALARIED EMPLOYEES MERIT PROGRAM FOR 2003


SECTION 1. INTRODUCTION

         The objectives of the CMS Energy Salaried Employees Merit Program for
2003 ("SEM Plan" or the "Plan") are to conserve cash during the term of the Plan
and to provide an incentive for eligible employees to remain with the CMS
Companies. The effective date of the SEM Plan is January 1, 2003.

SECTION 2. DEFINITIONS

"CMS Energy Corporation" or "CMS" or the "Corporation" means CMS Energy
Corporation. The Plan also applies to all of the subsidiary companies of CMS
electing to be covered by it (the "CMS Companies").

"Change in Control of CMS Energy" means:

     1.  A Change in Control would be required to be reported in response to
         Item 1(a) of the Current Report on Form 8-K, as in effect on January 1,
         2003, pursuant to Sections 13 or 15(d) of the Exchange Act, whether or
         not the Corporation is then subject to such reporting requirement;

     2.  Any "person" or "group" within the meaning of Sections 13(d) and
         14(d)(2) of the Exchange Act becomes the "beneficial owner" as defined
         in Rule 13d-3 under the Exchange Act of more than 30% of the ten
         outstanding voting securities of the Corporation;

     3.  There is a sale by the Corporation within a three-year period of assets
         of the Corporation with either a book value or market value of 50% or
         more of the assets of the Corporation; or

     4.  A bidder as defined in Rule 14D-1(b) under the Exchange Act files a
         Tender Offer Statement with the Securities and Exchange Commission and
         the Corporation.

"Closing Market Price" means, with respect to any particular period, the closing
price for Common Stock, as published in The Wall Street Journal in its report of
the New York Stock Exchange Composite Transactions, for the last business day on
which the Exchange is open during such period. In the event that the Common
Stock ceases, for any reason, to be listed on the Exchange, the Corporation will
determine another reasonable method of calculating Closing Market Price or take
such other action, as it deems appropriate.

"Common Stock" means the Common Stock of CMS Energy Corporation.

"Credit Period" means a 3-month calendar quarter beginning on or after January
1, 2003 and ending the last day of March, June, September or December of 2003 or
2004. Credit Period shall also include January 31, 2005.

 "Earnings" means Earnings as defined in the Pension Plan for Employees of
Consumers Energy and other CMS Energy Corporation companies.



                                       1
<PAGE>

"Eligible Employee" means a salaried employee who satisfies both of the
qualification requirements listed below:

     1.  The employee receives a credit in a Special Compensation Account
         effective on or after January 1, 2003, and

     2.  The employee either

         (a)   Remains an active employee of the Corporation through January 31,
               2005, or

         (b)   Terminates employment prior to January 31, 2005 due to:

               (i) Retirement with Retirement Income or Disability Payments
                   under the Pension Plan for Employees of Consumers Energy and
                   other CMS Energy Corporation Employees, or

               (ii) Layoff for lack of work, or

               (iii) Death.

In addition to any other reason by which an employee may no longer be considered
an active employee, an employee will be deemed to have ceased being an active
employee upon termination of the employee's continuous service in accordance
with (i) the practices and procedures of CMS or the CMS Company by which the
employee is employed, respectively and (ii) as specified in the Employee
Handbook (except where continuous service is terminated solely because a
full-time employee becomes a part-time employee). An employee terminated for
cause forfeits all rights and benefits under the Plan.

If a person ceases to be an active employee for any reason other than those
mentioned in subparagraphs 2(b)(i) or 2(b)(ii), above, and is subsequently
reemployed by CMS or one of the CMS Companies prior to December 31, 2003,
eligibility, if any, will be based solely upon amounts credited to the Special
Compensation Account on or after the date of rehire.

"Leave of Absence" means any unpaid leave of greater than 30 days for which an
individual received authorization from CMS or one of the Companies for any
reason other than sickness or injury. Employees on leave for sickness or injury
will be treated as if they are active employees for the purposes of this Plan.

"Salaried Employee" means any exempt or non-exempt employee (as defined by the
Fair Labor Standards Act) of CMS or one of the CMS Companies, other than those
employees in a job classification that is represented by a labor union as of the
effective date of the Plan, provided however, that if any such labor union
elects to participate in the Plan, the employees represented by the labor union
may participate under the same terms and conditions as a non-exempt salaried
employee. Salaried employee does not include any person classified by the
Company as being a leased employee, independent contractor, temporary employee,
a co-op student, or an intern employee.

"Special Compensation Account" or "Account "means a record-keeping account
established by one of the CMS Companies for an Eligible Employee pursuant to the
Plan.



                                       2
<PAGE>

"Special Increase" means any amount that may be designated as a special increase
for a salaried employee on or after January 1, 2003 and prior to December 31,
2004.

"Special Merit Increase" means any amount that may be designated as a special
merit increase for a salaried employee on or after January 1, 2003 and prior to
December 31, 2003.

"Valuation Date" means the last day on which the New York Stock Exchange is open
during a Credit Period.

SECTION 3 SPECIAL MERIT INCREASES

The full amount of any Special Merit Increases for each pay period will be
credited to the Special Compensation Accounts for each Credit Period.

SECTION 4 OTHER SPECIAL INCREASES

Other amounts may be designated as Special Increases by CMS or one of the CMS
Companies from time to time. For example, Outstanding Contributor Awards, or any
amounts payable under the Annual Incentive Compensation Plans or other bonus or
incentive plan or agreement may be designated a Special Increase. The full
amount of any such Special Increases awarded for each pay period will be
credited to the Special Compensation Accounts for each Credit Period.

SECTION 5 DATE OF CREDIT

All amounts credited to the Special Compensation Accounts will be credited as of
the Credit Period during which a relevant paycheck is dated or, in the case of
dividends, the Credit Period in which the record date occurs. These Credit
Periods may or may not correspond with the Credit Period in which work was
performed or dividends were declared. Retroactive payments or adjustments in pay
status will be reflected as of the Credit Period during which the payment or
adjustment is made and will not be applied retroactively.

SECTION 6 SPECIAL COMPENSATION ACCOUNT

Special Compensation Accounts will accrue units based upon the Closing Market
Price of Common Stock at the end of each Credit Period and the amount of any
Special Merit Increases, Special Promotion Increases or other Special Increases
and Dividends credited to the Accounts during that Credit Period. One unit will
represent the dollar value of one share of Common Stock at the Closing Market
Price for that Credit Period. The total number of dollars credited for any
Special Merit Increase, Special Promotion Increases or other Special Increases
and Dividends credited to the Accounts during that Credit Period will be divided
by the Closing Market Price. The resulting number will be the number of units to
be accrued.

The Special Compensation Accounts will be general liabilities of CMS or the CMS
Companies. No money or stock will be set aside at the time the units are
accrued. No guarantee of the dollar value of the Special Compensation Accounts
can be made since the value of the Accounts will fluctuate with the price of
Common Stock. The Special Compensation Accounts will remain


                                       3
<PAGE>

fully unfunded unless there is a Change of Control of CMS Energy. In the event
of a Change of Control of CMS Energy, a trust will be established within no less
than 30 days of the Change in Control of CMS Energy, and sufficient stock to
satisfy the accrued obligations under this SEM Plan will be deposited into such
account. The trust as established, will be subject only to the general creditors
of CMS Energy or any successor entity or entities, but will not be available for
any other corporate obligations. No additional participants or obligations shall
be added to the trust as established without the consent of the majority of the
then participating eligible employees. Subsequent to the Change in Control of
CMS Energy, all additional amounts due under the terms of the SEM Plan shall be
added to the trust within 10 days of the accrual of the additional amount to any
Special Compensation Account.

SECTION 7 DIVIDENDS

If any dividends are paid on Common Stock after December 31, 2002 and prior to
the Valuation Date used for distribution, an amount equivalent to any such
dividends will be credited to the Special Compensation Accounts as if dividends
were reinvested in Common Stock at the end of the Credit Period in which the
record date occurs.

SECTION 8 CONDITION PRECEDENT

All Special Compensation Accounts are intended as an incentive for employees to
remain at work. Consequently, the payout for Special Compensation Accounts for
each employee is expressly conditioned upon the employee being an Eligible
Employee.

The failure of this condition to be satisfied by an employee for any reason
whatsoever will result in the cancellation of any Special Compensation Account
for that employee and will relieve the Company of any further obligations
hereunder.

SECTION 9 EFFECT ON OTHER EMPLOYEE BENEFIT PLANS

The Pension Plan will be amended so that, to the extent allowed by law, any
amounts credited to the Special Compensation Accounts for any Credit Period as
Special Merit Increases will be treated as though they are Earnings during the
year in which such Credit Period occurs for the purposes of calculating pension
benefits for Eligible Employees. Any increase or decrease in the value of the
Special Compensation Accounts due to dividends or changes in the price of Common
Stock will not be reflected in Earnings for the purposes of calculating pension
benefits.

Other than as specified above, no amounts credited to the Special Compensation
Accounts or payments or distributions under the Plan will be considered as
salary or earnings for purposes of any employee benefit plan or practice of CMS
or the CMS Companies, including but not limited to, the Pension Plan, The
Savings Plan, the Long Term Disability Plan, Paid Personal Absence or the Group
Term Life Insurance Plan.



                                       4
<PAGE>

SECTION 10 NATURE OF THE PLAN

The Plan is an unfunded plan of CMS or the CMS Companies and is not intended to
be a qualified employee benefit plan under the Internal Revenue Code. Any
amounts that may become due are to be satisfied from the general corporate funds
of CMS or the CMS Companies, which are subject to the claims of creditors.

SECTION 11 DISTRIBUTIONS

Eligible Employees will receive distribution of their Special Compensation
Accounts in 2005. Payment may be made in cash, shares of Common Stock, or any
combination thereof at the discretion of CMS or the CMS Companies.

Each Eligible Employee will be eligible to receive one share of Common Stock for
each unit in his or her Account, or cash or other Corporation marketable
securities having a value equal to the number of units in such account
multiplied by the Closing Market price of Common Stock as of the Valuation Date
first preceding the date on which distribution is made (except as provided in
Sections 13 and 14 below). Amounts shall be withheld for FICA tax, federal,
state and local income taxes and such other amounts as may be authorized or
required by law.

The units accrued to the Accounts will be distributed in March 2005 based upon
the Valuation Date as of January 31, 2005, or such earlier date as is the last
business day for the New York Stock Exchange in January, 2005. For an Eligible
Employee terminating employment on or before December 31, 2003 as set forth in
the definition at 2 (b)(i), (ii) or (iii), the units accrued to the Accounts
will be distributed as soon as practicable after January 1, 2004 but not later
than March 31, 2004 based upon the Valuation Date as of December 31, 2003 or
such earlier date as is the last business day for the New York Stock Exchange in
December, 2003. For an Eligible Employee who dies prior to January 1, 2005,
distribution will be made to the beneficiary as set forth at Section 14 in a
single payment in March 2005.

SECTION 12 SPECIAL RULES FOR EMPLOYEES ON LEAVE OF ABSENCE

Any individual who fails to return to active pay status at the expiration of a
leave of absence will be deemed to have ceased being an active employee
effective as of the date the leave of absence began.

Any individual who is on a leave of absence on January 1, 2003, and who is still
on leave of absence on March 1 of the year a distribution would be made in
accordance with Section 12, above, will not receive any distribution at that
time because it cannot be determined if such individual is an Eligible Employee
until the leave of absence expires or the employee returns to work, whichever
comes first. Therefore, CMS or the CMS Companies will designate an amount as a
number of shares of stock or an amount of cash or some combination thereof,
based upon the units in the individual's Account as of the Valuation Date which
would have been used had the individual not been on a leave of absence. If the
individual becomes an Eligible Employee,


                                       5

<PAGE>

those amounts, with no addition for interest, dividends or any other reason,
will be distributed to the individual not more than two months after the
individual becomes an Eligible Employee.

SECTION 13 OVERTIME

When an employee receives overtime pay subject to a Special Merit Increase or
other Special Increase, the Special Compensation Account will be credited
appropriately.

SECTION 14 BENEFICIARIES

If the employee is deceased on the day distribution would otherwise be made,
distribution may be made to beneficiaries determined in accordance with this
section, and CMS or the CMS Companies will be relieved of all liability if
distribution is made (i) to the estate of the decedent, or (ii) to the first of
the following classes in which there exist survivors of the decedent.

               1.  Spouse of the decedent.

               2.  Children of the decedent.

               3.  Parents of the decedent.

               4.  Brothers and sisters of the decedent.

Distribution may be delayed without payment of interest or any penalty or the
accumulation of dividends for a reasonable period during which CMS or the CMS
Companies may decide to whom to make a distribution.

SECTION 15 NO ASSIGNMENT OF BENEFITS

No interest in the Plan may be assigned or alienated by voluntary or involuntary
assignment. Any attempt by an employee or beneficiary to assign or alienate any
interest under the Plan will be void.

SECTION 16 CLAIMS PROCEDURE

Distributions under the Plan will normally be made without an employee having to
file a claim for benefits. However, an employee or beneficiary who does not
receive a distribution to which he believes he is entitled may present a claim
to the Sr. Vice President, Human Resources.

Each employee or beneficiary who wishes to file a claim for benefits will do so
in writing, addressed to the Sr. Vice President, Human Resources at CMS Energy,
One Energy Plaza, Jackson, MI 49201. All such claims must be submitted within
one year after the date the employee or beneficiary claims distribution should
have been made. Claims not made within one year will be forever barred.

Within 90 days after receipt of a claim in writing, the Sr. Vice President,
Human Resources will make a determination of the claim. If a claim is denied the
claimant will be advised in writing of the reason for the denial and of any
additional action or information that may be necessary to determine the claim.



                                       6
<PAGE>

An employee or beneficiary whose claim has been denied will have an opportunity
to request a review of the claim, and may submit a written statement regarding
issues relevant to his or her claim. Requests for review must be filed within 60
days after receipt of written notification of denial of a claim. The employee or
beneficiary will be given the opportunity for an oral hearing on the claim and a
determination will be made in writing within 30 days of the oral hearing or
within 30 days after receiving notice that the claimant does not desire an oral
hearing.

All interpretations of the Plan by the Sr. Vice President, Human Resources and
determinations of the Sr. Vice President, Human Resources concerning the Plan's
administration and application will be final and binding upon all persons.

SECTION 17 EARLY RESOLUTIONS OF POTENTIAL CLAIMS

Employees will receive periodic statements and are encouraged to review the
statements carefully for accuracy. Any questions as to the correctness of the
statements should be raised in writing with the Human Resource Department of CMS
or the CMS Companies as soon as possible after a problem is discovered. The
statement will be reviewed and any inaccuracies discovered will be corrected, or
an explanation of why the statement is correct will be provided to the employee.

There will be a rebuttable presumption that if any statement has not been
disputed within 6 months of the date delivered to the employee, such statement
is correct in all particulars. This presumption may be rebutted by clear and
convincing evidence.

SECTION 18 COMPLIANCE WITH LAW

This Plan will be construed, whenever possible, to be in conformity with the
requirements of any applicable Federal law or law of the state of Michigan. The
Plan is not, however, subject to the Employee Retirement Income Security Act
(ERISA). The Plan may be amended to the extent deemed necessary or desirable due
to Federal law or law of the State of Michigan, including but not limited to
income tax laws.

SECTION 19 TERMINATION OF PLAN

This Plan will terminate on December 31, 2005. No distribution will be made to
any person, nor will any other benefits of any kind be payable to any person
under this Plan after December 31, 2005.




                                       7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(I)
<SEQUENCE>14
<FILENAME>k82154aexv10wxiy.txt
<DESCRIPTION>ANNUAL OFFICER INCENTIVE COMPENSATION PLAN
<TEXT>
<PAGE>
                                                                   EXHIBIT 10(i)












                            ANNUAL OFFICER INCENTIVE
                  COMPENSATION PLAN FOR CMS ENERGY CORPORATION
                              AND ITS SUBSIDIARIES























Effective January 1, 2003
Approved by Committee on May 23, 2003








                                       1
<PAGE>





                            ANNUAL OFFICER INCENTIVE
        COMPENSATION PLAN FOR OFFICERS OF CMS ENERGY CORPORATION AND ITS
                                  SUBSIDIARIES

    I.   GENERAL PROVISIONS

         1.1   PURPOSE. The purpose of the Annual Officer Incentive Compensation
               Plan ("Plan") is to:

               (a)  Provide an equitable and competitive level of compensation
                    that will permit CMS Energy Corporation ("Company") and its
                    subsidiaries to attract, retain and motivate highly
                    competent Officers.

               (b)  No payments to Officers in the form of incentive
                    compensation shall be made unless pursuant to a plan
                    approved by the Committee and after express approval of the
                    Committee.

         1.2   EFFECTIVE DATE. The predecessor to the Plan was initially
               effective as of January 1, 1986 and that predecessor, as amended,
               is hereby terminated. The Plan as described herein, is effective
               as of January 1, 2003.

         1.3   DEFINITIONS. As used in this Plan, the following terms have the
               meaning described below:

               (a)  "Annual Award" means an annual incentive award granted under
                    the Plan.

               (b)  "Base Salary" means the base salary on January 1 of a
                    Performance Year, except as impacted by a Change in Status
                    as defined in Article V. Deferred merit increases from the
                    Salaried Employees Merit Program for the year 2003 shall be
                    added to Base Salary being paid in cash for the 2003 and
                    2004 Performance Years. Deferred merit increases from the
                    Salaried Employees Merit Program for the year 2004 shall be
                    added to Base Salary being paid in cash for the 2004
                    Performance Year. For purposes of the Plan, an Officer's
                    Base Salary must be subject to annual review and annual
                    approval by the Committee. For any Code Section 162(m)
                    Employee, the Base Salary upon which the Annual Award is
                    based will be the amount in effect on January 1 of the
                    Performance Year.

               (c)  "CMS Energy" means CMS Energy Corporation.

               (d)  "Code" means the Internal Revenue Code of 1986, as amended.

               (e)  "Code Section 162(m)" means the "Million Dollar Cap" that
                    may limit an employer's annual tax compensation deduction
                    for certain compensation of covered employees, unless the
                    compensation is based on specific performance goals that are
                    adopted and administered in accordance with requirements set
                    forth in Code Section 162(m) and regulations thereunder.

               (f)  "Code Section 162(m) Employee" means an employee whose
                    compensation is subject to the "Million Dollar Cap" under
                    Code Section 162(m). Generally, this is the CEO and the four
                    highest paid executive officers of the Company.

               (g)  "Committee" means the Committee on Organization and
                    Compensation of the Board of Directors of CMS Energy.

               (h)  "Common Stock" means the common stock of CMS Energy.


                                        2


<PAGE>




               (i)  "Company" means CMS Energy Corporation.

               (j)  "Corporate Free Cash Flow" (CFCF) means CMS Consolidated
                    Cash Flow from operating activities, excluding pension
                    contributions and adjusted for GCR Recovery, plus Cash Flow
                    from Investing Activities.

               (k)  "Earnings Per Share" (EPS) means the amount of ongoing net
                    income per outstanding CMS Energy Share.

               (l)  "Disability" means that a participant has terminated
                    employment with the Company or a Subsidiary and is entitled
                    to disability payments under the Pension Plan.

               (m)  "GCR Recovery" means actual/forecast incremental GCR
                    recovery during January and February of 2004 calculated as
                    actual/forecast GCR cycle billed sales times above budget
                    GCR factor.

               (n)  "Leave of Absence" for purposes of this Plan means a leave
                    of absence that has been approved by the Plan Administrator.

               (o)  "Officer" means an employee of the Company or a Subsidiary
                    in Salary Grade "E-3" or higher.

               (p)  "Outside Directors" means directors of CMS Energy who are
                    not employed by CMS Energy or a Subsidiary and satisfy the
                    requirements of an "Outside Director" under Code Section
                    162(m).

               (q)  "Pension Plan" means the Pension Plan for Employees of
                    Consumers Energy and Other CMS Energy Companies.

               (r)  "Performance Year" means the calendar year prior to the year
                    in which an Annual Award is made by the Committee.

               (s)  "Plan" means the Annual Officer Incentive Compensation Plan
                    for Officers of CMS Energy Corporation and Its Subsidiaries,
                    as effective January 1, 2003 and any amendments thereto.

               (t)  "Plan Administrator" means the Chairman and Chief Executive
                    Officer of CMS Energy, under the general direction of the
                    Outside Directors on the Committee.

               (u)  "Retirement" means that a Plan participant is no longer an
                    active employee and qualifies for a retirement benefit other
                    than a deferred vested retirement benefit under the Pension
                    Plan.

               (v)  "Subsidiary" means any direct or indirect subsidiary of the
                    Company.

         1.4   ELIGIBILITY. Officers are eligible for participation in the Plan.

         1.5   ADMINISTRATION OF THE PLAN.

               (a)  The Plan is administered by the Chairman and Chief Executive
                    Officer of CMS Energy under the general direction of the
                    Outside Directors who are members of the Committee.

               (b)  The Committee, no later than March 30th of the Performance
                    Year, will approve performance goals for the Performance
                     Year.



                                        3

<PAGE>




               (c)  The Committee, no later than March 30th of the calendar year
                    following the Performance Year, will review for approval
                    proposed Annual Awards for all Officer participants, as
                    recommended by the Chairman and CEO of the Company. All
                    proposed Annual Awards are subject to approval of the
                    Committee. Before the payment of any Annual Awards, the
                    Committee will certify in writing that the performance goals
                    were in fact satisfied in accordance with Code Section
                    162(m).

               (d)  The Committee reserves the right to modify the performance
                    goals with respect to unforeseeable circumstances or
                    otherwise exercise discretion with respect to proposed
                    Annual Awards as it deems necessary to maintain the spirit
                    and intent of the Plan, provided that such discretion will
                    be to decrease or eliminate, not increase, Annual Awards in
                    the case of any Code Section 162(m) Employees. The Committee
                    also reserves the right in its discretion to not pay Annual
                    Awards for a Performance Year. All discretionary decisions
                    of the Committee are final.

   II.   CORPORATE PERFORMANCE GOALS

         2.1   IN GENERAL. The composite Plan Performance Factor will depend on
               corporate performance in two areas: (1) the ongoing net income
               per outstanding CMS Energy share (EPS); and (2) the Corporate
               Free Cash Flow of CMS Energy (CFCF). There will be no payout
               under the Plan unless a composite Plan Performance Factor of at
               least 60% is achieved. The composite Plan Performance Factor to
               be used for payouts will be capped at a maximum of 200%. A table
               containing the composite Plan Performance Factors shall be
               created by the Committee for each Performance Year. The table for
               Performance Year 2003 is set forth below.

               (a)  EPS COMPONENT. EPS performance shall constitute 40% of the
                    composite Plan Performance Factor. The 100% EPS goal for the
                    2003 performance year is $.80 per share, and the EPS
                    component shall increase or decrease by 50% for each $.10
                    per share change in performance. (Mathematical interpolation
                    shall be used for actual results not shown in the table.)
                    There will be no payout under the plan unless at least $.60
                    per share is achieved (regardless of CFCF performance).

               (b)  CFCF COMPONENT. CFCF performance shall constitute 60% of
                    composite Plan Performance Factor. The 100% CFCF goal for
                    the 2003 performance year is $400 million, and the CFCF
                    component shall increase or decrease by 25% for each $50
                    million change in performance. (Mathematical interpolation
                    shall be used for actual results not shown in the table.)
                    There will be no payout under the plan unless at least $250
                    million is achieved (regardless of EPS performance).

                    COMPOSITE PERFORMANCE FACTORS FOR 2003 PERFORMANCE YEAR
<TABLE>
<CAPTION>
          CFCF
        Component      $250       $300      $350      $400      $450      $500      $550
       (Millions)
     ------------------------------------------------------------------------------------
<S>                   <C>       <C>        <C>       <C>       <C>      <C>       <C>
     EPS COMPONENT

     $ .60             NONE       NONE      NONE       60%       75%       90%      105%
     $ .70             NONE       NONE       65%       80%       95%      110%      125%
     $ .80             NONE        70%       85%      100%      115%      130%      145%
     $ .90              75%        90%      105%      120%      135%      150%      165%
     $1.00              95%       110%      125%      140%      155%      170%      185%
     $1.10             115%       130%      145%      160%      175%      190%      200%
     $1.20             135%       150%      165%      180%      195%      200%      200%
     $1.30             155%       170%      185%      200%      200%      200%      200%
</TABLE>

     Notes: Mathematical interpolation shall be used for actual results not
     shown in the table.

     Target Award is Bolded 100% and Maximum Award is Bolded 200%


                                        4



<PAGE>





  III.   ANNUAL AWARD FORMULA

         3.1        OFFICERS' ANNUAL AWARDS. Annual Awards for each eligible
                    Officer will be based upon a standard award percentage of
                    the Officer's Base Salary as in effect on January 1 of the
                    Performance Year. The standard award percentages are set
                    forth in the table below. The maximum amount that can be
                    awarded under this Plan for any Code Section 162(m) Employee
                    will not exceed $2.5 Million in any one Performance Year.
                    The total amount of an Officer's Annual Award shall be
                    computed according to the annual award formula set forth in
                    Section 3.2.
<TABLE>
<CAPTION>
                                                            SALARY          STANDARD AWARD AS A % OF
                               POSITION                      GRADE                BASE  SALARY
                       ------------------------------       ------                ------------
<S>                                                        <C>              <C>
                       Chairman & CEO                         E-9                     66%
                       President & COO/Vice Chairman          E-8                     57%
                       Executive Vice President               E-7                     53%
                       President, Subsidiary - Sr. VP         E-6                     49%
                       Senior Vice President                  E-5                     45%
                       Vice President                         E-4                     41%
                       Vice President                         E-3                     37%
</TABLE>
         3.2        Annual Awards for Officers will be calculated and made as
                    follows:

                      INDIVIDUAL AWARD = BASE SALARY TIMES
                   STANDARD AWARD % TIMES PERFORMANCE FACTOR %

   IV.   PAYMENT OF ANNUAL AWARDS

         4.1   CASH ANNUAL AWARD. All Annual Awards for a Performance Year for
               Salary Grades E-5 and below will be paid in cash no later than
               March 30th of the calendar year following the Performance Year
               provided that they first have been reviewed and approved by the
               Committee, and provided further that the Annual Award for a
               particular Performance Year has not been deferred voluntarily
               pursuant to Section 4.3. The amounts required by law to be
               withheld for income and employment taxes will be deducted from
               the Annual Award payments. All Annual Awards become the
               obligation of the company on whose payroll the Officer is
               enrolled at the time the Committee makes the Annual Award.

         4.2   MANDATORY DEFERRED ANNUAL AWARD. All Annual Awards for the 2003
               performance year for Salary Grade E-6 and above will be credited
               to the individual officer's Salaried Employees Merit Plan special
               account and will be paid in accordance with that plan.

         4.3   VOLUNTARY DEFERRED ANNUAL AWARDS.

               (a)  The payment of all or one-half of a cash Annual Award may be
                    deferred voluntarily at the election of an individual Plan
                    participant. A separate irrevocable election must be made in
                    the calendar year prior to the beginning of the Performance
                    Year. Any Annual Award made by the Committee after
                    termination of employment of an Officer or retirement of an
                    Officer is not eligible for a voluntary deferral and will be
                    paid in full in cash in the year in which the Annual Award
                    is made.

               (b)  A Voluntary Deferred Annual Award may be paid out in a lump
                    sum or in five or ten annual installments beginning in the
                    first January of the calendar year following retirement or
                    termination of employment. If an Annual Award is paid in
                    annual installments, each year the payment will be a
                    fraction of the balance equal to one over the number of
                    annual


                                        5


<PAGE>




                    installments remaining. In the event of the participant's
                    death, all deferred amounts will be paid in total in January
                    of the calendar year following the year of death.

               (c)  At the time of electing to voluntarily defer payment, the
                    participant must elect whether the sum deferred will be
                    treated by the Company or Subsidiary, as applicable, in
                    accordance with Paragraph I or Paragraph II below.

                    i.  A Voluntary Deferred Annual Award will be credited with
                        sums in lieu of interest from the first day of the month
                        following the month in which the Annual Award is
                        determined to the date of payment. The interest accrual
                        rate will be equivalent to the prime rate of interest as
                        reported in The Wall Street Journal, compounded
                        quarterly as of the first business day of January,
                        April, July and October of each year during the deferral
                        period. The prime rate in effect on the first business
                        day of January, April, July and October will be the
                        prime rate (described above) in effect for that
                        quarterly period.

                    ii. A Voluntary Deferred Annual Award will be treated as if
                        it were invested as an optional cash payment under the
                        CMS Energy Stock Purchase Plan including the
                        accumulation of any dividends. The value of the deferred
                        sum at the time of payment will be equal to the number
                        of dollars such an investment would have been worth as
                        measured by the purchase price of shares of Common Stock
                        using the average closing price, as reported in The Wall
                        Street Journal (NYSE - composite transactions) for the
                        first five trading days in the December previous to a
                        January payout.

                    The amount of any Voluntary Deferred Annual Award is to be
                    satisfied from the general corporate funds of the company on
                    whose payroll the Officer was enrolled prior to the payout
                    beginning and are subject to the claims of general creditors
                    of that company.

         4.4  PAYMENT IN THE EVENT OF DEATH.

               (a)  A participant may name the beneficiary of his or her choice
                    on a beneficiary form provided by the Company, and the
                    beneficiary shall receive payment in the event that the
                    Participant dies prior to receipt of either a cash Annual
                    Award, a Mandatory Deferred Annual Award or a Voluntary
                    Deferred Annual Award. If a beneficiary is not named, the
                    payment will be made to the first surviving class as
                    follows:

                            1. Widow or Widower
                            2. Children, per capita
                            3. Parents, per capita
                            4. Brothers and Sisters, per capita
                            5. Estate of the Deceased

               (b)  A participant may change beneficiaries at any time, and the
                    change will be effective as of the date the participant
                    completes and signs the beneficiary form, whether or not the
                    participant is living at the time the request is received by
                    the Company. However, the Company or the applicable
                    Subsidiary will not be liable for any payments made before
                    receipt of a written request.

    V.   CHANGE OF STATUS

         Payments in the event of a change in status will not apply if no awards
         are made for the performance year.

         5.1   PRO-RATA ANNUAL AWARDS.  A new Officer, whether hired or promoted
               to the position, or an Officer promoted to a higher salary grade
               during the Performance Year will receive a pro rata



                                        6




<PAGE>




               Annual Award based on the percentage of the Performance Year in
               which the employee is in a particular salary grade. An Officer
               whose salary grade has been lowered, but whose employment is not
               terminated, during the Performance Year will receive a pro rata
               Annual Award based on the percentage of the Performance Year in
               which the employee is in a particular salary grade.

         5.2   TERMINATION. An Officer whose employment is terminated pursuant
               to a violation of the Company code of conduct or other corporate
               policies will not be considered for an Annual Award.

         5.3   RESIGNATION. An Officer who resigns during or after a Performance
               Year will not be eligible for an Annual Award. If the resignation
               is due to reasons such as a downsizing or reorganization, or the
               ill health of the Officer or ill health in the immediate family,
               the Officer may petition the Committee and may be considered, in
               the discretion of the Committee, for a pro rata Annual Award. The
               Committee's decision to approve or deny the request for a pro
               rata Annual Award shall be final.

         5.4   DEATH, DISABILITY, RETIREMENT, LEAVE OF ABSENCE. An Officer whose
               status as an active employee is changed during the Performance
               Year due to death, Disability, Retirement, or Leave of Absence
               will receive a pro rata Annual Award.

   VI.   MISCELLANEOUS

         6.1   IMPACT ON BENEFIT PLANS. Payments made under the Plan will be
               considered as earnings for the Supplemental Executive Retirement
               Plan (Salary Grades E-3 through E-9) but not for purposes of the
               Employees' Savings Plan, Pension Plan, or other employee benefit
               programs.

         6.2   IMPACT ON EMPLOYMENT. Neither the adoption of the Plan nor the
               granting of any Annual Award under the Plan will be deemed to
               create any right in any individual to be retained or continued in
               the employment of the Company or any corporation within the
               Company's control group.

         6.3   TERMINATION OR AMENDMENT OF THE PLAN. The Company at any time
               may, in writing, terminate or amend the Plan.

         6.4   GOVERNING LAW. The Plan will be governed and construed in
               accordance with the laws of the State of Michigan.

         6.5   DISPUTE RESOLUTION. Any disputes related to the Plan should first
               be brought to the Plan Administrator. If that does not result in
               a mutually agreeable resolution, then the dispute shall be
               subject to final and binding arbitration before a single
               arbitrator selected by the parties to be conducted in Jackson,
               Michigan. The arbitration will be conducted and finished within
               90 days of the selection of the arbitrator. The parties shall
               share equally the cost of the arbitrator and of conducting the
               arbitration proceeding, but each party shall bear the cost of its
               own legal counsel and experts and other out-of-pocket
               expenditures.



                                        7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Y)
<SEQUENCE>15
<FILENAME>k82154aexv10wxyy.txt
<DESCRIPTION>PURCHASE AGREEMENT DATED JULY 9, 2003
<TEXT>
<PAGE>

                                                                   EXHIBIT 10(y)

                                                                  EXECUTION COPY

                                  $150,000,000

                             CMS ENERGY CORPORATION

                    3.375% Convertible Senior Notes due 2023

                               Purchase Agreement

                                                                    July 9, 2003

Citigroup Global Markets Inc.
   As Representative of the several Initial Purchasers
   named in Schedule I hereto
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

         CMS Energy Corporation, a Michigan corporation (the "Company"),
proposes to issue and sell to Citigroup Global Markets Inc. ("Citigroup") and
each of the other Initial Purchasers named in Schedule I hereto (collectively,
the "Initial Purchasers"), for whom Citigroup is acting as representative (in
such capacity, the "Representative"), an aggregate of $150,000,000 in principal
amount of its 3.375% Convertible Senior Notes due 2023 (the "Restricted Notes"),
subject to the terms and conditions set forth herein. The Restricted Notes are
to be issued pursuant to the provisions of the Indenture dated as of September
15, 1992 between the Company and Bank One Trust Company, N.A. (ultimate
successor to NBD Bank, National Association), as trustee (the "Trustee"), as
supplemented and amended by various supplemental indentures and as to be
supplemented by the Thirteenth Supplemental Indenture, to be dated as of July
16, 2003, establishing the terms of the Restricted Notes (the "Supplemental
Indenture") (as so supplemented, the "Indenture"). Capitalized terms used but
not defined herein shall have the meanings given to such terms in the Indenture.

         The Company has agreed to grant to the Initial Purchasers, severally
and not jointly, an option to purchase up to $50,000,000 aggregate principal
amount of additional Restricted Notes (the "Option Restricted Notes"), at a
price per Option Restricted Note equal to the price per Restricted Note. Such
option shall expire 45 days after the Time of Purchase (as defined below), and
may be exercised in whole or in part from time to time. Such option may be
exercised upon notice by the Representative to the Company setting forth the
aggregate principal amount of Option Restricted Notes as to which the several
Initial Purchasers are then exercising the option and the time, date and place
of payment and delivery for such Option Restricted Notes. Any such time and date
of payment and delivery shall be determined by the Representative, but shall not
be later than seven full business days after the exercise of said option, nor,
in any event, prior to the Time of Purchase, unless otherwise agreed upon by the
Representative and the Company. Any such time and date of payment and delivery
which falls after the Time of Purchase is referred to herein as a "Date of
Option Delivery". If the option is exercised as to all or any portion of the
Option Restricted Notes, each of the Initial Purchasers, severally and not
jointly, will purchase that proportion of the aggregate principal amount of
Option Restricted Notes then being purchased which the aggregate principal
amount of Restricted Notes each such Initial

<PAGE>

Purchaser has severally agreed to purchase as set forth herein bears to the
aggregate principal amount of Restricted Notes, subject to such adjustments as
the Representative in its discretion shall make to eliminate any sales or
purchases of an incremental principal amount of Option Restricted Notes less
than $1,000. As used herein, the term "Restricted Notes" shall include the
Restricted Notes and all or any portion of any Option Restricted Notes.

         Holders (including subsequent transferees) of the Restricted Notes will
have the registration rights set forth in the registration rights agreement in
the form attached hereto as Exhibit A (the "Registration Rights Agreement"), to
be dated the Time of Purchase, for so long as such Restricted Notes constitute
Registrable Securities (as defined in the Registration Rights Agreement).
Pursuant to the Registration Rights Agreement, the Company will agree to file
with the Securities and Exchange Commission (the "Commission") a shelf
registration statement (the "Registration Statement") pursuant to Rule 415 under
the Securities Act of 1933, as amended (the "Act") relating to the resale by
certain holders of the Restricted Notes and the sale of the shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), issuable
upon conversion of the Restricted Notes (the "Issuable Common Stock"), and to
use its best efforts to cause such Registration Statement to be declared and
remain effective and usable for the periods specified in the Registration Rights
Agreement. This Agreement, the Indenture, the Restricted Notes, the Issuable
Common Stock and the Registration Rights Agreement are hereinafter sometimes
referred to collectively as the "Operative Documents".

         1.       Offering Memorandum: The Restricted Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Act. The Company has prepared a preliminary
offering memorandum dated July 9, 2003 (the "Preliminary Offering Memorandum")
and a confidential offering memorandum dated July 10, 2003 (the "Offering
Memorandum") relating to the Restricted Notes, which incorporate by reference
documents filed by the Company pursuant to Section 13, 14 or 15 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As used
herein, the term "Preliminary Offering Memorandum" and "Offering Memorandum"
shall include respectively the documents incorporated by reference therein. Any
reference herein to the terms "amend", "amendment" or "supplement" with respect
to the Preliminary Offering Memorandum and Offering Memorandum shall be deemed
to include amendments or supplements to the Preliminary Offering Memorandum and
Offering Memorandum, and documents incorporated by reference after the time of
execution of this Agreement and prior to the termination of the offering of the
Restricted Notes by the Initial Purchasers.

         Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Restricted Notes and the Issuable
Common Stock (and all securities issued in exchange therefor or in substitution
thereof) shall bear the following legend:

         THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
         TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
         ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY AND THE COMMON
         STOCK ISSUABLE UPON CONVERSION HEREOF MAY NOT BE OFFERED, SOLD OR
         OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
         APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS

                                       2

<PAGE>

         SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE
         RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
         SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS
         SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY
         AND THE COMMON STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE OFFERED,
         RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) IN THE UNITED STATES
         TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
         INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT
         ("RULE 144A")) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
         PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
         INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
         144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
         ACCORDANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (III)
         PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
         PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) IN ACCORDANCE WITH
         ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
         ACT, (V) TO CMS ENERGY CORPORATION OR (VI) PURSUANT TO AN EFFECTIVE
         REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I)
         THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
         STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
         SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY
         FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN CLAUSE (A) ABOVE.

         THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE IN
         HEDGING TRANSACTIONS INVOLVING THIS SECURITY AND THE COMMON STOCK
         ISSUABLE UPON CONVERSION HEREOF UNLESS IN COMPLIANCE WITH THE
         SECURITIES ACT.

         THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
         SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND
         PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT
         ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION
         THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF
         RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL BE
         DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO ANY SUCH
         AMENDMENT OR SUPPLEMENT.

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS
         OF, A REGISTRATION RIGHTS AGREEMENT DATED AS

                                       3

<PAGE>

         OF JULY 16, 2003 ENTERED INTO BY THE COMPANY FOR THE BENEFIT OF CERTAIN
         HOLDERS OF SECURITIES FROM TIME TO TIME.

         2.       Purchase and Sale: Upon the basis of the representations and
warranties and subject to the terms and conditions herein set forth, the Company
agrees to sell to the respective Initial Purchasers, severally and not jointly,
and the respective Initial Purchasers, severally and not jointly, agree to
purchase from the Company at the purchase price specified in Schedule I hereto
(the "Purchase Price"), the respective principal amounts of Restricted Notes set
opposite their names in Schedule I hereto.

         The Company hereby agrees that, without the prior written consent of
the Representative, it will not offer, sell, contract to sell or otherwise issue
debt securities substantially similar to the Restricted Notes for a period from
the date of the execution of this Agreement until the Time of Purchase.

         3.       Terms of Offering: The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Restricted Notes purchased hereunder on the terms set forth in the Offering
Memorandum solely to persons whom the Initial Purchasers reasonably believe to
be "qualified institutional buyers" as defined in Rule 144A under the Act or, at
the time any buy order for the Restricted Notes was or is originated, were or
are outside the United States and were or are not "U.S. persons" within the
meaning of Regulation S under the Act (such persons being referred to herein as
the "Eligible Purchasers"). The Initial Purchasers will offer the Restricted
Notes to Eligible Purchasers initially at a price equal to 100% of the principal
amount thereof. Such price may be changed at any time without notice.

         4.       Payment and Delivery: Payment for the Restricted Notes shall
be made to the Company in federal or other immediately available funds in New
York City (or such other place or places of payment as shall be agreed upon by
the Company and the Representative in writing), upon the delivery of the
Restricted Notes at the offices of Pillsbury Winthrop LLP ("PW"), at One Battery
Park Plaza, New York, New York 10004-1490 (or such other place or places of
delivery as shall be agreed upon by the Company and the Representative) to the
Representative for the respective accounts of the Initial Purchasers against
receipt therefor signed by the Representative on behalf of themselves and as
agent for the other Initial Purchasers. Such payment and delivery shall be made
at 10:00 A.M., New York time on July 16, 2003 (or on such later business day as
shall be agreed upon by the Company and the Representative in writing), unless
postponed in accordance with the provisions of Section 11 hereof. The day and
time at which payment and delivery for the Restricted Notes (without regard to
any Option Restricted Notes) are to be made is herein called the "Time of
Purchase".

         In addition, in the event that the Initial Purchasers have exercised
their option to purchase any or all of the Option Restricted Notes, payment of
the purchase price for, and delivery of, such Option Restricted Notes shall be
made at the above mentioned offices, or at such other place as shall be agreed
upon by the Representative and the Company on the relevant Date of Option
Delivery as specified in the notice from the Representative to the Company.

                                       4

<PAGE>

         Delivery of the Restricted Notes shall be made in definitive, fully
registered form or global form, as specified by the Representative, in
authorized denominations registered in such names as the Representative may
request in writing to the Company not later than two full business days prior to
the Time of Purchase, or, if no such request is received, in the names of the
respective Initial Purchasers for the respective principal amounts of Restricted
Notes set forth opposite the name of each Initial Purchaser in Schedule I, in
denominations selected by the Company. The certificates evidencing the
Restricted Notes shall be delivered at the Time of Purchase for the account of
the Initial Purchasers, with any transfer taxes payable in connection with the
transfer of the Restricted Notes to the Initial Purchasers duly paid, against
payment of the Purchase Price therefor.

         The Company agrees to make the Restricted Notes available for
inspection by the Initial Purchasers at the offices of PW at least 24 hours
prior to the Time of Purchase, in definitive, fully registered form, and as
requested pursuant to the preceding paragraph.

         5.       Conditions of Initial Purchasers' Obligations: The several
obligations of the Initial Purchasers hereunder are subject to the accuracy of
the representations and warranties, at and as of the Time of Purchase, on the
part of the Company, and to the following other conditions:

                  (a)      That all legal proceedings to be taken in connection
with the issue and sale of the Restricted Notes shall be reasonably satisfactory
in form and substance to PW, counsel to the Initial Purchasers.

                  (b)      That, at the Time of Purchase, the Representative
shall be furnished with the following opinions, dated the Time of Purchase:

                           (i)      Opinion of Robert C. Shrosbree, Esq.,
         Assistant General Counsel of the Company, substantially to the effect
         set forth in Exhibit B attached hereto;

                           (ii)     Opinion of Skadden, Arps, Slate, Meagher &
         Flom LLP, counsel to the Company, substantially to the effect set forth
         in Exhibit C-1 and Exhibit C-2 attached hereto; and

                           (iii)    Opinion of PW, counsel to the Initial
         Purchasers, in a form satisfactory to the Initial Purchasers.

                  (c) (i) That, on the date hereof and on the date of the Time
of Purchase, the Representative shall have received a letter from Ernst & Young
LLP ("E&Y") in form and substance satisfactory to the Initial Purchasers, dated
as of such date, (i) confirming that they are independent public accountants
with respect to the Company within the meaning of the Act and the applicable
published rules and regulations of the Commission thereunder, (ii) stating that
in their opinion the financial statements examined by them and included or
incorporated by reference in the Preliminary Offering Memorandum or Offering
Memorandum, as the case may be, complied as to form in all material respects
with the applicable accounting requirements of the Commission, including the
applicable published rules and regulations of the Commission, and (iii)
covering, as of a date not more than five business days prior to the date of
such letter, such other matters as the Initial Purchasers reasonably request.

                                       5

<PAGE>

                           (ii)     That, on the date hereof, the Representative
shall have received a letter from each of PricewaterhouseCoopers LLP and Price
Waterhouse, each in form and substance satisfactory to the Initial Purchasers,
dated as of such date, (i) confirming that each are independent public
accountants with respect to (A) the Company and the Midland Cogeneration Venture
Limited Partnership, in the case of PricewaterhouseCoopers LLP, and (B) the
Company and Jorf Lasfar Energy Company S.C.A., in the case of Price Waterhouse,
each within the meaning of the Act and the applicable published rules and
regulations of the Commission thereunder, (ii) stating that in each of their
opinions the financial statements examined by them and referred to in the letter
of E&Y complied as to form in all material respects with the applicable
accounting requirements of the Commission, including the applicable published
rules and regulations of the Commission, and (iii) covering, as of a date not
more than five business days prior to the date of such letter, such other
matters as the Initial Purchasers reasonably request.

                  (d)      Subsequent to the date hereof or, if earlier, the
dates as of which information is given in the Offering Memorandum (exclusive of
any amendment or supplement thereto), there shall not have been (i) any change
or decrease specified in the letter or letters referred to in Section 5(c)
hereof or (ii) any change, or any development involving a prospective change, in
or affecting the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries taken as a whole,
except as set forth in or contemplated in the Offering Memorandum (exclusive of
any amendment or supplement thereto), the effect of which, in any case referred
to in clause (i) or (ii) above, is, in the judgment of the Representative, so
material and adverse as to make it impractical or inadvisable to proceed with
the offering or delivery of the Restricted Notes as contemplated in the Offering
Memorandum (exclusive of any amendment or supplement thereto).

                  (e)      That, at the Time of Purchase, the Company shall have
delivered to the Representative a certificate of an executive officer of the
Company to the effect that, to the best of his or her knowledge, information and
belief, (i) there shall have been no material adverse change in the condition
(financial or otherwise), earnings, business or properties of the Company from
that set forth in the Offering Memorandum (other than changes referred to in or
contemplated by the Offering Memorandum) and (ii) the representations and
warranties of the Company in this Agreement are true and correct on and as of
the Time of Purchase with the same effect as if made at the Time of Purchase,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied hereunder at or prior to the
Time of Purchase.

                  (f)      That the Company shall have executed and delivered
the Registration Rights Agreement and shall have furnished the Representative
signed counterparts of the Supplemental Indenture.

                  (g)      That the Company shall have performed such of its
obligations under this Agreement as are to be performed at or before the Time of
Purchase by the terms hereof.

                  (h)      That the Company shall have complied with the
provisions of Section 6(c) hereof with respect to the furnishing of the Offering
Memorandum.

                                       6

<PAGE>

                  (i)      That, at the Time of Purchase, the Restricted Notes
shall be rated at least B+ by Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc. ("S&P"), B3 by Moody's Investors Service, Inc.
("Moody's") and B+ by Fitch, Inc. ("Fitch"), and the Company shall have
delivered to the Representative a letter, dated the Time of Purchase, from each
such rating agency, or other evidence reasonably satisfactory to the
Representative, confirming that the Restricted Notes have been assigned such
ratings; and between the date of the execution of this Agreement and the Time of
Purchase, there has been no downgrading or withdrawal of the investment ratings
of the Restricted Notes, securities of the Company or securities of Consumers
Energy Company by any nationally recognized statistical rating agency, and no
such rating agency shall have publicly announced that it has under surveillance
or review, with possible negative implications, any such rating.

                  (j)      In the event that the Initial Purchasers exercise
their option to purchase all or any portion of the Option Restricted Notes, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall be true
and correct as of each Date of Option Delivery, and, at the relevant Date of
Option Delivery, the Representative shall have received:

                           (1)      a certificate, dated such Date of Option
                  Delivery, of an executive officer of the Company confirming
                  that the certificate delivered at the Time of Purchase
                  pursuant to Section 5(e) hereof remains true and correct as of
                  such Date of Option Delivery;

                           (2)      opinions of Robert C. Shrosbree, Esq.,
                  Assistant General Counsel of the Company, Skadden, Arps,
                  Slate, Meagher & Flom LLP, counsel to the Company, and PW,
                  counsel to the Initial Purchasers, dated such Date of Option
                  Delivery, relating to the Option Restricted Notes and
                  otherwise to the same effect as the opinions required by
                  Section 5(b) hereof; and

                           (3)      a letter from E&Y, dated such Date of Option
                  Delivery, substantially in the same form and substance as the
                  letter furnished to the Representative pursuant to Section
                  5(c) hereof, except that the date specified in Section
                  5(c)(iii) hereof shall be a date not more than five days prior
                  to such Date of Option Delivery.

                  (k)      At the Time of Purchase, the Issuable Common Stock
shall have been duly listed, subject only to official notice of issuance, on The
New York Stock Exchange.

                  (l)      The Restricted Notes shall have been designated as
PORTAL-eligible securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD") and the Restricted
Notes shall be eligible for clearance and settlement through The Depository
Trust Company ("DTC").

                  (m)      At the Time of Purchase, the Company shall have
furnished to the Representative a letter substantially in the form of Exhibit D
hereto addressed to the Representative from each person listed in Schedule II
hereto.

                                       7

<PAGE>

                  (n)      That any additional documents or agreements
reasonably requested by the Initial Purchasers or their counsel to permit the
Initial Purchasers to perform their obligations or permit their counsel to
deliver opinions hereunder shall have been provided to them.

         6.       Certain Covenants of the Company: In further consideration of
the agreements of the Initial Purchasers herein contained, the Company covenants
as follows:

                  (a)      To advise the Representative promptly and, if
requested by the Representative, confirm such advice in writing, of the issuance
by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Restricted Notes for
offering or sale in any jurisdiction designated by the Initial Purchasers
pursuant to Section 6(d) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory authority
for such purpose. The Company shall use its best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of any
Restricted Notes under any state securities or blue sky laws and, if at any time
any state securities commission or other federal or state regulatory authority
shall issue an order suspending the qualification or exemption of any Restricted
Notes under any state securities or blue sky laws, the Company shall use its
best efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.

                  (b)      To deliver to the Initial Purchasers, without charge,
as soon as practicable, as many copies of the Offering Memorandum (as
supplemented or amended if the Company shall have made any supplements or
amendments thereto) as the Initial Purchasers may reasonably request. Subject to
the Initial Purchasers' compliance with their representations and warranties and
agreements set forth in Section 8 hereof, the Company consents to the use of the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.

                  (c)      For such period of time as the Initial Purchasers are
required by law or customary practice to deliver an offering memorandum in
respect of the Restricted Notes, if any event shall have occurred as a result of
which it is necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in light of the circumstances when the Offering
Memorandum is delivered to an Eligible Purchaser, not misleading, or if it
becomes necessary to amend or supplement the Offering Memorandum to comply with
law, to forthwith prepare an appropriate amendment or supplement to the Offering
Memorandum and deliver to the Initial Purchasers, without charge, such number of
copies thereof as may be reasonably requested.

                  (d)      To use its best efforts to qualify the Restricted
Notes for offer and sale under the securities or blue sky laws of such
jurisdictions as the Initial Purchasers may designate and to pay (or cause to be
paid), or reimburse (or cause to be reimbursed) the Initial Purchasers and their
counsel for, reasonable filing fees and expenses in connection therewith
(including the reasonable fees and disbursements of counsel to the Initial
Purchasers and filing fees and expenses paid and incurred prior to the date
hereof), provided, however, that the Company shall not be required to qualify to
do business as a foreign corporation or as a securities dealer or to file a
general consent to service of process or to file annual reports or to comply
with any other requirements deemed by the Company to be unduly burdensome.

                                       8

<PAGE>

                  (e)      So long as the Restricted Notes are outstanding, (i)
to mail and make generally available as soon as practicable after the end of
each fiscal year to the record holders of the Restricted Notes a financial
report of the Company on a consolidated basis, all such financial reports to
include a consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.

                  (f)      So long as any of the Restricted Notes or Issuable
Common Stock are "restricted securities" within the meaning of Rule 144(a)(3)
under the Act and remain outstanding and during any period in which the Company
is not subject to Section 13 or 15(d) of the Exchange Act, to make available to
any holder of Restricted Notes in connection with any sale thereof and any
prospective purchaser of such Restricted Notes from such holder, the information
required by Rule 144A(d)(4) under the Act.

                  (g)      To pay all expenses, fees and taxes (other than
transfer taxes on sales by the respective Initial Purchasers) in connection with
the issuance and delivery of the Restricted Notes and the Issuable Common Stock,
except that the Company shall be required to pay the fees and disbursements
(other than disbursements referred to in Section 6(d) hereof) of PW, counsel to
the Initial Purchasers, only in the events provided in Section 6(h) hereof, the
Initial Purchasers hereby agreeing to pay such fees and disbursements in any
other event, and that except as provided in such Section 6(h), the Company shall
not be responsible for any out-of-pocket expenses of the Initial Purchasers in
connection with their services hereunder.

                  (h)      If the Initial Purchasers shall not take up and pay
for the Restricted Notes due to the failure of the Company to comply with any of
the conditions specified in Section 5 hereof, or, if this Agreement shall be
terminated in accordance with the provisions of Section 12 hereof prior to the
Time of Purchase or the Date of Delivery, as the case may be, to pay the
reasonable fees and disbursements of PW, counsel to the Initial Purchasers, and,
if the Initial Purchasers shall not take up and pay for the Restricted Notes due
to the failure of the Company to comply with any of the conditions specified in
Section 5 hereof, to reimburse the Initial Purchasers for their reasonable
out-of-pocket expenses not to exceed $10,000 incurred in connection with the
financing contemplated by this Agreement.

                  (i)      During the period referred to in Section 6(c) hereof,
to not amend or supplement the Offering Memorandum unless the Company has
furnished the Initial Purchasers and counsel to the Initial Purchasers with a
copy for their review and comment a reasonable time prior to the making of such
amendment or supplement and has reasonably considered any comments of the
Initial Purchasers, and not to make any such amendment or supplement to which
such counsel shall reasonably object on legal grounds in writing after
consultation with the Initial Purchasers.

                                       9

<PAGE>

                  (j)      During the period referred to in Section 6(c) hereof,
to furnish the Initial Purchasers with copies of all documents required to be
filed with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.

                  (k)      During the period referred to in Section 6(c) hereof,
to comply with all requirements under the Exchange Act relating to the timely
filing with the Commission of its reports pursuant to Section 13 or 15(d) of the
Exchange Act and of its proxy statements pursuant to Section 14 of the Exchange
Act.

                  (l)      To comply in all material respects with all of its
agreements set forth in the Registration Rights Agreement.

                  (m)      To obtain the approval of DTC for "book-entry"
transfer of the Restricted Notes, and to comply in all material respects with
all of its agreements set forth in the representation letter or letters of the
Company to DTC relating to the approval of the Restricted Notes by DTC for
"book-entry" transfer.

                  (n)      Not to (or permit any affiliate (as defined in Rule
144 under the Act) to) sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Restricted Notes to the Initial
Purchasers or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the Restricted Notes under the Act.

                  (o)      Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Restricted Notes.

                  (p)      During the period of two years after the Time of
Purchase, not to, and not permit any of its affiliates (as defined in Rule 144
under the Act) to, resell any of the Restricted Notes which constitute
"restricted securities" under Rule 144 under the Act that have been reacquired
by any of them.

                  (q)      To take all reasonable action necessary to enable
S&P, Moody's and Fitch to provide their respective credit ratings of the
Restricted Notes.

                  (r)      Until the second anniversary of the Time of Purchase,
not to, and not to permit any affiliates under its control to, purchase any
Restricted Notes or Issuable Common Stock unless, immediately upon any such
purchase, the Company or any such affiliate shall (1) submit such Restricted
Notes to the Trustee for cancellation and/or (2) treat such Issuable Common
Stock as treasury shares ineligible for re-issuance.

                  (s)      Not to, and not to permit any of its affiliates or
any person acting on its or their behalf (other than the Initial Purchasers, as
to which no agreement is made) to, directly or indirectly, make offers or sales
of any security, or solicit offers to buy any security, under circumstances that
would require the registration of the Restricted Notes or the Issuable Common
Stock under the Act.

                  (t)      The Company will reserve and keep available at all
times, free of preemptive rights, the full number of shares of Issuable Common
Stock.

                                       10

<PAGE>

                  (u)      The Company will use its best efforts to effect the
listing of the Issuable Common Stock, prior to the Time of Purchase, on The New
York Stock Exchange subject only to official notice of issuance.

                  (v)      The Company will not for a period of 60 days
following the date hereof, without the prior written consent of the
Representative, offer, sell or contract to sell, or otherwise dispose of (or
enter into any transaction which is designed to, or might reasonably be expected
to, result in the disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) by the Company or any
affiliate of the Company or any person in privity with the Company or any
affiliate of the Company), directly or indirectly, or announce the offering of,
any shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock (other than the Restricted Notes);
provided, however, that the Company may issue and sell Common Stock or
securities convertible into or exchangeable for Common Stock pursuant to any
employee stock option plan, stock ownership plan or dividend reinvestment plan
of the Company existing and in effect at the date hereof, and the Company may
issue Common Stock issuable upon the conversion of securities or the exercise of
warrants existing and outstanding at the date hereof.

                  (w)      Any information provided by the Company to publishers
of publicly available databases about the terms of the Restricted Notes shall
include a statement that the Restricted Notes have not been registered under the
Act and are subject to restrictions under Rule 144A under the Act and Regulation
S under the Act.

                  (x)      The Company will not take, directly or indirectly,
any action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Restricted Notes.

                  (y)      Between the date hereof and the Time of Purchase, the
Company will not do or authorize any act or thing that would result in an
adjustment of the conversion price.

                  (z)      The Company will cause the proceeds of the issuance
and sale of the Restricted Notes to be applied for the purposes described in the
Offering Memorandum.

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

                  (a)      Each of the Preliminary Offering Memorandum and the
Offering Memorandum does not, and any supplement or amendment to it will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this Section 7(a)
shall not apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment thereto)
based upon information relating to the Initial Purchasers furnished to the
Company in writing by the Initial Purchasers expressly for use therein. No stop
order preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the

                                       11

<PAGE>

transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.

                  (b)      The documents incorporated by reference in the
Preliminary Offering Memorandum and the Offering Memorandum, when they were
filed (or, if an amendment with respect to any such document was filed, when
such amendment was filed) with the Commission, conformed in all material
respects to the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder, and any further documents so filed and
incorporated by reference will, when they are filed with the Commission, conform
in all material respects to the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder; none of such
documents, when it was filed (or, if an amendment with respect to any such
document was filed, when such amendment was filed), 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, in light of the
circumstances under which they were made, not misleading; and no such further
document, when it is filed, will contain an untrue statement of a material fact
or will omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading.

                  (c)      The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Michigan and has all requisite authority to own or lease its properties and
conduct its business as described in the Preliminary Offering Memorandum and the
Offering Memorandum and to consummate the transactions contemplated hereby, and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business as described in the
Preliminary Offering Memorandum and the Offering Memorandum or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company.

                  (d)      The Restricted Notes are in the form contemplated by
the Indenture and have been duly authorized by the Company. At the Time of
Purchase, the Restricted Notes will have been duly executed and delivered by the
Company and, when authenticated by the Trustee in the manner provided for in the
Indenture and delivered against payment therefor as provided in this Agreement,
will constitute 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 affecting creditors' rights generally or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding at law or in equity), will be entitled to the security afforded by
the Indenture equally and ratably with all securities outstanding thereunder,
and will be convertible into Common Stock in accordance with their terms. Each
of the Restricted Notes and the Issuable Common Stock conform in all material
respects to the descriptions thereof in the Preliminary Offering Memorandum and
the Offering Memorandum. Each significant subsidiary (as defined in Rule 405
under the Act, and hereinafter called a "Significant Subsidiary") of the Company
has been duly organized and is validly existing and in good standing under the
laws of the jurisdiction of its formation, has all requisite authority to own or
lease its properties and conduct its business as described in the Offering
Memorandum and is duly qualified to transact business and is in good standing in
each jurisdiction in which the conduct of its business as

                                       12

<PAGE>

described in the Offering Memorandum or its ownership or leasing of property
requires such qualification, except to the extent that the failure to be so
qualified or be in good standing would not have a material adverse effect on the
Company and its Significant Subsidiaries, taken as a whole.

                  (e)      This Agreement has been duly authorized, executed and
delivered by the Company, and the Company has full corporate power and authority
to enter into this Agreement.

                  (f)      The Registration Rights Agreement has been duly
authorized by the Company. At the Time of Purchase, the Registration Rights
Agreement will have been duly executed and delivered by the Company and will
constitute a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity). The Registration Rights Agreement conforms in
all material respects to the description thereof in the Preliminary Offering
Memorandum and the Offering Memorandum.

                  (g)      The Indenture has been duly authorized by the
Company. At the Time of Purchase, the Indenture will have been duly executed and
delivered by the Company and will constitute a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws 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
Indenture conforms in all material respects to the description thereof in the
Preliminary Offering Memorandum and the Offering Memorandum; and the Indenture
conforms to the requirements of the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act").

                  (h)      Except for the outstanding shares of preferred stock
of Consumers Energy Company, the 8.36% Trust Originated Preferred Securities of
Consumers Power Company Financing I, the 8.20% Trust Originated Preferred
Securities of Consumers Energy Company Financing II, the 9 1/4% Trust Originated
Preferred Securities of Consumers Energy Company Financing III, the 9.00% Trust
Preferred Securities of Consumers Energy Company Financing IV, the 7 3/4%
Convertible Quarterly Income Preferred Securities of CMS Energy Trust I and the
7 1/4% PEPS Units of CMS Energy Trust III, all of the outstanding capital stock
of each of Consumers Energy Company and CMS Enterprises Company is owned
directly or indirectly by the Company, free and clear of any security interest,
claim, lien or other encumbrance (except as disclosed in the Offering
Memorandum) or preemptive rights, and there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interest in any of Consumers Energy Company and
CMS Enterprises Company or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any such capital stock, any
such convertible or exchangeable securities or any such rights, warrants or
options.

                  (i)      The Company has all necessary consents,
authorizations, approvals, orders, certificates and permits of and from, and has
made all declarations and filings with, all federal,

                                       13

<PAGE>

state, local and other governmental authorities, all self-regulatory
organizations and all courts and other tribunals, to own, lease, license and use
its properties and assets and to conduct business in the manner described in the
Preliminary Offering Memorandum and the Offering Memorandum, except to the
extent that the failure to obtain or file would not have a material adverse
effect on the Company.

                  (j)      No order, license, consent, authorization or approval
of, or exemption by, or the giving of notice to, or the registration with, any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, and no filing, recording, publication or
registration in any public office or any other place, was or is now required to
be obtained by the Company to authorize its execution or delivery of, or the
performance of its obligations under, this Agreement or any of the other
Operative Documents, except such as have been obtained or may be required under
state securities or blue sky laws or as referred to in the Offering Memorandum.

                  (k)      None of the issuance, sale or conversion of the
Restricted Notes, or the execution or delivery by the Company of, or the
performance by the Company of its obligations under, this Agreement or the other
Operative Documents, did or will conflict with, result in a breach of any of the
terms or provisions of, or constitute a default or require the consent of any
party under, the Company's Articles of Incorporation or by-laws, any material
agreement or instrument to which it is a party, any existing applicable law,
rule or regulation or any judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or assets, or did or will result in
the creation or imposition of any lien on the Company's properties or assets.

                  (l)      Except as disclosed in the Offering Memorandum, there
is no action, suit, proceeding, inquiry or investigation (at law or in equity or
otherwise) pending or, to the knowledge of the Company, threatened against the
Company, by any governmental authority that (i) questions the validity,
enforceability or performance of this Agreement or any of the other Operative
Documents or (ii) if determined adversely, is likely to have a material adverse
effect on the business or financial condition of the Company, or materially
adversely affect the ability of the Company to perform its obligations hereunder
or the consummation of the transactions contemplated by this Agreement.

                  (m)      There has not been any material and adverse change in
the business, properties, prospects or financial condition of the Company from
that set forth or incorporated by reference in the Offering Memorandum (other
than changes referred to in or contemplated by the Offering Memorandum).

                  (n)      Except as set forth in the Offering Memorandum, no
event or condition exists that constitutes, or with the giving of notice or
lapse of time or both would constitute, a default or any breach or failure to
perform by the Company in any material respect under any indenture, mortgage,
loan agreement, lease or other material agreement or instrument to which the
Company is a party or by which it or any of its properties may be bound.

                  (o)      The Offering Memorandum, as of its date, contained
all the information specified in, and met the requirements of, Rule 144A(d)(4)
under the Act.

                                       14

<PAGE>

                  (p)      When the Restricted Notes are issued and delivered
pursuant to this Agreement, the Restricted Notes and the Issuable Common Stock
will not be of the same class (within the meaning of Rule 144A under the Act) as
any security of the Company that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a United
States automated inter-dealer quotation system. No securities of the same class
as the Restricted Notes have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.

                  (q)      Neither the Company nor any affiliate (as defined in
Rule 144 under the Act) of the Company has directly, or through any agent, (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act) which is or will be integrated
with the sale of the Restricted Notes in a manner that would require the
registration under the Act of the Restricted Notes or (ii) engaged in any form
of general solicitation or general advertising in connection with the offering
of the Restricted Notes (as those terms are used in Regulation D under the Act),
or in any manner involving a public offering within the meaning of Section 4(2)
of the Act, including, but not limited to, publication or release of articles,
notices or other communications published in any newspaper, magazine, or similar
medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.

                  (r)      None of the Company nor any of its affiliates (as
defined in Rule 144 under the Act) or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act with respect to the Restricted
Notes.

                  (s)      No registration under the Act of the Restricted Notes
is required for the sale of the Restricted Notes to the Initial Purchasers as
contemplated hereby or for the Exempt Resales (assuming the accuracy of the
Initial Purchasers' representation and warranty and agreement set forth in
Section 8 hereof).

                  (t)      The Company, after giving effect to the offering and
sale of the Restricted Notes, will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.

                  (u)      The Company has an authorized capitalization as set
forth in the Offering Memorandum and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and are fully
paid and non-assessable. The shares of Issuable Common Stock have been duly and
validly authorized and reserved for issuance by the Company and, when issued and
delivered in accordance with the provisions of the Indenture as it relates to
the Restricted Notes, will be duly and validly issued, fully paid and
non-assessable and will conform in all material respects to the description of
the Common Stock contained in the Offering Memorandum and the issuance of the
Issuable Common Stock is not, and will not be, subject to any preemptive or
other similar right.

                  (v)      The Restricted Notes satisfy the eligibility
requirements of Rule 144A(d)(3) under the Act.

                                       15

<PAGE>

                  (w)      The Company has been advised by the NASD's PORTAL
Market that the Restricted Notes and the Issuable Common Stock have been
designated PORTAL-eligible securities in accordance with the rules and
regulations of the NASD.

                  (x)      The Company's chief executive officer and chief
financial officer are responsible for establishing and maintaining the Company's
disclosure controls and procedures. The Company's management, under the
direction of the Company's principal executive and financial officers, has
evaluated the effectiveness of the Company's disclosure controls and procedures
as of a date within 90 days of the filing of the Company's most recent annual
report on Form 10-K/A. Based on such evaluation, the Company's chief executive
officer and chief financial officer have concluded that the Company's disclosure
controls and procedures are effective to ensure that material information was
presented to them and properly disclosed. There have been no significant changes
in the Company's internal controls or in other factors that could significantly
affect internal controls subsequent to such evaluation.

         The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 5
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.

         8.       Representations and Warranties of Initial Purchasers: Upon the
authorization by the Initial Purchasers of the release of the Restricted Notes,
the Initial Purchasers propose to offer the Restricted Notes for sale upon the
terms and conditions set forth in this Agreement and the Offering Memorandum and
the Initial Purchasers hereby represent and warrant to, and agree with, the
Company that:

                  (a)      they each will offer and sell the Restricted Notes
only to Eligible Purchasers;

                  (b)      they each are Accredited Investors (as defined in
Regulation D under the Act); and

                  (c)      they each will not offer or sell the Restricted Notes
by any form of general solicitation or general advertising, including, but not
limited to, the methods described in Rule 502(c) under the Act.

         9.       Indemnification:

                  (a)      The Company agrees, to the extent permitted by law,
to indemnify and hold harmless each of the Initial Purchasers and each person,
if any, who controls any such Initial Purchaser within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Act or otherwise, and to reimburse the Initial
Purchasers and such controlling person or persons, if any, for any legal or
other expenses incurred by them in connection with defending any action, suit or
proceeding (including governmental investigations) as provided in Section 9(c)
hereof, insofar as such losses, claims, damages, liabilities or actions, suits
or proceedings (including governmental investigations) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in

                                       16

<PAGE>

the Preliminary Offering Memorandum or the Offering Memorandum, or, if the
Preliminary Offering Memorandum or the Offering Memorandum shall be amended or
supplemented, in the Preliminary Offering Memorandum or the Offering Memorandum
as so amended or supplemented or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission which was made in the Preliminary Offering Memorandum or the
Offering Memorandum or in the Preliminary Offering Memorandum or the Offering
Memorandum as so amended or supplemented, in reliance upon and in conformity
with information furnished in writing to the Company by, or through the
Representative on behalf of, any Initial Purchaser expressly for use therein and
except that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability or action, suit or proceeding arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in the Preliminary Offering Memorandum if
copies of the Offering Memorandum were timely delivered to the Initial
Purchasers pursuant to Section 6 hereof and a copy of the Offering Memorandum
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of the
Initial Purchasers to the person asserting such loss, claim, damage or liability
or action, suit or proceeding and if the Offering Memorandum (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability or action, suit or proceeding.

                  The Company's indemnity  agreement contained in this Section 9
(a), and the covenants, representations and warranties of the Company contained
in this Agreement, shall remain in full force and effect regardless of any
investigation made by or on behalf of any person, and shall survive the delivery
of and payment for the Restricted Notes hereunder, and the indemnity agreement
contained in this Section 9 shall survive any termination of this Agreement. The
liabilities of the Company in this Section 9(a) are in addition to any other
liabilities of the Company under this Agreement or otherwise.

                  (b)      Each Initial Purchaser agrees, severally and not
jointly, to the extent permitted by law, to indemnify, hold harmless and
reimburse the Company, each other Initial Purchaser, and each person, if any,
who controls the Company or any such other Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
and upon the same terms as the indemnity agreement of the Company set forth in
Section 9(a) hereof, but only with respect to alleged untrue statements or
omissions made in the Preliminary Offering Memorandum or the Offering
Memorandum, as amended or supplemented (if applicable), in reliance upon and in
conformity with information furnished in writing to the Company by such Initial
Purchaser expressly for use therein.

                  The indemnity  agreement on the part of each Initial Purchaser
contained in this Section 9(b) and the representations and warranties of such
Initial Purchaser contained in this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company or
any other person, and shall survive the delivery of and payment for the
Restricted Notes hereunder, and the indemnity agreement contained in this
Section 9(b) shall survive any termination of this Agreement. The liabilities of
each Initial Purchaser in this

                                       17

<PAGE>

Section 9(b) are in addition to any other liabilities of such Initial Purchaser
under this Agreement or otherwise.

                  (c)      If a claim is made or an action, suit or proceeding
(including governmental investigations) is commenced or threatened against any
person as to which indemnity may be sought under Section 9(a) or 9(b) hereof,
such person (the "Indemnified Person") shall notify the person against whom such
indemnity may be sought (the "Indemnifying Person") promptly after any assertion
of such claim threatening to institute an action, suit or proceeding or if such
an action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 9(a) or 9(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by the Representative
in the case of parties indemnified pursuant to Section 9(b) hereof and by the
Company in the case of parties indemnified pursuant to Section 9(a) hereof. Any
Indemnified Person shall have the right to participate in such litigation or
proceeding and to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include (x) the Indemnifying Person and (y)
the Indemnified Person and, in the written opinion of counsel to such
Indemnified Person, representation of both parties by the same counsel would be
inappropriate due to actual or likely conflicts of interest between them, in
either of which cases the reasonable fees and expenses of counsel (including
disbursements) for such Indemnified Person shall be reimbursed by the
Indemnifying Person to the Indemnified Person. If there is a conflict as
described in clause (ii) above, and the Indemnified Persons have participated in
the litigation or proceeding utilizing separate counsel whose fees and expenses
have been reimbursed by the Indemnifying Person and the Indemnified Persons, or
any of them, are found to be solely liable, such Indemnified Persons shall repay
to the Indemnifying Person such fees and expenses of such separate counsel as
the Indemnifying Person shall have reimbursed. It is understood that the
Indemnifying Person shall not, in connection with any litigation or proceeding
or related litigation or proceedings in the same jurisdiction as to which the
Indemnified Persons are entitled to such separate representation, be liable
under this Agreement for the reasonable fees and out-of-pocket expenses of more
than one separate firm (together with not more than one appropriate local
counsel) for all such Indemnified Persons. Subject to the next paragraph, all
such fees and expenses shall be reimbursed by payment to the Indemnified Persons
of such reasonable fees and expenses of counsel promptly after payment thereof
by the Indemnified Persons.

                  In furtherance of the requirement  above that fees and
expenses of any separate counsel for the Indemnified Persons shall be
reasonable, the Initial Purchasers and the Company agree that the Indemnifying
Person's obligations to pay such fees and expenses shall be conditioned upon the
following:

                                       18

<PAGE>

                           (1)      in case separate counsel is proposed to be
                  retained by the Indemnified Persons pursuant to clause (ii) of
                  the preceding paragraph, the Indemnified Persons shall in good
                  faith fully consult with the Indemnifying Person in advance as
                  to the selection of such counsel;

                           (2)      reimbursable fees and expenses of such
                  separate counsel shall be detailed and supported in a manner
                  reasonably acceptable to the Indemnifying Person (but nothing
                  herein shall be deemed to require the furnishing to the
                  Indemnifying Person of any information, including, without
                  limitation, computer print-outs of lawyers' daily time
                  entries, to the extent that, in the judgment of such counsel,
                  furnishing such information might reasonably be expected to
                  result in a waiver of any attorney-client privilege); and

                           (3)      the Company and the Representative shall
                  cooperate in monitoring and controlling the fees and expenses
                  of separate counsel for Indemnified Persons for which the
                  Indemnifying Person is liable hereunder, and the Indemnified
                  Person shall use reasonable effort to cause such separate
                  counsel to minimize the duplication of activities as between
                  themselves and counsel to the Indemnifying Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees, subject to the
provisions of this Section 9, to indemnify the Indemnified Person from and
against any loss, damage, liability or expenses by reason of such settlement or
judgment. The Indemnifying Person shall not, without the prior written consent
of the Indemnified Persons, effect any settlement of any pending or threatened
litigation, proceeding or claim in respect of which indemnity has been properly
sought by the Indemnified Persons hereunder, unless such settlement includes an
unconditional release by the claimant of all Indemnified Persons from all
liability with respect to claims which are the subject matter of such
litigation, proceeding or claim.

                  (d)      If the indemnification provided for in Section 9
above is unavailable to or insufficient to hold harmless an Indemnified Person
under this Section 9 in respect of any losses, claims, damages or liabilities
(or actions, suits or proceedings (including governmental investigations) in
respect thereof) referred to therein, then each Indemnifying Person under this
Section 9 shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Person on the one hand and the Indemnified
Person on the other from the offering of the Restricted Notes. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each Indemnifying Person shall contribute to such amount
paid or payable by such Indemnified Person in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable

                                       19

<PAGE>

considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the total discounts or commissions
received by the Initial Purchasers, in each case as set forth in the Offering
Memorandum, bear to the aggregate public offering price of the Restricted Notes.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Initial Purchasers on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 9(d) were determined by pro rata
allocation (even if the Initial Purchasers 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 9(d). The amount paid
or payable by an Indemnified Person as a result of the losses, claims, damages
or liabilities (or actions, suits or proceedings (including governmental
proceedings) in respect thereof) referred to above in this Section 9(d) shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Person in connection with investigating or defending any such
actions, suits or proceedings (including governmental proceedings) or claim,
provided that the provisions of this Section 9 have been complied with (in all
material respects) in respect of any separate counsel for such Indemnified
Person. Notwithstanding the provisions of this Section 9(d), in no case shall
any Initial Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Restricted Notes purchased by such
Initial Purchaser hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations in this Section 9(d) to
contribute are several in proportion to their respective obligations and not
joint.

         The agreement with respect to contribution contained in this Section
9(d) shall remain in full force and effect regardless of any investigation made
by or on behalf of the Company or any Initial Purchaser, and shall survive
delivery of and payment for the Restricted Notes hereunder and any termination
of this Agreement.

         10.      Survival: The respective indemnities, agreements,
representations, warranties and other statements of the Company and the Initial
Purchasers as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Initial Purchasers or any controlling person of the
Initial Purchasers, the Company, or any officer, director or controlling person
of the Company, and shall survive delivery of and payment for the Restricted
Notes.

         11.      Substitution of Initial Purchasers: If any Initial Purchaser
under this agreement shall fail or refuse (otherwise than for some reason
sufficient to justify in accordance with the terms hereof, the termination of
its obligations hereunder) to purchase the Restricted Notes which it had agreed
to purchase on the Time of Purchase or any applicable Date of Option Delivery,
the Representative shall immediately notify the Company and the Representative
and the other Initial Purchasers may, within 36 hours of the giving of such
notice, determine to

                                       20

<PAGE>

purchase, or to procure one or more other members of the NASD (or, if not
members of the NASD, who are foreign banks, dealers or institutions not
registered under the Exchange Act and who agree in making sales to comply with
the NASD's Rules of Fair Practice), satisfactory to the Company, to purchase,
upon the terms herein set forth, the principal amount of Restricted Notes which
the defaulting Initial Purchaser had agreed to purchase. If any non-defaulting
Initial Purchaser or Initial Purchasers shall determine to exercise such right,
the Representative shall give written notice to the Company of such
determination within 36 hours after the Company shall have received notice of
any such default, and thereupon the Time of Purchase or Date of Option Delivery,
as the case may be, shall be postponed for such period, not exceeding three
business days, as the Company shall determine. If, in the event of such a
default, the Representative shall fail to give such notice, or shall within such
36-hour period give written notice to the Company that no other Initial
Purchaser or Initial Purchasers, or others, will exercise such right, then this
Agreement may be terminated by the Company, upon like notice given to the
Representative within a further period of 36 hours. If in such case the Company
shall not elect to terminate this Agreement, it shall have the right,
irrespective of such default:

                  (a)      to require such non-defaulting Initial Purchasers to
purchase and pay for the respective principal amounts of Restricted Notes which
they had severally agreed to purchase hereunder, as herein above provided, and,
in addition, the principal amount of Restricted Notes which the defaulting
Initial Purchaser shall have so failed to purchase up to a principal amount
thereof equal to one-ninth (1/9) of the respective principal amounts of
Restricted Notes which such non-defaulting Initial Purchasers have otherwise
agreed to purchase hereunder; and/or

                  (b)      to procure one or more other members of the NASD (or,
if not members of the NASD, who are foreign banks, dealers or institutions not
registered under the Exchange Act and who agree in making sales to comply with
the NASD's Rules of Fair Practice) to purchase, upon the terms herein set forth,
the principal amount of Restricted Notes which such defaulting Initial Purchaser
had agreed to purchase, or that portion thereof which the remaining Initial
Purchasers shall not be obligated to purchase pursuant to Section 11(a) hereof.

         In the event the Company shall exercise its rights under Section 11(a)
and/or Section 11(b) hereof, the Company shall give written notice thereof to
the Representative within such further period of 36 hours, and thereupon the
Time of Purchase or the Date of Option Delivery, as the case may be, shall be
postponed for such period, not exceeding five business days, as the Company
shall determine. In the event the Company shall be entitled to but shall not
elect to exercise its rights under Section 11(a) and/or Section 11(b) hereof,
the Company shall be deemed to have elected to terminate this Agreement.

         Any action taken by the Company under this Section 11 shall not relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this Agreement. Termination by the Company under
this Section 11 shall be without any liability on the part of the Company or any
non-defaulting Initial Purchaser.

         In the computation of any period of 36 hours referred to in this
Section 11, there shall be excluded a period of 24 hours in respect of each
Saturday, Sunday or legal holiday which would otherwise be included in such
period of time.

                                       21

<PAGE>

         12.      Termination of Agreement: This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.

         This Agreement may be terminated at any time prior to the Time of
Purchase or any applicable Date of Option Delivery by the Representative if,
prior to such time, any of the following events shall have occurred: (i) trading
in the Company's Common Stock shall have been suspended by the Commission or the
New York Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established on such exchange; (ii) a banking moratorium shall have been declared
either by U.S. federal or New York State authorities; or (iii) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis the effect of
which on the financial markets of the United States is such as to impair, in the
sole judgment of the Representative, the marketability of the Restricted Notes.

         If the Representative elects to terminate this Agreement, as provided
in this Section 12, the Representative will promptly notify the Company and each
other Initial Purchaser by telephone or telecopy, confirmed by letter. If this
Agreement shall not be carried out by any Initial Purchaser for any reason
permitted hereunder, or if the sale of the Restricted Notes to the Initial
Purchasers as herein contemplated shall not be carried out because the Company
is not able to comply with the terms hereof, the Company shall not be under any
obligation under this Agreement and shall not be liable to any Initial Purchaser
or to any member of any selling group for the loss of anticipated profits from
the transactions contemplated by this Agreement and the Initial Purchasers shall
be under no liability to the Company nor be under any liability under this
Agreement to one another.

         Notwithstanding the foregoing, the provisions of Sections 6(e), 6(i), 9
and 10 shall survive any termination of this Agreement.

         13.      Notices:  All notices hereunder shall,  unless otherwise
expressly provided, be in writing and be delivered at or mailed to the following
addresses or be sent by telecopy as follows: (i) if to the Initial Purchasers or
the Representative, to Citigroup Global Markets Inc., 388 Greenwich Street, New
York, New York 10013, Attention: General Counsel (Telecopy 212-816-7912); and
(ii) if to the Company, to CMS Energy Corporation, One Energy Plaza, Jackson,
Michigan 49201, Attention: Executive Vice President and Chief Financial Officer
(Telecopy 517-788-2186).

         14.      Parties in Interest: This Agreement has been and is made
solely for the benefit of the Initial Purchasers, the Company, the Initial
Purchasers' directors and officers and the controlling persons, if any, referred
to herein, and their respective successors, assigns, executors and
administrators, and, except as expressly otherwise provided in Section 11
hereof, no other person shall acquire or have any right under or by virtue of
this Agreement.

         15.      Definition of Certain Terms: All obligations of the Initial
Purchasers hereunder are several and not joint. The term "successors" as used in
this Agreement shall not include any purchaser, as such purchaser, of any of the
Restricted Notes from any of the respective Initial Purchasers.

                                       22

<PAGE>

         16.      Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.

         17.      Waiver of Tax Confidentiality: Notwithstanding anything herein
to the contrary, purchasers of the Restricted Notes (and each employee,
representative or other agent of the Company) may disclose to any and all
persons, without limitation of any kind, the U.S. tax treatment and U.S. tax
structure of any transaction contemplated herein and all materials of any kind
(including opinions or other tax analyses) that are provided to the purchasers
of the Restricted Notes relating to such U.S. tax treatment and U.S. tax
structure, other than any information for which nondisclosure is reasonably
necessary in order to comply with applicable securities laws.

         18.      Counterparts: This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such respective counterparts shall together
constitute one and the same instrument.

                                       23

<PAGE>

         If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and, upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
between each of the Initial Purchasers and the Company.

                                         Very truly yours,

                                         CMS ENERGY CORPORATION

                                         By: /s/ Laura Mountcastle
                                             ------------------------------
                                             Name: Laura Mountcastle
                                             Title: Vice President and Treasurer

Confirmed and accepted as
of the date first written above:

CITIGROUP GLOBAL MARKETS INC.
     As Representative of the several Initial Purchasers
     named in Schedule I hereto

By: CITIGROUP GLOBAL MARKETS INC.

By:/s/ Jane Sadowsky
   -----------------------------------
   Name: Jane Sadowsky
   Title: Managing Director

<PAGE>

                                   SCHEDULE I

<TABLE>
<CAPTION>
                                            Principal Amount of
                                                Restricted
Initial Purchasers                               Notes                 Purchase Price
- ------------------                               -----                 --------------
<S>                                         <C>                        <C>
Citigroup Global Markets Inc.                 $ 60,000,000              $ 58,200,000

Merrill Lynch, Pierce, Fenner & Smith
          Incorporated                        $ 52,500,000              $ 50,925,000

Deutsche Bank Securities Inc.                 $ 37,500,000              $ 36,375,000
                                              ------------              ------------
Total                                         $150,000,000              $145,500,000
                                              ============              ============
</TABLE>

                                      I-1

<PAGE>

                                   SCHEDULE II

1.       John F. Drake

2.       James J. Duderstadt

3.       Carl L. English

4.       Thomas W. Elward

5.       Kathleen R. Flaherty

6.       Earl D. Holton

7.       David W. Joos

8.       David G. Mengebier

9.       Michael T. Monahan

10.      Joseph F. Paquette Jr.

11.      William U. Parfet

12.      Percy A. Pierre

13.      John G. Russell

14.      S. Kinnie Smith, Jr.

15.      Kenneth L. Way

16.      Thomas J. Webb

17.      Ken Whipple

18.      John B. Yasinsky

                                      II-1

<PAGE>

                                    EXHIBIT A

         This Registration Rights Agreement (this "Agreement") is made and
entered into this 16th day of July, 2003 among CMS Energy Corporation, a
Michigan corporation (the "Company"), and Citigroup Global Markets Inc., as
representative (the "Representative") of the Initial Purchasers (the "Initial
Purchasers") listed on Schedule I to the Purchase Agreement (as defined below).

         This Agreement is made pursuant to the Purchase Agreement dated July 9,
2003, among the Company and the Representative on behalf of the Initial
Purchasers (the "Purchase Agreement"), which provides for the sale by the
Company to the Initial Purchasers of an aggregate of $150,000,000 principal
amount of the Company's 3.375% Convertible Senior Notes due 2023 (the "Firm
Notes") and the granting by the Company to the Initial Purchasers of the option
to purchase $50,000,000 additional principal amount of such Convertible Senior
Notes (the "Option Notes" and, together with the Firm Notes, the "Notes"). The
Notes are convertible into shares of common stock, par value $0.01 per share, of
the Company at the initial conversion price set forth in the Offering Memorandum
dated July 10, 2003, subject to adjustment in accordance with the Indenture (as
defined below). In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchasers
and their direct and indirect transferees the registration rights set forth in
this Agreement. The execution and delivery of this Agreement is a condition to
the closing under the Purchase Agreement.

         In consideration of the foregoing, the parties hereto agree as follows:

         1.       Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:

                  "Additional Amounts" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Additional Amounts Payment Date" shall have the meaning set
forth in Section 2(c)(ii) hereof.

                  "Agreement" shall have the meaning set forth in the preamble.

                  "Applicable Conversion Price" shall mean, as of any date of
determination, $1,000 principal amount of Notes as of such date of determination
divided by the Conversion Rate (as defined below) in effect as of such date of
determination or, if no Notes are then outstanding, the Conversion Rate that
would be in effect were Notes then outstanding.

                  "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in The City
of New York are authorized or obligated by law or executive order to close.

                  "Closing Date" shall mean the later of (i) the date on which
the Firm Notes are issued and (ii) the date on which the Option Notes are
issued.

                                      A-1

<PAGE>

                  "Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.

                  "Conversion Rate" shall have the meaning assigned to such term
in the Supplemental Indenture.

                  "Depositary" shall mean The Depository Trust Company, or any
other depositary for the Securities (as defined below) appointed by the Company;
provided, however, that such depositary must have an address in the Borough of
Manhattan, in The City of New York.

                  "Firm Closing Date" shall mean the date on which the Firm
Notes are issued.

                  "Firm Notes" shall have the meaning set forth in the preamble.

                  "Holder" shall mean an Initial Purchaser, for so long as it
owns any Registrable Securities (as defined below), and each of its successors,
assigns and direct and indirect transferees who become owners of Registrable
Securities.

                  "Indemnified Holder" shall have the meaning set forth in
Section 4(a) hereof.

                  "Indemnified Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Indemnifying Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Initial Purchasers" shall have the meaning set forth in the
preamble.

                  "Majority Holders" shall mean, on any date, Holders of a
majority of the outstanding Shares (as defined below) constituting Registrable
Securities; provided, that whenever the consent or approval of Holders of a
specified percentage of Registrable Securities is required hereunder,
Registrable Securities held by the Company and other obligors on the Securities
or any Affiliate (as defined in the Indenture) of the Company or other obligor
shall be disregarded in determining whether such consent or approval was given
by the Holders of such required percentage amount. For the purposes of this
definition, Holders of Notes constituting Registrable Securities shall be deemed
to be Holders of the number of Shares into which such Notes are or would be
convertible as of such date.

                  "Material Event" shall have the meaning set forth in Section
3(f) hereof.

                  "Notes" shall have the meaning set forth in the preamble.

                  "Notice  and Questionnaire" shall mean a written notice
delivered to the Company substantially in the form attached as Appendix I to the
Offering Memorandum.

                  "Notice  Holder" shall mean, on any date, any Holder that has
delivered a Notice and Questionnaire to the Company on or prior to such date.

                  "Option  Notes" shall have the meaning set forth in the
preamble.

                                      A-2

<PAGE>

                  "Person" shall mean any individual, corporation, partnership,
joint venture, trust, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.

                  "Prospectus" shall mean the prospectus included in the Shelf
Registration Statement (as defined below), including any preliminary prospectus,
and any such prospectus as amended or supplemented by any prospectus supplement,
including any such prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to a
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.

                  "Purchase Agreement" shall have the meaning set forth in the
preamble.

                  "Registrable Securities" shall mean the Securities; provided,
however, that Securities shall cease to be Registrable Securities when (i) a
Shelf Registration Statement with respect to such Securities shall have been
declared effective under the Act and such Securities shall have been disposed of
pursuant to such Shelf Registration Statement, (ii) such Securities have been
sold to the public pursuant to Rule 144 under the Act or may be sold pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A) under
the Act or (iii) such Securities shall have ceased to be outstanding.

                  "Registration Default" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this Agreement,
including, without limitation: (i) all Commission, stock exchange or NASD
registration and filing fees, including, if applicable, the reasonable fees and
expenses of any "qualified independent underwriter" (and its counsel) that is
required to be retained by any Holder of Registrable Securities in accordance
with the rules and regulations of the NASD; (ii) all fees and expenses incurred
in connection with compliance with state securities or blue sky laws and
compliance with the rules of the NASD (including reasonable fees and
disbursements of one counsel for the placement agent or underwriters, if any, in
connection with blue sky qualification of any of the Registrable Securities and
any filings with the NASD); (iii) all expenses of any Persons in preparing or
assisting in preparing word processing, printing and distributing any Shelf
Registration Statement, any Prospectus, any amendments or supplements thereto,
any underwriting agreements, any securities sales agreements and any other
documents relating to the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges; (v)
all rating agency fees; (vi) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance; (vii) the fees and expenses of the Trustee,
and any escrow agent or custodian; (viii) the reasonable fees and disbursements
of one firm, at any one time, of legal counsel selected by the Representative
(subject to the reasonable approval of the Company) to represent the Holders of
Registrable Securities, which firm shall be PW unless otherwise requested in
writing by the Majority Holders; and (ix) any reasonable fees and disbursements
of the underwriters customarily required to be paid by issuers

                                      A-3

<PAGE>

or sellers of securities and the fees and expenses of any special experts
retained by the Company in connection with any Shelf Registration Statement, but
excluding underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of Registrable Securities by a Holder.

                  "Representative" shall have the meaning set forth in the
preamble.

                  "Securities" shall mean collectively the Notes and the Shares.

                  "Shares" shall mean the shares of common stock of the Company,
par value $0.01 per share, into which the Notes are convertible or that have
been issued upon any conversion of the Notes into common stock of the Company.

                  "Shelf Registration" shall mean a registration effected
pursuant to Section 2(a) hereof.

                  "Shelf Registration Filing Date" shall have the meaning set
forth in Section 2(a)(i) hereof.

                  "Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of Section 2(a)
hereof which covers all of the Registrable Securities on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.

                  "Suspension Period" shall have the meaning set forth in
Section 2(a)(i) hereof.

         2.       Registration Under the Act.

                  (a)      Shelf Registration.

                                    (i)      The Company agrees to use
         reasonable commercial efforts to file under the Act as promptly as
         practicable after the time that the Company becomes eligible to file
         registration statements on Form S-3 under the Act but in any event
         within 15 months after the Firm Closing Date (the "Shelf Registration
         Filing Date") a Shelf Registration Statement providing for the
         registration of, and the sale on a continuous or delayed basis by the
         Holders of, all of the Registrable Securities, pursuant to Rule 415
         under the Act or any similar rule that may be adopted by the
         Commission. If the Company is not eligible to file registration
         statements on Form S-3 under the Act before the Shelf Registration
         Filing Date, then the Company shall file a Shelf Registration Statement
         on whatever form is then available for the Company to use. The Company
         agrees to use its reasonable commercial efforts to cause the Shelf
         Registration Statement to become or be declared effective within 120
         days after the Shelf Registration Filing Date and to keep such Shelf
         Registration Statement continuously effective until the earliest of (i)
         the date on which all Registrable Securities covered by the Shelf
         Registration Statement have been sold pursuant to such Shelf
         Registration Statement, (ii) the date on which all Registrable
         Securities have been sold pursuant to Rule 144 under

                                      A-4

<PAGE>

         the Act, (iii) such time as there are no longer any Registrable
         Securities outstanding and (iv) the second anniversary of the Closing
         Date (plus, in each case, the number of days in any Suspension Period);
         provided, however, that upon the occurrence of any event or the
         discovery of any facts as contemplated by Section 3(f)(iv) hereof, the
         Company shall not be obligated to keep the Shelf Registration Statement
         effective or to permit the use of any Prospectus forming a part of the
         Shelf Registration Statement if the Company promptly thereafter
         complies with the requirements of Section 3(k) hereof; provided,
         further, that the failure to keep the Shelf Registration Statement
         effective and usable for offers and sales of Registrable Securities for
         such reason shall last no longer than 45 consecutive calendar days or
         no more than an aggregate of 90 calendar days during any consecutive
         twelve-month period (whereafter a Registration Default shall occur and
         Additional Amounts shall accrue as set forth in Section 2.4(A)(v)
         hereof); any such period during which the Company is so excused from
         keeping the Shelf Registration Statement effective and usable for
         offers and sales of Registrable Securities is referred to herein as a
         "Suspension Period"; a Suspension Period shall commence on and include
         the date that the Company gives notice to the Holders that the Shelf
         Registration Statement is no longer effective or the Prospectus
         included therein is no longer usable for offers and sales of
         Registrable Securities as a result of the application of the proviso of
         the foregoing sentence, stating the reason therefor, and shall end on
         the earlier to occur of the date on which each seller of Registrable
         Securities covered by the Shelf Registration Statement either receives
         the copies of the supplemented or amended Prospectus or is advised in
         writing by the Company that use of the Prospectus may be resumed.

                                    (ii)     Each Holder of Registrable
         Securities agrees that if such Holder wishes to sell Registrable
         Securities pursuant to the Shelf Registration Statement and related
         Prospectus, it will do so only in accordance with this Section 2(a)(ii)
         and the last paragraph of Section 3 hereof. To be named a selling
         holder in the Shelf Registration Statement when it first becomes
         effective, Holders must deliver a Notice and Questionnaire to the
         Company at least five (5) Business Days prior to the effectiveness of
         the Shelf Registration Statement. From and after the date the Shelf
         Registration Statement is declared effective, the Company shall, as
         promptly as is practicable after the date a Notice and Questionnaire is
         delivered, and in any event within five (5) Business Days after such
         date, (1) if required by applicable law, file with the Commission a
         post-effective amendment to the Shelf Registration Statement or prepare
         and, if required by applicable law, file a supplement to the related
         Prospectus or an amendment or supplement to any document incorporated
         therein by reference or file any other required document (including, if
         required, a new or amended Shelf Registration Statement) so that the
         Holder delivering such Notice and Questionnaire is named as a selling
         holder in the Shelf Registration Statement and the related Prospectus
         and so that such Holder is permitted to deliver such Prospectus to
         purchasers of the Registrable Securities in accordance with applicable
         law and, if the Company shall file a post-effective amendment to the
         Shelf Registration Statement, use commercially reasonable efforts to
         cause such post-effective amendment to be declared effective under the
         Act as promptly as is practicable, (2) provide such Holder copies of
         any documents filed pursuant to Section 2(a)(ii)(1) hereof and (3)
         notify such Holder as promptly as practicable after the effectiveness
         under the Act of any post-effective amendment filed pursuant to Section
         2(a)(ii)(1) hereof; provided, that if such Notice and Questionnaire is
         delivered during a

                                      A-5
<PAGE>

         Suspension Period, the Company shall so inform the Holder delivering
         such Notice and Questionnaire and shall take the actions set forth in
         clauses (1), (2) and (3) above upon expiration of the Suspension
         Period. Notwithstanding anything contained herein to the contrary, the
         Company shall be under no obligation to name any Holder that is not a
         Notice Holder as a selling holder in the Shelf Registration Statement
         or related Prospectus; provided, however, that any Holder that becomes
         a Notice Holder pursuant to the provisions of this Section 2(a)(ii)
         (whether or not such Holder was a Notice Holder at the time the Shelf
         Registration Statement was declared effective) shall be named as a
         selling holder in the Shelf Registration Statement or related
         Prospectus in accordance with the requirements of this Section
         2(a)(ii).

                           (iii) The Company shall not permit any securities
         other than Registrable Securities to be included in the Shelf
         Registration Statement. The Company further agrees, if necessary, to
         supplement or amend the Shelf Registration Statement, as required by
         Section 3(b) hereof, and to furnish to the Holders of Registrable
         Securities copies of any such supplement or amendment promptly after
         its being used or filed with the Commission.

                  (b) Expenses. The Company shall pay all Registration Expenses
         in connection with the registration pursuant to Section 2(a) hereof and
         the performance of its obligations under Section 2(a) and Section 3
         hereof. Each Holder shall pay all underwriting discounts and
         commissions and transfer taxes, if any, relating to the sale or
         disposition of such Holder's Registrable Securities pursuant to the
         Shelf Registration Statement.

                  (c) Interest.

                           (i) If any of the following events (any such event a
         "Registration Default") shall occur, then additional amounts (the
         "Additional Amounts") shall become payable to Holders in respect of the
         Securities as follows:

                           (1)      if the Shelf Registration Statement is not
                  filed with the Commission by the Shelf Registration Filing
                  Date, then commencing on the day immediately after the Shelf
                  Registration Filing Date, Additional Amounts shall accrue on
                  the principal amount of the outstanding Notes that are
                  Registrable Securities and on the Applicable Conversion Price
                  of any outstanding Shares that are Registrable Securities at a
                  rate of 0.25% per annum for the first 90 days following such
                  day immediately after the Shelf Registration Filing Date and
                  at a rate of 0.50% per annum thereafter;

                           (2)      if the Shelf Registration Statement is not
                  declared effective by the Commission within 120 days following
                  the Shelf Registration Filing Date, then commencing on the
                  121st day after the Shelf Registration Filing Date, Additional
                  Amounts shall accrue on the principal amount of the
                  outstanding Notes that are Registrable Securities and on the
                  Applicable Conversion Price of any outstanding Shares that are
                  Registrable Securities at a rate of 0.25% per annum for the
                  first 90 days following such 121st day after the Shelf
                  Registration Filing Date and at a rate of 0.50% per annum
                  thereafter;

                                      A-6
<PAGE>

                           (3)      if the Company has failed to perform its
                  obligations set forth in Section 2(a)(ii) hereof within the
                  time periods required therein, then commencing on the first
                  day after the date by which the Company was required to
                  perform such obligations, Additional Amounts shall accrue on
                  the principal amount of the outstanding Notes that are
                  Registrable Securities and on the Applicable Conversion Price
                  of any outstanding Shares that are Registrable Securities at a
                  rate of 0.25% per annum for the first 90 days and at a rate of
                  0.50% per annum thereafter;

                           (4)      if the Shelf Registration Statement has been
                  declared effective but such Shelf Registration Statement
                  ceases to be effective at any time (other than as specifically
                  permitted in Section 2(a)(i) hereof) without being succeeded
                  within 30 days by an amendment thereto or an additional
                  registration statement filed and declared effective, then
                  commencing on the day such Shelf Registration Statement ceases
                  to be effective, Additional Amounts shall accrue on the
                  principal amount of the outstanding Notes that are Registrable
                  Securities and on the Applicable Conversion Price of any
                  outstanding Shares that are Registrable Securities at a rate
                  of 0.25% per annum for the first 90 days following such date
                  on which the Shelf Registration Statement ceases to be
                  effective and at a rate of 0.50% per annum thereafter; or

                           (5)      if the aggregate duration of Suspension
                  Periods in any period exceeds the number of days permitted in
                  respect of such period pursuant to Section 2(a)(i) hereof,
                  then commencing on the day the aggregate duration of
                  Suspension Periods in any period exceeds the number of days
                  permitted in respect of such period, Additional Amounts shall
                  accrue on the principal amount of the outstanding Notes that
                  are Registrable Securities and on the Applicable Conversion
                  Price of any outstanding Shares that are Registrable
                  Securities at a rate of 0.25% per annum for the first 90 days
                  and at a rate of 0.50% per annum thereafter;

         provided, however, that the Additional Amounts on the Securities shall
         not exceed in the aggregate 0.50% per annum and shall not be payable
         under more than one clause above for any given period of time, except
         that if Additional Amounts would be payable under more than one clause
         above, but at a rate of 0.25% per annum under one clause and at a rate
         of 0.50% per annum under the other, then the Additional Amounts rate
         shall be the higher rate of 0.50% per annum; provided, further,
         however, that (1) upon the filing of the Shelf Registration Statement
         (in the case of Section 2(c)(i)(1) hereof), (2) upon the effectiveness
         of the Shelf Registration Statement (in the case of Section 2(c)(i)(2)
         hereof), (3) upon the Company's performing its obligations set forth in
         Section 2(a)(ii) hereof (in the case of Section 2(c)(i)(3) hereof), (4)
         upon the effectiveness of the Shelf Registration Statement which had
         ceased to remain effective (in the case of Section 2(c)(i)(4) hereof)
         or (5) upon the termination of the Suspension Period that caused the
         limit on the aggregate duration of Suspension Periods in a period set
         forth in Section 2(a)(i) hereof to be exceeded (in the case of Section
         2(c)(i)(5) hereof), Additional Amounts on the Securities as a result of
         such Section, as the case may be, shall cease to accrue.

                                      A-7
<PAGE>

                           (ii) Additional Amounts on the Securities, if any,
         will be payable in cash on January 15 and July 15 of each year (the
         "Additional Amounts Payment Date") to holders of record of outstanding
         Registrable Securities on each preceding January 1 and July 1,
         respectively. The date of determination of the Applicable Conversion
         Price of any outstanding Shares that are Registrable Securities shall
         be the Business Day immediately preceding the Additional Amounts
         Payment Date; provided, that in the case of an event of the type
         described in Section 2(c)(i)(3) hereof, such Additional Amounts shall
         be paid only to the Holders that have delivered Notice and
         Questionnaires that caused the Company to incur the obligations set
         forth in Section 2(a)(ii) hereof, the non-performance of which is the
         basis of such Registration Default; provided, further, that any
         Additional Amounts accrued with respect to any Notes or portion thereof
         called for redemption on a redemption date or purchased on a purchase
         date or converted into Shares on a conversion date prior to the
         Registration Default shall, in any such event, be paid instead to the
         Holder who submitted such Notes or portion thereof for redemption,
         purchase or conversion on the applicable redemption date, purchase date
         or conversion date, as the case may be, on such date (or promptly
         following the conversion date, in the case of conversion), and shall
         continue to accrue on the Shares issuable upon conversion of any Notes
         to the extent any Registration Default has not yet been cured.
         Following the cure of all Registration Defaults requiring the payment
         of Additional Amounts by the Company to the Holders of Registrable
         Securities pursuant to Section 2(c)(i) hereof, the accrual of
         Additional Amounts will cease without in any way limiting the effect of
         any subsequent Registration Default requiring the payment of Additional
         Amounts by the Company.

         The Trustee shall be entitled, on behalf of Holders of Securities, to
seek any available remedy for the enforcement of this Agreement, including for
the payment of any Additional Amounts. Notwithstanding the foregoing, the
parties agree that the sole monetary damages payable for a violation of the
terms of this Agreement with respect to which Additional Amounts are expressly
provided shall be as set forth in this Section 2(c) in addition to any remedies
available to the Holders of the Securities under the Indenture. Nothing shall
preclude a Notice Holder or Holder of Registrable Securities from pursuing or
obtaining specific performance or other equitable relief with respect to this
Agreement.

         3.       Registration Procedures. In connection with the obligations of
the Company with respect to Shelf Registration Statements pursuant to Section
2(a) hereof, the Company shall:

                  (a) use reasonable commercial efforts to prepare and file with
the Commission a Shelf Registration Statement, within the relevant time period
specified in Section 2 hereof, on the appropriate form under the Act, which form
shall (i) be selected by the Company, (ii) be available for the sale of the
Registrable Securities by the selling Holders thereof and (iii) comply as to
form in all material respects with the requirements of the applicable form and
include or incorporate by reference all financial statements required by the
Commission to be filed therewith or incorporated by reference therein, and use
its reasonable commercial efforts to cause such Shelf Registration Statement to
become effective and remain effective in accordance with Section 2 hereof;

                                      A-8
<PAGE>

                  (b) use reasonable commercial efforts to cause (i) any Shelf
Registration Statement and any amendment thereto, when it becomes effective, not
to 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 and (ii) subject to Section 2(a)(iii) hereof, any Prospectus
forming part of any Shelf Registration Statement, and any supplement to such
Prospectus (as amended or supplemented from time to time), not to include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;

                  (c) use reasonable commercial efforts to prepare and file with
the Commission such amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary under applicable law to keep such
Shelf Registration Statement effective for the applicable period; and cause each
Prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provision then in
force) under the Act and comply with the provisions of the Act, the Exchange Act
and the rules and regulations thereunder applicable to them with respect to the
disposition of all securities covered by the Shelf Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution reasonably requested by the selling Holders thereof;

                  (d) (i) notify each Holder of Registrable Securities, at least
fifteen (15) calendar days prior to filing, that a Shelf Registration Statement
with respect to the Registrable Securities is being filed and advising such
Holders that the distribution of Registrable Securities will be made in
accordance with the methods reasonably requested by the Majority Holders
participating in the Shelf Registration and as set forth in the Notices and
Questionnaires, (ii) furnish to each Notice Holder of Registrable Securities and
to each underwriter of an underwritten offering of Registrable Securities, if
any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto, and such other
documents as such Notice Holder or underwriter may reasonably request, including
financial statements and schedules and, if the Notice Holder so requests, all
exhibits in order to facilitate the public sale or other disposition of the
Registrable Securities and (iii) hereby consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Notice Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto, save and except during any Suspension Period;

                  (e) use its reasonable commercial efforts to register or
qualify the Registrable Securities under such state securities or blue sky laws
of such jurisdictions as any Notice Holder of Registrable Securities covered by
a Shelf Registration Statement and each underwriter of an underwritten offering
of Registrable Securities shall reasonably request in writing (which request
shall be included in the Notice and Questionnaire) by the time such Shelf
Registration Statement is declared effective by the Commission, and do any and
all other acts and things which may be reasonably necessary or advisable to
enable each such Notice Holder and underwriter to consummate the disposition in
each such jurisdiction of such Registrable Securities owned by such Notice
Holder; provided, however, that the Company shall not be required to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be

                                      A-9
<PAGE>

required to qualify but for this Section 3(e) or (ii) take any action which
would require it to file general consent to service of process or taxation or
file annual reports or comply with any other requirement deemed by the Company
in its reasonable judgment to be unduly burdensome;

                  (f) notify promptly each Notice Holder of Registrable
Securities under a Shelf Registration and, if requested by such Notice Holder,
confirm such advice in writing promptly (i) when such Shelf Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the Commission or
any state securities authority for post-effective amendments and supplements to
such Shelf Registration Statement and Prospectus or for additional information
after such Shelf Registration Statement has become effective, (iii) of the
issuance by the Commission or any state securities authority of any stop order
suspending the effectiveness of such Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the happening of any
event (but not the nature of the details concerning the same) or the discovery
of any facts during the period the Shelf Registration Statement is effective
which makes any statement made in such Shelf Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Shelf Registration Statement or Prospectus in order to
make the statements therein not misleading (a "Material Event"); provided,
however, that no notice by the Company shall be required pursuant to this clause
(iv) in the event that the Company either promptly files a Prospectus supplement
to update the Prospectus or a Form 8-K or other appropriate Exchange Act report
that is incorporated by reference into the Shelf Registration Statement, which,
in either case, contains the requisite information with respect to such Material
Event that results in such Shelf Registration Statement no longer containing any
untrue statement of material fact or omitting to state a material fact necessary
to make the statements contained therein not misleading, (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities, as the case may be, for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose
and (vi) of any determination by the Company that a post-effective amendment to
the Shelf Registration Statement would be appropriate other than post-effective
amendments prepared and filed in accordance with Section 2(a)(ii) hereof;

                  (g) furnish counsel for the Holders of Registrable Securities
copies of any comment letters received from the Commission or any other request
by the Commission or any state securities authority for amendments or
supplements to a Shelf Registration Statement and Prospectus or for additional
information;

                  (h) use its reasonable commercial efforts to obtain the
withdrawal of any order suspending the effectiveness of the Shelf Registration
Statement as soon as practicable and provide prompt notice to legal counsel for
the Holders of the withdrawal of any such order;

                  (i) furnish to each Notice Holder of Registrable Securities,
and each underwriter, if any, without charge, at least one conformed copy of
each Shelf Registration Statement and any post-effective amendment thereto,
including financial statements and schedules (without documents incorporated
therein by reference or all exhibits thereto, unless requested);

                                      A-10
<PAGE>

                  (j) use its reasonable commercial efforts to cooperate with
the selling Notice Holders of Registrable Securities to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold to the extent not held with the Depositary through Cede & Co., to remove
any restrictive legends, and to enable such Registrable Securities to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Notice Holders or the underwriters, if any, may
reasonably request at least three (3) Business Days prior to the closing of any
sale of Registrable Securities;

                  (k) upon the occurrence of any event or the discovery of any
facts, each as contemplated by Section 3(f)(ii), Section 3(f)(iii), Section
3(f)(iv), Section 3(f)(v) and Section 3(f)(vi) hereof and subject to the
provisions of the first paragraph immediately following Section 3(t) hereof, as
promptly as practicable after the occurrence of such an event, use its
reasonable commercial efforts to prepare a supplement or post-effective
amendment to the Shelf Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain at the time of such delivery any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. At such time as such public disclosure is otherwise
made or the Company determines that such disclosure is not necessary, in each
case to correct any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Notice Holder of such
determination and to furnish each Notice Holder such number of copies of the
Prospectus, as amended or supplemented, as such Notice Holder may reasonably
request;

                  (l) obtain a CUSIP number for all Registrable Securities
covered by the Shelf Registration Statement not later than the effective date of
such Shelf Registration Statement, and provide the Trustee for the Notes and the
transfer agent for the Shares with printed certificates for the Registrable
Securities that are in a form eligible for deposit with the Depositary;

                  (m) unless the Indenture, as its relates to the Registrable
Securities, has already been so qualified, use its reasonable commercial efforts
to (i) cause the Indenture to be qualified under the Trust Indenture Act in
connection with the registration of the Registrable Securities, as the case may
be, (ii) cooperate with the Trustee and the Holders to effect such changes to
the Indenture as may be required for the Indenture to be so qualified in
accordance with the terms of the Trust Indenture Act and (iii) execute, and use
its reasonable commercial efforts to cause the Trustee to execute, all documents
as may be required to effect such changes, and all other forms and documents
required to be filed with the Commission to enable the Indenture to be so
qualified in a timely manner;

                  (n) enter into such customary agreements (including an
underwriting or similar agreement) and make such representations and warranties
and take all such other actions in connection therewith (including, without
limitation, furnishing customary comfort letters and legal opinions pursuant to
the terms of such agreement) in order to expedite or facilitate the disposition
of the Registrable Securities pursuant to any Shelf Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder of
Registrable Securities or underwriter in connection with any sale or resale
pursuant to any Shelf Registration Statement contemplated by this Agreement;

                                      A-11
<PAGE>

                  (o) upon reasonable notice, for a reasonable period prior to
the filing of the Shelf Registration Statement and until the time at which there
are no Registrable Securities, make available at reasonable times at the
Company's principal place of business or such other reasonable place for
inspection by a representative appointed by the Notice Holders in connection
with an underwritten offering (or any underwriter, placement agent or counsel
acting on their behalf), who shall certify to the Company that they have a
current intention to sell their Registrable Securities pursuant to the Shelf
Registration Statement, such financial and other information and books and
records of the Company, and cause the officers, directors, employees and
independent certified public accountants of the Company to respond to such
inquiries, as shall be reasonably necessary, in the judgment of the counsel to
such Notice Holders, to conduct a reasonable "due diligence" investigation;
provided, however, that such persons shall first agree in writing with the
Company that any information that is reasonably and in good faith designated by
the Company in writing as confidential at the time of delivery of such
information shall be kept confidential by such persons, unless (i) disclosure of
such information is required by court or administrative order or is necessary to
respond to inquiries of regulatory authorities, (ii) disclosure of such
information is required by law (including any disclosure requirements pursuant
to federal securities laws in connection with the filing of the Shelf
Registration Statement or the use of any Prospectus), (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard such information by such persons or (iv) such
information becomes available to such persons from a source other than the
Company and its subsidiaries and such source is not known by such persons to be
bound by a confidentiality agreement; provided, further, that the foregoing
inspection and information gathering shall be coordinated by (x) the managing
underwriter in connection with any underwritten offering pursuant to a Shelf
Registration and (y) the Holder or Holders designated by the participating
Majority Holders in connection with any non-underwritten offering pursuant to a
Shelf Registration, together with one counsel designated by and on behalf of
such persons;

                  (p) if reasonably requested by the Initial Purchasers or any
Notice Holder, promptly incorporate in a Prospectus supplement or post-effective
amendment to the Shelf Registration Statement such information as the Initial
Purchasers or such Notice Holder shall, on the basis of a written opinion of
nationally-recognized counsel experienced in such matters, determine to be
required to be included therein by applicable law and make any required filings
of such Prospectus supplement or such post-effective amendment; provided, that
the Company shall not be required to take any actions under this Section 3(p)
that are not, in the reasonable opinion of counsel for the Company, in
compliance with applicable law;

                  (q) use its reasonable commercial efforts to (i) confirm that
the ratings of the Notes will apply to the Notes covered by the Shelf
Registration Statement or (ii) if the Notes were not previously rated, cause the
Notes covered by the Shelf Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Majority Holders of
Securities covered by such Shelf Registration Statement, or by the managing
underwriters, if any;

                  (r) otherwise comply with all applicable rules and regulations
of the Commission and make available to its security holders, as soon as
reasonably practicable, an earnings statement covering at least 12 months which
shall satisfy the provisions of Section 11(a) of the Act and Rule 158
thereunder;

                                      A-12
<PAGE>

                  (s) use its reasonable commercial efforts to cause the Shares
to remain listed on the New York Stock Exchange; and

                  (t) cooperate and assist in any filings required to be made
with the NASD and in the performance of any due diligence investigation by any
underwriter and its counsel (including any "qualified independent underwriter"
that is required to be retained in accordance with the rules and regulations of
the NASD).

         Each Holder agrees that upon receipt of any notice from the Company of
the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to such Shelf Registration
Statement or Prospectus until the receipt by such Holder of either copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice, or notice
in writing from the Company that such Holder may resume disposition of
Registrable Securities pursuant to such Shelf Registration Statement or
Prospectus. If the Company shall give any such notice to suspend the disposition
of Registrable Securities pursuant to a Shelf Registration Statement as a result
of the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, the Company shall be deemed to have used its
reasonable commercial efforts to keep such Shelf Registration Statement
effective during such Suspension Period; provided, that the Company shall use
its reasonable commercial efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to such Shelf
Registration Statement. The Company shall extend the period during which such
Shelf Registration Statement shall be maintained effective or the Prospectus
shall be used pursuant to this Agreement by the number of days during the period
from and including the date of the giving of the notice described above to and
including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such dispositions or
notification that they may resume such disposition under an existing Prospectus.

         If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be reasonably acceptable to the Company. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.

         The Company may require each Holder of Registrable Securities as to
which any registration pursuant to Section 2(a) is being effected to furnish to
the Company such information regarding such Holder and such Holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Act. Each such

                                      A-13
<PAGE>

Holder agrees to notify the Company as promptly as practicable of any inaccuracy
or change in information previously furnished by such Holder to the Company or
of the occurrence of any event in either case as a result of which any
Prospectus relating to such registration contains or would contain an untrue
statement of a material fact regarding such Holder or such Holder's intended
method of disposition of such Registrable Securities or omits to state any
material fact regarding such Holder or such Holder's intended method of
disposition of such Registrable Securities required to be stated therein or
necessary to make the statements therein not misleading, and promptly to furnish
to the Company any additional information required to correct and update any
previously furnished information or required so that such Prospectus shall not
contain, with respect to such Holder or the disposition of such Registrable
Securities, 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.

         Each Holder agrees, by acquisition of the Registrable Securities, that
such Holder shall not be entitled to sell any of such Registrable Securities
pursuant to the Shelf Registration Statement or to receive a Prospectus related
thereto, unless such Holder has furnished the Company with a Notice and
Questionnaire. Each Notice Holder agrees to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as may be required to be disclosed in the Shelf Registration Statement under
applicable law or pursuant to the Commission's comments. Each Holder further
agrees not to sell any Registrable Securities pursuant to the Shelf Registration
Statement without delivering or causing to be delivered a Prospectus to the
purchaser thereof and, following the time at which there are no Registrable
Securities, to notify the Company, within 10 business days of a request by the
Company of the amount of Registrable Securities sold pursuant to the Shelf
Registration Statement and, in the absence of a response, the Company may assume
that all of the Holder's Registrable Securities were so sold.

         4.       Indemnification; Contribution.

         (a)      The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each Holder and each Person, if any, who controls
any Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or
otherwise ("Indemnified Holder"), and to reimburse the Holders and such
controlling Person or Persons, if any, for any legal or other expenses incurred
by them in connection with defending any action, suit or proceeding (including
governmental investigations) as provided in Section 4(c) hereof, insofar as such
losses, claims, damages, liabilities or actions, suits or proceedings (including
governmental investigations) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Shelf
Registration Statement, or, if any Shelf Registration Statement shall be amended
or supplemented, in the Shelf Registration Statement as so amended or
supplemented, or arise out of or are based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
which was made in the Shelf Registration Statement or in the Shelf Registration
Statement as so amended or supplemented, in reliance

                                      A-14
<PAGE>

upon and in conformity with information furnished in writing to the Company by
any Holder expressly for use therein.

         The Company's indemnity agreement contained in this Section 4(a), and
the covenants, representations and warranties of the Company contained in this
Agreement, shall remain in full force and effect regardless of any investigation
made by or on behalf of any Person, and the indemnity agreement contained in
this Section 4 shall survive any termination of this Agreement. The liabilities
of the Company in this Section 4 are in addition to any other liabilities of the
Company under this Agreement or otherwise.

         (b)      Each Holder agrees, severally and not jointly, to the extent
permitted by law, to indemnify, hold harmless and reimburse the Company and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Company set forth in Section 4(a)
hereof, but only with respect to alleged untrue statements or omissions made in
the Shelf Registration Statement or in the Shelf Registration Statement, as
amended or supplemented (if applicable), in reliance upon and in conformity with
information furnished in writing to the Company by such Holder expressly for use
therein.

         The indemnity agreement on the part of each Holder contained in this
Section 4(b) shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any other Person, and the
indemnity agreement contained in this Section 4(b) shall survive any termination
of this Agreement.

         (c)      If a claim is made or an action, suit or proceeding (including
governmental investigations) is commenced or threatened against any person as to
which indemnity may be sought under Section 4(a) or 4(b) hereof, such Person
(the "Indemnified Person") shall notify the Person against whom such indemnity
may be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or, if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 4(a) or 4(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by a majority in
principal amount of the Holders in the case of parties indemnified pursuant to
Section 4(b) hereof and by the Company in the case of parties indemnified
pursuant to Section 4(a) hereof. Any Indemnified Person shall have the right to
participate in such litigation or proceeding and to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or likely conflicts of
interest

                                      A-15
<PAGE>

between them, in either of which cases the reasonable fees and expenses of
counsel (including disbursements) for such Indemnified Person shall be
reimbursed by the Indemnifying Person to the Indemnified Person. If there is a
conflict as described in clause (ii) above, and the Indemnified Persons have
participated in the litigation or proceeding utilizing separate counsel whose
fees and expenses have been reimbursed by the Indemnifying Person, and the
Indemnified Persons, or any of them, are found to be solely liable, such
Indemnified Person shall repay to the Indemnifying Parties such fees and
expenses of such separate counsel as the Indemnifying Person shall have
reimbursed. It is understood that the Indemnifying Person shall not, in
connection with any litigation or proceeding or related litigation or
proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for the
reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.

         In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the Holders
and the Company agree that the Indemnifying Person's obligations to pay such
fees and expenses shall be conditioned upon the following:

                           (1)      in case separate counsel is proposed to be
                  retained by the Indemnified Persons pursuant to clause (ii) of
                  the preceding paragraph, the Indemnified Persons shall in good
                  faith fully consult with the Indemnifying Person in advance as
                  to the selection of such counsel;

                           (2)      reimbursable fees and expenses of such
                  separate counsel shall be detailed and supported in a manner
                  reasonably acceptable to the Indemnifying Person (but nothing
                  herein shall be deemed to require the furnishing to the
                  Indemnifying Person of any information, including, without
                  limitation, computer print-outs of lawyers' daily time
                  entries, to the extent that, in the judgment of such counsel,
                  furnishing such information might reasonably be expected to
                  result in a waiver of any attorney-client privilege); and

                           (3)      the Company and the Holders shall cooperate
                  in monitoring and controlling the fees and expenses of
                  separate counsel for Indemnified Persons for which the
                  Indemnifying Person is liable hereunder, and the Indemnified
                  Person shall use every reasonable effort to cause such
                  separate counsel to minimize the duplication of activities as
                  between themselves and counsel to the Indemnifying Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment against the Indemnified Person, the Indemnifying Person agrees, subject
to the provisions of this Section 4, to indemnify the Indemnified Person from
and against any loss, damage, liability or expenses by reason of such settlement
or judgment. The Indemnifying Person shall not, without the prior written
consent of the

                                      A-16
<PAGE>

Indemnified Persons, effect any settlement of any pending or threatened
litigation, proceeding or claim in respect of which indemnity has been properly
sought by the Indemnified Persons hereunder, unless such settlement includes an
unconditional release by the claimant of all Indemnified Persons from all
liability with respect to claims which are the subject matter of such
litigation, proceeding or claim.

         (d)      If the indemnification provided for in this Section 4 is
unavailable to or insufficient to hold harmless an Indemnified Person under this
Section 4 in respect of any losses, claims, damages or liabilities (or actions,
suits or proceedings (including governmental investigations) in respect thereof)
referred to therein, then each Indemnifying Person under this Section 4 shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Person on the one hand and the Indemnified Person on the
other from the sale of the Registrable Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each Indemnifying Person shall contribute to such amount paid or
payable by such Indemnified Person in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Holders on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
(even if the Holders 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 in this Section 4. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages or liabilities (or
actions, suits or proceedings (including governmental proceedings) in respect
thereof) referred to in this Section 4 shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such actions, suits or proceedings (including
governmental proceedings) or claims, provided that the provisions of this
Section 4 have been complied with (in all material respects) in respect of any
separate counsel for such Indemnified Person. Notwithstanding the provisions of
this Section 4, no Holder shall be required to contribute any amount greater
than the excess of the amount by which the total received by such Holder with
respect to the sale of its Registrable Securities pursuant to a Shelf
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Registrable Securities plus (B) the amount of any damages which such Holder
has otherwise been required to pay by reason of 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section 4 to contribute are
several in proportion to their respective obligations and not joint.

                                      A-17
<PAGE>

         The agreement with respect to contribution contained in this Section 4
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any Holder, and shall survive any termination of
this Agreement.

         5.       Miscellaneous.

                  (a) Rule 144 and Rule 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act,
the Company covenants that it will file the reports required to be filed by it
under the Act and Section 13(a) or 15(d) of the Exchange Act and the rules and
regulations adopted by the Commission thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will, upon the
request of any Holder of Registrable Securities, (i) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
Act, (ii) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the Act and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the Act within the limitation of the
exemptions provided by (A) Rule 144 under the Act, as such Rule may be amended
from time to time, (B) Rule 144A under the Act, as such Rule may be amended from
time to time or (C) any similar rules or regulations hereafter adopted by the
Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.

                  (b) No Inconsistent Agreements. The Company has not entered
into and the Company will not after the date of this Agreement enter into any
agreement which is inconsistent with the rights granted to the Holders of
Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not and will
not for the term of this Agreement in any way conflict with the rights granted
to the holders of the Company's other issued and outstanding securities under
any such agreements.

                  (c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company has obtained the written consent of the
Majority Holders of the Registrable Securities affected by such amendment,
modification, supplement, waiver or departure. Without the consent of the Holder
of each Security, however, no modification may change the provisions relating to
the payment of Additional Amounts.

                  (d) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier or any courier guaranteeing overnight delivery: (a)
if to a Holder, at the most current address given by such Holder to the Company
by means of a notice given in accordance with the provisions of this Section
5(d), which address initially is the address set forth in the Purchase Agreement
with respect to the Initial Purchasers; and (b) if to the Company, initially at
the Company's address set forth in the Purchase Agreement, and thereafter at
such other address of which notice is given in accordance with the provisions of
this Section 5(d).

                                      A-18
<PAGE>

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two (2) Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged, if telecopied; and on the next Business Day if timely delivered
to an air courier guaranteeing overnight delivery.

         Copies of all such notices, demands or other communications shall be
concurrently delivered by the person giving the same to the Trustee under the
Indenture, at the address specified in the Indenture.

                  (e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement or the Indenture.
If any transferee of any Holder shall acquire Registrable Securities, in any
manner, whether by operation of law or otherwise, such Registrable Securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Securities such person shall be conclusively deemed to
have agreed to be bound by and to perform all of the terms and provisions of
this Agreement, including the restrictions on resale set forth in this Agreement
and, if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.

                  (f) Third Party Beneficiaries. The Initial Purchasers (even if
the Initial Purchasers are not Holders of Registrable Securities) shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Holders, on the other hand, and shall have the right to
enforce such agreements directly to the extent they deem such enforcement
necessary or advisable to protect their rights or the rights of Holders
hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.

                  (g) Specific Performance. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section 2
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2 hereof.

                  (h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

                  (i) Headings. The headings in this Agreement are for the
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                                      A-19
<PAGE>

                  (j) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO
THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

                  (k) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

                  (l) Entire Agreement. This Agreement and other writings
referred to herein (including the Indenture and the Purchase Agreement)
represent the entire agreement among the parties hereto with respect to the
subject matter hereof and supercedes and replaces any and all prior agreements
and understandings, whether oral or written, with respect thereto.

                                      A-20
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                               CMS ENERGY CORPORATION

                                               By: _____________________________
                                                   Name:
                                                   Title:

CONFIRMED AND ACCEPTED
AS OF THE DATE FIRST ABOVE WRITTEN:

CITIGROUP GLOBAL MARKETS INC.,
for itself and as Representative
of the Initial Purchasers

By: _________________________________
    Name:
    Title:

                                      A-21
<PAGE>

                                    EXHIBIT B

1.       The Company is a duly organized, validly existing corporation in good
standing under the laws of the State of Michigan.

2.       All legally required corporate proceedings in connection with the
authorization, issuance and validity of the Restricted Notes and the sale of the
Restricted Notes by the Company in accordance with the Purchase Agreement have
been taken; and no approval, authorization, consent or order of any governmental
regulatory body is required with respect to the issuance and sale of the
Restricted Notes (other than in connection with or in compliance with the
provisions of the securities or blue sky laws of any state, as to which I
express no opinion).

3.       I do not know of any legal or governmental proceedings that would be
required to be described in the Offering Memorandum if it were a registration
statement filed by the Company under the Act that are not described as required,
nor of any contracts or documents of a character so required to be described in
the Offering Memorandum that are not described as required.

4.       The statements made in the Offering Memorandum under the caption
"Description of the Notes", "Registration Rights", "Description of Common Stock"
and "Material United States Federal Income Tax Considerations" constitute
summaries of legal matters or documents referred to therein and are accurate in
all material respects; and the Indenture, the Restricted Notes and the Issuable
Common Stock conform as to legal matters to the descriptions thereof and to the
statements in regard thereto contained in such section of the Offering
Memorandum.

5.       Each document incorporated in the Offering Memorandum as such document
was originally filed pursuant to the Exchange Act (except for (i) the operating
statistics, financial statements and schedules contained or incorporated by
reference therein (including the notes thereto and the auditors' reports
thereon) and (ii) the other financial or statistical information contained or
incorporated by reference therein, as to which I express no opinion) complied as
to form when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder.

6.       The Purchase Agreement has been duly authorized, executed and delivered
by the Company.

7.       The Registration Rights Agreement has been duly authorized, executed
and delivered by the Company and, assuming due authorization, execution and
delivery thereof by the Initial Purchasers, is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).

8.       The Indenture has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery of the Indenture
by the Trustee, will be a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally

                                      B-1
<PAGE>

or by general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).

9.       The Indenture complies as to form in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture that is qualified thereunder. It is not
necessary in connection with the offer, sale and delivery of the Restricted
Notes to the Initial Purchasers in the manner contemplated by the Purchase
Agreement or in connection with the Exempt Resales to qualify the Indenture
under the Trust Indenture Act.

10.      The Restricted Notes are in the form contemplated by the Indenture,
have been duly authorized, executed and delivered by the Company and, assuming
the due authentication thereof by the Trustee and upon payment and delivery in
accordance with the Purchase Agreement, will constitute 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
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 Restricted Notes are entitled to the security afforded by the
Indenture equally and ratably with all securities presently outstanding
thereunder, and no stamp taxes in respect of the original issue thereof are
payable; the Restricted Notes will be convertible into Common Stock in
accordance with their terms.

11.      The issuance, sale and conversion of the Restricted Notes in accordance
with the terms of the Indenture and the Purchase Agreement do not violate the
provisions of the Restated Articles of Incorporation or the Bylaws of the
Company, and will not result in a breach of any of the terms or provisions of,
or constitute a default under, any indenture, mortgage, deed of trust, loan
agreement or other material agreement or instrument to which the Company is a
party.

12.      The Company is not an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

13.      The Company (i) is a "holding company", as such term is defined in the
Public Utility Holding Company Act of 1935, as amended, and (ii) is currently
exempt from all provisions of the Public Utility Holding Company Act of 1935, as
amended, except Section 9(a)(2) thereof.

14.      No registration under the Act of the Restricted Notes is required for
the sale of the Restricted Notes to the Initial Purchasers as contemplated by
the Purchase Agreement or for the Exempt Resales assuming (i) that each of the
Initial Purchasers is an Eligible Purchaser or an Accredited Investor (as
defined in Regulation D under the Act), (ii) the accuracy of, and compliance
with, the Initial Purchasers' representations and agreements contained in
Section 8 of the Purchase Agreement, and (iii) the accuracy of the
representations of the Company set forth in Sections 6(e), 6(n), 7(o), 7(q) and
7(s) of the Purchase Agreement.

15.      Except for the outstanding shares of preferred stock of Consumers
Energy Company, the 8.36% Trust Originated Preferred Securities of Consumers
Power Company Financing I, the 8.20% Trust Originated Preferred Securities of
Consumers Energy Company Financing II, the 9

                                      B-2
<PAGE>

1/4% Trust Originated Preferred Securities of Consumers Energy Company Financing
III, the 9.00% Trust Preferred Securities of Consumers Energy Company Financing
IV, the 7 3/4% Convertible Quarterly Income Preferred Securities of CMS Energy
Trust I and the 7 1/4% PEPS Units of CMS Energy Trust III, all of the
outstanding capital stock of each of Consumers Energy Company and CMS
Enterprises Company is owned directly or indirectly by the Company, free and
clear of any security interest, claim, lien or other encumbrance (except as
disclosed in the Offering Memorandum) or preemptive rights, and there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in any of Consumers Energy
Company and CMS Enterprises Company or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any such
capital stock, any such convertible or exchangeable securities or any such
rights, warrants or options.

16.      The Company has an authorized capitalization as set forth in the
Offering Memorandum and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable. The shares of Issuable Common Stock have been duly and validly
authorized and reserved for issuance by the Company and, when issued and
delivered in accordance with the provisions of the Indenture as it relates to
the Restricted Notes, will be duly and validly issued, fully paid and
non-assessable and will conform in all material respects to the description of
the Common Stock contained in the Offering Memorandum and the issuance of the
Issuable Common Stock is not, and will not be, subject to any preemptive or
other similar right.

17.      Nothing has come to my attention that would lead me to believe that the
Offering Memorandum (other than (i) the operating statistics, financial
statements and schedules contained or incorporated by reference therein
(including the notes thereto and the auditors' reports thereon) and (ii) the
other financial or statistical information contained or incorporated by
reference therein, as to which I express no opinion), as of its date or at the
date hereof contained or contains 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.

                                      B-3
<PAGE>

                                   EXHIBIT C-1

1.       The offer, sale and delivery of the Restricted Notes to the Initial
Purchasers in the manner contemplated by the Purchase Agreement and the Offering
Memorandum and the initial resale of the Restricted Notes by the Initial
Purchasers in the manner contemplated in the Offering Memorandum and the
Purchase Agreement, do not require registration under the Act and the
Supplemental Indenture does not require qualification under the Trust Indenture
Act, it being understood that we do not express any opinion as to any subsequent
reoffer or resale of any of the Restricted Notes.

2.       The Registration Rights Agreement is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.

                                     C-1-1
<PAGE>

                                   EXHIBIT C-2

No facts have come to our attention that have caused us to believe that the
Offering Memorandum, as of its date and as of the date hereof, contained or
contains 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 light of the
circumstances under which they were made, not misleading (except that in each
case we do not express any view as to the financial statements, schedules and
other financial data and financial projections included therein or excluded
therefrom). For purposes of the foregoing, we note that the Offering Memorandum
has been prepared in the context of a Rule 144A transaction and not as part of a
registration statement under the Act and does not contain all the information
that would be required in a registration statement under the Act.

                                     C-2-1
<PAGE>

                                    EXHIBIT D

               [Letterhead of officer or director of the Company]

                                __________, 2003

Citigroup Global Markets Inc.
   As Representative of the several Initial Purchasers
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

         This letter is being delivered to you in connection with a proposed
Purchase Agreement (the "Purchase Agreement") between CMS Energy Corporation, a
Michigan corporation (the "Company") and you as representative of a group of
Initial Purchasers named therein, whereby the Initial Purchasers have agreed to
purchase Convertible Senior Notes due 2023, convertible into shares of common
stock, par value $0.01 per share (the "Restricted Notes"), of the Company
pursuant to the Purchase Agreement. Terms used but not defined in this letter
shall have the meanings ascribed to such terms in the Purchase Agreement.

         In order to induce you and the other Initial Purchasers to purchase the
Restricted Notes pursuant to the Purchase Agreement, the undersigned will not,
without the prior written consent of the Representative, offer, sell, contract
to sell, pledge or otherwise dispose of, or file (or participate in the filing
of) a registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act, and the rules and
regulations of the Commission promulgated thereunder with respect to, any shares
of capital stock of the Company or any securities convertible or exercisable or
exchangeable for such capital stock, or publicly announce an intention to effect
any such transaction, for a period of 60 days after the date of the Purchase
Agreement, other than shares of Common Stock disposed of as bona fide gifts
approved by the Representative, and up to 10,000 shares of Common Stock for any
one executive officer or director of the Company with an aggregate limit of
100,000 shares of Common Stock for all executive officers or directors of the
Company.

         If for any reason the Purchase Agreement shall be terminated prior to
the Time of Purchase (as defined in the Purchase Agreement), the agreement set
forth above shall likewise be terminated.

                                            Very truly yours,

                                            By:_________________________________
                                               Name:
                                               Title:

                                       D-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(Z)
<SEQUENCE>16
<FILENAME>k82154aexv10wxzy.txt
<DESCRIPTION>PURCHASE AGREEMENT DATED JULY 9, 2003
<TEXT>
<PAGE>

                                                                   EXHIBIT 10(z)

                                                                  EXECUTION COPY

                                  $300,000,000

                             CMS ENERGY CORPORATION

                           7.75% Senior Notes due 2010

                               Purchase Agreement

                                                              July 9, 2003

Citigroup Global Markets Inc.
   As Representative of the several Initial Purchasers
   named in Schedule I hereto
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

         CMS Energy Corporation, a Michigan corporation (the "Company"),
proposes to issue and sell to Citigroup Global Markets Inc. ("Citigroup") and
each of the other Initial Purchasers named in Schedule I hereto (collectively,
the "Initial Purchasers"), for whom Citigroup is acting as representative (in
such capacity, the "Representative"), an aggregate of $300,000,000 in principal
amount of its 7.75% Senior Notes due 2010 (the "Restricted Notes"), subject to
the terms and conditions set forth herein. The Restricted Notes are to be issued
pursuant to the provisions of the Indenture dated as of September 15, 1992
between the Company and Bank One Trust Company, N.A. (ultimate successor to NBD
Bank, National Association), as trustee (the "Trustee"), as supplemented and
amended by various supplemental indentures and as to be supplemented by the
Fourteenth Supplemental Indenture, to be dated as of July 17, 2003, establishing
the terms of the Restricted Notes (the "Supplemental Indenture") (as so
supplemented, the "Indenture"). Capitalized terms used but not defined herein
shall have the meanings given to such terms in the Indenture.

         Holders (including subsequent transferees) of the Restricted Notes will
have the registration rights set forth in the registration rights agreement in
the form attached hereto as Exhibit A (the "Registration Rights Agreement"), to
be dated the Time of Purchase, for so long as such Restricted Notes constitute
Transfer Restricted Securities (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "Commission") a
shelf registration statement (the "Registration Statement") pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Act") relating to the
exchange or resale by certain holders of the Restricted Notes, and to use its
best efforts to cause such Registration Statement to be declared and remain
effective and usable for the periods specified in the Registration Rights
Agreement. This Agreement, the Indenture, the Restricted Notes and the
Registration Rights Agreement are hereinafter sometimes referred to collectively
as the "Operative Documents".

         1.       Offering Memorandum: The Restricted Notes will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Act. The Company has prepared a preliminary
offering memorandum dated July 9, 2003 (the

<PAGE>

"Preliminary Offering Memorandum") and a confidential offering memorandum dated
July 9, 2003 (the "Offering Memorandum") relating to the Restricted Notes, which
incorporate by reference documents filed by the Company pursuant to Section 13,
14 or 15 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). As used herein, the term "Preliminary Offering Memorandum" and "Offering
Memorandum" shall include respectively the documents incorporated by reference
therein. Any reference herein to the terms "amend", "amendment" or "supplement"
with respect to the Preliminary Offering Memorandum and Offering Memorandum
shall be deemed to include amendments or supplements to the Preliminary Offering
Memorandum and Offering Memorandum, and documents incorporated by reference
after the time of execution of this Agreement and prior to the termination of
the offering of the Restricted Notes by the Initial Purchasers.

         Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the Indenture, the Restricted Notes (and all
securities issued in exchange therefor or in substitution thereof) shall bear
the following legend:

         THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
         TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES
         ACT OF 1933 (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE
         OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
         REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF
         THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
         BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
         SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS
         SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS SECURITY
         MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) IN
         THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
         QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
         SECURITIES ACT ("RULE 144A")) IN A TRANSACTION MEETING THE REQUIREMENTS
         OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
         QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS
         OF RULE 144A, (II) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
         IN ACCORDANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES ACT, (III)
         PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
         PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE), (IV) IN ACCORDANCE WITH
         ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
         ACT, (V) TO CMS ENERGY CORPORATION OR (VI) PURSUANT TO AN EFFECTIVE
         REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I)
         THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
         STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH
         SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THE

                                       2
<PAGE>

         SECURITY FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN CLAUSE (A)
         ABOVE.

         THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT ENGAGE IN
         HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS IN COMPLIANCE WITH
         THE SECURITIES ACT.

         THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
         SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON AND
         PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS SECURITY TO REFLECT
         ANY CHANGE IN APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION
         THEREOF) OR IN PRACTICES RELATING TO THE RESALE OR TRANSFER OF
         RESTRICTED SECURITIES GENERALLY. THE HOLDER OF THIS SECURITY SHALL BE
         DEEMED BY THE ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO ANY SUCH
         AMENDMENT OR SUPPLEMENT.

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO THE BENEFITS
         OF, A REGISTRATION RIGHTS AGREEMENT DATED AS OF JULY 17, 2003 ENTERED
         INTO BY THE COMPANY FOR THE BENEFIT OF CERTAIN HOLDERS OF SECURITIES
         FROM TIME TO TIME.

         2.       Purchase and Sale: Upon the basis of the representations and
warranties and subject to the terms and conditions herein set forth, the Company
agrees to sell to the respective Initial Purchasers, severally and not jointly,
and the respective Initial Purchasers, severally and not jointly, agree to
purchase from the Company at the purchase price specified in Schedule I hereto
(the "Purchase Price"), the respective principal amounts of Restricted Notes set
opposite their names in Schedule I hereto.

         The Company hereby agrees that, without the prior written consent of
the Representative, it will not offer, sell, contract to sell or otherwise issue
debt securities substantially similar to the Restricted Notes for a period from
the date of the execution of this Agreement until the Time of Purchase.

         3.       Terms of Offering: The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Restricted Notes purchased hereunder on the terms set forth in the Offering
Memorandum solely to persons whom the Initial Purchasers reasonably believe to
be "qualified institutional buyers" as defined in Rule 144A under the Act or, at
the time any buy order for the Restricted Notes was or is originated, were or
are outside the United States and were or are not "U.S. persons" within the
meaning of Regulation S under the Act (such persons being referred to herein as
the "Eligible Purchasers"). The Initial Purchasers will offer the Restricted
Notes to Eligible Purchasers initially at a price equal to 100% of the principal
amount thereof. Such price may be changed at any time without notice.

                                       3
<PAGE>

         4.       Payment and Delivery: Payment for the Restricted Notes shall
be made to the Company in federal or other immediately available funds in New
York City (or such other place or places of payment as shall be agreed upon by
the Company and the Representative in writing), upon the delivery of the
Restricted Notes at the offices of Pillsbury Winthrop LLP ("PW"), at One Battery
Park Plaza, New York, New York 10004-1490 (or such other place or places of
delivery as shall be agreed upon by the Company and the Representative) to the
Representative for the respective accounts of the Initial Purchasers against
receipt therefor signed by the Representative on behalf of themselves and as
agent for the other Initial Purchasers. Such payment and delivery shall be made
at 10:00 A.M., New York time on July 17, 2003 (or on such later business day as
shall be agreed upon by the Company and the Representative in writing), unless
postponed in accordance with the provisions of Section 11 hereof. The day and
time at which payment and delivery for the Restricted Notes are to be made is
herein called the "Time of Purchase".

         Delivery of the Restricted Notes shall be made in definitive, fully
registered form or global form, as specified by the Representative, in
authorized denominations registered in such names as the Representative may
request in writing to the Company not later than two full business days prior to
the Time of Purchase, or, if no such request is received, in the names of the
respective Initial Purchasers for the respective principal amounts of Restricted
Notes set forth opposite the name of each Initial Purchaser in Schedule I, in
denominations selected by the Company. The certificates evidencing the
Restricted Notes shall be delivered at the Time of Purchase for the account of
the Initial Purchasers, with any transfer taxes payable in connection with the
transfer of the Restricted Notes to the Initial Purchasers duly paid, against
payment of the Purchase Price therefor.

         The Company agrees to make the Restricted Notes available for
inspection by the Initial Purchasers at the offices of PW at least 24 hours
prior to the Time of Purchase, in definitive, fully registered form, and as
requested pursuant to the preceding paragraph.

         5.       Conditions of Initial Purchasers' Obligations: The several
obligations of the Initial Purchasers hereunder are subject to the accuracy of
the representations and warranties, at and as of the Time of Purchase, on the
part of the Company, and to the following other conditions:

                  (a) That all legal proceedings to be taken in connection with
the issue and sale of the Restricted Notes shall be reasonably satisfactory in
form and substance to PW, counsel to the Initial Purchasers.

                  (b) That, at the Time of Purchase, the Representative shall be
furnished with the following opinions, dated the Time of Purchase:

                           (i) Opinion of Robert C. Shrosbree, Esq., Assistant
         General Counsel of the Company, substantially to the effect set forth
         in Exhibit B attached hereto;

                           (ii) Opinion of Skadden, Arps, Slate, Meagher & Flom
         LLP, counsel to the Company, substantially to the effect set forth in
         Exhibit C-1 and Exhibit C-2 attached hereto; and

                                       4
<PAGE>

                           (iii) Opinion of PW, counsel to the Initial
         Purchasers, in a form satisfactory to the Initial Purchasers.

                  (c)      (i) That, on the date hereof and on the date of the
Time of Purchase, the Representative shall have received a letter from Ernst &
Young LLP ("E&Y") in form and substance satisfactory to the Initial Purchasers,
dated as of such date, (i) confirming that they are independent public
accountants with respect to the Company within the meaning of the Act and the
applicable published rules and regulations of the Commission thereunder, (ii)
stating that in their opinion the financial statements examined by them and
included or incorporated by reference in the Preliminary Offering Memorandum or
Offering Memorandum, as the case may be, complied as to form in all material
respects with the applicable accounting requirements of the Commission,
including the applicable published rules and regulations of the Commission, and
(iii) covering, as of a date not more than five business days prior to the date
of such letter, such other matters as the Initial Purchasers reasonably request.

                           (ii) That, on the date hereof, the Representative
shall have received a letter from each of PricewaterhouseCoopers LLP and Price
Waterhouse, each in form and substance satisfactory to the Initial Purchasers,
dated as of such date, (i) confirming that each are independent public
accountants with respect to (A) the Company and the Midland Cogeneration Venture
Limited Partnership, in the case of PricewaterhouseCoopers LLP, and (B) the
Company and Jorf Lasfar Energy Company S.C.A., in the case of Price Waterhouse,
each within the meaning of the Act and the applicable published rules and
regulations of the Commission thereunder, (ii) stating that in each of their
opinions the financial statements examined by them and referred to in the letter
of E&Y complied as to form in all material respects with the applicable
accounting requirements of the Commission, including the applicable published
rules and regulations of the Commission, and (iii) covering, as of a date not
more than five business days prior to the date of such letter, such other
matters as the Initial Purchasers reasonably request.

                  (d) Subsequent to the date hereof or, if earlier, the dates as
of which information is given in the Offering Memorandum (exclusive of any
amendment or supplement thereto), there shall not have been (i) any change or
decrease specified in the letter or letters referred to in Section 5(c) hereof
or (ii) any change, or any development involving a prospective change, in or
affecting the condition (financial or otherwise), prospects, earnings, business
or properties of the Company and its subsidiaries taken as a whole, except as
set forth in or contemplated in the Offering Memorandum (exclusive of any
amendment or supplement thereto), the effect of which, in any case referred to
in clause (i) or (ii) above, is, in the judgment of the Representative, so
material and adverse as to make it impractical or inadvisable to proceed with
the offering or delivery of the Restricted Notes as contemplated in the Offering
Memorandum (exclusive of any amendment or supplement thereto).

                  (e) That, at the Time of Purchase, the Company shall have
delivered to the Representative a certificate of an executive officer of the
Company to the effect that, to the best of his or her knowledge, information and
belief, (i) there shall have been no material adverse change in the condition
(financial or otherwise), earnings, business or properties of the Company from
that set forth in the Offering Memorandum (other than changes referred to in or
contemplated by the Offering Memorandum) and (ii) the representations and
warranties of the

                                       5
<PAGE>

Company in this Agreement are true and correct on and as of the Time of Purchase
with the same effect as if made at the Time of Purchase, and the Company has
complied with all the agreements and satisfied all the conditions on its part to
be performed or satisfied hereunder at or prior to the Time of Purchase.

                  (f) That the Company shall have executed and delivered the
Registration Rights Agreement and shall have furnished the Representative signed
counterparts of the Supplemental Indenture.

                  (g) That the Company shall have performed such of its
obligations under this Agreement as are to be performed at or before the Time of
Purchase by the terms hereof.

                  (h) That the Company shall have complied with the provisions
of Section 6(c) hereof with respect to the furnishing of the Offering
Memorandum.

                  (i) That, at the Time of Purchase, the Restricted Notes shall
be rated at least B+ by Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc. ("S&P"), B3 by Moody's Investors Service, Inc.
("Moody's") and B+ by Fitch, Inc. ("Fitch"), and the Company shall have
delivered to the Representative a letter, dated the Time of Purchase, from each
such rating agency, or other evidence reasonably satisfactory to the
Representative, confirming that the Restricted Notes have been assigned such
ratings; and between the date of the execution of this Agreement and the Time of
Purchase, there has been no downgrading or withdrawal of the investment ratings
of the Restricted Notes, securities of the Company or securities of Consumers
Energy Company by any nationally recognized statistical rating agency, and no
such rating agency shall have publicly announced that it has under surveillance
or review, with possible negative implications, any such rating.

                  (j) The Restricted Notes shall have been designated as
PORTAL-eligible securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD") and the Restricted
Notes shall be eligible for clearance and settlement through The Depository
Trust Company ("DTC").

                  (k) That any additional documents or agreements reasonably
requested by the Initial Purchasers or their counsel to permit the Initial
Purchasers to perform their obligations or permit their counsel to deliver
opinions hereunder shall have been provided to them.

         6.       Certain Covenants of the Company: In further consideration of
the agreements of the Initial Purchasers herein contained, the Company covenants
as follows:

                  (a) To advise the Representative promptly and, if requested by
the Representative, confirm such advice in writing, of the issuance by any state
securities commission of any stop order suspending the qualification or
exemption from qualification of any Restricted Notes for offering or sale in any
jurisdiction designated by the Initial Purchasers pursuant to Section 6(d)
hereof, or the initiation of any proceeding by any state securities commission
or any other federal or state regulatory authority for such purpose. The Company
shall use its best efforts to prevent the issuance of any stop order or order
suspending the qualification or exemption of any Restricted Notes under any
state securities or blue sky laws and, if at any time any state securities
commission or other federal or state regulatory authority

                                       6
<PAGE>

shall issue an order suspending the qualification or exemption of any Restricted
Notes under any state securities or blue sky laws, the Company shall use its
best efforts to obtain the withdrawal or lifting of such order at the earliest
possible time.

                  (b) To deliver to the Initial Purchasers, without charge, as
soon as practicable, as many copies of the Offering Memorandum (as supplemented
or amended if the Company shall have made any supplements or amendments thereto)
as the Initial Purchasers may reasonably request. Subject to the Initial
Purchasers' compliance with their representations and warranties and agreements
set forth in Section 8 hereof, the Company consents to the use of the Offering
Memorandum, and any amendments and supplements thereto required pursuant hereto,
by the Initial Purchasers in connection with Exempt Resales.

                  (c) For such period of time as the Initial Purchasers are
required by law or customary practice to deliver an offering memorandum in
respect of the Restricted Notes, if any event shall have occurred as a result of
which it is necessary to amend or supplement the Offering Memorandum in order to
make the statements therein, in light of the circumstances when the Offering
Memorandum is delivered to an Eligible Purchaser, not misleading, or if it
becomes necessary to amend or supplement the Offering Memorandum to comply with
law, to forthwith prepare an appropriate amendment or supplement to the Offering
Memorandum and deliver to the Initial Purchasers, without charge, such number of
copies thereof as may be reasonably requested.

                  (d) To use its best efforts to qualify the Restricted Notes
for offer and sale under the securities or blue sky laws of such jurisdictions
as the Initial Purchasers may designate and to pay (or cause to be paid), or
reimburse (or cause to be reimbursed) the Initial Purchasers and their counsel
for, reasonable filing fees and expenses in connection therewith (including the
reasonable fees and disbursements of counsel to the Initial Purchasers and
filing fees and expenses paid and incurred prior to the date hereof), provided,
however, that the Company shall not be required to qualify to do business as a
foreign corporation or as a securities dealer or to file a general consent to
service of process or to file annual reports or to comply with any other
requirements deemed by the Company to be unduly burdensome.

                  (e) So long as the Restricted Notes are outstanding, (i) to
mail and make generally available as soon as practicable after the end of each
fiscal year to the record holders of the Restricted Notes a financial report of
the Company on a consolidated basis, all such financial reports to include a
consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.

                                       7
<PAGE>

                  (f) So long as any of the Restricted Notes are "restricted
securities" within the meaning of Rule 144(a)(3) under the Act and remain
outstanding and during any period in which the Company is not subject to Section
13 or 15(d) of the Exchange Act, to make available to any holder of Restricted
Notes in connection with any sale thereof and any prospective purchaser of such
Restricted Notes from such holder, the information required by Rule 144A(d)(4)
under the Act.

                  (g) To pay all expenses, fees and taxes (other than transfer
taxes on sales by the respective Initial Purchasers) in connection with the
issuance and delivery of the Restricted Notes, except that the Company shall be
required to pay the fees and disbursements (other than disbursements referred to
in Section 6(d) hereof) of PW, counsel to the Initial Purchasers, only in the
events provided in Section 6(h) hereof, the Initial Purchasers hereby agreeing
to pay such fees and disbursements in any other event, and that except as
provided in such Section 6(h), the Company shall not be responsible for any
out-of-pocket expenses of the Initial Purchasers in connection with their
services hereunder.

                  (h) If the Initial Purchasers shall not take up and pay for
the Restricted Notes due to the failure of the Company to comply with any of the
conditions specified in Section 5 hereof, or, if this Agreement shall be
terminated in accordance with the provisions of Section 12 hereof prior to the
Time of Purchase or the Date of Delivery, as the case may be, to pay the
reasonable fees and disbursements of PW, counsel to the Initial Purchasers, and,
if the Initial Purchasers shall not take up and pay for the Restricted Notes due
to the failure of the Company to comply with any of the conditions specified in
Section 5 hereof, to reimburse the Initial Purchasers for their reasonable
out-of-pocket expenses not to exceed $3,000 incurred in connection with the
financing contemplated by this Agreement.

                  (i) During the period referred to in Section 6(c) hereof, to
not amend or supplement the Offering Memorandum unless the Company has furnished
the Initial Purchasers and counsel to the Initial Purchasers with a copy for
their review and comment a reasonable time prior to the making of such amendment
or supplement and has reasonably considered any comments of the Initial
Purchasers, and not to make any such amendment or supplement to which such
counsel shall reasonably object on legal grounds in writing after consultation
with the Initial Purchasers.

                  (j) During the period referred to in Section 6(c) hereof, to
furnish the Initial Purchasers with copies of all documents required to be filed
with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

                  (k) During the period referred to in Section 6(c) hereof, to
comply with all requirements under the Exchange Act relating to the timely
filing with the Commission of its reports pursuant to Section 13 or 15(d) of the
Exchange Act and of its proxy statements pursuant to Section 14 of the Exchange
Act.

                  (l) To comply in all material respects with all of its
agreements set forth in the Registration Rights Agreement.

                                       8
<PAGE>

                  (m) To obtain the approval of DTC for "book-entry" transfer of
the Restricted Notes, and to comply in all material respects with all of its
agreements set forth in the representation letter or letters of the Company to
DTC relating to the approval of the Restricted Notes by DTC for "book-entry"
transfer.

                  (n) Not to (or permit any affiliate (as defined in Rule 144
under the Act) to) sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any security (as defined in the Act) that would be
integrated with the sale of the Restricted Notes to the Initial Purchasers or
pursuant to Exempt Resales in a manner that would require the registration of
any such sale of the Restricted Notes under the Act.

                  (o) Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Restricted Notes.

                  (p) During the period of two years after the Time of Purchase,
not to, and not permit any of its affiliates (as defined in Rule 144 under the
Act) to, resell any of the Restricted Notes which constitute "restricted
securities" under Rule 144 under the Act that have been reacquired by any of
them.

                  (q) To take all reasonable action necessary to enable S&P,
Moody's and Fitch to provide their respective credit ratings of the Restricted
Notes.

                  (r) Until the second anniversary of the Time of Purchase, not
to, and not to permit any affiliates under its control to, purchase any
Restricted Notes unless, immediately upon any such purchase, the Company or any
such affiliate shall submit such Restricted Notes to the Trustee for
cancellation.

                  (s) Not to, and not to permit any of its affiliates or any
person acting on its or their behalf (other than the Initial Purchasers, as to
which no agreement is made) to, directly or indirectly, make offers or sales of
any security, or solicit offers to buy any security, under circumstances that
would require the registration of the Restricted Notes under the Act.

                  (t) Any information provided by the Company to publishers of
publicly available databases about the terms of the Restricted Notes shall
include a statement that the Restricted Notes have not been registered under the
Act and are subject to restrictions under Rule 144A under the Act and Regulation
S under the Act.

                  (u) The Company will not take, directly or indirectly, any
action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Restricted Notes.

                  (v) The Company will cause the proceeds of the issuance and
sale of the Restricted Notes to be applied for the purposes described in the
Offering Memorandum.

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

                                       9
<PAGE>

                  (a) Each of the Preliminary Offering Memorandum and the
Offering Memorandum does not, and any supplement or amendment to it will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this Section 7(a)
shall not apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment thereto)
based upon information relating to the Initial Purchasers furnished to the
Company in writing by the Initial Purchasers expressly for use therein. No stop
order preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the transactions
contemplated by this Agreement are subject to the registration requirements of
the Act, has been issued.

                  (b) The documents incorporated by reference in the Preliminary
Offering Memorandum and the Offering Memorandum, when they were filed (or, if an
amendment with respect to any such document was filed, when such amendment was
filed) with the Commission, conformed in all material respects to the
requirements of the Exchange Act and the rules and regulations of the Commission
promulgated thereunder, and any further documents so filed and incorporated by
reference will, when they are filed with the Commission, conform in all material
respects to the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder; none of such documents, when it was
filed (or, if an amendment with respect to any such document was filed, when
such amendment was filed), 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, in light of the circumstances under which they were
made, not misleading; and no such further document, when it is filed, will
contain an untrue statement of a material fact or will omit to state a material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading.

                  (c) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Michigan and has all requisite authority to own or lease its properties and
conduct its business as described in the Preliminary Offering Memorandum and the
Offering Memorandum and to consummate the transactions contemplated hereby, and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business as described in the
Preliminary Offering Memorandum and the Offering Memorandum or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company.

                  (d) The Restricted Notes are in the form contemplated by the
Indenture and have been duly authorized by the Company. At the Time of Purchase,
the Restricted Notes will have been duly executed and delivered by the Company
and, when authenticated by the Trustee in the manner provided for in the
Indenture and delivered against payment therefor as provided in this Agreement,
will constitute 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 affecting creditors' rights generally or by
general principles of equity (regardless of whether enforcement

                                       10
<PAGE>

is considered in a proceeding at law or in equity), and will be entitled to the
security afforded by the Indenture equally and ratably with all securities
outstanding thereunder. The Restricted Notes conform in all material respects to
the descriptions thereof in the Preliminary Offering Memorandum and the Offering
Memorandum. Each significant subsidiary (as defined in Rule 405 under the Act,
and hereinafter called a "Significant Subsidiary") of the Company has been duly
organized and is validly existing and in good standing under the laws of the
jurisdiction of its formation, has all requisite authority to own or lease its
properties and conduct its business as described in the Offering Memorandum and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business as described in the Offering
Memorandum or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and its Significant
Subsidiaries, taken as a whole.

                  (e) This Agreement has been duly authorized, executed and
delivered by the Company, and the Company has full corporate power and authority
to enter into this Agreement.

                  (f) The Registration Rights Agreement has been duly authorized
by the Company. At the Time of Purchase, the Registration Rights Agreement will
have been duly executed and delivered by the Company and will constitute a valid
and binding agreement of the Company, enforceable against the Company in
accordance with its terms, except to the extent that the enforcement thereof may
be limited by bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether enforcement is considered in a proceeding at law
or in equity). The Registration Rights Agreement conforms in all material
respects to the description thereof in the Preliminary Offering Memorandum and
the Offering Memorandum.

                  (g) The Indenture has been duly authorized by the Company. At
the Time of Purchase, the Indenture will have been duly executed and delivered
by the Company and will constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except to
the extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws 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 Indenture conforms in
all material respects to the description thereof in the Preliminary Offering
Memorandum and the Offering Memorandum; and the Indenture conforms to the
requirements of the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act").

                  (h) Except for the outstanding shares of preferred stock of
Consumers Energy Company, the 8.36% Trust Originated Preferred Securities of
Consumers Power Company Financing I, the 8.20% Trust Originated Preferred
Securities of Consumers Energy Company Financing II, the 9 1/4% Trust Originated
Preferred Securities of Consumers Energy Company Financing III, the 9.00% Trust
Preferred Securities of Consumers Energy Company Financing IV, the 7 3/4%
Convertible Quarterly Income Preferred Securities of CMS Energy Trust I and the
7 1/4% PEPS Units of CMS Energy Trust III, all of the outstanding capital stock
of each of Consumers Energy Company and CMS Enterprises Company is owned
directly or indirectly by the Company, free and clear of any security interest,
claim, lien or other encumbrance (except as disclosed in the Offering
Memorandum) or preemptive rights, and there are no outstanding rights

                                       11
<PAGE>

(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any shares of
capital stock or other equity interest in any of Consumers Energy Company and
CMS Enterprises Company or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any such capital stock, any
such convertible or exchangeable securities or any such rights, warrants or
options.

                  (i) The Company has all necessary consents, authorizations,
approvals, orders, certificates and permits of and from, and has made all
declarations and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals, to own, lease, license and use its properties and assets and to
conduct business in the manner described in the Preliminary Offering Memorandum
and the Offering Memorandum, except to the extent that the failure to obtain or
file would not have a material adverse effect on the Company.

                  (j) No order, license, consent, authorization or approval of,
or exemption by, or the giving of notice to, or the registration with, any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, and no filing, recording, publication or
registration in any public office or any other place, was or is now required to
be obtained by the Company to authorize its execution or delivery of, or the
performance of its obligations under, this Agreement or any of the other
Operative Documents, except such as have been obtained or may be required under
state securities or blue sky laws or as referred to in the Offering Memorandum.

                  (k) None of the issuance or sale of the Restricted Notes, or
the execution or delivery by the Company of, or the performance by the Company
of its obligations under, this Agreement or the other Operative Documents, did
or will conflict with, result in a breach of any of the terms or provisions of,
or constitute a default or require the consent of any party under, the Company's
Articles of Incorporation or by-laws, any material agreement or instrument to
which it is a party, any existing applicable law, rule or regulation or any
judgment, order or decree of any government, governmental instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of its
properties or assets, or did or will result in the creation or imposition of any
lien on the Company's properties or assets.

                  (l) Except as disclosed in the Offering Memorandum, there is
no action, suit, proceeding, inquiry or investigation (at law or in equity or
otherwise) pending or, to the knowledge of the Company, threatened against the
Company, by any governmental authority that (i) questions the validity,
enforceability or performance of this Agreement or any of the other Operative
Documents or (ii) if determined adversely, is likely to have a material adverse
effect on the business or financial condition of the Company, or materially
adversely affect the ability of the Company to perform its obligations hereunder
or the consummation of the transactions contemplated by this Agreement.

                  (m) There has not been any material and adverse change in the
business, properties, prospects or financial condition of the Company from that
set forth or incorporated by reference in the Offering Memorandum (other than
changes referred to in or contemplated by the Offering Memorandum).

                                       12
<PAGE>

                  (n) Except as set forth in the Offering Memorandum, no event
or condition exists that constitutes, or with the giving of notice or lapse of
time or both would constitute, a default or any breach or failure to perform by
the Company in any material respect under any indenture, mortgage, loan
agreement, lease or other material agreement or instrument to which the Company
is a party or by which it or any of its properties may be bound.

                  (o) The Offering Memorandum, as of its date, contained all the
information specified in, and met the requirements of, Rule 144A(d)(4) under the
Act.

                  (p) When the Restricted Notes are issued and delivered
pursuant to this Agreement, the Restricted Notes will not be of the same class
(within the meaning of Rule 144A under the Act) as any security of the Company
that is listed on a national securities exchange registered under Section 6 of
the Exchange Act or that is quoted in a United States automated inter-dealer
quotation system. No securities of the same class as the Restricted Notes have
been issued and sold by the Company within the six-month period immediately
prior to the date hereof.

                  (q) Neither the Company nor any affiliate (as defined in Rule
144 under the Act) of the Company has directly, or through any agent, (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the Act) which is or will be integrated with the
sale of the Restricted Notes in a manner that would require the registration
under the Act of the Restricted Notes or (ii) engaged in any form of general
solicitation or general advertising in connection with the offering of the
Restricted Notes (as those terms are used in Regulation D under the Act), or in
any manner involving a public offering within the meaning of Section 4(2) of the
Act, including, but not limited to, publication or release of articles, notices
or other communications published in any newspaper, magazine, or similar medium
or broadcast over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.

                  (r) None of the Company nor any of its affiliates (as defined
in Rule 144 under the Act) or any person acting on its or their behalf (other
than the Initial Purchasers, as to whom the Company makes no representation) has
engaged or will engage in any directed selling efforts within the meaning of
Regulation S under the Act with respect to the Restricted Notes.

                  (s) No registration under the Act of the Restricted Notes is
required for the sale of the Restricted Notes to the Initial Purchasers as
contemplated hereby or for the Exempt Resales (assuming the accuracy of the
Initial Purchasers' representation and warranty and agreement set forth in
Section 8 hereof).

                  (t) The Company, after giving effect to the offering and sale
of the Restricted Notes, will not be an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.

                  (u) The Restricted Notes satisfy the eligibility requirements
of Rule 144A(d)(3) under the Act.

                                       13
<PAGE>

                  (v) The Company has been advised by the NASD's PORTAL Market
that the Restricted Notes have been designated PORTAL-eligible securities in
accordance with the rules and regulations of the NASD.

                  (w) The Company's chief executive officer and chief financial
officer are responsible for establishing and maintaining the Company's
disclosure controls and procedures. The Company's management, under the
direction of the Company's principal executive and financial officers, has
evaluated the effectiveness of the Company's disclosure controls and procedures
as of a date within 90 days of the filing of the Company's most recent annual
report on Form 10-K/A. Based on such evaluation, the Company's chief executive
officer and chief financial officer have concluded that the Company's disclosure
controls and procedures are effective to ensure that material information was
presented to them and properly disclosed. There have been no significant changes
in the Company's internal controls or in other factors that could significantly
affect internal controls subsequent to such evaluation.

         The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 5
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.

         8.       Representations and Warranties of Initial Purchasers: Upon the
authorization by the Initial Purchasers of the release of the Restricted Notes,
the Initial Purchasers propose to offer the Restricted Notes for sale upon the
terms and conditions set forth in this Agreement and the Offering Memorandum and
the Initial Purchasers hereby represent and warrant to, and agree with, the
Company that:

                  (a)      they each will offer and sell the Restricted Notes
only to Eligible Purchasers;

                  (b)      they each are Accredited Investors (as defined in
Regulation D under the Act); and

                  (c)      they each will not offer or sell the Restricted Notes
by any form of general solicitation or general advertising, including, but not
limited to, the methods described in Rule 502(c) under the Act.

         9.       Indemnification:

                  (a) The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each of the Initial Purchasers and each person, if
any, who controls any such Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, against any and all losses, claims,
damages or liabilities, joint or several, to which they or any of them may
become subject under the Act or otherwise, and to reimburse the Initial
Purchasers and such controlling person or persons, if any, for any legal or
other expenses incurred by them in connection with defending any action, suit or
proceeding (including governmental investigations) as provided in Section 9(c)
hereof, insofar as such losses, claims, damages, liabilities or actions, suits
or proceedings (including governmental investigations) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in

                                       14
<PAGE>

the Preliminary Offering Memorandum or the Offering Memorandum, or, if the
Preliminary Offering Memorandum or the Offering Memorandum shall be amended or
supplemented, in the Preliminary Offering Memorandum or the Offering Memorandum
as so amended or supplemented or arise out of or are based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or actions arise out of or are based
upon any such untrue statement or alleged untrue statement or omission or
alleged omission which was made in the Preliminary Offering Memorandum or the
Offering Memorandum or in the Preliminary Offering Memorandum or the Offering
Memorandum as so amended or supplemented, in reliance upon and in conformity
with information furnished in writing to the Company by, or through the
Representative on behalf of, any Initial Purchaser expressly for use therein and
except that the Company will not be liable in any such case to the extent that
any such loss, claim, damage or liability or action, suit or proceeding arises
out of or is based upon any such untrue statement or alleged untrue statement or
omission or alleged omission made in the Preliminary Offering Memorandum if
copies of the Offering Memorandum were timely delivered to the Initial
Purchasers pursuant to Section 6 hereof and a copy of the Offering Memorandum
(as then amended or supplemented if the Company shall have furnished any
amendments or supplements thereto) was not sent or given by or on behalf of the
Initial Purchasers to the person asserting such loss, claim, damage or liability
or action, suit or proceeding and if the Offering Memorandum (as so amended or
supplemented) would have cured the defect giving rise to such loss, claim,
damage or liability or action, suit or proceeding.

                  The Company's indemnity agreement contained in this Section
9(a), and the covenants, representations and warranties of the Company contained
in this Agreement, shall remain in full force and effect regardless of any
investigation made by or on behalf of any person, and shall survive the delivery
of and payment for the Restricted Notes hereunder, and the indemnity agreement
contained in this Section 9 shall survive any termination of this Agreement. The
liabilities of the Company in this Section 9(a) are in addition to any other
liabilities of the Company under this Agreement or otherwise.

                  (b) Each Initial Purchaser agrees, severally and not jointly,
to the extent permitted by law, to indemnify, hold harmless and reimburse the
Company, each other Initial Purchaser, and each person, if any, who controls the
Company or any such other Initial Purchaser within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Company set forth in Section 9(a)
hereof, but only with respect to alleged untrue statements or omissions made in
the Preliminary Offering Memorandum or the Offering Memorandum, as amended or
supplemented (if applicable), in reliance upon and in conformity with
information furnished in writing to the Company by such Initial Purchaser
expressly for use therein.

                  The indemnity agreement on the part of each Initial Purchaser
contained in this Section 9(b) and the representations and warranties of such
Initial Purchaser contained in this Agreement shall remain in full force and
effect regardless of any investigation made by or on behalf of the Company or
any other person, and shall survive the delivery of and payment for the
Restricted Notes hereunder, and the indemnity agreement contained in this
Section 9(b) shall survive any termination of this Agreement. The liabilities of
each Initial Purchaser in this

                                       15
<PAGE>

Section 9(b) are in addition to any other liabilities of such Initial Purchaser
under this Agreement or otherwise.

                  (c) If a claim is made or an action, suit or proceeding
(including governmental investigations) is commenced or threatened against any
person as to which indemnity may be sought under Section 9(a) or 9(b) hereof,
such person (the "Indemnified Person") shall notify the person against whom such
indemnity may be sought (the "Indemnifying Person") promptly after any assertion
of such claim threatening to institute an action, suit or proceeding or if such
an action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 9(a) or 9(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by the Representative
in the case of parties indemnified pursuant to Section 9(b) hereof and by the
Company in the case of parties indemnified pursuant to Section 9(a) hereof. Any
Indemnified Person shall have the right to participate in such litigation or
proceeding and to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed to the
retention of such counsel or (ii) the named parties to any such proceeding
(including any impleaded parties) include (x) the Indemnifying Person and (y)
the Indemnified Person and, in the written opinion of counsel to such
Indemnified Person, representation of both parties by the same counsel would be
inappropriate due to actual or likely conflicts of interest between them, in
either of which cases the reasonable fees and expenses of counsel (including
disbursements) for such Indemnified Person shall be reimbursed by the
Indemnifying Person to the Indemnified Person. If there is a conflict as
described in clause (ii) above, and the Indemnified Persons have participated in
the litigation or proceeding utilizing separate counsel whose fees and expenses
have been reimbursed by the Indemnifying Person and the Indemnified Persons, or
any of them, are found to be solely liable, such Indemnified Persons shall repay
to the Indemnifying Person such fees and expenses of such separate counsel as
the Indemnifying Person shall have reimbursed. It is understood that the
Indemnifying Person shall not, in connection with any litigation or proceeding
or related litigation or proceedings in the same jurisdiction as to which the
Indemnified Persons are entitled to such separate representation, be liable
under this Agreement for the reasonable fees and out-of-pocket expenses of more
than one separate firm (together with not more than one appropriate local
counsel) for all such Indemnified Persons. Subject to the next paragraph, all
such fees and expenses shall be reimbursed by payment to the Indemnified Persons
of such reasonable fees and expenses of counsel promptly after payment thereof
by the Indemnified Persons.

                  In furtherance of the requirement above that fees and expenses
of any separate counsel for the Indemnified Persons shall be reasonable, the
Initial Purchasers and the Company agree that the Indemnifying Person's
obligations to pay such fees and expenses shall be conditioned upon the
following:

                                       16
<PAGE>

                           (1)      in case separate counsel is proposed to be
                  retained by the Indemnified Persons pursuant to clause (ii) of
                  the preceding paragraph, the Indemnified Persons shall in good
                  faith fully consult with the Indemnifying Person in advance as
                  to the selection of such counsel;

                           (2)      reimbursable fees and expenses of such
                  separate counsel shall be detailed and supported in a manner
                  reasonably acceptable to the Indemnifying Person (but nothing
                  herein shall be deemed to require the furnishing to the
                  Indemnifying Person of any information, including, without
                  limitation, computer print-outs of lawyers' daily time
                  entries, to the extent that, in the judgment of such counsel,
                  furnishing such information might reasonably be expected to
                  result in a waiver of any attorney-client privilege); and

                           (3)      the Company and the Representative shall
                  cooperate in monitoring and controlling the fees and expenses
                  of separate counsel for Indemnified Persons for which the
                  Indemnifying Person is liable hereunder, and the Indemnified
                  Person shall use reasonable effort to cause such separate
                  counsel to minimize the duplication of activities as between
                  themselves and counsel to the Indemnifying Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees, subject to the
provisions of this Section 9, to indemnify the Indemnified Person from and
against any loss, damage, liability or expenses by reason of such settlement or
judgment. The Indemnifying Person shall not, without the prior written consent
of the Indemnified Persons, effect any settlement of any pending or threatened
litigation, proceeding or claim in respect of which indemnity has been properly
sought by the Indemnified Persons hereunder, unless such settlement includes an
unconditional release by the claimant of all Indemnified Persons from all
liability with respect to claims which are the subject matter of such
litigation, proceeding or claim.

                  (d) If the indemnification provided for in Section 9 above is
unavailable to or insufficient to hold harmless an Indemnified Person under this
Section 9 in respect of any losses, claims, damages or liabilities (or actions,
suits or proceedings (including governmental investigations) in respect thereof)
referred to therein, then each Indemnifying Person under this Section 9 shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Person on the one hand and the Indemnified Person on the
other from the offering of the Restricted Notes. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each Indemnifying Person shall contribute to such amount paid or
payable by such Indemnified Person in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable

                                       17
<PAGE>

considerations. The relative benefits received by the Company on the one hand
and the Initial Purchasers on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the total discounts or commissions
received by the Initial Purchasers, in each case as set forth in the Offering
Memorandum, bear to the aggregate public offering price of the Restricted Notes.
The relative fault shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by the Company on the one hand or the Initial Purchasers on the other
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
the Initial Purchasers agree that it would not be just and equitable if
contribution pursuant to this Section 9(d) were determined by pro rata
allocation (even if the Initial Purchasers 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 9(d). The amount paid
or payable by an Indemnified Person as a result of the losses, claims, damages
or liabilities (or actions, suits or proceedings (including governmental
proceedings) in respect thereof) referred to above in this Section 9(d) shall be
deemed to include any legal or other expenses reasonably incurred by such
Indemnified Person in connection with investigating or defending any such
actions, suits or proceedings (including governmental proceedings) or claim,
provided that the provisions of this Section 9 have been complied with (in all
material respects) in respect of any separate counsel for such Indemnified
Person. Notwithstanding the provisions of this Section 9(d), in no case shall
any Initial Purchaser be responsible for any amount in excess of the purchase
discount or commission applicable to the Restricted Notes purchased by such
Initial Purchaser hereunder. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Initial Purchasers' obligations in this Section 9(d) to
contribute are several in proportion to their respective obligations and not
joint.

         The agreement with respect to contribution contained in this Section
9(d) shall remain in full force and effect regardless of any investigation made
by or on behalf of the Company or any Initial Purchaser, and shall survive
delivery of and payment for the Restricted Notes hereunder and any termination
of this Agreement.

         10.      Survival: The respective indemnities, agreements,
representations, warranties and other statements of the Company and the Initial
Purchasers as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Initial Purchasers or any controlling person of the
Initial Purchasers, the Company, or any officer, director or controlling person
of the Company, and shall survive delivery of and payment for the Restricted
Notes.

         11.      Substitution of Initial Purchasers: If any Initial Purchaser
under this agreement shall fail or refuse (otherwise than for some reason
sufficient to justify in accordance with the terms hereof, the termination of
its obligations hereunder) to purchase the Restricted Notes which it had agreed
to purchase on the Time of Purchase, the Representative shall immediately notify
the Company and the Representative and the other Initial Purchasers may, within
36 hours of the giving of such notice, determine to purchase, or to procure one
or more other members of

                                       18
<PAGE>

the NASD (or, if not members of the NASD, who are foreign banks, dealers or
institutions not registered under the Exchange Act and who agree in making sales
to comply with the NASD's Rules of Fair Practice), satisfactory to the Company,
to purchase, upon the terms herein set forth, the principal amount of Restricted
Notes which the defaulting Initial Purchaser had agreed to purchase. If any
non-defaulting Initial Purchaser or Initial Purchasers shall determine to
exercise such right, the Representative shall give written notice to the Company
of such determination within 36 hours after the Company shall have received
notice of any such default, and thereupon the Time of Purchase shall be
postponed for such period, not exceeding three business days, as the Company
shall determine. If, in the event of such a default, the Representative shall
fail to give such notice, or shall within such 36-hour period give written
notice to the Company that no other Initial Purchaser or Initial Purchasers, or
others, will exercise such right, then this Agreement may be terminated by the
Company, upon like notice given to the Representative within a further period of
36 hours. If in such case the Company shall not elect to terminate this
Agreement, it shall have the right, irrespective of such default:

                  (a) to require such non-defaulting Initial Purchasers to
purchase and pay for the respective principal amounts of Restricted Notes which
they had severally agreed to purchase hereunder, as herein above provided, and,
in addition, the principal amount of Restricted Notes which the defaulting
Initial Purchaser shall have so failed to purchase up to a principal amount
thereof equal to one-ninth (1/9) of the respective principal amounts of
Restricted Notes which such non-defaulting Initial Purchasers have otherwise
agreed to purchase hereunder; and/or

                  (b) to procure one or more other members of the NASD (or, if
not members of the NASD, who are foreign banks, dealers or institutions not
registered under the Exchange Act and who agree in making sales to comply with
the NASD's Rules of Fair Practice) to purchase, upon the terms herein set forth,
the principal amount of Restricted Notes which such defaulting Initial Purchaser
had agreed to purchase, or that portion thereof which the remaining Initial
Purchasers shall not be obligated to purchase pursuant to Section 11(a) hereof.

         In the event the Company shall exercise its rights under Section 11(a)
and/or Section 11(b) hereof, the Company shall give written notice thereof to
the Representative within such further period of 36 hours, and thereupon the
Time of Purchase shall be postponed for such period, not exceeding five business
days, as the Company shall determine. In the event the Company shall be entitled
to but shall not elect to exercise its rights under Section 11(a) and/or Section
11(b) hereof, the Company shall be deemed to have elected to terminate this
Agreement.

         Any action taken by the Company under this Section 11 shall not relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this Agreement. Termination by the Company under
this Section 11 shall be without any liability on the part of the Company or any
non-defaulting Initial Purchaser.

         In the computation of any period of 36 hours referred to in this
Section 11, there shall be excluded a period of 24 hours in respect of each
Saturday, Sunday or legal holiday which would otherwise be included in such
period of time.

         12.      Termination of Agreement: This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.

                                       19
<PAGE>

         This Agreement may be terminated at any time prior to the Time of
Purchase by the Representative if, prior to such time, any of the following
events shall have occurred: (i) trading in the Company's common stock, par value
$0.01 per share, shall have been suspended by the Commission or the New York
Stock Exchange or trading in securities generally on the New York Stock Exchange
shall have been suspended or limited or minimum prices shall have been
established on such exchange; (ii) a banking moratorium shall have been declared
either by U.S. federal or New York State authorities; or (iii) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis the effect of
which on the financial markets of the United States is such as to impair, in the
sole judgment of the Representative, the marketability of the Restricted Notes.

         If the Representative elects to terminate this Agreement, as provided
in this Section 12, the Representative will promptly notify the Company and each
other Initial Purchaser by telephone or telecopy, confirmed by letter. If this
Agreement shall not be carried out by any Initial Purchaser for any reason
permitted hereunder, or if the sale of the Restricted Notes to the Initial
Purchasers as herein contemplated shall not be carried out because the Company
is not able to comply with the terms hereof, the Company shall not be under any
obligation under this Agreement and shall not be liable to any Initial Purchaser
or to any member of any selling group for the loss of anticipated profits from
the transactions contemplated by this Agreement and the Initial Purchasers shall
be under no liability to the Company nor be under any liability under this
Agreement to one another.

         Notwithstanding the foregoing, the provisions of Sections 6(e), 6(i), 9
and 10 shall survive any termination of this Agreement.

         13.      Notices: All notices hereunder shall, unless otherwise
expressly provided, be in writing and be delivered at or mailed to the following
addresses or be sent by telecopy as follows: (i) if to the Initial Purchasers or
the Representative, to Citigroup Global Markets Inc., 388 Greenwich Street, New
York, New York 10013, Attention: General Counsel (Telecopy 212-816-7912); and
(ii) if to the Company, to CMS Energy Corporation, One Energy Plaza, Jackson,
Michigan 49201, Attention: Executive Vice President and Chief Financial Officer
(Telecopy 517-788-2186).

         14.      Parties in Interest: This Agreement has been and is made
solely for the benefit of the Initial Purchasers, the Company, the Initial
Purchasers' directors and officers and the controlling persons, if any, referred
to herein, and their respective successors, assigns, executors and
administrators, and, except as expressly otherwise provided in Section 11
hereof, no other person shall acquire or have any right under or by virtue of
this Agreement.

         15.      Definition of Certain Terms: All obligations of the Initial
Purchasers hereunder are several and not joint. The term "successors" as used in
this Agreement shall not include any purchaser, as such purchaser, of any of the
Restricted Notes from any of the respective Initial Purchasers.

         16.      Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.

                                       20
<PAGE>

         17.      Waiver of Tax Confidentiality: Notwithstanding anything herein
to the contrary, purchasers of the Restricted Notes (and each employee,
representative or other agent of the Company) may disclose to any and all
persons, without limitation of any kind, the U.S. tax treatment and U.S. tax
structure of any transaction contemplated herein and all materials of any kind
(including opinions or other tax analyses) that are provided to the purchasers
of the Restricted Notes relating to such U.S. tax treatment and U.S. tax
structure, other than any information for which nondisclosure is reasonably
necessary in order to comply with applicable securities laws.

         18.      Counterparts: This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such respective counterparts shall together
constitute one and the same instrument.

                                       21
<PAGE>

         If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and, upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
between each of the Initial Purchasers and the Company.

                                         Very truly yours,

                                         CMS ENERGY CORPORATION

                                         By: /s/ Laura M. Mountcastle
                                             ------------------------------
                                             Name: Laura M. Mountcastle
                                             Title: Vice President and Treasurer

Confirmed and accepted as
of the date first written above:

CITIGROUP GLOBAL MARKETS INC.
     As Representative of the several Initial Purchasers
     named in Schedule I hereto

By: CITIGROUP GLOBAL MARKETS INC.

By:/s/ Jane Sadowsky
   -----------------------------------
   Name: Jane Sadowsky
   Title: Managing Director



<PAGE>

                                   SCHEDULE I

<TABLE>
<CAPTION>
                                         Principal Amount of Restricted
         Initial Purchasers                           Notes                Purchase Price
         ------------------                           -----                --------------
<S>                                      <C>                               <C>
Citigroup Global Markets Inc.                     $120,000,000              $115,401,600

Merrill Lynch, Pierce, Fenner & Smith             $105,000,000              $100,976,400
             Incorporated

Deutsche Bank Securities Inc.                     $ 75,000,000              $ 72,126,000

                                                  ------------              ------------
Total                                             $300,000,000              $288,504,000
                                                  ============              ============
</TABLE>

                                       I-1
<PAGE>

                                    EXHIBIT A

         This Registration Rights Agreement (this "Agreement") is made and
entered into as of July 17, 2003, by CMS Energy Corporation, a Michigan
corporation (the "Company"), and Citigroup Global Markets Inc., as
representative of the Initial Purchasers (the "Initial Purchasers") listed on
Schedule I to the Purchase Agreement (as defined below), pursuant to which the
Initial Purchasers have agreed to purchase the Company's $300,000,000 7.75%
Senior Notes due 2010 (the "Restricted Notes").

         This Agreement is made pursuant to the Purchase Agreement, dated July
9, 2003 (the "Purchase Agreement"), between the Company and Citigroup Global
Markets Inc., as representative of the Initial Purchasers. In order to induce
the Initial Purchasers to purchase the Restricted Notes, the Company has agreed
to provide the registration rights set forth in this Agreement. The execution
and delivery of this Agreement is a condition to the obligations of the Initial
Purchasers set forth in Section 5(f) of the Purchase Agreement.

         The parties hereby agree as follows:

SECTION 1. DEFINITIONS

         Capitalized terms used but not defined herein shall have the meanings
ascribed to such terms in the Purchase Agreement. As used in this Agreement, the
following capitalized terms shall have the following meanings:

         Act: The Securities Act of 1933, as amended.

         Advice: As defined in Section 6(d) hereof.

         Agreement: As defined in the first paragraph hereof.

         Broker-Dealer: Any broker or dealer registered under the Exchange Act.

         Broker-Dealer Transfer Restricted Securities: Exchange Notes that are
acquired by a Broker-Dealer in the Exchange Offer in exchange for Restricted
Notes that such Broker-Dealer acquired for its own account as a result of
market-making activities or other trading activities (other than Restricted
Notes acquired directly from the Company or any of its affiliates).

         Business Day: Any day except a Saturday, Sunday or other day in the
City of New York, or in the city of the primary corporate trust office of the
Trustee, on which banks are authorized to close.

         Certificated Securities: Notes that are not in Global Note form.

         Closing Date: The date hereof.

         Commission: The Securities and Exchange Commission.

         Company: As defined in the first paragraph hereof.

                                       A-1
<PAGE>

         Consummate: An Exchange Offer shall be deemed "Consummated" for
purposes of this Agreement upon the occurrence of (a) the filing and
effectiveness under the Act of the Exchange Offer Registration Statement
relating to the Exchange Notes to be issued in the Exchange Offer, (b) the
maintenance of such Exchange Offer Registration Statement continuously effective
and the keeping of the Exchange Offer open for a period not less than the
minimum period required pursuant to Section 3(b) hereof and (c) the delivery by
the Company to the Security Registrar of the Exchange Notes in the same
aggregate principal amount as the aggregate principal amount of the Restricted
Notes tendered by Holders thereof pursuant to the Exchange Offer.

         Damages Payment Date: With respect to the Restricted Notes, each
Interest Payment Date.

         Exchange Act: The Securities Exchange Act of 1934, as amended.

         Exchange Notes: The Company's 7.75% Senior Notes due 2010, to be issued
pursuant to the Indenture (i) in the Exchange Offer or (ii) upon the request of
any Holder of Restricted Notes covered by a Shelf Registration Statement, in
exchange for such Restricted Notes.

         Exchange Offer: The registration by the Company under the Act of the
Exchange Notes pursuant to the Exchange Offer Registration Statement pursuant to
which the Company shall offer the Holders of all outstanding Transfer Restricted
Securities relating to Restricted Notes the opportunity to exchange all such
outstanding Transfer Restricted Securities relating to Restricted Notes for
Exchange Notes in an aggregate principal amount equal to the aggregate principal
amount of the Transfer Restricted Securities relating to Restricted Notes
tendered in such exchange offer by such Holders.

         Exchange Offer Registration Statement: The Registration Statement
relating to the Exchange Offer, including the related Prospectus.

         Exempt Resales: The transactions in which the Initial Purchasers
propose to sell the Restricted Notes to certain "qualified institutional
buyers", as such term is defined in Rule 144A under the Act, or to persons who
are not "U.S. persons", as such term is defined in Regulation S under the Act.

         Global Note: As defined in the Notes.

         Holder: As defined in Section 2 hereof.

         Indemnified Holder: As defined in Section 8(a) hereof.

         Indemnified Person: As defined in Section 8(c) hereof.

         Indemnifying Person: As defined in Section 8(c) hereof.

         Indenture: Indenture dated as of September 15, 1992, between the
Company and the Trustee, as supplemented by various supplemental indentures.

         Initial Purchasers: As defined in the first paragraph hereof.

                                       A-2
<PAGE>

         Interest Payment Date: As defined in the Notes.

         NASD: National Association of Securities Dealers, Inc.

         Notes: The Restricted Notes and the Exchange Notes.

         Person: An individual, partnership, corporation, trust, limited
liability company, unincorporated organization, or a government or agency or
political subdivision thereof.

         Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.

         Purchase Agreement: As defined in the second paragraph hereof.

         Record Holder: With respect to any Damages Payment Date, each Person
who is a Holder of Notes on the record date with respect to the Interest Payment
Date on which such Damages Payment Date shall occur.

         Registration Default: As defined in Section 5 hereof.

         Registration Statement: Any registration statement of the Company
relating to (a) an offering of Exchange Notes pursuant to an Exchange Offer or
(b) the registration for resale of Transfer Restricted Securities pursuant to
the Shelf Registration Statement, in each case, (i) which is filed pursuant to
the provisions of this Agreement and (ii) including the Prospectus included
therein, all amendments and supplements thereto (including post-effective
amendments) and all exhibits and material incorporated by reference therein.

         Restricted Broker-Dealer: Any Broker-Dealer which holds Broker-Dealer
Transfer Restricted Securities.

         Restricted Notes: As defined in the first paragraph hereof.

         S-3 Ineligibility Date: As defined in Section 12(l) hereof.

         Security Registrar: As defined in the Indenture.

         Shelf Registration Statement: As defined in Section 4(a) hereof.

         TIA: The Trust Indenture Act of 1939 (15 U.S.C. Sections 77aaa-77bbbb)
as in effect on the date of the Indenture.

         Transfer Restricted Securities: Each Note, until the earliest to occur
of (a) the date on which such Restricted Note is exchanged in the Exchange Offer
and entitled to be resold to the public by the Holder thereof without complying
with the prospectus delivery requirements of the Act, (b) the date on which such
Restricted Note has been disposed of in accordance with a Shelf Registration
Statement, (c) the date on which such Restricted Note is disposed of by a
Broker-

                                       A-3
<PAGE>

Dealer pursuant to the "Plan of Distribution" contemplated by the Exchange Offer
Registration Statement (including delivery of the Prospectus contained therein)
or (d) the date on which such Restricted Note is distributed to the public
pursuant to Rule 144 under the Act.

         Trustee: Bank One Trust Company, N.A. (ultimate successor to NBD Bank,
National Association), as trustee under the Indenture.

         Underwritten Offering or Underwritten Registration: An offering or
registration in which securities of the Company are sold to an underwriter for
reoffering to the public.

SECTION 2. HOLDERS

         A Person is deemed to be a holder of Transfer Restricted Securities
(each, a "Holder") whenever such Person owns Transfer Restricted Securities.

SECTION 3. REGISTERED EXCHANGE OFFER

         (a)      Unless the Exchange Offer shall not be permitted by applicable
federal law (after the procedures set forth in Section 6(a)(i) hereof have been
complied with), the Company shall (i) cause to be filed with the Commission as
soon as practicable after the Closing Date, but in no event later than 240 days
after the Closing Date, the Exchange Offer Registration Statement, (ii) use its
reasonable best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 330
days after the Closing Date, (iii) in connection with the foregoing, (A) file
all pre-effective amendments to such Exchange Offer Registration Statement as
may be necessary in order to cause such Exchange Offer Registration Statement to
become effective, (B) file, if applicable, a post-effective amendment to such
Exchange Offer Registration Statement pursuant to Rule 430A under the Act and
(C) cause all necessary filings, if any, in connection with the registration and
qualification of the Exchange Notes to be made under the blue sky laws of such
jurisdictions as are necessary to permit Consummation of the Exchange Offer, and
(iv) upon the effectiveness of such Exchange Offer Registration Statement,
commence and Consummate the Exchange Offer. The Exchange Offer shall be on the
appropriate form permitting registration of the Exchange Notes to be offered in
exchange for the Restricted Notes that are Transfer Restricted Securities and to
permit sales of Broker-Dealer Transfer Restricted Securities by Restricted
Broker-Dealers as contemplated by Section 3(c) hereof.

         (b)      The Company shall use its reasonable best efforts to cause the
Exchange Offer Registration Statement to be effective continuously, and shall
keep the Exchange Offer open for a period of not less than the minimum period
required under applicable federal and state securities laws to Consummate the
Exchange Offer; provided, however, that in no event shall such period be less
than 20 Business Days. The Company shall cause the Exchange Offer to comply with
all applicable federal and state securities laws. No securities other than the
Notes shall be included in the Exchange Offer Registration Statement. The
Company shall use its best efforts to cause the Exchange Offer to be Consummated
on the earliest practicable date after the Exchange Offer Registration Statement
has become effective, but in no event later than 30 days thereafter.

                                       A-4
<PAGE>

         (c)      The Company shall include a "Plan of Distribution" section in
the Prospectus contained in the Exchange Offer Registration Statement and
indicate therein that any Restricted Broker-Dealer who holds Restricted Notes
that are Transfer Restricted Securities and that were acquired for the account
of such Broker-Dealer as a result of market-making activities or other trading
activities, may exchange such Restricted Notes (other than Transfer Restricted
Securities acquired directly from the Company or any affiliate of the Company)
pursuant to the Exchange Offer; however, such Broker-Dealer may be deemed to be
an "underwriter" within the meaning of the Act and must, therefore, deliver a
prospectus meeting the requirements of the Act in connection with its initial
sale of each Exchange Note received by such Broker-Dealer in the Exchange Offer,
which prospectus delivery requirement may be satisfied by the delivery by such
Broker-Dealer of the Prospectus contained in the Exchange Offer Registration
Statement. Such "Plan of Distribution" section shall also contain all other
information with respect to such sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers that the Commission may require in order
to permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Notes held by any such
Broker-Dealer, except to the extent required by the Commission as a result of a
change in policy after the date of this Agreement.

         The Company shall use its best efforts to keep the Exchange Offer
Registration Statement continuously effective, supplemented and amended as
required by the provisions of Section 6(c) hereof to the extent necessary to
ensure that it is available for sales of Broker-Dealer Transfer Restricted
Securities by Restricted Broker-Dealers, and to ensure that such Registration
Statement conforms with the requirements of this Agreement, the Act and the
policies, rules and regulations of the Commission as announced from time to
time, for a period of one year from the date on which the Exchange Offer is
Consummated.

         The Company shall promptly provide sufficient copies of the latest
version of such Prospectus to such Restricted Broker-Dealers promptly upon
request, and in no event later than one day after such request, at any time
during such one-year period in order to facilitate such sales.

SECTION 4. SHELF REGISTRATION

         (a)      Shelf Registration. If (i) the Company is not required to file
an Exchange Offer Registration Statement with respect to the Exchange Notes
because the Exchange Offer is not permitted by applicable law or Commission
policy (after the procedures set forth in Section 6(a)(i) hereof have been
complied with) or (ii) any Holder of Transfer Restricted Securities shall notify
the Company within 20 Business Days following the Consummation of the Exchange
Offer that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the
Exchange Notes acquired by it in the Exchange Offer to the public without
delivering a prospectus and the Prospectus contained in the Exchange Offer
Registration Statement is not appropriate or available for such resales by such
Holder, the Company shall, if, and when, the Company is eligible to use Act Form
S-3, (x) cause to be filed on or prior to 180 days after the date on which the
Company determines that it is not required to file the Exchange Offer
Registration Statement pursuant to clause (i) above or 180 days after the date
on which the Company receives the notice specified in clause (ii) above a shelf
registration statement pursuant to Rule 415 under the Act (which may be an
amendment to

                                       A-5
<PAGE>

the Exchange Offer Registration Statement (in either event, the "Shelf
Registration Statement")), relating to all Transfer Restricted Securities the
Holders of which shall have provided the information required pursuant to
Section 4(b) hereof, and (y) use its best efforts to cause such Shelf
Registration Statement to become effective on or prior to 270 days after the
date on which the Company becomes obligated to file such Shelf Registration
Statement. If, after the Company has filed an Exchange Offer Registration
Statement which satisfies the requirements of Section 3(a) hereof, the Company
is required to file and make effective a Shelf Registration Statement solely
because the Exchange Offer shall not be permitted under applicable federal law,
then the filing of the Exchange Offer Registration Statement shall be deemed to
satisfy the requirements of clause (x) above. Such an event shall have no effect
on the requirements of clause (y) above. The Company shall use its reasonable
best efforts to keep the Shelf Registration Statement discussed in this Section
4(a) continuously effective, supplemented and amended as required by and subject
to the provisions of Sections 6(b) and (c) hereof to the extent necessary to
ensure that it is available for sales of Transfer Restricted Securities by the
Holders thereof entitled to the benefit of this Section 4(a), and to ensure that
it conforms with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i) hereof)
following the date on which such Shelf Registration Statement first becomes
effective under the Act.

         (b)      Provision by Holders of Certain Information in Connection with
the Shelf Registration Statement. No Holder of Transfer Restricted Securities
may include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, such
information specified in Item 507 of Regulation S-K for use in connection with
any Shelf Registration Statement or Prospectus or preliminary Prospectus
included therein. No Holder of Transfer Restricted Securities shall be entitled
to liquidated damages pursuant to Section 5 hereof unless and until such Holder
shall have used its best efforts to provide all such information. Each Holder as
to which any Shelf Registration Statement is being effected agrees to furnish
promptly to the Company all information required to be disclosed in order to
make the information previously furnished to the Company by such Holder not
materially misleading.

SECTION 5. LIQUIDATED DAMAGES

         If (i) any Registration Statement required by this Agreement is not
filed with the Commission on or prior to the date specified for such filing in
this Agreement, (ii) any such Registration Statement has not been declared
effective by the Commission on or prior to the date specified for such
effectiveness in this Agreement, (iii) the Exchange Offer has not been
Consummated within 30 calendar days after the Exchange Offer Registration
Statement is first declared effective by the Commission or (iv) any Registration
Statement required by this Agreement is filed and declared effective but shall
thereafter cease to be effective or fail to be usable for its intended purpose
without being succeeded within 15 Business Days by a post-effective amendment to
such Registration Statement that cures such failure and that is itself declared
effective within five Business Days (each such event referred to in clauses (i)
through (iv), a "Registration Default"), then the Company agrees to pay
liquidated damages in the form of additional interest on the Transfer Restricted
Securities to each Holder of Transfer Restricted

                                       A-6
<PAGE>

Securities, from and including the date on which any Registration Default shall
occur to, but excluding, the date on which such Registration Default has been
cured, at a rate of 0.25% per annum during the 90-day period immediately
following the occurrence of such Registration Default and shall increase by
0.25% per annum at the end of each subsequent 90-day period, but in no event
shall such rate exceed 0.50% per annum. Notwithstanding anything to the contrary
set forth herein, (1) upon filing of the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement), in the case of clause
(i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of clause (ii) above, (3) upon Consummation of the Exchange Offer, in the case
of clause (iii) above, or (4) upon the filing of a post-effective amendment to
the Registration Statement or an additional Registration Statement that causes
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement) to again be declared effective or made usable, in the
case of clause (iv) above, the liquidated damages payable with respect to the
Transfer Restricted Securities as a result of such clause (i), (ii), (iii) or
(iv), as applicable, shall cease.

         All additional interest shall be paid on each payment date to the
Holder of Global Notes by wire transfer of immediately available funds or by
federal funds check and to Holders of Certificated Securities by mailing checks
to their registered addresses on the books of the Company or the Trustee for
such payment. All obligations of the Company set forth in the preceding
paragraph that are outstanding with respect to any Transfer Restricted Security
at the time such security ceases to be a Transfer Restricted Security shall
survive until such time as all such obligations with respect to such security
shall have been satisfied in full.

SECTION 6. REGISTRATION PROCEDURES

         (a)      Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall comply with all applicable provisions of
Section 6(c) hereof, shall use its reasonable best efforts to effect such
exchange and to permit the sale of Broker-Dealer Transfer Restricted Securities
being sold in accordance with the intended method or methods of distribution
thereof, and shall comply with all of the following provisions:

                  (i)      If, following the date hereof, there has been
         published a change in Commission policy with respect to exchange offers
         such as the Exchange Offer, such that in the reasonable opinion of
         counsel to the Company there is a substantial question as to whether
         the Exchange Offer is permitted by applicable federal law, the Company
         hereby agrees to seek a no-action letter or other favorable decision
         from the Commission allowing the Company to Consummate an Exchange
         Offer for the Restricted Notes. The Company hereby agrees to pursue the
         issuance of such a decision to the Commission staff level. In
         connection with the foregoing, the Company hereby agrees to take all
         such other actions as are reasonably requested by the Commission or
         otherwise required in connection with the issuance of such decision,
         including without limitation (A) participating in telephonic
         conferences with the Commission, (B) delivering to the Commission staff
         an analysis prepared by counsel to the Company setting forth the legal
         bases, if any, upon which such counsel has concluded that such an

                                       A-7
<PAGE>

         Exchange Offer should be permitted and (C) diligently pursuing a
         resolution (which need not be favorable) by the Commission staff of
         such submission.

                  (ii)     As a condition to its participation in the Exchange
         Offer pursuant to the terms of this Agreement, each Holder of Transfer
         Restricted Securities shall furnish upon the request of the Company,
         prior to the Consummation of the Exchange Offer, a written
         representation to the Company (which may be contained in the letter of
         transmittal contemplated by the Exchange Offer Registration Statement)
         to the effect that (A) it is not an affiliate of the Company, (B) it is
         not engaged in, and does not intend to engage in, and has no
         arrangement or understanding with any Person to participate in, a
         distribution of the Exchange Notes to be issued in the Exchange Offer
         and (C) it is acquiring the Exchange Notes in its ordinary course of
         business. Each Holder hereby acknowledges and agrees that any
         Broker-Dealer and any such Holder using the Exchange Offer to
         participate in a distribution of the securities to be acquired in the
         Exchange Offer (1) could not under Commission policy as in effect on
         the date of this Agreement rely on the position of the Commission
         enunciated in Morgan Stanley and Co. Inc. (available June 5, 1991) and
         Exxon Capital Holdings Corp. (available May 13, 1988), as interpreted
         in the Commission's letter to Shearman & Sterling (available July 2,
         1993), and similar no-action letters (including, if applicable, any
         no-action letter obtained pursuant to clause (i) above), and (2) must
         comply with the registration and prospectus delivery requirements of
         the Act in connection with a secondary resale transaction and that such
         a secondary resale transaction must be covered by an effective
         registration statement containing the selling security holder
         information required by Item 507 or 508, as applicable, of Regulation
         S-K if the resales are of Exchange Notes obtained by such Holder in
         exchange for Restricted Notes acquired by such Holder directly from the
         Company or an affiliate thereof.

                  (iii)    Prior to effectiveness of the Exchange Offer
         Registration Statement, the Company shall provide a supplemental letter
         to the Commission (A) stating that the Company is registering the
         Exchange Offer in reliance on the position of the Commission enunciated
         in Exxon Capital Holdings Corp. (available May 13, 1988), Morgan
         Stanley and Co. Inc. (available June 5, 1991) and, if applicable, any
         no-action letter obtained pursuant to clause (i) above, (B) including a
         representation that the Company has not entered into any arrangement or
         understanding with any Person to distribute the Exchange Notes to be
         received in the Exchange Offer and that, to the best of the Company's
         information and belief, each Holder participating in the Exchange Offer
         is acquiring the Exchange Notes in its ordinary course of business and
         has no arrangement or understanding with any Person to participate in
         the distribution of the Exchange Notes received in the Exchange Offer
         and (C) any other undertaking or representation required by the
         Commission as set forth in any no-action letter obtained pursuant to
         clause (i) above.

         (b)      Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company shall comply with all the provisions of
Section 6(c) hereof and shall use its best

                                       A-8
<PAGE>

efforts to effect such registration to permit the sale of the Transfer
Restricted Securities being sold in accordance with the intended method or
methods of distribution thereof (as indicated in the information furnished to
the Company pursuant to Section 4(b) hereof), and pursuant thereto the Company
will prepare and file with the Commission a Registration Statement relating to
the registration on any appropriate form under the Act, which form shall be
available for the sale of the Transfer Restricted Securities in accordance with
the intended method or methods of distribution thereof within the time periods
and otherwise in accordance with the provisions hereof.

         (c)      General Provisions. In connection with any Registration
Statement and any related Prospectus required by this Agreement to permit the
sale or resale of Transfer Restricted Securities (including, without limitation,
any Exchange Offer Registration Statement and the related Prospectus, to the
extent that the same are required to be available to permit sales of
Broker-Dealer Transfer Restricted Securities by Restricted Broker-Dealers), the
Company shall:

                  (i)      use its best efforts to keep such Registration
         Statement continuously effective and provide all requisite financial
         statements for the period specified in Section 3 or 4 hereof, as
         applicable. Upon the occurrence of any event that would cause any such
         Registration Statement or the Prospectus contained therein (A) to
         contain a material misstatement or omission or (B) not to be effective
         and usable for resale of Transfer Restricted Securities during the
         period required by this Agreement, the Company shall file promptly an
         appropriate amendment to such Registration Statement, (1) in the case
         of clause (A), correcting any such misstatement or omission, and (2) in
         the case of clauses (A) and (B), using its best efforts to cause such
         amendment to be declared effective and such Registration Statement and
         the related Prospectus to become usable for their intended purpose(s)
         as soon as practicable thereafter;

                  (ii)     prepare and file with the Commission such amendments
         and post-effective amendments to the Registration Statement as may be
         necessary to keep the Registration Statement effective for the
         applicable period set forth in Section 3 or 4 hereof, or such shorter
         period as will terminate when all Transfer Restricted Securities
         covered by such Registration Statement have been sold; cause the
         Prospectus to be supplemented by any required Prospectus supplement,
         and as so supplemented to be filed pursuant to Rule 424 under the Act,
         and to comply fully with Rules 424, 430A and 462, as applicable, under
         the Act in a timely manner; and comply with the provisions of the Act
         with respect to the disposition of all securities covered by such
         Registration Statement during the applicable period in accordance with
         the intended method or methods of distribution by the sellers thereof
         set forth in such Registration Statement or supplement to the
         Prospectus;

                  (iii)    advise the underwriter(s), if any, and selling
         Holders promptly and, if requested by such Persons, confirm such advice
         in writing, (A) when the Prospectus or any Prospectus supplement or
         post-effective amendment has been filed, and, with respect to any
         Registration Statement or any post-effective amendment thereto, when
         the same has become effective, (B) of any request by the Commission for
         amendments to the Registration Statement or amendments or

                                       A-9
<PAGE>

         supplements to the Prospectus or for additional information relating
         thereto, (C) of the issuance by the Commission of any stop order
         suspending the effectiveness of the Registration Statement under the
         Act or of the suspension by any state securities commission of the
         qualification of the Transfer Restricted Securities for offering or
         sale in any jurisdiction, or the initiation of any proceeding for any
         of the preceding purposes, (D) of the existence of any fact or the
         happening of any event that makes any statement of a material fact made
         in the Registration Statement, the Prospectus, any amendment or
         supplement thereto or any document incorporated by reference therein
         untrue, or that requires the making of any additions to or changes in
         the Registration Statement in order to make the statements therein not
         misleading, or that requires the making of any additions to or changes
         in the Prospectus in order to make the statements therein, in the light
         of the circumstances under which they were made, not misleading. If at
         any time the Commission shall issue any stop order suspending the
         effectiveness of the Registration Statement, or any state securities
         commission or other regulatory authority shall issue an order
         suspending the qualification or exemption from qualification of the
         Transfer Restricted Securities under state securities or blue sky laws,
         the Company shall use its best efforts to obtain the withdrawal or
         lifting of such order at the earliest possible time;

                  (iv)     furnish to the Initial Purchaser(s), each selling
         Holder named in any Registration Statement or Prospectus and each of
         the underwriter(s) in connection with such sale, if any, before filing
         with the Commission, copies of any Registration Statement or any
         Prospectus included therein or any amendments or supplements to any
         such Registration Statement or Prospectus (including all documents
         incorporated by reference after the initial filing of such Registration
         Statement), which documents will be subject to the review and comment
         of such Holders and underwriter(s) in connection with such sale, if
         any, for a period of at least five Business Days, and the Company will
         not file any such Registration Statement or Prospectus or any amendment
         or supplement to any such Registration Statement or Prospectus
         (including all such documents incorporated by reference) to which the
         selling Holders of the Transfer Restricted Securities covered by such
         Registration Statement or the underwriter(s) in connection with such
         sale, if any, shall reasonably object within five Business Days after
         the receipt thereof;

                  (v)      promptly prior to the filing of any document that is
         to be incorporated by reference into a Registration Statement or
         Prospectus, provide copies of such document to the selling Holders and
         to the underwriter(s) in connection with such sale, if any, make the
         Company's representatives available for discussion of such document and
         other customary due diligence matters, and include such information in
         such document prior to the filing thereof as such selling Holders or
         underwriter(s), if any, reasonably may request;

                  (vi)     make available at reasonable times for inspection by
         the selling Holders, any managing underwriter participating in any
         disposition pursuant to such Registration Statement and any attorney or
         accountant retained by such

                                      A-10
<PAGE>

         selling Holders or any of such underwriter(s), all financial and other
         records, material corporate documents and properties of the Company and
         cause the Company's officers, directors and employees to supply all
         information reasonably requested by any such Holder, underwriter,
         attorney or accountant in connection with such Registration Statement
         or any post-effective amendment thereto subsequent to the filing
         thereof and prior to its effectiveness;

                  (vii)    if requested by any selling Holders or the
         underwriter(s) in connection with such sale, if any, promptly include
         in any Registration Statement or Prospectus, pursuant to a supplement
         or post-effective amendment if necessary, such information as such
         selling Holders and underwriter(s), if any, may reasonably request to
         have included therein, including, without limitation, information
         relating to the "Plan of Distribution" of the Transfer Restricted
         Securities, information with respect to the principal amount of
         Transfer Restricted Securities being sold to such underwriter(s), the
         purchase price being paid therefor and any other terms of the offering
         of the Transfer Restricted Securities to be sold in such offering; and
         make all required filings of such Prospectus supplement or
         post-effective amendment as soon as practicable after the Company is
         notified of the matters to be included in such Prospectus supplement or
         post-effective amendment;

                  (viii)   if requested in writing by any selling Holder and
         each of the underwriter(s) in connection with such sale, if any,
         furnish, without charge, at least one copy of the Registration
         Statement, as first filed with the Commission, and of each amendment
         thereto, including all documents incorporated by reference therein and
         all exhibits (including exhibits incorporated therein by reference);

                  (ix)     if requested in writing by any selling Holder and
         each of the underwriter(s), if any, deliver, without charge, as many
         copies of the Prospectus (including each preliminary Prospectus) and
         any amendment or supplement thereto as such Persons reasonably may
         request; the Company hereby consents to the use (in accordance with
         law) of the Prospectus and any amendment or supplement thereto by each
         of the selling Holders and each of the underwriter(s), if any, in
         connection with the offering and the sale of the Transfer Restricted
         Securities covered by the Prospectus or any amendment or supplement
         thereto;

                  (x)      enter into such agreements (including an underwriting
         or similar agreement) and make such representations and warranties and
         take all such other actions in connection therewith in order to
         expedite or facilitate the disposition of the Transfer Restricted
         Securities pursuant to any Registration Statement contemplated by this
         Agreement as may be reasonably requested by any Holder of Transfer
         Restricted Securities or underwriter in connection with any sale or
         resale pursuant to any Registration Statement contemplated by this
         Agreement, and in such connection, whether or not an underwriting or
         similar agreement is entered into and whether or not the registration
         is an Underwritten Registration, the Company shall:

                                      A-11
<PAGE>

                           (A)      furnish (or in the case of clauses (2) and
                  (3) below, use its best efforts to furnish) to each selling
                  Holder and each underwriter, if any, upon the effectiveness of
                  the Shelf Registration Statement and to each Restricted
                  Broker-Dealer upon Consummation of the Exchange Offer:

                                    (1)      a certificate, dated the date of
                           Consummation of the Exchange Offer or the date of
                           effectiveness of the Shelf Registration Statement, as
                           the case may be, signed on behalf of the Company by
                           (x) the President or any Vice President and (y) a
                           principal financial or accounting officer of the
                           Company, confirming, as of the date thereof, the
                           matters set forth in Sections 5(d) and 5(e) of the
                           Purchase Agreement and such other similar matters as
                           the Holders, underwriter(s) and/or Restricted
                           Broker-Dealers may reasonably request;

                                    (2)      an opinion, dated the date of
                           Consummation of the Exchange Offer or the date of
                           effectiveness of the Shelf Registration Statement, as
                           the case may be, of counsel for the Company covering
                           matters similar to those set forth in Section 5(b)(i)
                           of the Purchase Agreement and such other matters as
                           the Holders, underwriter(s) and/or Restricted
                           Broker-Dealers may reasonably request, and in any
                           event including a statement to the effect that such
                           counsel has participated in conferences with officers
                           and other representatives of the Company,
                           representatives of the independent public accountants
                           for the Company and have considered the matters
                           required to be stated therein and the statements
                           contained therein, although such counsel has not
                           independently verified the accuracy, completeness or
                           fairness of such statements; and that such counsel
                           advises that, on the basis of the foregoing (relying
                           as to materiality to a large extent upon facts
                           provided to such counsel by officers and other
                           representatives of the Company and without
                           independent check or verification), no facts came to
                           such counsel's attention that caused such counsel to
                           believe that the applicable Registration Statement,
                           at the time such Registration Statement or any
                           post-effective amendment thereto became effective
                           and, in the case of the Exchange Offer Registration
                           Statement, as of the date of Consummation of the
                           Exchange Offer, 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 contained in such Registration Statement
                           as of its date and, in the case of the opinion dated
                           the date of Consummation of the Exchange Offer, as of
                           the date of Consummation,

                                      A-12
<PAGE>

                           contained an untrue statement of a material fact or
                           omitted 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. Without limiting the foregoing, such
                           counsel may state further that such counsel assumes
                           no responsibility for, and has not independently
                           verified, the accuracy, completeness or fairness of
                           the financial statements, Notes and schedules and
                           other financial data included in any Registration
                           Statement contemplated by this Agreement or the
                           related Prospectus; and

                                    (3)      a customary comfort letter, dated
                           as of the date of effectiveness of the Shelf
                           Registration Statement or the date of Consummation of
                           the Exchange Offer, as the case may be, from the
                           Company's independent accountants, in the customary
                           form and covering matters of the type customarily
                           covered in comfort letters to underwriters in
                           connection with primary underwritten offerings, and
                           affirming the matters set forth in the comfort
                           letters delivered pursuant to Section 5(c)(i) and
                           Section 5(c)(ii) of the Purchase Agreement, without
                           exception;

                           (B)      set forth in full or incorporate by
                  reference in the underwriting or similar agreement, if any, in
                  connection with any sale or resale pursuant to any Shelf
                  Registration Statement, the indemnification provisions and
                  procedures of Section 8 hereof with respect to all parties to
                  be indemnified pursuant to said Section 8; and

                           (C)      deliver such other documents and
                  certificates as may be reasonably requested by the selling
                  Holders, the underwriter(s), if any, and Restricted
                  Broker-Dealers, if any, to evidence compliance with clause (A)
                  above and with any customary conditions contained in the
                  underwriting agreement or other agreement entered into by the
                  Company pursuant to this clause (C);

the above shall be done at each closing under such underwriting or similar
agreement, as and to the extent required thereunder, and if at any time the
representations and warranties of the Company contemplated in clause (A)(1)
above cease to be true and correct, the Company shall so advise the
underwriter(s), if any, the selling Holders and each Restricted Broker-Dealer
promptly and, if requested by such Persons, shall confirm such advice in
writing;

                  (xi)     prior to any public offering of Transfer Restricted
         Securities, cooperate with the selling Holders, the underwriter(s), if
         any, and their respective counsel in connection with the registration
         and qualification of the Transfer Restricted Securities under the
         securities or blue sky laws of such jurisdictions as the selling
         Holders or underwriter(s), if any, may request and do any and all other

                                      A-13
<PAGE>

         acts or things necessary or advisable to enable the disposition in such
         jurisdictions of the Transfer Restricted Securities covered by the
         applicable Registration Statement; provided, however, that the Company
         shall not be required to register or qualify as a foreign corporation
         where it is not now so qualified or to take any action that would
         subject it to the service of process in suits or to taxation, other
         than as to matters and transactions relating to the Registration
         Statement, in any jurisdiction where it is not now so subject;

                  (xii)    issue, upon the request of any Holder of Restricted
         Notes covered by any Shelf Registration Statement contemplated by this
         Agreement, Exchange Notes having an aggregate principal amount equal to
         the aggregate principal amount of Restricted Notes surrendered to the
         Company by such Holder in exchange therefor or being sold by such
         Holder; such Exchange Notes to be registered in the name of such Holder
         or in the name of the purchaser(s) of such Notes, as the case may be;
         in return, the Restricted Notes held by such Holder shall be
         surrendered to the Company for cancellation;

                  (xiii)   in connection with any sale of Transfer Restricted
         Securities that will result in such securities no longer being Transfer
         Restricted Securities, cooperate with the selling Holders and the
         underwriter(s), if any, to facilitate the timely preparation and
         delivery of certificates representing Transfer Restricted Securities to
         be sold and not bearing any restrictive legends; and to register such
         Transfer Restricted Securities in such denominations and such names as
         the Holders or the underwriter(s), if any, may request at least two
         Business Days prior to such sale of Transfer Restricted Securities;

                  (xiv)    use its best efforts to cause the disposition of the
         Transfer Restricted Securities covered by the Registration Statement to
         be registered with or approved by such other governmental agencies or
         authorities as may be necessary to enable the seller or sellers thereof
         or the underwriter(s), if any, to consummate the disposition of such
         Transfer Restricted Securities, subject to the proviso contained in
         clause (xi) above;

                  (xv)     subject to clause (i) above, if any fact or event
         contemplated by clause (iii)(D) above shall exist or have occurred,
         prepare a supplement or post-effective amendment to the Registration
         Statement or related Prospectus or any document incorporated therein by
         reference or file any other required document so that, as thereafter
         delivered to the purchasers of Transfer Restricted Securities, the
         Prospectus will not contain an untrue statement of a material fact or
         omit to state any material fact necessary to make the statements
         therein, in the light of the circumstances under which they were made,
         not misleading;

                  (xvi)    provide CUSIP numbers for all Transfer Restricted
         Securities not later than the effective date of a Registration
         Statement covering such Transfer Restricted Securities and provide the
         Trustee with printed certificates for the Transfer Restricted
         Securities which are in a form eligible for deposit with The Depository
         Trust Company;

                                      A-14
<PAGE>

                  (xvii)   cooperate and assist in any filings required to be
         made with the NASD and in the performance of any due diligence
         investigation by any underwriter (including any "qualified independent
         underwriter") that is required to be retained in accordance with the
         rules and regulations of the NASD, and use its best efforts to cause
         such Registration Statement to become effective and approved by such
         governmental agencies or authorities as may be necessary to enable the
         Holders selling Transfer Restricted Securities to consummate the
         disposition of such Transfer Restricted Securities;

                  (xviii)  otherwise use its best efforts to comply with all
         applicable rules and regulations of the Commission, and make generally
         available to its security holders with regard to any applicable
         Registration Statement, as soon as practicable, a consolidated earning
         statement meeting the requirements of Rule 158 under the Act (which
         need not be audited) covering a twelve-month period beginning after the
         effective date of the Registration Statement (as such term is defined
         in paragraph (c) of Rule 158 under the Act);

                  (xix)    cause the Indenture to be qualified under the TIA not
         later than the effective date of the first Registration Statement
         required by this Agreement and, in connection therewith, cooperate with
         the Trustee and the Holders of Notes to effect such changes to the
         Indenture as may be required for such Indenture to be so qualified in
         accordance with the terms of the TIA; and execute and use its best
         efforts to cause the Trustee to execute all documents that may be
         required to effect such changes and all other forms and documents
         required to be filed with the Commission to enable such Indenture to be
         so qualified in a timely manner; and

                  (xx)     provide promptly to each Holder upon request each
         document filed with the Commission pursuant to the requirements of
         Section 13 or Section 15(d) of the Exchange Act.

         (d)      Restrictions on Holders. Each Holder agrees by acquisition of
a Transfer Restricted Security that, upon receipt of a notice of actions to be
taken as referred to in Section 6(c)(i) hereof or any notice from the Company of
the existence of any fact of the kind described in Section 6(c)(iii)(D) hereof,
such Holder will forthwith discontinue disposition of Transfer Restricted
Securities pursuant to the applicable Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 6(c)(xv) hereof, or until it is advised in writing by the Company that
the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus (the "Advice"). If so directed by the Company, each Holder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Transfer Restricted Securities that was current at the time of
receipt of either such notice. In the event the Company shall give any such
notice, the time period regarding the effectiveness of such Registration
Statement set forth in Section 3 or 4 hereof, as applicable, shall be extended
by the number of days during the period from and including the date of the
giving of such notice pursuant to Section 6(c)(i) or Section 6(c)(iii)(D) hereof
to and including the date when each selling Holder

                                      A-15
<PAGE>

covered by such Registration Statement shall have received the copies of the
supplemented or amended Prospectus contemplated by Section 6(c)(xv) hereof or
shall have received the Advice.

SECTION 7. REGISTRATION EXPENSES

         (a)      All expenses incident to the Company's performance of or
compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees; (ii) all fees and expenses of
compliance with federal securities and state blue sky or securities laws; (iii)
all expenses of printing (including printing certificates for the Exchange Notes
to be issued in the Exchange Offer and printing of Prospectuses), messenger and
delivery services and telephone; (iv) all fees and disbursements of counsel for
the Company and (other than in connection with the Exchange Offer) the Holders
of Transfer Restricted Securities; (v) all application and filing fees, if any,
in connection with listing the Notes on a national securities exchange or
automated quotation system pursuant to the requirements hereof; and (vi) all
fees and disbursements of independent certified public accountants of the
Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).

         The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.

         (b)      In connection with the Shelf Registration Statement, the
Company will reimburse the Holders of Transfer Restricted Securities registered
pursuant to the Shelf Registration Statement for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the Holders
of a majority in principal amount of the Transfer Restricted Securities for
whose benefit the Shelf Registration Statement is being prepared in consultation
with the Company.

SECTION 8. INDEMNIFICATION AND CONTRIBUTION

         (a)      The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each Holder and each Person, if any, who controls
any Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or
otherwise ("Indemnified Holder"), and to reimburse the Holders and such
controlling Person or Persons, if any, for any legal or other expenses incurred
by them in connection with defending any action, suit or proceeding (including
governmental investigations) as provided in Section 8(c) hereof, insofar as such
losses, claims, damages, liabilities or actions, suits or proceedings (including
governmental investigations) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement, or, if any Registration Statement shall be amended or supplemented,
in the Registration Statement as so amended or supplemented, or arise out of or
are based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages, liabilities or
actions arise out of or are based upon any such untrue statement or alleged
untrue statement or

                                      A-16
<PAGE>

omission or alleged omission which was made in the Registration Statement or in
the Registration Statement as so amended or supplemented, in reliance upon and
in conformity with information furnished in writing to the Company by any Holder
expressly for use therein.

         The Company's indemnity agreement contained in this Section 8(a), and
the covenants, representations and warranties of the Company contained in this
Agreement, shall remain in full force and effect regardless of any investigation
made by or on behalf of any Person, and the indemnity agreement contained in
this Section 8 shall survive any termination of this Agreement. The liabilities
of the Company in this Section 8 are in addition to any other liabilities of the
Company under this Agreement or otherwise.

         (b)      Each Holder agrees, severally and not jointly, to the extent
permitted by law, to indemnify, hold harmless and reimburse the Company and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Company set forth in Section 8(a)
hereof, but only with respect to alleged untrue statements or omissions made in
the Registration Statement or in the Registration Statement, as amended or
supplemented (if applicable), in reliance upon and in conformity with
information furnished in writing to the Company by such Holder expressly for use
therein.

         The indemnity agreement on the part of each Holder contained in this
Section 8(b) shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any other Person, and the
indemnity agreement contained in this Section 8(b) shall survive any termination
of this Agreement.

         (c)      If a claim is made or an action, suit or proceeding (including
governmental investigations) is commenced or threatened against any person as to
which indemnity may be sought under Section 8(a) or 8(b) hereof, such Person
(the "Indemnified Person") shall notify the Person against whom such indemnity
may be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or, if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 8(a) or 8(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by a majority in
principal amount of the Holders in the case of parties indemnified pursuant to
Section 8(b) hereof and by the Company in the case of parties indemnified
pursuant to Section 8(a) hereof. Any Indemnified Person shall have the right to
participate in such litigation or proceeding and to retain its own counsel, but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person
shall have mutually agreed to the retention of such counsel or (ii) the named
parties to any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both

                                      A-17
<PAGE>

parties by the same counsel would be inappropriate due to actual or likely
conflicts of interest between them, in either of which cases the reasonable fees
and expenses of counsel (including disbursements) for such Indemnified Person
shall be reimbursed by the Indemnifying Person to the Indemnified Person. If
there is a conflict as described in clause (ii) above, and the Indemnified
Persons have participated in the litigation or proceeding utilizing separate
counsel whose fees and expenses have been reimbursed by the Indemnifying Person,
and the Indemnified Persons, or any of them, are found to be solely liable, such
Indemnified Person shall repay to the Indemnifying Parties such fees and
expenses of such separate counsel as the Indemnifying Person shall have
reimbursed. It is understood that the Indemnifying Person shall not, in
connection with any litigation or proceeding or related litigation or
proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for the
reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.

         In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the Holders
and the Company agree that the Indemnifying Person's obligations to pay such
fees and expenses shall be conditioned upon the following:

                  (1)      in case separate counsel is proposed to be retained
         by the Indemnified Persons pursuant to clause (ii) of the preceding
         paragraph, the Indemnified Persons shall in good faith fully consult
         with the Indemnifying Person in advance as to the selection of such
         counsel;

                  (2)      reimbursable fees and expenses of such separate
         counsel shall be detailed and supported in a manner reasonably
         acceptable to the Indemnifying Person (but nothing herein shall be
         deemed to require the furnishing to the Indemnifying Person of any
         information, including, without limitation, computer print-outs of
         lawyers' daily time entries, to the extent that, in the judgment of
         such counsel, furnishing such information might reasonably be expected
         to result in a waiver of any attorney-client privilege); and

                  (3)      the Company and the Holders shall cooperate in
         monitoring and controlling the fees and expenses of separate counsel
         for Indemnified Persons for which the Indemnifying Person is liable
         hereunder, and the Indemnified Person shall use every reasonable effort
         to cause such separate counsel to minimize the duplication of
         activities as between themselves and counsel to the Indemnifying
         Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment against the Indemnified Person, the Indemnifying Person agrees, subject
to the provisions of this Section 8, to indemnify the Indemnified Person from
and against any loss, damage, liability or expenses by reason of such settlement
or judgment. The Indemnifying Person shall not, without the prior written
consent of the Indemnified Persons, effect any settlement of any pending or
threatened litigation, proceeding or

                                      A-18
<PAGE>

claim in respect of which indemnity has been properly sought by the Indemnified
Persons hereunder, unless such settlement includes an unconditional release by
the claimant of all Indemnified Persons from all liability with respect to
claims which are the subject matter of such litigation, proceeding or claim.

         (d)      If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an Indemnified Person under this
Section 8 in respect of any losses, claims, damages or liabilities (or actions,
suits or proceedings (including governmental investigations) in respect thereof)
referred to therein, then each Indemnifying Person under this Section 8 shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Person on the one hand and the Indemnified Person on the
other from the sale of the Transfer Restricted Securities. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each Indemnifying Person shall contribute to such amount
paid or payable by such Indemnified Person in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Holders on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 8 were determined by pro rata allocation
(even if the Holders 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 in this Section 8. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages or liabilities (or
actions, suits or proceedings (including governmental proceedings) in respect
thereof) referred to in this Section 8 shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such actions, suits or proceedings (including
governmental proceedings) or claims, provided that the provisions of this
Section 8 have been complied with (in all material respects) in respect of any
separate counsel for such Indemnified Person. Notwithstanding the provisions of
this Section 8, no Holder shall be required to contribute any amount greater
than the excess of the amount by which the total received by such Holder with
respect to the sale of its Transfer Restricted Securities pursuant to a
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Transfer Restricted Securities plus (B) the amount of any damages which
such Holder has otherwise been required to pay by reason of 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 Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations in this Section 8 to
contribute are several in proportion to their respective obligations and not
joint.

                                      A-19
<PAGE>

         The agreement with respect to contribution contained in this Section 8
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any Holder, and shall survive any termination of
this Agreement.

SECTION 9. RULE 144A

         The Company hereby agrees with each Holder, for so long as any Transfer
Restricted Securities remain outstanding and during any period in which the
Company is not subject to Section 13 or 15(d) of the Exchange Act, to make
available, upon request of any Holder of Transfer Restricted Securities, to any
Holder or beneficial owner of Transfer Restricted Securities in connection with
any sale thereof and any prospective purchaser of such Transfer Restricted
Securities designated by such Holder or beneficial owner, the information
required by Rule 144A(d)(4) under the Act in order to permit resales of such
Transfer Restricted Securities pursuant to Rule 144A.

SECTION 10. UNDERWRITTEN REGISTRATIONS

         No Holder may participate in any Underwritten Registration hereunder
unless such Holder (a) agrees to sell such Holder's Transfer Restricted
Securities on the basis provided in customary underwriting arrangements entered
into in connection therewith and (b) completes and executes all reasonable
questionnaires, powers of attorney, and other documents required under the terms
of such underwriting arrangements.

SECTION 11. SELECTION OF UNDERWRITERS

         For any Underwritten Offering, the investment banker or investment
bankers and manager or managers for any Underwritten Offering that will
administer such offering will be selected by the Holders of a majority in
aggregate principal amount of the Transfer Restricted Securities included in
such offering; provided, that such investment bankers and managers must be
reasonably satisfactory to the Company. The Holders of Transfer Restricted
Securities included in any such Underwritten Offering shall be responsible for
paying all underwriting or placement fees charged, or costs or expenses
incurred, by such investment bankers and managers in connection with such
Underwritten Offering. Such investment bankers and managers are referred to
herein as the "underwriters".

SECTION 12. MISCELLANEOUS

         (a)      Remedies. Each Holder, in addition to being entitled to
exercise all rights provided herein, in the Indenture, in the Purchase Agreement
or granted by law, including recovery of liquidated or other damages, will be
entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss
incurred by reason of a breach by the Company of the provisions of this
Agreement and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.

         (b)      No Inconsistent Agreements. The Company will not, on or after
the date of this Agreement, enter into any agreement with respect to its
securities that is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof.

                                      A-20
<PAGE>

The Company has not previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.

         (c)      Adjustments Affecting the Notes. The Company will not take any
action, or voluntarily permit any change to occur, with respect to the Notes
that would materially and adversely affect the ability of the Holders to
Consummate any Exchange Offer.

         (d)      Amendments and Waivers. The provisions of this Agreement may
not be amended, modified or supplemented, and waivers or consents to or
departures from the provisions hereof may not be given, unless (i) in the case
of Section 5 hereof and this Section 12(d)(i), the Company has obtained the
written consent of Holders of all outstanding Transfer Restricted Securities and
(ii) in the case of all other provisions hereof, the Company has obtained the
written consent of Holders of a majority of the outstanding principal amount of
Transfer Restricted Securities. Notwithstanding the foregoing, a waiver or
consent to or departure from the provisions hereof that relates exclusively to
the rights of Holders whose securities are being tendered pursuant to the
Exchange Offer and that does not affect directly or indirectly the rights of
other Holders whose securities are not being tendered pursuant to such Exchange
Offer may be given by the Holders of a majority of the outstanding principal
amount of Transfer Restricted Securities subject to such Exchange Offer.

         (e)      Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telecopier, or air courier
guaranteeing overnight delivery:

                  (i)      if to a Holder, at the address set forth on the
         records of the Security Registrar under the Indenture, with a copy to
         the Security Registrar; and

                  (ii)     if to the Company:

                           CMS Energy Corporation
                           One Energy Plaza
                           Jackson, Michigan 49201
                           Telecopier No.: (517) 788-2186, Attention: Executive
                           Vice President and Chief Financial Officer

                  With a copy at the same address to:

                           Robert C. Shrosbree, Esq.
                           Telecopier No.: (313) 436-9225

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next Business Day, if timely delivered
to an air courier guaranteeing overnight delivery.

                                      A-21
<PAGE>

         Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.

         (f)      Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders of Transfer Restricted Securities; provided,
however, that this Agreement shall not inure to the benefit of or be binding
upon a successor or assign of a Holder unless and to the extent such successor
or assign acquired Transfer Restricted Securities directly from such Holder.

         (g)      Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.

         (h)      Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.

         (i)      Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAW RULES THEREOF.

         (j)      Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

         (k)      Entire Agreement. This Agreement is intended by the parties as
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to the registration rights granted with respect to the
Transfer Restricted Securities. This Agreement supersedes all prior agreements
and understandings between the parties with respect to such subject matter.

         (l)      S-3 Ineligibility. If the Company is not eligible to use Act
Form S-3 by the 270th day after the date on which it determines that it is not
required to file the Exchange Offer Registration Statement pursuant to Section
4(a)(i) hereof or the 270th day after the date on which it receives the notice
specified in Section 4(a)(ii) hereof (either, the "S-3 Ineligibility Date"), the
Company shall (A) cause to be filed as soon as practicable after the S-3
Ineligibility Date a registration statement containing a resale prospectus on
whatever Act form the Company is then eligible to use relating to all Transfer
Restricted Securities the Holders of which shall have provided the information
required pursuant to Section 4(b) hereof and (B) use its best efforts to cause
such shelf registration statement to become effective as soon as practicable.

                                      A-22
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                         CMS ENERGY CORPORATION

                                         By: ___________________________________
                                             Name:
                                             Title:

CONFIRMED AND ACCEPTED
AS OF THE DATE FIRST ABOVE WRITTEN:

CITIGROUP GLOBAL MARKETS INC.,
for itself and as Representative
of the Initial Purchasers

By: _________________________________
    Name:
    Title:

                                      A-23
<PAGE>

                                    EXHIBIT B

1.       The Company is a duly organized, validly existing corporation in good
standing under the laws of the State of Michigan.

2.       All legally required corporate proceedings in connection with the
authorization, issuance and validity of the Restricted Notes and the sale of the
Restricted Notes by the Company in accordance with the Purchase Agreement have
been taken; and no approval, authorization, consent or order of any governmental
regulatory body is required with respect to the issuance and sale of the
Restricted Notes (other than in connection with or in compliance with the
provisions of the securities or blue sky laws of any state, as to which I
express no opinion).

3.       I do not know of any legal or governmental proceedings that would be
required to be described in the Offering Memorandum if it were a registration
statement filed by the Company under the Act that are not described as required,
nor of any contracts or documents of a character so required to be described in
the Offering Memorandum that are not described as required.

4.       The statements made in the Offering Memorandum under the caption
"Description of the Notes" and "Exchange Offer; Registration Rights" constitute
summaries of legal matters or documents referred to therein and are accurate in
all material respects; and the Indenture and the Restricted Notes conform as to
legal matters to the descriptions thereof and to the statements in regard
thereto contained in such section of the Offering Memorandum.

5.       Each document incorporated in the Offering Memorandum as such document
was originally filed pursuant to the Exchange Act (except for (i) the operating
statistics, financial statements and schedules contained or incorporated by
reference therein (including the notes thereto and the auditors' reports
thereon) and (ii) the other financial or statistical information contained or
incorporated by reference therein, as to which I express no opinion) complied as
to form when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder.

6.       The Purchase Agreement has been duly authorized, executed and delivered
by the Company.

7.       The Registration Rights Agreement has been duly authorized, executed
and delivered by the Company and, assuming due authorization, execution and
delivery thereof by the Initial Purchasers, is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).

8.       The Indenture has been duly authorized, executed and delivered by the
Company and, assuming due authorization, execution and delivery of the Indenture
by the Trustee, will be a valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except to the
extent that enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally

                                       B-1
<PAGE>

or by general principles of equity (regardless of whether enforcement is
considered in a proceeding at law or in equity).

9.       The Indenture complies as to form in all material respects with the
requirements of the Trust Indenture Act and the rules and regulations of the
Commission applicable to an indenture that is qualified thereunder. It is not
necessary in connection with the offer, sale and delivery of the Restricted
Notes to the Initial Purchasers in the manner contemplated by the Purchase
Agreement or in connection with the Exempt Resales to qualify the Indenture
under the Trust Indenture Act.

10.      The Restricted Notes are in the form contemplated by the Indenture,
have been duly authorized, executed and delivered by the Company and, assuming
the due authentication thereof by the Trustee and upon payment and delivery in
accordance with the Purchase Agreement, will constitute 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
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 Restricted Notes are entitled to the security afforded by the
Indenture equally and ratably with all securities presently outstanding
thereunder, and no stamp taxes in respect of the original issue thereof are
payable.

11.      The issuance and sale of the Restricted Notes in accordance with the
terms of the Indenture and the Purchase Agreement do not violate the provisions
of the Restated Articles of Incorporation or the Bylaws of the Company, and will
not result in a breach of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which the Company is a party.

12.      The Company is not an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

13.      The Company (i) is a "holding company", as such term is defined in the
Public Utility Holding Company Act of 1935, as amended, and (ii) is currently
exempt from all provisions of the Public Utility Holding Company Act of 1935, as
amended, except Section 9(a)(2) thereof.

14.      No registration under the Act of the Restricted Notes is required for
the sale of the Restricted Notes to the Initial Purchasers as contemplated by
the Purchase Agreement or for the Exempt Resales assuming (i) that each of the
Initial Purchasers is an Eligible Purchaser or an Accredited Investor (as
defined in Regulation D under the Act), (ii) the accuracy of, and compliance
with, the Initial Purchasers' representations and agreements contained in
Section 8 of the Purchase Agreement, and (iii) the accuracy of the
representations of the Company set forth in Sections 6(e), 6(n), 7(o), 7(q) and
7(s) of the Purchase Agreement.

15.      Nothing has come to my attention that would lead me to believe that the
Offering Memorandum (other than (i) the operating statistics, financial
statements and schedules contained or incorporated by reference therein
(including the notes thereto and the auditors' reports thereon) and (ii) the
other financial or statistical information contained or incorporated by

                                       B-2
<PAGE>

reference therein, as to which I express no opinion), as of its date or at the
date hereof contained or contains 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.

                                       B-3
<PAGE>

                                   EXHIBIT C-1

1.       The offer, sale and delivery of the Restricted Notes to the Initial
Purchasers in the manner contemplated by the Purchase Agreement and the Offering
Memorandum and the initial resale of the Restricted Notes by the Initial
Purchasers in the manner contemplated in the Offering Memorandum and the
Purchase Agreement, do not require registration under the Act and the
Supplemental Indenture does not require qualification under the Trust Indenture
Act, it being understood that we do not express any opinion as to any subsequent
reoffer or resale of any of the Restricted Notes.

2.       The Registration Rights Agreement is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.

                                      C-1-1
<PAGE>

                                   EXHIBIT C-2

No facts have come to our attention that have caused us to believe that the
Offering Memorandum, as of its date and as of the date hereof, contained or
contains 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 light of the
circumstances under which they were made, not misleading (except that in each
case we do not express any view as to the financial statements, schedules and
other financial data and financial projections included therein or excluded
therefrom). For purposes of the foregoing, we note that the Offering Memorandum
has been prepared in the context of a Rule 144A transaction and not as part of a
registration statement under the Act and does not contain all the information
that would be required in a registration statement under the Act.

                                      C-2-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(AA)
<SEQUENCE>17
<FILENAME>k82154aexv10wxaay.txt
<DESCRIPTION>PURCHASE AGREEMENT DATED DECEMBER 1, 2003
<TEXT>
<PAGE>

                                                                  EXHIBIT 10(aa)

                                                                  EXECUTION COPY

                                4,500,000 Shares

                             CMS ENERGY CORPORATION

                  4.50% Cumulative Convertible Preferred Stock

                               Purchase Agreement

                                                        December 1, 2003

Citigroup Global Markets Inc.
   As Representative of the several Initial Purchasers
   named in Schedule I hereto
388 Greenwich Street
New York, New York 10013

Merrill Lynch, Pierce, Fenner & Smith
                       Incorporated
   As Representative of the several Initial Purchasers
   named in Schedule I hereto
4 World Financial Center
New York, New York 10080

Ladies and Gentlemen:

         CMS Energy Corporation, a Michigan corporation (the "Company"),
proposes to issue and sell to Citigroup Global Markets Inc. ("Citigroup"),
Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill") and each of the
other Initial Purchasers named in Schedule I hereto (collectively, the "Initial
Purchasers"), for whom Citigroup and Merrill are acting as representatives (in
such capacity, the "Representatives"), an aggregate of 4,500,000 shares of its
4.50% Cumulative Convertible Preferred Stock (the "Restricted Shares"), subject
to the terms and conditions set forth herein.

         The Company has agreed to grant to the Initial Purchasers, severally
and not jointly, an option to purchase up to 500,000 shares of additional
Restricted Shares to cover over-allotments, if any (the "Option Restricted
Shares"), at a price per Option Restricted Share equal to the price per
Restricted Share. Such option shall expire 30 days after the date of the
Offering Memorandum (as defined below), and may be exercised in whole or in part
from time to time. Such option may be exercised upon notice by the
Representatives to the Company setting forth the number of Option Restricted
Shares as to which the several Initial Purchasers are then exercising the option
and the time, date and place of payment and delivery for such Option Restricted
Shares. Any such time and date of payment and delivery shall be determined by
the Representatives, but shall not be later than seven full business days after
the exercise of said option, nor, in any event, prior to the Time of Purchase
(as defined below), unless otherwise agreed upon by the Representatives and the
Company. Any such time and date of payment and delivery which falls after the
Time of Purchase is referred to herein as a "Date of Option Delivery". If the
option is exercised as to all or any portion of the Option Restricted Shares,
each of the Initial Purchasers, severally and not jointly, will purchase that
proportion of the number of

<PAGE>

Option Restricted Shares then being purchased which the number of Restricted
Shares each such Initial Purchaser has severally agreed to purchase as set forth
herein bears to the number of Restricted Shares, subject to such adjustments as
the Representatives in their discretion shall make to eliminate any sales or
purchases of an incremental number of Option Restricted Shares less than 1. As
used herein, the term "Restricted Shares" shall include the Restricted Shares
and all or any portion of any Option Restricted Shares.

         Holders (including subsequent transferees) of the Restricted Shares
will have the registration rights set forth in the registration rights agreement
in the form attached hereto as Exhibit A (the "Registration Rights Agreement"),
to be dated the Time of Purchase, for so long as such Restricted Shares
constitute Registrable Securities (as defined in the Registration Rights
Agreement). Pursuant to the Registration Rights Agreement, the Company will
agree to file with the Securities and Exchange Commission (the "Commission") a
shelf registration statement (the "Registration Statement") pursuant to Rule 415
under the Securities Act of 1933, as amended (the "Act") relating to the resale
by certain holders of the Restricted Shares and the sale of the shares of the
Company's common stock, par value $0.01 per share (the "Common Stock"), issuable
upon conversion of the Restricted Shares (the "Issuable Common Stock"), and to
use its best efforts to cause such Registration Statement to be declared and
remain effective and usable for the periods specified in the Registration Rights
Agreement. This Agreement, the Restricted Shares, the Issuable Common Stock and
the Registration Rights Agreement are hereinafter sometimes referred to
collectively as the "Operative Documents".

         1.       Offering Memorandum: The Restricted Shares will be offered and
sold to the Initial Purchasers pursuant to one or more exemptions from the
registration requirements under the Act. The Company has prepared a preliminary
offering memorandum dated December 1, 2003 (the "Preliminary Offering
Memorandum") and a confidential offering memorandum dated December 1, 2003 (the
"Offering Memorandum") relating to the Restricted Shares, which incorporate by
reference documents filed by the Company pursuant to Section 13, 14 or 15 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As used
herein, the term "Preliminary Offering Memorandum" and "Offering Memorandum"
shall include respectively the documents incorporated by reference therein. Any
reference herein to the terms "amend", "amendment" or "supplement" with respect
to the Preliminary Offering Memorandum and Offering Memorandum shall be deemed
to include amendments or supplements to the Preliminary Offering Memorandum and
Offering Memorandum, and documents incorporated by reference after the time of
execution of this Agreement and prior to the termination of the offering of the
Restricted Shares by the Initial Purchasers.

         Upon original issuance thereof, and until such time as the same is no
longer required pursuant to the certificate of designation relating to the
Restricted Shares (the "Certificate of Designation"), the Restricted Shares and
the Issuable Common Stock (and all securities issued in exchange therefor or in
substitution thereof) shall bear the following legend:

         THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A
         TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES
         SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND THIS
         SECURITY AND THE COMMON STOCK ISSUABLE UPON CONVERSION HEREOF
         MAY NOT BE OFFERED, SOLD OR OTHERWISE

                                  2
<PAGE>

         TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
         APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS
         SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY
         MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
         SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
         THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE
         BENEFIT OF THE COMPANY THAT (A) THIS SECURITY AND THE COMMON
         STOCK ISSUABLE UPON CONVERSION HEREOF MAY BE OFFERED, RESOLD,
         PLEDGED OR OTHERWISE TRANSFERRED ONLY (I) IN THE UNITED
         STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A
         QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
         THE SECURITIES ACT ("RULE 144A")) IN A TRANSACTION MEETING
         THE REQUIREMENTS OF RULE 144A PURCHASING FOR ITS OWN ACCOUNT
         OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A
         TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (II)
         OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
         ACCORDANCE WITH RULE 903 OR RULE 904 UNDER THE SECURITIES
         ACT, (III) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
         THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
         AVAILABLE), (IV) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
         THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, (V) TO
         CMS ENERGY CORPORATION OR (VI) PURSUANT TO AN EFFECTIVE
         REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF
         CASES (I) THROUGH (VI) IN ACCORDANCE WITH ANY APPLICABLE
         SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B)
         THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
         NOTIFY ANY PURCHASER OF THE SECURITY FROM IT OF THE RESALE
         RESTRICTIONS REFERRED TO IN CLAUSE (A) ABOVE.

         THE HOLDER OF THIS SECURITY AGREES THAT SUCH HOLDER WILL NOT
         ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY AND
         THE COMMON STOCK ISSUABLE UPON CONVERSION HEREOF UNLESS IN
         COMPLIANCE WITH THE SECURITIES ACT.

         THIS SECURITY AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR
         SUPPLEMENTED FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON
         AND PROCEDURES FOR RESALES AND OTHER TRANSFERS OF THIS
         SECURITY TO REFLECT ANY CHANGE IN APPLICABLE LAW OR
         REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
         RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES
         GENERALLY. THE HOLDER OF THIS SECURITY SHALL BE DEEMED BY THE
         ACCEPTANCE OF THIS SECURITY TO HAVE AGREED TO ANY SUCH
         AMENDMENT OR SUPPLEMENT.

                                  3
<PAGE>

         THE HOLDER OF THIS SECURITY IS SUBJECT TO, AND ENTITLED TO
         THE BENEFITS OF, A REGISTRATION RIGHTS AGREEMENT DATED AS OF
         DECEMBER 5, 2003 ENTERED INTO BY THE COMPANY FOR THE BENEFIT
         OF CERTAIN HOLDERS OF SECURITIES FROM TIME TO TIME.

         2.       Purchase and Sale: Upon the basis of the representations and
warranties and subject to the terms and conditions herein set forth, the Company
agrees to sell to the respective Initial Purchasers, severally and not jointly,
and the respective Initial Purchasers, severally and not jointly, agree to
purchase from the Company at the purchase price specified in Schedule I hereto
(the "Purchase Price"), the respective numbers of Restricted Shares set opposite
their names in Schedule I hereto.

         3.       Terms of Offering: The Initial Purchasers have advised the
Company that the Initial Purchasers will make offers (the "Exempt Resales") of
the Restricted Shares purchased hereunder on the terms set forth in the Offering
Memorandum solely to persons whom the Initial Purchasers reasonably believe to
be "qualified institutional buyers" as defined in Rule 144A under the Act or, at
the time any buy order for the Restricted Shares was or is originated, were or
are outside the United States and were or are not "U.S. persons" within the
meaning of Regulation S under the Act (such persons being referred to herein as
the "Eligible Purchasers"). The Initial Purchasers will offer the Restricted
Shares to Eligible Purchasers initially at the offering price set forth on the
cover page of the Offering Memorandum. Such price may be changed at any time
without notice.

         4.       Payment and Delivery: Payment for the Restricted Shares shall
be made to the Company in federal or other immediately available funds in New
York City (or such other place or places of payment as shall be agreed upon by
the Company and the Representatives in writing), upon the delivery of the
Restricted Shares at the offices of Pillsbury Winthrop LLP ("PW"), at One
Battery Park Plaza, New York, New York 10004-1490 (or such other place or places
of delivery as shall be agreed upon by the Company and the Representatives) to
the Representatives for the respective accounts of the Initial Purchasers
against receipt therefor signed by the Representatives on behalf of themselves
and as agent for the other Initial Purchasers. Such payment and delivery shall
be made at 10:00 A.M., New York time on December 5, 2003 (or on such later
business day as shall be agreed upon by the Company and the Representatives in
writing), unless postponed in accordance with the provisions of Section 11
hereof. The day and time at which payment and delivery for the Restricted Shares
(without regard to any Option Restricted Shares) are to be made is herein called
the "Time of Purchase".

         In addition, in the event that the Initial Purchasers have exercised
their option to purchase any or all of the Option Restricted Shares, payment of
the purchase price for, and delivery of, such Option Restricted Shares shall be
made at the above mentioned offices, or at such other place as shall be agreed
upon by the Representatives and the Company on the relevant Date of Option
Delivery as specified in the notice from the Representatives to the Company.

         Delivery of the Restricted Shares shall be made in definitive, fully
registered form or global form, as specified by the Representatives, in
authorized denominations registered in such names as the Representatives may
request in writing to the Company not later than two full business days prior to
the Time of Purchase, or, if no such request is received, in the names of

                                       4
<PAGE>

the respective Initial Purchasers for the respective numbers of Restricted
Shares set forth opposite the name of each Initial Purchaser in Schedule I, in
denominations selected by the Company. The certificates evidencing the
Restricted Shares shall be delivered at the Time of Purchase for the account of
the Initial Purchasers, with any transfer taxes payable in connection with the
transfer of the Restricted Shares to the Initial Purchasers duly paid, against
payment of the Purchase Price therefor.

         The Company agrees to make the Restricted Shares available for
inspection by the Initial Purchasers at the offices of PW at least 24 hours
prior to the Time of Purchase, in definitive, fully registered form, and as
requested pursuant to the preceding paragraph.

         5.       Conditions of Initial Purchasers' Obligations: The several
obligations of the Initial Purchasers hereunder are subject to the accuracy of
the representations and warranties, at and as of the Time of Purchase, on the
part of the Company, and to the following other conditions:

                  (a)      That all legal proceedings to be taken in connection
with the issue and sale of the Restricted Shares shall be reasonably
satisfactory in form and substance to PW, counsel to the Initial Purchasers.

                  (b)      That, at the Time of Purchase, the Representatives
shall be furnished with the following opinions, dated the Time of Purchase:

                           (i)      Opinion of Robert C. Shrosbree, Esq.,
         Assistant General Counsel of the Company, substantially to the effect
         set forth in Exhibit B attached hereto;

                           (ii)     Opinion of Skadden, Arps, Slate, Meagher &
         Flom LLP, counsel to the Company, substantially to the effect set forth
         in Exhibit C-1 and Exhibit C-2 attached hereto; and

                           (iii)    Opinion of PW, counsel to the Initial
         Purchasers, in a form satisfactory to the Initial Purchasers.

         (c)      (i) That, on the date hereof and at the Time of Purchase, the
Representatives shall have received a letter from Ernst & Young LLP ("E&Y") in
form and substance satisfactory to the Initial Purchasers, dated as of such
date, (i) confirming that they are independent public accountants with respect
to the Company within the meaning of the Act and the applicable published rules
and regulations of the Commission thereunder, (ii) stating that in their opinion
the financial statements examined by them and included or incorporated by
reference in the Preliminary Offering Memorandum or Offering Memorandum, as the
case may be, complied as to form in all material respects with the applicable
accounting requirements of the Commission, including the applicable published
rules and regulations of the Commission, and (iii) covering, as of a date not
more than five business days prior to the date of such letter, such other
matters as the Initial Purchasers reasonably request.

                  (ii)     That, on the date hereof and at the Time of Purchase,
the Representatives shall have received a letter from each of
PricewaterhouseCoopers LLP and Price Waterhouse, each in form and substance
satisfactory to the Initial Purchasers, dated as of such

                                       5
<PAGE>

date, (i) confirming that each are independent public accountants with respect
to (A) the Company and the Midland Cogeneration Venture Limited Partnership, in
the case of PricewaterhouseCoopers LLP, and (B) the Company and Jorf Lasfar
Energy Company S.C.A., in the case of Price Waterhouse, each within the meaning
of the Act and the applicable published rules and regulations of the Commission
thereunder, (ii) stating that in each of their opinions the financial statements
examined by them and referred to in the letter of E&Y complied as to form in all
material respects with the applicable accounting requirements of the Commission,
including the applicable published rules and regulations of the Commission, and
(iii) covering, as of a date not more than five business days prior to the date
of such letter, such other matters as the Initial Purchasers reasonably request;
provided, that the Initial Purchasers acknowledge that the Price Waterhouse
letter received on the date hereof (but not the Price Waterhouse letter received
at the Time of Purchase or either of the PricewaterhouseCoopers LLP letters)
shall not be required to address October 2003 financial data.

                  (d)      Subsequent to the date hereof or, if earlier, the
dates as of which information is given in the Offering Memorandum (exclusive of
any amendment or supplement thereto), there shall not have been (i) any change
or decrease specified in the letter or letters referred to in Section 5(c)
hereof or (ii) any change, or any development involving a prospective change, in
or affecting the condition (financial or otherwise), prospects, earnings,
business or properties of the Company and its subsidiaries taken as a whole,
except as set forth in or contemplated in the Offering Memorandum (exclusive of
any amendment or supplement thereto), the effect of which, in any case referred
to in clause (i) or (ii) above, is, in the judgment of the Representatives, so
material and adverse as to make it impractical or inadvisable to proceed with
the offering or delivery of the Restricted Shares as contemplated in the
Offering Memorandum (exclusive of any amendment or supplement thereto).

                  (e)      That, at the Time of Purchase, the Company shall have
delivered to the Representatives a certificate of an executive officer of the
Company to the effect that, to the best of his or her knowledge, information and
belief, (i) there shall have been no material adverse change in the condition
(financial or otherwise), earnings, business or properties of the Company from
that set forth in the Offering Memorandum (other than changes referred to in or
contemplated by the Offering Memorandum) and (ii) the representations and
warranties of the Company in this Agreement are true and correct on and as of
the Time of Purchase with the same effect as if made at the Time of Purchase,
and the Company has complied with all the agreements and satisfied all the
conditions on its part to be performed or satisfied hereunder at or prior to the
Time of Purchase.

                  (f)      That the Company shall have executed and delivered
the Registration Rights Agreement.

                  (g)      That the Company shall have performed such of its
obligations under this Agreement as are to be performed at or before the Time of
Purchase by the terms hereof.

                  (h)      That the Company shall have complied with the
provisions of Section 6(c) hereof with respect to the furnishing of the Offering
Memorandum.

                                       6
<PAGE>

                  (i)      That, at the Time of Purchase, the Restricted Shares
shall be rated at least B by Standard & Poor's Ratings Group, a division of The
McGraw Hill Companies, Inc. ("S&P"), Ca by Moody's Investors Service, Inc.
("Moody's") and B- by Fitch, Inc. ("Fitch"), and the Company shall have
delivered to the Representatives a letter, dated the Time of Purchase, from each
such rating agency, or other evidence reasonably satisfactory to the
Representatives, confirming that the Restricted Shares have been assigned such
ratings; and between the date of the execution of this Agreement and the Time of
Purchase, there has been no downgrading or withdrawal of the investment ratings
of the Restricted Shares, securities of the Company or securities of Consumers
Energy Company by any nationally recognized statistical rating agency, and no
such rating agency shall have publicly announced that it has under surveillance
or review, with possible negative implications, any such rating.

                  (j)      In the event that the Initial Purchasers exercise
their option to purchase all or any portion of the Option Restricted Shares, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company hereunder shall be true
and correct as of each Date of Option Delivery, and, at the relevant Date of
Option Delivery, the Representatives shall have received:

                           (1)      a certificate, dated such Date of Option
                  Delivery, of an executive officer of the Company confirming
                  that the certificate delivered at the Time of Purchase
                  pursuant to Section 5(e) hereof remains true and correct as of
                  such Date of Option Delivery;

                           (2)      opinions of Robert C. Shrosbree, Esq.,
                  Assistant General Counsel of the Company, Skadden, Arps,
                  Slate, Meagher & Flom LLP, counsel to the Company, and PW,
                  counsel to the Initial Purchasers, dated such Date of Option
                  Delivery, relating to the Option Restricted Shares and
                  otherwise to the same effect as the opinions required by
                  Section 5(b) hereof; and

                           (3)      a letter from E&Y, dated such Date of Option
                  Delivery, substantially in the same form and substance as the
                  letter furnished to the Representatives pursuant to Section
                  5(c) hereof, except that the date specified in Section
                  5(c)(iii) hereof shall be a date not more than five days prior
                  to such Date of Option Delivery.

                  (k)      At the Time of Purchase, the Issuable Common Stock
shall have been duly listed, subject only to official notice of issuance, on The
New York Stock Exchange.

                  (l)      The Restricted Shares shall have been designated as
PORTAL-eligible securities in accordance with the rules and regulations of the
National Association of Securities Dealers, Inc. ("NASD") and the Restricted
Shares shall be eligible for clearance and settlement through The Depository
Trust Company ("DTC").

                  (m)      At the Time of Purchase, the Company shall have
furnished to the Representatives a letter substantially in the form of Exhibit D
hereto addressed to the Representatives from each person listed in Schedule II
hereto.

                                       7
<PAGE>

                  (n)      That any additional documents or agreements
reasonably requested by the Initial Purchasers or their counsel to permit the
Initial Purchasers to perform their obligations or permit their counsel to
deliver opinions hereunder shall have been provided to them.

         6.       Certain Covenants of the Company: In further consideration of
the agreements of the Initial Purchasers herein contained, the Company covenants
as follows:

                  (a)      To advise the Representatives promptly and, if
requested by the Representatives, confirm such advice in writing, of the
issuance by any state securities commission of any stop order suspending the
qualification or exemption from qualification of any Restricted Shares for
offering or sale in any jurisdiction designated by the Initial Purchasers
pursuant to Section 6(d) hereof, or the initiation of any proceeding by any
state securities commission or any other federal or state regulatory authority
for such purpose. The Company shall use its best efforts to prevent the issuance
of any stop order or order suspending the qualification or exemption of any
Restricted Shares under any state securities or blue sky laws and, if at any
time any state securities commission or other federal or state regulatory
authority shall issue an order suspending the qualification or exemption of any
Restricted Shares under any state securities or blue sky laws, the Company shall
use its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.

                  (b)      To deliver to the Initial Purchasers, without charge,
as soon as practicable, as many copies of the Offering Memorandum (as
supplemented or amended if the Company shall have made any supplements or
amendments thereto) as the Initial Purchasers may reasonably request. Subject to
the Initial Purchasers' compliance with their representations and warranties and
agreements set forth in Section 8 hereof, the Company consents to the use of the
Offering Memorandum, and any amendments and supplements thereto required
pursuant hereto, by the Initial Purchasers in connection with Exempt Resales.

                  (c)      For such period of time as the Initial Purchasers are
required by law or customary practice to deliver an offering memorandum in
respect of the Restricted Shares, if any event shall have occurred as a result
of which it is necessary to amend or supplement the Offering Memorandum in order
to make the statements therein, in light of the circumstances when the Offering
Memorandum is delivered to an Eligible Purchaser, not misleading, or if it
becomes necessary to amend or supplement the Offering Memorandum to comply with
law, to forthwith prepare an appropriate amendment or supplement to the Offering
Memorandum and deliver to the Initial Purchasers, without charge, such number of
copies thereof as may be reasonably requested.

                  (d)      To use its best efforts to qualify the Restricted
Shares for offer and sale under the securities or blue sky laws of such
jurisdictions as the Initial Purchasers may designate and to pay (or cause to be
paid), or reimburse (or cause to be reimbursed) the Initial Purchasers and their
counsel for, reasonable filing fees and expenses in connection therewith
(including the reasonable fees and disbursements of counsel to the Initial
Purchasers and filing fees and expenses paid and incurred prior to the date
hereof), provided, however, that the Company shall not be required to qualify to
do business as a foreign corporation or as a securities dealer or to file a
general consent to service of process or to file annual reports or to comply
with any other requirements deemed by the Company to be unduly burdensome.

                                       8
<PAGE>

                  (e)      So long as the Restricted Shares are outstanding, (i)
to mail and make generally available as soon as practicable after the end of
each fiscal year to the record holders of the Restricted Shares a financial
report of the Company on a consolidated basis, all such financial reports to
include a consolidated balance sheet, a consolidated statement of operations, a
consolidated statement of cash flows and a consolidated statement of
shareholders' equity as of the end of and for such fiscal year, together with
comparable information as of the end of and for the preceding year, certified by
the Company's independent public accountants and (ii) to mail and make generally
available as soon as practicable after the end of each quarterly period (except
for the last quarterly period of each fiscal year) to such holders, a
consolidated balance sheet, a consolidated statement of operations and a
consolidated statement of cash flows as of the end of and for such period, and
for the period from the beginning of such year to the close of such quarterly
period, together with comparable information for the corresponding periods of
the preceding year.

                  (f)      So long as any of the Restricted Shares or Issuable
Common Stock are "restricted securities" within the meaning of Rule 144(a)(3)
under the Act and remain outstanding and during any period in which the Company
is not subject to Section 13 or 15(d) of the Exchange Act, to make available to
any holder of Restricted Shares in connection with any sale thereof and any
prospective purchaser of such Restricted Shares from such holder, the
information required by Rule 144A(d)(4) under the Act.

                  (g)      To pay all expenses, fees and taxes (other than
transfer taxes on sales by the respective Initial Purchasers) in connection with
the issuance and delivery of the Restricted Shares and the Issuable Common
Stock, except that the Company shall be required to pay the fees and
disbursements (other than disbursements referred to in Section 6(d) hereof) of
PW, counsel to the Initial Purchasers, only in the events provided in Section
6(h) hereof, the Initial Purchasers hereby agreeing to pay such fees and
disbursements in any other event, and that except as provided in such Section
6(h), the Company shall not be responsible for any out-of-pocket expenses of the
Initial Purchasers in connection with their services hereunder.

                  (h)      If the Initial Purchasers shall not take up and pay
for the Restricted Shares due to the failure of the Company to comply with any
of the conditions specified in Section 5 hereof, or, if this Agreement shall be
terminated in accordance with the provisions of Section 12 hereof prior to the
Time of Purchase or the Date of Delivery, as the case may be, to pay the
reasonable fees and disbursements of PW, counsel to the Initial Purchasers, and,
if the Initial Purchasers shall not take up and pay for the Restricted Shares
due to the failure of the Company to comply with any of the conditions specified
in Section 5 hereof, to reimburse the Initial Purchasers for their reasonable
out-of-pocket expenses not to exceed $10,000 incurred in connection with the
financing contemplated by this Agreement.

                  (i)      During the period referred to in Section 6(c) hereof,
to not amend or supplement the Offering Memorandum unless the Company has
furnished the Initial Purchasers and counsel to the Initial Purchasers with a
copy for their review and comment a reasonable time prior to the making of such
amendment or supplement and has reasonably considered any comments of the
Initial Purchasers, and not to make any such amendment or supplement to which
such counsel shall reasonably object on legal grounds in writing after
consultation with the Initial Purchasers.

                                       9
<PAGE>

                  (j)      During the period referred to in Section 6(c) hereof,
to furnish the Initial Purchasers with copies of all documents required to be
filed with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange
Act.

                  (k)      During the period referred to in Section 6(c) hereof,
to comply with all requirements under the Exchange Act relating to the timely
filing with the Commission of its reports pursuant to Section 13 or 15(d) of the
Exchange Act and of its proxy statements pursuant to Section 14 of the Exchange
Act.

                  (l)      To comply in all material respects with all of its
agreements set forth in the Registration Rights Agreement.

                  (m)      To obtain the approval of DTC for "book-entry"
transfer of the Restricted Shares, and to comply in all material respects with
all of its agreements set forth in the representation letter or letters of the
Company to DTC relating to the approval of the Restricted Shares by DTC for
"book-entry" transfer.

                  (n)      Not to (or permit any affiliate (as defined in Rule
144 under the Act) to) sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in the Act) that
would be integrated with the sale of the Restricted Shares to the Initial
Purchasers or pursuant to Exempt Resales in a manner that would require the
registration of any such sale of the Restricted Shares under the Act.

                  (o)      Not to voluntarily claim, and to actively resist any
attempts to claim, the benefit of any usury laws against the holders of any
Restricted Shares.

                  (p)      During the period of two years after the Time of
Purchase, not to, and not permit any of its affiliates (as defined in Rule 144
under the Act) to, resell any of the Restricted Shares which constitute
"restricted securities" under Rule 144 under the Act that have been reacquired
by any of them.

                  (q)      To take all reasonable action necessary to enable
S&P, Moody's and Fitch to provide their respective credit ratings of the
Restricted Shares.

                  (r)      Until the second anniversary of the Time of Purchase,
not to, and not to permit any affiliates under its control to, purchase any
Restricted Shares or Issuable Common Stock unless, immediately upon any such
purchase, the Company or any such affiliate shall (1) cancel such Restricted
Shares and/or (2) treat such Issuable Common Stock as treasury shares ineligible
for re-issuance.

                  (s)      Not to, and not to permit any of its affiliates or
any person acting on its or their behalf (other than the Initial Purchasers, as
to which no agreement is made) to, directly or indirectly, make offers or sales
of any security, or solicit offers to buy any security, under circumstances that
would require the registration of the Restricted Shares or the Issuable Common
Stock under the Act.

                  (t)      The Company will reserve and keep available at all
times, free of preemptive rights, the full number of shares of Issuable Common
Stock.

                                       10
<PAGE>

                  (u)      The Company will use its best efforts to effect the
listing of the Issuable Common Stock, prior to the Time of Purchase, on The New
York Stock Exchange subject only to official notice of issuance.

                  (v)      The Company will not for a period of 60 days
following the date hereof, without the prior written consent of the
Representatives, offer, sell or contract to sell, or otherwise dispose of (or
enter into any transaction which is designed to, or might reasonably be expected
to, result in the disposition (whether by actual disposition or effective
economic disposition due to cash settlement or otherwise) by the Company or any
affiliate of the Company or any person in privity with the Company or any
affiliate of the Company), directly or indirectly, or announce the offering of,
any shares of Common Stock or any securities convertible into, or exercisable or
exchangeable for, shares of Common Stock (other than the Restricted Shares);
provided, however, that the Company may issue and sell Common Stock or
securities convertible into or exchangeable for Common Stock pursuant to any
employee stock option plan, stock ownership plan or dividend reinvestment plan
of the Company existing and in effect at the date hereof, and the Company may
issue Common Stock issuable upon the conversion of securities or the exercise of
warrants existing and outstanding at the date hereof.

                  (w)      Any information provided by the Company to publishers
of publicly available databases about the terms of the Restricted Shares shall
include a statement that the Restricted Shares have not been registered under
the Act and are subject to restrictions under Rule 144A under the Act and
Regulation S under the Act.

                  (x)      The Company will not take, directly or indirectly,
any action designed to or which has constituted or which might reasonably be
expected to cause or result, under the Exchange Act or otherwise, in
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of the Restricted Shares.

                  (y)      Between the date hereof and the Time of Purchase, the
Company will not do or authorize any act or thing that would result in an
adjustment of the conversion price.

                  (z)      The Company will cause the proceeds of the issuance
and sale of the Restricted Shares to be applied for the purposes described in
the Offering Memorandum.

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

                  (a)      Each of the Preliminary Offering Memorandum and the
Offering Memorandum does not, and any supplement or amendment to it will not,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except that the representations and warranties contained in this Section 7(a)
shall not apply to statements in or omissions from the Preliminary Offering
Memorandum and the Offering Memorandum (or any supplement or amendment thereto)
based upon information relating to the Initial Purchasers furnished to the
Company in writing by the Initial Purchasers expressly for use therein. No stop
order preventing the use of the Offering Memorandum, or any amendment or
supplement thereto, or any order asserting that any of the

                                       11
<PAGE>

transactions contemplated by this Agreement are subject to the registration
requirements of the Act, has been issued.

                  (b)      The documents incorporated by reference in the
Preliminary Offering Memorandum and the Offering Memorandum, when they were
filed (or, if an amendment with respect to any such document was filed, when
such amendment was filed) with the Commission, conformed in all material
respects to the requirements of the Exchange Act and the rules and regulations
of the Commission promulgated thereunder, and any further documents so filed and
incorporated by reference will, when they are filed with the Commission, conform
in all material respects to the requirements of the Exchange Act and the rules
and regulations of the Commission promulgated thereunder; none of such
documents, when it was filed (or, if an amendment with respect to any such
document was filed, when such amendment was filed), 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, in light of the
circumstances under which they were made, not misleading; and no such further
document, when it is filed, will contain an untrue statement of a material fact
or will omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
are made, not misleading.

                  (c)      The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Michigan and has all requisite authority to own or lease its properties and
conduct its business as described in the Preliminary Offering Memorandum and the
Offering Memorandum and to consummate the transactions contemplated hereby, and
is duly qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business as described in the
Preliminary Offering Memorandum and the Offering Memorandum or its ownership or
leasing of property requires such qualification, except to the extent that the
failure to be so qualified or be in good standing would not have a material
adverse effect on the Company.

                  (d)      The Restricted Shares have been duly authorized by
the Company. At the Time of Purchase, when delivered against payment therefor as
provided in this Agreement, the Restricted Shares will have been duly and
validly issued, fully paid and non-assessable, and will be convertible into
Common Stock in accordance with their terms. Each of the Restricted Shares and
the Issuable Common Stock conform in all material respects to the descriptions
thereof in the Preliminary Offering Memorandum and the Offering Memorandum. Each
significant subsidiary (as defined in Rule 405 under the Act, and hereinafter
called a "Significant Subsidiary") of the Company has been duly organized and is
validly existing and in good standing under the laws of the jurisdiction of its
formation, has all requisite authority to own or lease its properties and
conduct its business as described in the Offering Memorandum and is duly
qualified to transact business and is in good standing in each jurisdiction in
which the conduct of its business as described in the Offering Memorandum or its
ownership or leasing of property requires such qualification, except to the
extent that the failure to be so qualified or be in good standing would not have
a material adverse effect on the Company and its Significant Subsidiaries, taken
as a whole.

                  (e)      This Agreement has been duly authorized, executed and
delivered by the Company, and the Company has full corporate power and authority
to enter into this Agreement.

                                       12
<PAGE>

                  (f)      The Registration Rights Agreement has been duly
authorized by the Company. At the Time of Purchase, the Registration Rights
Agreement will have been duly executed and delivered by the Company and will
constitute a valid and binding agreement of the Company, enforceable against the
Company in accordance with its terms, except to the extent that the enforcement
thereof may be limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is considered in a
proceeding at law or in equity). The Registration Rights Agreement conforms in
all material respects to the description thereof in the Preliminary Offering
Memorandum and the Offering Memorandum.

                  (g)      Except for the outstanding shares of preferred stock
of Consumers Energy Company, the 8.36% Trust Originated Preferred Securities of
Consumers Power Company Financing I, the 8.20% Trust Originated Preferred
Securities of Consumers Energy Company Financing II, the 9 1/4% Trust Originated
Preferred Securities of Consumers Energy Company Financing III, the 9.00% Trust
Preferred Securities of Consumers Energy Company Financing IV and the 7 3/4%
Convertible Quarterly Income Preferred Securities of CMS Energy Trust I, all of
the outstanding capital stock of each of Consumers Energy Company and CMS
Enterprises Company is owned directly or indirectly by the Company, free and
clear of any security interest, claim, lien or other encumbrance (except as
disclosed in the Offering Memorandum) or preemptive rights, and there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in any of Consumers Energy
Company and CMS Enterprises Company or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any such
capital stock, any such convertible or exchangeable securities or any such
rights, warrants or options.

                  (h)      The Company has all necessary consents,
authorizations, approvals, orders, certificates and permits of and from, and has
made all declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all courts and
other tribunals, to own, lease, license and use its properties and assets and to
conduct business in the manner described in the Preliminary Offering Memorandum
and the Offering Memorandum, except to the extent that the failure to obtain or
file would not have a material adverse effect on the Company.

                  (i)      No order, license, consent, authorization or approval
of, or exemption by, or the giving of notice to, or the registration with, any
federal, state, local or other governmental department, commission, board,
bureau, agency or instrumentality, and no filing, recording, publication or
registration in any public office or any other place, was or is now required to
be obtained by the Company to authorize its execution or delivery of, or the
performance of its obligations under, this Agreement or any of the other
Operative Documents, except such as have been obtained or may be required under
state securities or blue sky laws or as referred to in the Offering Memorandum.

                  (j)      None of the issuance, sale or conversion of the
Restricted Shares, or the execution or delivery by the Company of, or the
performance by the Company of its obligations under, this Agreement or the other
Operative Documents, did or will conflict with, result in a breach of any of the
terms or provisions of, or constitute a default or require the consent of any

                                       13
<PAGE>

party under, the Company's Articles of Incorporation or by-laws, any material
agreement or instrument to which it is a party, any existing applicable law,
rule or regulation or any judgment, order or decree of any government,
governmental instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its properties or assets, or did or will result in
the creation or imposition of any lien on the Company's properties or assets.

                  (k)      Except as disclosed in the Offering Memorandum, there
is no action, suit, proceeding, inquiry or investigation (at law or in equity or
otherwise) pending or, to the knowledge of the Company, threatened against the
Company, by any governmental authority that (i) questions the validity,
enforceability or performance of this Agreement or any of the other Operative
Documents or (ii) if determined adversely, is likely to have a material adverse
effect on the business or financial condition of the Company, or materially
adversely affect the ability of the Company to perform its obligations hereunder
or the consummation of the transactions contemplated by this Agreement.

                  (l)      There has not been any material and adverse change in
the business, properties, prospects or financial condition of the Company from
that set forth or incorporated by reference in the Offering Memorandum (other
than changes referred to in or contemplated by the Offering Memorandum).

                  (m)      Except as set forth in the Offering Memorandum, no
event or condition exists that constitutes, or with the giving of notice or
lapse of time or both would constitute, a default or any breach or failure to
perform by the Company in any material respect under any indenture, mortgage,
loan agreement, lease or other material agreement or instrument to which the
Company is a party or by which it or any of its properties may be bound.

                  (n)      The Offering Memorandum, as of its date, contained
all the information specified in, and met the requirements of, Rule 144A(d)(4)
under the Act.

                  (o)      When the Restricted Shares are issued and delivered
pursuant to this Agreement, the Restricted Shares and the Issuable Common Stock
will not be of the same class (within the meaning of Rule 144A under the Act) as
any security of the Company that is listed on a national securities exchange
registered under Section 6 of the Exchange Act or that is quoted in a United
States automated inter-dealer quotation system. No securities of the same class
as the Restricted Shares have been issued and sold by the Company within the
six-month period immediately prior to the date hereof.

                  (p)      Neither the Company nor any affiliate (as defined in
Rule 144 under the Act) of the Company has directly, or through any agent, (i)
sold, offered for sale, solicited offers to buy or otherwise negotiated in
respect of, any security (as defined in the Act) which is or will be integrated
with the sale of the Restricted Shares in a manner that would require the
registration under the Act of the Restricted Shares or (ii) engaged in any form
of general solicitation or general advertising in connection with the offering
of the Restricted Shares (as those terms are used in Regulation D under the
Act), or in any manner involving a public offering within the meaning of Section
4(2) of the Act, including, but not limited to, publication or release of
articles, notices or other communications published in any newspaper, magazine,
or similar

                                       14
<PAGE>

medium or broadcast over television or radio, or any seminar or meeting whose
attendees have been invited by any general solicitation or general advertising.

                  (q)      None of the Company nor any of its affiliates (as
defined in Rule 144 under the Act) or any person acting on its or their behalf
(other than the Initial Purchasers, as to whom the Company makes no
representation) has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Act with respect to the Restricted
Shares.

                  (r)      No registration under the Act of the Restricted
Shares is required for the sale of the Restricted Shares to the Initial
Purchasers as contemplated hereby or for the Exempt Resales (assuming the
accuracy of the Initial Purchasers' representation and warranty and agreement
set forth in Section 8 hereof).

                  (s)      The Company, after giving effect to the offering and
sale of the Restricted Shares, will not be an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.

                  (t)      The Company has an authorized capitalization as set
forth in the Offering Memorandum and all of the issued shares of capital stock
of the Company have been duly and validly authorized and issued and are fully
paid and non-assessable. The shares of Issuable Common Stock have been duly and
validly authorized and reserved for issuance by the Company and, when issued and
delivered in accordance with the provisions of the Certificate of Designation,
will be duly and validly issued, fully paid and non-assessable and will conform
in all material respects to the description of the Common Stock contained in the
Offering Memorandum and the issuance of the Issuable Common Stock is not, and
will not be, subject to any preemptive or other similar right.

                  (u)      The Restricted Shares satisfy the eligibility
requirements of Rule 144A(d)(3) under the Act.

                  (v)      The Company has been advised by the NASD's PORTAL
Market that the Restricted Shares and the Issuable Common Stock have been
designated PORTAL-eligible securities in accordance with the rules and
regulations of the NASD.

                  (w)      The Company's chief executive officer and chief
financial officer are responsible for establishing and maintaining the Company's
disclosure controls and procedures. The Company's management, under the
direction of the Company's principal executive and financial officers, has
evaluated the effectiveness of the Company's disclosure controls and procedures
as of a date within 90 days of the filing of the Company's most recent annual
report on Form 10-K/A. Based on such evaluation, the Company's chief executive
officer and chief financial officer have concluded that the Company's disclosure
controls and procedures are effective to ensure that material information was
presented to them and properly disclosed. There have been no significant changes
in the Company's internal controls or in other factors that could significantly
affect internal controls subsequent to such evaluation.

                  (x)      Except as described in the Offering Memorandum and
except as would not, singly or in the aggregate, result in a material adverse
effect on the Company, (A) neither the Company nor any of its subsidiaries is in
violation of any federal, state, local or foreign statute,

                                       15
<PAGE>

law, rule, regulation, ordinance, code, policy or rule of common law or any
judicial or administrative interpretation thereof, 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,
asbestos-containing materials or mold (collectively, "Hazardous Materials") or
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company and its subsidiaries have all permits, authorizations
and approvals required under any applicable Environmental Laws and are each in
compliance with their requirements, (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 and (D) there are no events or circumstances that would reasonably
be expected to form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or governmental body or agency,
against or affecting the Company or any of its subsidiaries relating to
Hazardous Materials or any Environmental Laws.

         The Company acknowledges that the Initial Purchasers and, for purposes
of the opinions to be delivered to the Initial Purchasers pursuant to Section 5
hereof, counsel to the Company and counsel to the Initial Purchasers will rely
upon the accuracy and truth of the foregoing representations and hereby consents
to such reliance.

         8.       Representations and Warranties of Initial Purchasers: Upon the
authorization by the Initial Purchasers of the release of the Restricted Shares,
the Initial Purchasers propose to offer the Restricted Shares for sale upon the
terms and conditions set forth in this Agreement and the Offering Memorandum and
the Initial Purchasers hereby represent and warrant to, and agree with, the
Company that:

                  (a)      they each will offer and sell the Restricted Shares
only to Eligible Purchasers;

                  (b)      they each are Accredited Investors (as defined in
Regulation D under the Act); and

                  (c)      they each will not offer or sell the Restricted
Shares by any form of general solicitation or general advertising, including,
but not limited to, the methods described in Rule 502(c) under the Act.

         9.       Indemnification:

                  (a)      The Company agrees, to the extent permitted by law,
to indemnify and hold harmless each of the Initial Purchasers and each person,
if any, who controls any such Initial Purchaser within the meaning of Section 15
of the Act or Section 20 of the Exchange Act, against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Act or otherwise, and to reimburse the Initial
Purchasers

                                       16
<PAGE>

and such controlling person or persons, if any, for any legal or other expenses
incurred by them in connection with defending any action, suit or proceeding
(including governmental investigations) as provided in Section 9(c) hereof,
insofar as such losses, claims, damages, liabilities or actions, suits or
proceedings (including governmental investigations) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in the Preliminary Offering Memorandum or the Offering Memorandum, or,
if the Preliminary Offering Memorandum or the Offering Memorandum shall be
amended or supplemented, in the Preliminary Offering Memorandum or the Offering
Memorandum as so amended or supplemented or arise out of or are based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or actions arise out
of or are based upon any such untrue statement or alleged untrue statement or
omission or alleged omission which was made in the Preliminary Offering
Memorandum or the Offering Memorandum or in the Preliminary Offering Memorandum
or the Offering Memorandum as so amended or supplemented, in reliance upon and
in conformity with information furnished in writing to the Company by, or
through the Representatives on behalf of, any Initial Purchaser expressly for
use therein and except that the Company will not be liable in any such case to
the extent that any such loss, claim, damage or liability or action, suit or
proceeding arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Offering Memorandum if copies of the Offering Memorandum were timely delivered
to the Initial Purchasers pursuant to Section 6 hereof and a copy of the
Offering Memorandum (as then amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) was not sent or given by or on
behalf of the Initial Purchasers to the person asserting such loss, claim,
damage or liability or action, suit or proceeding and if the Offering Memorandum
(as so amended or supplemented) would have cured the defect giving rise to such
loss, claim, damage or liability or action, suit or proceeding.

                  The Company's indemnity agreement contained in this Section
9(a), and the covenants, representations and warranties of the Company contained
in this Agreement, shall remain in full force and effect regardless of any
investigation made by or on behalf of any person, and shall survive the delivery
of and payment for the Restricted Shares hereunder, and the indemnity agreement
contained in this Section 9 shall survive any termination of this Agreement. The
liabilities of the Company in this Section 9(a) are in addition to any other
liabilities of the Company under this Agreement or otherwise.

                  (b)      Each Initial Purchaser agrees, severally and not
jointly, to the extent permitted by law, to indemnify, hold harmless and
reimburse the Company, each other Initial Purchaser, and each person, if any,
who controls the Company or any such other Initial Purchaser within the meaning
of Section 15 of the Act or Section 20 of the Exchange Act, to the same extent
and upon the same terms as the indemnity agreement of the Company set forth in
Section 9(a) hereof, but only with respect to alleged untrue statements or
omissions made in the Preliminary Offering Memorandum or the Offering
Memorandum, as amended or supplemented (if applicable), in reliance upon and in
conformity with information furnished in writing to the Company by such Initial
Purchaser expressly for use therein.

                  The indemnity agreement on the part of each Initial Purchaser
contained in this Section 9(b) and the representations and warranties of such
Initial Purchaser contained in this

                                       17
<PAGE>

Agreement shall remain in full force and effect regardless of any investigation
made by or on behalf of the Company or any other person, and shall survive the
delivery of and payment for the Restricted Shares hereunder, and the indemnity
agreement contained in this Section 9(b) shall survive any termination of this
Agreement. The liabilities of each Initial Purchaser in this Section 9(b) are in
addition to any other liabilities of such Initial Purchaser under this Agreement
or otherwise.

                  (c)      If a claim is made or an action, suit or proceeding
(including governmental investigations) is commenced or threatened against any
person as to which indemnity may be sought under Section 9(a) or 9(b) hereof,
such person (the "Indemnified Person") shall notify the person against whom such
indemnity may be sought (the "Indemnifying Person") promptly after any assertion
of such claim threatening to institute an action, suit or proceeding or if such
an action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 9(a) or 9(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by the
Representatives in the case of parties indemnified pursuant to Section 9(b)
hereof and by the Company in the case of parties indemnified pursuant to Section
9(a) hereof. Any Indemnified Person shall have the right to participate in such
litigation or proceeding and to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or likely conflicts of
interest between them, in either of which cases the reasonable fees and expenses
of counsel (including disbursements) for such Indemnified Person shall be
reimbursed by the Indemnifying Person to the Indemnified Person. If there is a
conflict as described in clause (ii) above, and the Indemnified Persons have
participated in the litigation or proceeding utilizing separate counsel whose
fees and expenses have been reimbursed by the Indemnifying Person and the
Indemnified Persons, or any of them, are found to be solely liable, such
Indemnified Persons shall repay to the Indemnifying Person such fees and
expenses of such separate counsel as the Indemnifying Person shall have
reimbursed. It is understood that the Indemnifying Person shall not, in
connection with any litigation or proceeding or related litigation or
proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for the
reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.

                                       18
<PAGE>

                  In furtherance of the requirement above that fees and expenses
of any separate counsel for the Indemnified Persons shall be reasonable, the
Initial Purchasers and the Company agree that the Indemnifying Person's
obligations to pay such fees and expenses shall be conditioned upon the
following:

                           (1)      in case separate counsel is proposed to be
                  retained by the Indemnified Persons pursuant to clause (ii) of
                  the preceding paragraph, the Indemnified Persons shall in good
                  faith fully consult with the Indemnifying Person in advance as
                  to the selection of such counsel;

                           (2)      reimbursable fees and expenses of such
                  separate counsel shall be detailed and supported in a manner
                  reasonably acceptable to the Indemnifying Person (but nothing
                  herein shall be deemed to require the furnishing to the
                  Indemnifying Person of any information, including, without
                  limitation, computer print-outs of lawyers' daily time
                  entries, to the extent that, in the judgment of such counsel,
                  furnishing such information might reasonably be expected to
                  result in a waiver of any attorney-client privilege); and

                           (3)      the Company and the Representatives shall
                  cooperate in monitoring and controlling the fees and expenses
                  of separate counsel for Indemnified Persons for which the
                  Indemnifying Person is liable hereunder, and the Indemnified
                  Person shall use reasonable effort to cause such separate
                  counsel to minimize the duplication of activities as between
                  themselves and counsel to the Indemnifying Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment for the plaintiff, the Indemnifying Person agrees, subject to the
provisions of this Section 9, to indemnify the Indemnified Person from and
against any loss, damage, liability or expenses by reason of such settlement or
judgment. The Indemnifying Person shall not, without the prior written consent
of the Indemnified Persons, effect any settlement of any pending or threatened
litigation, proceeding or claim in respect of which indemnity has been properly
sought by the Indemnified Persons hereunder, unless such settlement includes an
unconditional release by the claimant of all Indemnified Persons from all
liability with respect to claims which are the subject matter of such
litigation, proceeding or claim.

                  (d)      If the indemnification provided for in Section 9
above is unavailable to or insufficient to hold harmless an Indemnified Person
under this Section 9 in respect of any losses, claims, damages or liabilities
(or actions, suits or proceedings (including governmental investigations) in
respect thereof) referred to therein, then each Indemnifying Person under this
Section 9 shall contribute to the amount paid or payable by such Indemnified
Person as a result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the relative
benefits received by the Indemnifying Person on the one hand and the Indemnified
Person on the other from the offering of the Restricted Shares. If, however, the
allocation provided by the immediately preceding sentence is not permitted by
applicable law, then each Indemnifying Person shall contribute to such amount
paid or payable

                                       19
<PAGE>

by such Indemnified Person in such proportion as is appropriate to reflect not
only such relative benefits but also the relative fault of each Indemnifying
Person, if any, on the one hand and the Indemnified Person on the other in
connection with the statements or omissions which resulted in such losses,
claims, damages or liabilities (or actions, suits or proceedings (including
governmental investigations) in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Initial Purchasers on the other shall be deemed to be in the
same proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company and the total discounts or commissions
received by the Initial Purchasers, in each case as set forth in the Offering
Memorandum, bear to the aggregate offering price of the Restricted Shares. The
relative fault shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or
alleged omission to state a material fact relates to information supplied by the
Company on the one hand or the Initial Purchasers on the other and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission. The Company and the Initial Purchasers agree
that it would not be just and equitable if contribution pursuant to this Section
9(d) were determined by pro rata allocation (even if the Initial Purchasers 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 9(d). The amount paid or payable by an Indemnified Person as a
result of the losses, claims, damages or liabilities (or actions, suits or
proceedings (including governmental proceedings) in respect thereof) referred to
above in this Section 9(d) shall be deemed to include any legal or other
expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such actions, suits or proceedings (including
governmental proceedings) or claim, provided that the provisions of this Section
9 have been complied with (in all material respects) in respect of any separate
counsel for such Indemnified Person. Notwithstanding the provisions of this
Section 9(d), in no case shall any Initial Purchaser be responsible for any
amount in excess of the purchase discount or commission applicable to the
Restricted Shares purchased by such Initial Purchaser hereunder. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Act) shall be entitled to contribution from any person who was not guilty of
such fraudulent misrepresentation. The Initial Purchasers' obligations in this
Section 9(d) to contribute are several in proportion to their respective
obligations and not joint.

         The agreement with respect to contribution contained in this Section
9(d) shall remain in full force and effect regardless of any investigation made
by or on behalf of the Company or any Initial Purchaser, and shall survive
delivery of and payment for the Restricted Shares hereunder and any termination
of this Agreement.

         10.      Survival: The respective indemnities, agreements,
representations, warranties and other statements of the Company and the Initial
Purchasers as set forth in this Agreement or made by or on behalf of them,
respectively, pursuant to this Agreement, shall remain in full force and effect,
regardless of any investigation (or any statement as to the results thereof)
made by or on behalf of the Initial Purchasers or any controlling person of the
Initial Purchasers, the Company, or any officer, director or controlling person
of the Company, and shall survive delivery of and payment for the Restricted
Shares.

                                       20
<PAGE>

         11.      Substitution of Initial Purchasers: If any Initial Purchaser
under this agreement shall fail or refuse (otherwise than for some reason
sufficient to justify in accordance with the terms hereof, the termination of
its obligations hereunder) to purchase the Restricted Shares which it had agreed
to purchase at the Time of Purchase or any applicable Date of Option Delivery,
the Representatives shall immediately notify the Company and the Representatives
and the other Initial Purchasers may, within 36 hours of the giving of such
notice, determine to purchase, or to procure one or more other members of the
NASD (or, if not members of the NASD, who are foreign banks, dealers or
institutions not registered under the Exchange Act and who agree in making sales
to comply with the NASD's Rules of Fair Practice), satisfactory to the Company,
to purchase, upon the terms herein set forth, the number of Restricted Shares
which the defaulting Initial Purchaser had agreed to purchase. If any
non-defaulting Initial Purchaser or Initial Purchasers shall determine to
exercise such right, the Representatives shall give written notice to the
Company of such determination within 36 hours after the Company shall have
received notice of any such default, and thereupon the Time of Purchase or Date
of Option Delivery, as the case may be, shall be postponed for such period, not
exceeding three business days, as the Company shall determine. If, in the event
of such a default, the Representatives shall fail to give such notice, or shall
within such 36-hour period give written notice to the Company that no other
Initial Purchaser or Initial Purchasers, or others, will exercise such right,
then this Agreement may be terminated by the Company, upon like notice given to
the Representatives within a further period of 36 hours. If in such case the
Company shall not elect to terminate this Agreement, it shall have the right,
irrespective of such default:

                  (a)      to require such non-defaulting Initial Purchasers to
purchase and pay for the respective number of Restricted Shares which they had
severally agreed to purchase hereunder, as herein above provided, and, in
addition, the number of Restricted Shares which the defaulting Initial Purchaser
shall have so failed to purchase up to a number thereof equal to one-ninth (1/9)
of the respective number of Restricted Shares which such non-defaulting Initial
Purchasers have otherwise agreed to purchase hereunder; and/or

                  (b)      to procure one or more other members of the NASD (or,
if not members of the NASD, who are foreign banks, dealers or institutions not
registered under the Exchange Act and who agree in making sales to comply with
the NASD's Rules of Fair Practice) to purchase, upon the terms herein set forth,
the number of Restricted Shares which such defaulting Initial Purchaser had
agreed to purchase, or that portion thereof which the remaining Initial
Purchasers shall not be obligated to purchase pursuant to Section 11(a) hereof.

         In the event the Company shall exercise its rights under Section 11(a)
and/or Section 11(b) hereof, the Company shall give written notice thereof to
the Representatives within such further period of 36 hours, and thereupon the
Time of Purchase or the Date of Option Delivery, as the case may be, shall be
postponed for such period, not exceeding five business days, as the Company
shall determine. In the event the Company shall be entitled to but shall not
elect to exercise its rights under Section 11(a) and/or Section 11(b) hereof,
the Company shall be deemed to have elected to terminate this Agreement.

         Any action taken by the Company under this Section 11 shall not relieve
any defaulting Initial Purchaser from liability in respect of any default of
such Initial Purchaser under this

                                       21
<PAGE>

Agreement. Termination by the Company under this Section 11 shall be without any
liability on the part of the Company or any non-defaulting Initial Purchaser.

         In the computation of any period of 36 hours referred to in this
Section 11, there shall be excluded a period of 24 hours in respect of each
Saturday, Sunday or legal holiday which would otherwise be included in such
period of time.

         12.      Termination of Agreement: This Agreement shall become
effective upon the execution and delivery of this Agreement by the parties
hereto.

         This Agreement may be terminated at any time prior to the Time of
Purchase or any applicable Date of Option Delivery by the Representatives if,
prior to such time, any of the following events shall have occurred: (i) trading
in the Company's Common Stock shall have been suspended by the Commission or the
New York Stock Exchange or trading in securities generally on the New York Stock
Exchange shall have been suspended or limited or minimum prices shall have been
established on such exchange; (ii) a banking moratorium shall have been declared
either by U.S. federal or New York State authorities; or (iii) there shall have
occurred any outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis the effect of
which on the financial markets of the United States is such as to impair, in the
sole judgment of the Representatives, the marketability of the Restricted
Shares.

         If the Representatives elect to terminate this Agreement, as provided
in this Section 12, the Representatives will promptly notify the Company and
each other Initial Purchaser by telephone or telecopy, confirmed by letter. If
this Agreement shall not be carried out by any Initial Purchaser for any reason
permitted hereunder, or if the sale of the Restricted Shares to the Initial
Purchasers as herein contemplated shall not be carried out because the Company
is not able to comply with the terms hereof, the Company shall not be under any
obligation under this Agreement and shall not be liable to any Initial Purchaser
or to any member of any selling group for the loss of anticipated profits from
the transactions contemplated by this Agreement and the Initial Purchasers shall
be under no liability to the Company nor be under any liability under this
Agreement to one another.

         Notwithstanding the foregoing, the provisions of Sections 6(g), 6(h), 9
and 10 shall survive any termination of this Agreement.

         13.      Notices: All notices hereunder shall, unless otherwise
expressly provided, be in writing and be delivered at or mailed to the following
addresses or be sent by telecopy as follows: (i) if to the Initial Purchasers or
the Representatives, to Citigroup Global Markets Inc., 388 Greenwich Street, New
York, New York 10013, Attention: General Counsel (Telecopy 212-816-7912), and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, 4 World Financial Center,
New York, New York 10080, Attention: Jeff Kulik (Telecopy 212-449-1787); and
(ii) if to the Company, to CMS Energy Corporation, One Energy Plaza, Jackson,
Michigan 49201, Attention: Executive Vice President and Chief Financial Officer
(Telecopy 517-788-2186).

         14.      Parties in Interest: This Agreement has been and is made
solely for the benefit of the Initial Purchasers, the Company, the Initial
Purchasers' directors and officers and the

                                       22
<PAGE>

controlling persons, if any, referred to herein, and their respective
successors, assigns, executors and administrators, and, except as expressly
otherwise provided in Section 11 hereof, no other person shall acquire or have
any right under or by virtue of this Agreement.

         15.      Definition of Certain Terms: All obligations of the Initial
Purchasers hereunder are several and not joint. The term "successors" as used in
this Agreement shall not include any purchaser, as such purchaser, of any of the
Restricted Shares from any of the respective Initial Purchasers.

         16.      Governing Law: This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.

         17.      Waiver of Tax Confidentiality: Notwithstanding anything herein
to the contrary, purchasers of the Restricted Shares (and each employee,
representative or other agent of such purchasers) may disclose to any and all
persons, without limitation of any kind, the U.S. federal and state tax
treatment and U.S. federal and state tax structure of any transaction
contemplated herein and all materials of any kind (including opinions or other
tax analyses) that are provided to the purchasers of the Restricted Shares
relating to such U.S. federal and state tax treatment and U.S. federal and state
tax structure, other than any information for which nondisclosure is reasonably
necessary in order to comply with applicable securities laws.

         18.      Counterparts: This Agreement may be executed by any one or
more of the parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such respective counterparts shall together
constitute one and the same instrument.

                                       23
<PAGE>

         If the foregoing is in accordance with your understanding, please sign
and return to us counterparts hereof, and, upon the acceptance hereof by you,
this letter and such acceptance hereof shall constitute a binding agreement
between each of the Initial Purchasers and the Company.

                                        Very truly yours,

                                        CMS ENERGY CORPORATION

                                        By: /s/ Thomas J. Webb
                                           ------------------------
                                           Name:  Thomas J. Webb
                                           Title: Executive Vice President and
                                                  Chief Financial Officer

Confirmed and accepted as
of the date first written above:

CITIGROUP GLOBAL MARKETS INC.
     As Representative of the several Initial Purchasers
     named in Schedule I hereto

By: CITIGROUP GLOBAL MARKETS INC.

By: /s/ Jane Sadowski
   -------------------------
   Name:  Jane Sadowski
   Title: Managing Director

MERRILL LYNCH, PIERCE, FENNER & SMITH
         INCORPORATED

   As Representative of the several Initial Purchasers
   named in Schedule I hereto

By: MERRILL LYNCH, PIERCE, FENNER & SMITH
         INCORPORATED

By: /s/ Jeff Kulik
   -------------------------
   Name:  Jeff Kulik
   Title: Vice President

<PAGE>

                                   SCHEDULE I

<TABLE>
<CAPTION>
                                                   Number of
     Initial Purchasers                        Restricted Shares   Purchase Price
     ------------------                        -----------------   --------------
<S>                                            <C>                 <C>
Citigroup Global Markets Inc.                       1,485,000       $ 72,022,500
Merrill Lynch, Pierce, Fenner & Smith               1,485,000       $ 72,022,500
                      Incorporated
J.P. Morgan Securities, Inc.                          900,000       $ 43,650,000
Deutsche Bank Securities Inc.                         270,000       $ 13,095,000
Wachovia Capital Markets, LLC                         270,000       $ 13,095,000
Banc One Capital Markets, Inc.                         90,000       $  4,365,000
                                                 ------------       ------------
Total                                               4,500,000       $218,250,000
                                                 ============       ============
</TABLE>

                                      I-1

<PAGE>

                                   SCHEDULE II

1. John F. Drake

2. James J. Duderstadt

3. Carl L. English

4. Thomas W. Elward

5. Kathleen R. Flaherty

6. Earl D. Holton

7. David W. Joos

8. David G. Mengebier

9. Michael T. Monahan

10. Joseph F. Paquette Jr.

11. William U. Parfet

12. Percy A. Pierre

13. John G. Russell

14. S. Kinnie Smith, Jr.

15. Kenneth L. Way

16. Thomas J. Webb

17. Ken Whipple

18. John B. Yasinsky

                                      II-1

<PAGE>

                                    EXHIBIT A

         This Registration Rights Agreement (this "Agreement") is made and
entered into this 5th day of December, 2003 among CMS Energy Corporation, a
Michigan corporation (the "Company"), and Citigroup Global Markets Inc. and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representatives (the
"Representatives") of the Initial Purchasers (the "Initial Purchasers") listed
on Schedule I to the Purchase Agreement (as defined below).

         This Agreement is made pursuant to the Purchase Agreement dated
December 1, 2003, among the Company and the Representatives on behalf of the
Initial Purchasers (the "Purchase Agreement"), which provides for the sale by
the Company to the Initial Purchasers of an aggregate of 4,500,000 shares of the
Company's 4.50% Cumulative Convertible Preferred Stock (the "Firm Shares") and
the granting by the Company to the Initial Purchasers of the option to purchase
an additional 500,000 shares of such Cumulative Convertible Preferred Stock to
cover over-allotments, if any (the "Option Shares" and, together with the Firm
Shares, the "Shares"). The Shares are convertible into shares of common stock,
par value $0.01 per share, of the Company at the initial conversion price set
forth in the Offering Memorandum dated December 1, 2003. In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide to the Initial Purchasers and their direct and indirect transferees
the registration rights set forth in this Agreement. The execution and delivery
of this Agreement is a condition to the closing under the Purchase Agreement.

         In consideration of the foregoing, the parties hereto agree as follows:

         1.       Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in the Purchase Agreement. As
used in this Agreement, the following capitalized defined terms shall have the
following meanings:

                  "Additional Dividends" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Additional Dividends Payment Date" shall have the meaning set
forth in Section 2(c)(ii) hereof.

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

                  "Agreement" shall have the meaning set forth in the preamble.

                  "Applicable Conversion Price" shall mean, as of any date of
determination, the number of Shares as of such date of determination divided by
the Conversion Rate (as defined below) in effect as of such date of
determination or, if no Shares are then outstanding, the Conversion Rate that
would be in effect were Shares then outstanding.

                                      A-1
<PAGE>

                  "Business Day" shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banking institutions in The City
of New York are authorized or obligated by law or executive order to close.

                  "Closing Date" shall mean the later of (i) the date on which
the Firm Shares are issued and (ii) the date on which the Option Shares are
issued.

                  "Company" shall have the meaning set forth in the preamble and
shall also include the Company's successors.

                  "Conversion Rate" shall mean 5.0541 shares of common stock,
par value $0.01 per share, of the Company per share of Preferred Stock.

                  "Depositary" shall mean The Depository Trust Company, or any
other depositary for the Securities (as defined below) appointed by the Company;
provided, however, that such depositary must have an address in the Borough of
Manhattan, in The City of New York.

                  "Firm Closing Date" shall mean the date on which the Firm
Shares are issued.

                  "Firm Shares" shall have the meaning set forth in the
preamble.

                  "Holder" shall mean an Initial Purchaser, for so long as it
owns any Registrable Securities (as defined below), and each of its successors,
assigns and direct and indirect transferees who become owners of Registrable
Securities.

                  "Indemnified Holder" shall have the meaning set forth in
Section 4(a) hereof.

                  "Indemnified Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Indemnifying Person" shall have the meaning set forth in
Section 4(c) hereof.

                  "Initial Purchasers" shall have the meaning set forth in the
preamble.

                  "Majority Holders" shall mean, on any date, Holders of a
majority of the outstanding shares of Stock (as defined below) constituting
Registrable Securities; provided, that whenever the consent or approval of
Holders of a specified percentage of Registrable Securities is required
hereunder, Registrable Securities held by the Company and other obligors on the
Securities or any Affiliate of the Company or other obligor shall be disregarded
in determining whether such consent or approval was given by the Holders of such
required percentage amount. For the purposes of this definition, Holders of
Shares constituting Registrable Securities shall be deemed to be Holders of the
number of shares of Stock into which such Shares are or would be convertible as
of such date.

                  "Material Event" shall have the meaning set forth in Section
3(f) hereof.

                  "Notice and Questionnaire" shall mean a written notice
delivered to the Company substantially in the form attached as Appendix I to the
Offering Memorandum.

                                      A-2
<PAGE>

                  "Notice Holder" shall mean, on any date, any Holder that has
delivered a Notice and Questionnaire to the Company on or prior to such date.

                  "Option Shares" shall have the meaning set forth in the
preamble.

                  "Person" shall mean any individual, corporation, partnership,
joint venture, trust, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.

                  "Prospectus" shall mean the prospectus included in the Shelf
Registration Statement (as defined below), including any preliminary prospectus,
and any such prospectus as amended or supplemented by any prospectus supplement,
including any such prospectus supplement with respect to the terms of the
offering of any portion of the Registrable Securities covered by a Shelf
Registration Statement, and by all other amendments and supplements to a
prospectus, including post-effective amendments, and in each case including all
material incorporated by reference therein.

                  "Purchase Agreement" shall have the meaning set forth in the
preamble.

                  "Registrable Securities" shall mean the Securities; provided,
however, that Securities shall cease to be Registrable Securities when (i) a
Shelf Registration Statement with respect to such Securities shall have been
declared effective under the Act and such Securities shall have been disposed of
pursuant to such Shelf Registration Statement, (ii) such Securities have been
sold to the public pursuant to Rule 144 under the Act or may be sold pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A) under
the Act or (iii) such Securities shall have ceased to be outstanding.

                  "Registration Default" shall have the meaning set forth in
Section 2(c)(i) hereof.

                  "Registration Expenses" shall mean any and all expenses
incident to performance of or compliance by the Company with this Agreement,
including, without limitation: (i) all Commission, stock exchange or NASD
registration and filing fees, including, if applicable, the reasonable fees and
expenses of any "qualified independent underwriter" (and its counsel) that is
required to be retained by any Holder of Registrable Securities in accordance
with the rules and regulations of the NASD; (ii) all fees and expenses incurred
in connection with compliance with state securities or blue sky laws and
compliance with the rules of the NASD (including reasonable fees and
disbursements of one counsel for the placement agent or underwriters, if any, in
connection with blue sky qualification of any of the Registrable Securities and
any filings with the NASD); (iii) all expenses of any Persons in preparing or
assisting in preparing word processing, printing and distributing any Shelf
Registration Statement, any Prospectus, any amendments or supplements thereto,
any underwriting agreements, any securities sales agreements and any other
documents relating to the performance of and compliance with this Agreement;
(iv) all fees and expenses incurred in connection with the listing, if any, of
any of the Registrable Securities on any securities exchange or exchanges; (v)
all rating agency fees; (vi) the fees and disbursements of counsel for the
Company and of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or incident
to such performance and compliance; (vii) the fees and expenses

                                      A-3
<PAGE>

of the transfer agent (if not the Company) and any escrow agent or custodian;
(viii) the reasonable fees and disbursements of one firm, at any one time, of
legal counsel selected by the Representatives (subject to the reasonable
approval of the Company) to represent the Holders of Registrable Securities,
which firm shall be PW unless otherwise requested in writing by the Majority
Holders; and (ix) any reasonable fees and disbursements of the underwriters
customarily required to be paid by issuers or sellers of securities and the fees
and expenses of any special experts retained by the Company in connection with
any Shelf Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by a Holder.

                  "Representatives" shall have the meaning set forth in the
preamble.

                  "Securities" shall mean collectively the Shares and the Stock.

                  "Shares" shall have the meaning set forth in the preamble.

                  "Shelf Registration" shall mean a registration effected
pursuant to Section 2(a) hereof.

                  "Shelf Registration Filing Date" shall have the meaning set
forth in Section 2(a)(i) hereof.

                  "Shelf Registration Statement" shall mean a "shelf"
registration statement of the Company pursuant to the provisions of Section 2(a)
hereof which covers all of the Registrable Securities on an appropriate form
under Rule 415 under the Act, or any similar rule that may be adopted by the
Commission, and all amendments and supplements to such registration statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.

                  "Stock" shall mean the shares of common stock of the Company,
par value $0.01 per share, into which the Shares are convertible or that have
been issued upon any conversion of the Shares into common stock of the Company.

                  "Suspension Period" shall have the meaning set forth in
Section 2(a)(i) hereof.

         2.       Registration Under the Act.

                  (a)      Shelf Registration.

                           (i)      The Company agrees to use reasonable
         commercial efforts to file under the Act as promptly as practicable
         after the time that the Company becomes eligible to file registration
         statements on Form S-3 under the Act but in any event within 11 months
         after the Firm Closing Date (the "Shelf Registration Filing Date") a
         Shelf Registration Statement providing for the registration of, and the
         sale on a continuous or delayed basis by the Holders of, all of the
         Registrable Securities, pursuant to Rule 415 under the Act or any
         similar rule that may be adopted by the Commission. If the Company is
         not eligible to file registration statements on Form S-3 under the Act
         before the Shelf Registration Filing Date, then the Company shall file
         a Shelf Registration

                                      A-4
<PAGE>

         Statement on whatever form is then available for the Company to use.
         The Company agrees to use its reasonable commercial efforts to cause
         the Shelf Registration Statement to become or be declared effective
         within 120 days after the Shelf Registration Filing Date and to keep
         such Shelf Registration Statement continuously effective until the
         earliest of (i) the date on which all Registrable Securities covered by
         the Shelf Registration Statement have been sold pursuant to such Shelf
         Registration Statement, (ii) the date on which all Registrable
         Securities have been sold pursuant to Rule 144 under the Act, (iii)
         such time as there are no longer any Registrable Securities outstanding
         and (iv) the second anniversary of the Closing Date (plus, in each
         case, the number of days in any Suspension Period); provided, however,
         that upon the occurrence of any event or the discovery of any facts as
         contemplated by Section 3(f)(iv) hereof, the Company shall not be
         obligated to keep the Shelf Registration Statement effective or to
         permit the use of any Prospectus forming a part of the Shelf
         Registration Statement if the Company promptly thereafter complies with
         the requirements of Section 3(k) hereof; provided, further, that the
         failure to keep the Shelf Registration Statement effective and usable
         for offers and sales of Registrable Securities for such reason shall
         last no longer than 45 consecutive calendar days or no more than an
         aggregate of 90 calendar days during any consecutive twelve-month
         period (whereafter a Registration Default shall occur and Additional
         Dividends shall accumulate as set forth in Section 2.4(A)(v) hereof);
         any such period during which the Company is so excused from keeping the
         Shelf Registration Statement effective and usable for offers and sales
         of Registrable Securities is referred to herein as a "Suspension
         Period"; a Suspension Period shall commence on and include the date
         that the Company gives notice to the Holders that the Shelf
         Registration Statement is no longer effective or the Prospectus
         included therein is no longer usable for offers and sales of
         Registrable Securities as a result of the application of the proviso of
         the foregoing sentence, stating the reason therefor, and shall end on
         the earlier to occur of the date on which each seller of Registrable
         Securities covered by the Shelf Registration Statement either receives
         the copies of the supplemented or amended Prospectus or is advised in
         writing by the Company that use of the Prospectus may be resumed.

                           (ii)     Each Holder of Registrable Securities agrees
         that if such Holder wishes to sell Registrable Securities pursuant to
         the Shelf Registration Statement and related Prospectus, it will do so
         only in accordance with this Section 2(a)(ii) and the last paragraph of
         Section 3 hereof. To be named a selling holder in the Shelf
         Registration Statement when it first becomes effective, Holders must
         deliver a Notice and Questionnaire to the Company at least five (5)
         Business Days prior to the effectiveness of the Shelf Registration
         Statement. From and after the date the Shelf Registration Statement is
         declared effective, the Company shall, as promptly as is practicable
         after the date a Notice and Questionnaire is delivered, and in any
         event within five (5) Business Days after such date, (1) if required by
         applicable law, file with the Commission a post-effective amendment to
         the Shelf Registration Statement or prepare and, if required by
         applicable law, file a supplement to the related Prospectus or an
         amendment or supplement to any document incorporated therein by
         reference or file any other required document (including, if required,
         a new or amended Shelf Registration Statement) so that the Holder
         delivering such Notice and Questionnaire is named as a selling holder
         in the Shelf Registration Statement and the related Prospectus and so
         that such Holder is permitted to deliver such Prospectus to purchasers
         of the Registrable Securities in

                                      A-5
<PAGE>

         accordance with applicable law and, if the Company shall file a
         post-effective amendment to the Shelf Registration Statement, use
         commercially reasonable efforts to cause such post-effective amendment
         to be declared effective under the Act as promptly as is practicable,
         (2) provide such Holder copies of any documents filed pursuant to
         Section 2(a)(ii)(1) hereof and (3) notify such Holder as promptly as
         practicable after the effectiveness under the Act of any post-effective
         amendment filed pursuant to Section 2(a)(ii)(1) hereof; provided, that
         if such Notice and Questionnaire is delivered during a Suspension
         Period, the Company shall so inform the Holder delivering such Notice
         and Questionnaire and shall take the actions set forth in clauses (1),
         (2) and (3) above upon expiration of the Suspension Period.
         Notwithstanding anything contained herein to the contrary, the Company
         shall be under no obligation to name any Holder that is not a Notice
         Holder as a selling holder in the Shelf Registration Statement or
         related Prospectus; provided, however, that any Holder that becomes a
         Notice Holder pursuant to the provisions of this Section 2(a)(ii)
         (whether or not such Holder was a Notice Holder at the time the Shelf
         Registration Statement was declared effective) shall be named as a
         selling holder in the Shelf Registration Statement or related
         Prospectus in accordance with the requirements of this Section
         2(a)(ii).

                           (iii)    The Company shall not permit any securities
         other than Registrable Securities to be included in the Shelf
         Registration Statement. The Company further agrees, if necessary, to
         supplement or amend the Shelf Registration Statement, as required by
         Section 3(b) hereof, and to furnish to the Holders of Registrable
         Securities copies of any such supplement or amendment promptly after
         its being used or filed with the Commission.

                  (b)      Expenses. The Company shall pay all Registration
Expenses in connection with the registration pursuant to Section 2(a) hereof and
the performance of its obligations under Section 2(a) and Section 3 hereof. Each
Holder shall pay all underwriting discounts and commissions and transfer taxes,
if any, relating to the sale or disposition of such Holder's Registrable
Securities pursuant to the Shelf Registration Statement.

                  (c)      Interest.

                           (i)      If any of the following events (any such
         event a "Registration Default") shall occur, then additional dividends
         (the "Additional Dividends") shall become payable to Holders in respect
         of the Securities as follows:

                           (1)      if the Shelf Registration Statement is not
                  filed with the Commission by the Shelf Registration Filing
                  Date, then commencing on the day immediately after the Shelf
                  Registration Filing Date, Additional Dividends shall
                  accumulate on the outstanding Shares that are Registrable
                  Securities and on the Applicable Conversion Price of any
                  outstanding Stock that are Registrable Securities at a rate of
                  0.25% per annum for the first 90 days following such day
                  immediately after the Shelf Registration Filing Date and at a
                  rate of 0.50% per annum thereafter;

                                      A-6
<PAGE>

                           (2)      if the Shelf Registration Statement is not
                  declared effective by the Commission within 120 days following
                  the Shelf Registration Filing Date, then commencing on the
                  121st day after the Shelf Registration Filing Date, Additional
                  Dividends shall accumulate on the outstanding Shares that are
                  Registrable Securities and on the Applicable Conversion Price
                  of any outstanding Stock that are Registrable Securities at a
                  rate of 0.25% per annum for the first 90 days following such
                  121st day after the Shelf Registration Filing Date and at a
                  rate of 0.50% per annum thereafter;

                           (3)      if the Company has failed to perform its
                  obligations set forth in Section 2(a)(ii) hereof within the
                  time periods required therein, then commencing on the first
                  day after the date by which the Company was required to
                  perform such obligations, Additional Dividends shall
                  accumulate on the outstanding Shares that are Registrable
                  Securities and on the Applicable Conversion Price of any
                  outstanding Stock that are Registrable Securities at a rate of
                  0.25% per annum for the first 90 days and at a rate of 0.50%
                  per annum thereafter;

                           (4)      if the Shelf Registration Statement has been
                  declared effective but such Shelf Registration Statement
                  ceases to be effective at any time (other than as specifically
                  permitted in Section 2(a)(i) hereof) without being succeeded
                  within 30 days by an amendment thereto or an additional
                  registration statement filed and declared effective, then
                  commencing on the day such Shelf Registration Statement ceases
                  to be effective, Additional Dividends shall accumulate on the
                  outstanding Shares that are Registrable Securities and on the
                  Applicable Conversion Price of any outstanding Stock that are
                  Registrable Securities at a rate of 0.25% per annum for the
                  first 90 days following such date on which the Shelf
                  Registration Statement ceases to be effective and at a rate of
                  0.50% per annum thereafter; or

                           (5)      if the aggregate duration of Suspension
                  Periods in any period exceeds the number of days permitted in
                  respect of such period pursuant to Section 2(a)(i) hereof,
                  then commencing on the day the aggregate duration of
                  Suspension Periods in any period exceeds the number of days
                  permitted in respect of such period, Additional Dividends
                  shall accumulate on the outstanding Shares that are
                  Registrable Securities and on the Applicable Conversion Price
                  of any outstanding Stock that are Registrable Securities at a
                  rate of 0.25% per annum for the first 90 days and at a rate of
                  0.50% per annum thereafter;

         provided, however, that the Additional Dividends on the Securities
         shall not exceed in the aggregate 0.50% per annum and shall not be
         payable under more than one clause above for any given period of time,
         except that if Additional Dividends would be payable under more than
         one clause above, but at a rate of 0.25% per annum under one clause and
         at a rate of 0.50% per annum under the other, then the Additional
         Dividends rate shall be the higher rate of 0.50% per annum; provided,
         further, however, that (1) upon the filing of the Shelf Registration
         Statement (in the case of Section 2(c)(i)(1) hereof), (2) upon the
         effectiveness of the Shelf Registration Statement (in the case of
         Section 2(c)(i)(2)

                                      A-7
<PAGE>

         hereof), (3) upon the Company's performing its obligations set forth in
         Section 2(a)(ii) hereof (in the case of Section 2(c)(i)(3) hereof), (4)
         upon the effectiveness of the Shelf Registration Statement which had
         ceased to remain effective (in the case of Section 2(c)(i)(4) hereof)
         or (5) upon the termination of the Suspension Period that caused the
         limit on the aggregate duration of Suspension Periods in a period set
         forth in Section 2(a)(i) hereof to be exceeded (in the case of Section
         2(c)(i)(5) hereof), Additional Dividends on the Securities as a result
         of such Section, as the case may be, shall cease to accumulate.

                           (ii)     Additional Dividends on the Securities, if
         any, will be payable in cash on March 1, June 1, September 1 and
         December 1 of each year (the "Additional Dividends Payment Date") to
         holders of record of outstanding Registrable Securities on each
         preceding February 15, May 15, August 15 and November 15, respectively.
         The date of determination of the Applicable Conversion Price of any
         outstanding Stock that are Registrable Securities shall be the Business
         Day immediately preceding the Additional Dividends Payment Date;
         provided, that in the case of an event of the type described in Section
         2(c)(i)(3) hereof, such Additional Dividends shall be paid only to the
         Holders that have delivered Notice and Questionnaires that caused the
         Company to incur the obligations set forth in Section 2(a)(ii) hereof,
         the non-performance of which is the basis of such Registration Default;
         provided, further, that any Additional Dividends accumulated with
         respect to any Shares or portion thereof called for redemption on a
         redemption date or purchased on a purchase date or converted into Stock
         on a conversion date prior to the Registration Default shall, in any
         such event, be paid instead to the Holder who submitted such Shares or
         portion thereof for redemption, purchase or conversion on the
         applicable redemption date, purchase date or conversion date, as the
         case may be, on such date (or promptly following the conversion date,
         in the case of conversion), and shall continue to accumulate on the
         Stock issuable upon conversion of any Shares to the extent any
         Registration Default has not yet been cured. Following the cure of all
         Registration Defaults requiring the payment of Additional Dividends by
         the Company to the Holders of Registrable Securities pursuant to
         Section 2(c)(i) hereof, the accumulation of Additional Dividends will
         cease without in any way limiting the effect of any subsequent
         Registration Default requiring the payment of Additional Dividends by
         the Company.

         Notwithstanding the foregoing, the parties agree that the sole monetary
damages payable for a violation of the terms of this Agreement with respect to
which Additional Dividends are expressly provided shall be as set forth in this
Section 2(c). Nothing shall preclude a Notice Holder or Holder of Registrable
Securities from pursuing or obtaining specific performance or other equitable
relief with respect to this Agreement.

         3.       Registration Procedures. In connection with the obligations of
the Company with respect to Shelf Registration Statements pursuant to Section
2(a) hereof, the Company shall:

                  (a)      use reasonable commercial efforts to prepare and file
with the Commission a Shelf Registration Statement, within the relevant time
period specified in Section 2 hereof, on the appropriate form under the Act,
which form shall (i) be selected by the Company, (ii) be available for the sale
of the Registrable Securities by the selling Holders thereof and (iii) comply

                                      A-8
<PAGE>

as to form in all material respects with the requirements of the applicable form
and include or incorporate by reference all financial statements required by the
Commission to be filed therewith or incorporated by reference therein, and use
its reasonable commercial efforts to cause such Shelf Registration Statement to
become effective and remain effective in accordance with Section 2 hereof;

                  (b)      use reasonable commercial efforts to cause (i) any
Shelf Registration Statement and any amendment thereto, when it becomes
effective, not to 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 and (ii) subject to Section 2(a)(iii) hereof,
any Prospectus forming part of any Shelf Registration Statement, and any
supplement to such Prospectus (as amended or supplemented from time to time),
not to include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;

                  (c)      use reasonable commercial efforts to prepare and file
with the Commission such amendments and post-effective amendments to the Shelf
Registration Statement as may be necessary under applicable law to keep such
Shelf Registration Statement effective for the applicable period; and cause each
Prospectus to be supplemented by any required prospectus supplement, and as so
supplemented to be filed pursuant to Rule 424 (or any similar provision then in
force) under the Act and comply with the provisions of the Act, the Exchange Act
and the rules and regulations thereunder applicable to them with respect to the
disposition of all securities covered by the Shelf Registration Statement during
the applicable period in accordance with the intended method or methods of
distribution reasonably requested by the selling Holders thereof;

                  (d)      (i) notify each Holder of Registrable Securities, at
least fifteen (15) calendar days prior to filing, that a Shelf Registration
Statement with respect to the Registrable Securities is being filed and advising
such Holders that the distribution of Registrable Securities will be made in
accordance with the methods reasonably requested by the Majority Holders
participating in the Shelf Registration and as set forth in the Notices and
Questionnaires, (ii) furnish to each Notice Holder of Registrable Securities and
to each underwriter of an underwritten offering of Registrable Securities, if
any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto, and such other
documents as such Notice Holder or underwriter may reasonably request, including
financial statements and schedules and, if the Notice Holder so requests, all
exhibits in order to facilitate the public sale or other disposition of the
Registrable Securities and (iii) hereby consent to the use of the Prospectus or
any amendment or supplement thereto by each of the selling Notice Holders of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or supplement
thereto, save and except during any Suspension Period;

                  (e)      use its reasonable commercial efforts to register or
qualify the Registrable Securities under such state securities or blue sky laws
of such jurisdictions as any Notice Holder of Registrable Securities covered by
a Shelf Registration Statement and each underwriter of an underwritten offering
of Registrable Securities shall reasonably request in writing (which request

                                      A-9
<PAGE>

shall be included in the Notice and Questionnaire) by the time such Shelf
Registration Statement is declared effective by the Commission, and do any and
all other acts and things which may be reasonably necessary or advisable to
enable each such Notice Holder and underwriter to consummate the disposition in
each such jurisdiction of such Registrable Securities owned by such Notice
Holder; provided, however, that the Company shall not be required to (i) qualify
as a foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(e) or (ii)
take any action which would require it to file general consent to service of
process or taxation or file annual reports or comply with any other requirement
deemed by the Company in its reasonable judgment to be unduly burdensome;

                  (f)      notify promptly each Notice Holder of Registrable
Securities under a Shelf Registration and, if requested by such Notice Holder,
confirm such advice in writing promptly (i) when such Shelf Registration
Statement has become effective and when any post-effective amendments and
supplements thereto become effective, (ii) of any request by the Commission or
any state securities authority for post-effective amendments and supplements to
such Shelf Registration Statement and Prospectus or for additional information
after such Shelf Registration Statement has become effective, (iii) of the
issuance by the Commission or any state securities authority of any stop order
suspending the effectiveness of such Shelf Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the happening of any
event (but not the nature of the details concerning the same) or the discovery
of any facts during the period the Shelf Registration Statement is effective
which makes any statement made in such Shelf Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Shelf Registration Statement or Prospectus in order to
make the statements therein not misleading (a "Material Event"); provided,
however, that no notice by the Company shall be required pursuant to this clause
(iv) in the event that the Company either promptly files a Prospectus supplement
to update the Prospectus or a Form 8-K or other appropriate Exchange Act report
that is incorporated by reference into the Shelf Registration Statement, which,
in either case, contains the requisite information with respect to such Material
Event that results in such Shelf Registration Statement no longer containing any
untrue statement of material fact or omitting to state a material fact necessary
to make the statements contained therein not misleading, (v) of the receipt by
the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities, as the case may be, for sale in any
jurisdiction or the initiation or threatening of any proceeding for such purpose
and (vi) of any determination by the Company that a post-effective amendment to
the Shelf Registration Statement would be appropriate other than post-effective
amendments prepared and filed in accordance with Section 2(a)(ii) hereof;

                  (g)      furnish counsel for the Holders of Registrable
Securities copies of any comment letters received from the Commission or any
other request by the Commission or any state securities authority for amendments
or supplements to a Shelf Registration Statement and Prospectus or for
additional information;

                  (h)      use its reasonable commercial efforts to obtain the
withdrawal of any order suspending the effectiveness of the Shelf Registration
Statement as soon as practicable and provide prompt notice to legal counsel for
the Holders of the withdrawal of any such order;

                                      A-10
<PAGE>

                  (i)      furnish to each Notice Holder of Registrable
Securities, and each underwriter, if any, without charge, at least one conformed
copy of each Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules (without documents
incorporated therein by reference or all exhibits thereto, unless requested);

                  (j)      use its reasonable commercial efforts to cooperate
with the selling Notice Holders of Registrable Securities to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold to the extent not held with the Depositary through Cede &
Co., to remove any restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as the
selling Notice Holders or the underwriters, if any, may reasonably request at
least three (3) Business Days prior to the closing of any sale of Registrable
Securities;

                  (k)      upon the occurrence of any event or the discovery of
any facts, each as contemplated by Section 3(f)(ii), Section 3(f)(iii), Section
3(f)(iv), Section 3(f)(v) and Section 3(f)(vi) hereof and subject to the
provisions of the first paragraph immediately following Section 3(s) hereof, as
promptly as practicable after the occurrence of such an event, use its
reasonable commercial efforts to prepare a supplement or post-effective
amendment to the Shelf Registration Statement or the related Prospectus or any
document incorporated therein by reference or file any other required document
so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain at the time of such delivery any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. At such time as such public disclosure is otherwise
made or the Company determines that such disclosure is not necessary, in each
case to correct any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Notice Holder of such
determination and to furnish each Notice Holder such number of copies of the
Prospectus, as amended or supplemented, as such Notice Holder may reasonably
request;

                  (l)      obtain a CUSIP number for all Registrable Securities
covered by the Shelf Registration Statement not later than the effective date of
such Shelf Registration Statement, and provide the transfer agent for the Shares
and the Stock with printed certificates for the Registrable Securities that are
in a form eligible for deposit with the Depositary;

                  (m)      enter into such customary agreements (including an
underwriting or similar agreement) and make such representations and warranties
and take all such other actions in connection therewith (including, without
limitation, furnishing customary comfort letters and legal opinions pursuant to
the terms of such agreement) in order to expedite or facilitate the disposition
of the Registrable Securities pursuant to any Shelf Registration Statement
contemplated by this Agreement as may be reasonably requested by any Holder of
Registrable Securities or underwriter in connection with any sale or resale
pursuant to any Shelf Registration Statement contemplated by this Agreement;

                  (n)      upon reasonable notice, for a reasonable period prior
to the filing of the Shelf Registration Statement and until the time at which
there are no Registrable Securities, make available at reasonable times at the
Company's principal place of business or such other

                                      A-11
<PAGE>

reasonable place for inspection by a representative appointed by the Notice
Holders in connection with an underwritten offering (or any underwriter,
placement agent or counsel acting on their behalf), who shall certify to the
Company that they have a current intention to sell their Registrable Securities
pursuant to the Shelf Registration Statement, such financial and other
information and books and records of the Company, and cause the officers,
directors, employees and independent certified public accountants of the Company
to respond to such inquiries, as shall be reasonably necessary, in the judgment
of the counsel to such Notice Holders, to conduct a reasonable "due diligence"
investigation; provided, however, that such persons shall first agree in writing
with the Company that any information that is reasonably and in good faith
designated by the Company in writing as confidential at the time of delivery of
such information shall be kept confidential by such persons, unless (i)
disclosure of such information is required by court or administrative order or
is necessary to respond to inquiries of regulatory authorities, (ii) disclosure
of such information is required by law (including any disclosure requirements
pursuant to federal securities laws in connection with the filing of the Shelf
Registration Statement or the use of any Prospectus), (iii) such information
becomes generally available to the public other than as a result of a disclosure
or failure to safeguard such information by such persons or (iv) such
information becomes available to such persons from a source other than the
Company and its subsidiaries and such source is not known by such persons to be
bound by a confidentiality agreement; provided, further, that the foregoing
inspection and information gathering shall be coordinated by (x) the managing
underwriter in connection with any underwritten offering pursuant to a Shelf
Registration and (y) the Holder or Holders designated by the participating
Majority Holders in connection with any non-underwritten offering pursuant to a
Shelf Registration, together with one counsel designated by and on behalf of
such persons;

                  (o)      if reasonably requested by the Initial Purchasers or
any Notice Holder, promptly incorporate in a Prospectus supplement or
post-effective amendment to the Shelf Registration Statement such information as
the Initial Purchasers or such Notice Holder shall, on the basis of a written
opinion of nationally-recognized counsel experienced in such matters, determine
to be required to be included therein by applicable law and make any required
filings of such Prospectus supplement or such post-effective amendment;
provided, that the Company shall not be required to take any actions under this
Section 3(o) that are not, in the reasonable opinion of counsel for the Company,
in compliance with applicable law;

                  (p)      use its reasonable commercial efforts to (i) confirm
that the ratings of the Shares will apply to the Shares covered by the Shelf
Registration Statement or (ii) if the Shares were not previously rated, cause
the Shares covered by the Shelf Registration Statement to be rated with the
appropriate rating agencies, if so requested by the Majority Holders of
Securities covered by such Shelf Registration Statement, or by the managing
underwriters, if any;

                  (q)      otherwise comply with all applicable rules and
regulations of the Commission and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering at least 12
months which shall satisfy the provisions of Section 11(a) of the Act and Rule
158 thereunder;

                  (r)      use its reasonable commercial efforts to cause the
Stock to remain listed on the New York Stock Exchange; and

                                      A-12
<PAGE>

                  (s)      cooperate and assist in any filings required to be
made with the NASD and in the performance of any due diligence investigation by
any underwriter and its counsel (including any "qualified independent
underwriter" that is required to be retained in accordance with the rules and
regulations of the NASD).

         Each Holder agrees that upon receipt of any notice from the Company of
the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, such Holder will forthwith discontinue
disposition of Registrable Securities pursuant to such Shelf Registration
Statement or Prospectus until the receipt by such Holder of either copies of the
supplemented or amended Prospectus contemplated by Section 3(k) hereof, and, if
so directed by the Company, such Holder will deliver to the Company (at its
expense) all copies in its possession of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice, or notice
in writing from the Company that such Holder may resume disposition of
Registrable Securities pursuant to such Shelf Registration Statement or
Prospectus. If the Company shall give any such notice to suspend the disposition
of Registrable Securities pursuant to a Shelf Registration Statement as a result
of the happening of any event or the discovery of any facts, each of the kind
described in Section 3(f)(ii), Section 3(f)(iii), Section 3(f)(iv), Section
3(f)(v) or Section 3(f)(vi) hereof, the Company shall be deemed to have used its
reasonable commercial efforts to keep such Shelf Registration Statement
effective during such Suspension Period; provided, that the Company shall use
its reasonable commercial efforts to file and have declared effective (if an
amendment) as soon as practicable an amendment or supplement to such Shelf
Registration Statement. The Company shall extend the period during which such
Shelf Registration Statement shall be maintained effective or the Prospectus
shall be used pursuant to this Agreement by the number of days during the period
from and including the date of the giving of the notice described above to and
including the date when the Holders shall have received copies of the
supplemented or amended Prospectus necessary to resume such dispositions or
notification that they may resume such disposition under an existing Prospectus.

         If any of the Registrable Securities covered by any Shelf Registration
Statement are to be sold in an underwritten offering, the underwriter or
underwriters and manager or managers that will manage such offering will be
selected by the Majority Holders of such Registrable Securities included in such
offering and shall be reasonably acceptable to the Company. No Holder of
Registrable Securities may participate in any underwritten registration
hereunder unless such Holder (a) agrees to sell such Holder's Registrable
Securities on the basis provided in any underwriting arrangements approved by
the persons entitled hereunder to approve such arrangements and (b) completes
and executes all questionnaires, powers of attorney, indemnities, underwriting
agreements and other documents required under the terms of such underwriting
arrangements.

         The Company may require each Holder of Registrable Securities as to
which any registration pursuant to Section 2(a) is being effected to furnish to
the Company such information regarding such Holder and such Holder's intended
method of distribution of such Registrable Securities as the Company may from
time to time reasonably request in writing, but only to the extent that such
information is required in order to comply with the Act. Each such Holder agrees
to notify the Company as promptly as practicable of any inaccuracy or change in
information previously furnished by such Holder to the Company or of the
occurrence of any event in either case as a result of which any Prospectus
relating to such registration contains or

                                      A-13
<PAGE>

would contain an untrue statement of a material fact regarding such Holder or
such Holder's intended method of disposition of such Registrable Securities or
omits to state any material fact regarding such Holder or such Holder's intended
method of disposition of such Registrable Securities required to be stated
therein or necessary to make the statements therein not misleading, and promptly
to furnish to the Company any additional information required to correct and
update any previously furnished information or required so that such Prospectus
shall not contain, with respect to such Holder or the disposition of such
Registrable Securities, 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.

         Each Holder agrees, by acquisition of the Registrable Securities, that
such Holder shall not be entitled to sell any of such Registrable Securities
pursuant to the Shelf Registration Statement or to receive a Prospectus related
thereto, unless such Holder has furnished the Company with a Notice and
Questionnaire. Each Notice Holder agrees to furnish to the Company all
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not misleading and any other information
regarding such Notice Holder and the distribution of such Registrable Securities
as may be required to be disclosed in the Shelf Registration Statement under
applicable law or pursuant to the Commission's comments. Each Holder further
agrees not to sell any Registrable Securities pursuant to the Shelf Registration
Statement without delivering or causing to be delivered a Prospectus to the
purchaser thereof and, following the time at which there are no Registrable
Securities, to notify the Company, within 10 business days of a request by the
Company of the amount of Registrable Securities sold pursuant to the Shelf
Registration Statement and, in the absence of a response, the Company may assume
that all of the Holder's Registrable Securities were so sold.

         4.       Indemnification; Contribution.

         (a)      The Company agrees, to the extent permitted by law, to
indemnify and hold harmless each Holder and each Person, if any, who controls
any Holder within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act or
otherwise ("Indemnified Holder"), and to reimburse the Holders and such
controlling Person or Persons, if any, for any legal or other expenses incurred
by them in connection with defending any action, suit or proceeding (including
governmental investigations) as provided in Section 4(c) hereof, insofar as such
losses, claims, damages, liabilities or actions, suits or proceedings (including
governmental investigations) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in any Shelf
Registration Statement, or, if any Shelf Registration Statement shall be amended
or supplemented, in the Shelf Registration Statement as so amended or
supplemented, or arise out of or are based upon any omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, except insofar as such losses,
claims, damages, liabilities or actions arise out of or are based upon any such
untrue statement or alleged untrue statement or omission or alleged omission
which was made in the Shelf Registration Statement or in the Shelf Registration
Statement as so amended or supplemented, in reliance upon and in conformity with
information furnished in writing to the Company by any Holder expressly for use
therein.

                                      A-14
<PAGE>

         The Company's indemnity agreement contained in this Section 4(a), and
the covenants, representations and warranties of the Company contained in this
Agreement, shall remain in full force and effect regardless of any investigation
made by or on behalf of any Person, and the indemnity agreement contained in
this Section 4 shall survive any termination of this Agreement. The liabilities
of the Company in this Section 4 are in addition to any other liabilities of the
Company under this Agreement or otherwise.

         (b)      Each Holder agrees, severally and not jointly, to the extent
permitted by law, to indemnify, hold harmless and reimburse the Company and each
Person, if any, who controls the Company within the meaning of Section 15 of the
Act or Section 20 of the Exchange Act, to the same extent and upon the same
terms as the indemnity agreement of the Company set forth in Section 4(a)
hereof, but only with respect to alleged untrue statements or omissions made in
the Shelf Registration Statement or in the Shelf Registration Statement, as
amended or supplemented (if applicable), in reliance upon and in conformity with
information furnished in writing to the Company by such Holder expressly for use
therein.

         The indemnity agreement on the part of each Holder contained in this
Section 4(b) shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or any other Person, and the
indemnity agreement contained in this Section 4(b) shall survive any termination
of this Agreement.

         (c)      If a claim is made or an action, suit or proceeding (including
governmental investigations) is commenced or threatened against any person as to
which indemnity may be sought under Section 4(a) or 4(b) hereof, such Person
(the "Indemnified Person") shall notify the Person against whom such indemnity
may be sought (the "Indemnifying Person") promptly after any assertion of such
claim threatening to institute an action, suit or proceeding or, if such an
action, suit or proceeding is commenced against such Indemnified Person,
promptly after such Indemnified Person shall have been served with a summons or
other first legal process, giving information as to the nature and basis of the
claim. Failure to so notify the Indemnifying Person shall not, however, relieve
the Indemnifying Person from any liability which it may have on account of the
indemnity under Section 4(a) or 4(b) hereof if the Indemnifying Person has not
been prejudiced in any material respect by such failure. Subject to the
immediately succeeding sentence, the Indemnifying Person shall assume the
defense of any such litigation or proceeding, including the employment of
counsel and the payment of all expenses, with such counsel being designated,
subject to the immediately succeeding sentence, in writing by a majority in
interest of the Holders in the case of parties indemnified pursuant to Section
4(b) hereof and by the Company in the case of parties indemnified pursuant to
Section 4(a) hereof. Any Indemnified Person shall have the right to participate
in such litigation or proceeding and to retain its own counsel, but the fees and
expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed to the retention of such counsel or (ii) the named parties to
any such proceeding (including any impleaded parties) include (x) the
Indemnifying Person and (y) the Indemnified Person and, in the written opinion
of counsel to such Indemnified Person, representation of both parties by the
same counsel would be inappropriate due to actual or likely conflicts of
interest between them, in either of which cases the reasonable fees and expenses
of counsel (including disbursements) for such Indemnified Person shall be
reimbursed by the Indemnifying Person to the Indemnified Person. If there is a
conflict as described in clause (ii) above, and the

                                      A-15
<PAGE>

Indemnified Persons have participated in the litigation or proceeding utilizing
separate counsel whose fees and expenses have been reimbursed by the
Indemnifying Person, and the Indemnified Persons, or any of them, are found to
be solely liable, such Indemnified Person shall repay to the Indemnifying
Parties such fees and expenses of such separate counsel as the Indemnifying
Person shall have reimbursed. It is understood that the Indemnifying Person
shall not, in connection with any litigation or proceeding or related litigation
or proceedings in the same jurisdiction as to which the Indemnified Persons are
entitled to such separate representation, be liable under this Agreement for the
reasonable fees and out-of-pocket expenses of more than one separate firm
(together with not more than one appropriate local counsel) for all such
Indemnified Persons. Subject to the next paragraph, all such fees and expenses
shall be reimbursed by payment to the Indemnified Persons of such reasonable
fees and expenses of counsel promptly after payment thereof by the Indemnified
Persons.

         In furtherance of the requirement above that fees and expenses of any
separate counsel for the Indemnified Persons shall be reasonable, the Holders
and the Company agree that the Indemnifying Person's obligations to pay such
fees and expenses shall be conditioned upon the following:

                           (1)      in case separate counsel is proposed to be
                  retained by the Indemnified Persons pursuant to clause (ii) of
                  the preceding paragraph, the Indemnified Persons shall in good
                  faith fully consult with the Indemnifying Person in advance as
                  to the selection of such counsel;

                           (2)      reimbursable fees and expenses of such
                  separate counsel shall be detailed and supported in a manner
                  reasonably acceptable to the Indemnifying Person (but nothing
                  herein shall be deemed to require the furnishing to the
                  Indemnifying Person of any information, including, without
                  limitation, computer print-outs of lawyers' daily time
                  entries, to the extent that, in the judgment of such counsel,
                  furnishing such information might reasonably be expected to
                  result in a waiver of any attorney-client privilege); and

                           (3)      the Company and the Holders shall cooperate
                  in monitoring and controlling the fees and expenses of
                  separate counsel for Indemnified Persons for which the
                  Indemnifying Person is liable hereunder, and the Indemnified
                  Person shall use every reasonable effort to cause such
                  separate counsel to minimize the duplication of activities as
                  between themselves and counsel to the Indemnifying Person.

         The Indemnifying Person shall not be liable for any settlement of any
litigation or proceeding effected without the written consent of the
Indemnifying Person, but if settled with such consent or if there be a final
judgment against the Indemnified Person, the Indemnifying Person agrees, subject
to the provisions of this Section 4, to indemnify the Indemnified Person from
and against any loss, damage, liability or expenses by reason of such settlement
or judgment. The Indemnifying Person shall not, without the prior written
consent of the Indemnified Persons, effect any settlement of any pending or
threatened litigation, proceeding or claim in respect of which indemnity has
been properly sought by the Indemnified Persons hereunder, unless such
settlement includes an unconditional release by the claimant of all

                                      A-16
<PAGE>

Indemnified Persons from all liability with respect to claims which are the
subject matter of such litigation, proceeding or claim.

         (d)      If the indemnification provided for in this Section 4 is
unavailable to or insufficient to hold harmless an Indemnified Person under this
Section 4 in respect of any losses, claims, damages or liabilities (or actions,
suits or proceedings (including governmental investigations) in respect thereof)
referred to therein, then each Indemnifying Person under this Section 4 shall
contribute to the amount paid or payable by such Indemnified Person as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative benefits received
by the Indemnifying Person on the one hand and the Indemnified Person on the
other from the sale of the Registrable Securities. If, however, the allocation
provided by the immediately preceding sentence is not permitted by applicable
law, then each Indemnifying Person shall contribute to such amount paid or
payable by such Indemnified Person in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of each
Indemnifying Person, if any, on the one hand and the Indemnified Person on the
other in connection with the statements or omissions which resulted in such
losses, claims, damages or liabilities (or actions, suits or proceedings
(including governmental investigations) in respect thereof), as well as any
other relevant equitable considerations. The relative fault shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Company on the one hand or
the Holders on the other and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Holders agree that it would not be just and equitable if
contribution pursuant to this Section 4 were determined by pro rata allocation
(even if the Holders 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 in this Section 4. The amount paid or payable by an
Indemnified Person as a result of the losses, claims, damages or liabilities (or
actions, suits or proceedings (including governmental proceedings) in respect
thereof) referred to in this Section 4 shall be deemed to include any legal or
other expenses reasonably incurred by such Indemnified Person in connection with
investigating or defending any such actions, suits or proceedings (including
governmental proceedings) or claims, provided that the provisions of this
Section 4 have been complied with (in all material respects) in respect of any
separate counsel for such Indemnified Person. Notwithstanding the provisions of
this Section 4, no Holder shall be required to contribute any amount greater
than the excess of the amount by which the total received by such Holder with
respect to the sale of its Registrable Securities pursuant to a Shelf
Registration Statement exceeds the sum of (A) the amount paid by such Holder for
such Registrable Securities plus (B) the amount of any damages which such Holder
has otherwise been required to pay by reason of 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 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Holders' obligations in this Section 4 to contribute are
several in proportion to their respective obligations and not joint.

         The agreement with respect to contribution contained in this Section 4
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Company or any Holder, and shall survive any termination of
this Agreement.

                                      A-17
<PAGE>

         5.       Miscellaneous.

                  (a)      Rule 144 and Rule 144A. For so long as the Company is
subject to the reporting requirements of Section 13 or 15 of the Exchange Act,
the Company covenants that it will file the reports required to be filed by it
under the Act and Section 13(a) or 15(d) of the Exchange Act and the rules and
regulations adopted by the Commission thereunder. If the Company ceases to be so
required to file such reports, the Company covenants that it will, upon the
request of any Holder of Registrable Securities, (i) make publicly available
such information as is necessary to permit sales pursuant to Rule 144 under the
Act, (ii) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the Act and (iii) take such further
action that is reasonable in the circumstances, in each case, to the extent
required from time to time to enable such Holder to sell its Registrable
Securities without registration under the Act within the limitation of the
exemptions provided by (A) Rule 144 under the Act, as such Rule may be amended
from time to time, (B) Rule 144A under the Act, as such Rule may be amended from
time to time or (C) any similar rules or regulations hereafter adopted by the
Commission. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.

                  (b)      No Inconsistent Agreements. The Company has not
entered into and the Company will not after the date of this Agreement enter
into any agreement which is inconsistent with the rights granted to the Holders
of Registrable Securities in this Agreement or otherwise conflicts with the
provisions hereof. The rights granted to the Holders hereunder do not and will
not for the term of this Agreement in any way conflict with the rights granted
to the holders of the Company's other issued and outstanding securities under
any such agreements.

                  (c)      Amendments and Waivers. The provisions of this
Agreement, including the provisions of this sentence, may not be amended,
modified or supplemented, and waivers or consents to departures from the
provisions hereof may not be given, unless the Company has obtained the written
consent of the Majority Holders of the Registrable Securities affected by such
amendment, modification, supplement, waiver or departure. Without the consent of
the Holder of each Security, however, no modification may change the provisions
relating to the payment of Additional Dividends.

                  (d)      Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
registered first-class mail, telecopier or any courier guaranteeing overnight
delivery: (a) if to a Holder, at the most current address given by such Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 5(d), which address initially is the address set forth in the
Purchase Agreement with respect to the Initial Purchasers; and (b) if to the
Company, initially at the Company's address set forth in the Purchase Agreement,
and thereafter at such other address of which notice is given in accordance with
the provisions of this Section 5(d).

         All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; two (2) Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
is acknowledged, if telecopied; and on the next Business Day if timely delivered
to an air courier guaranteeing overnight delivery.

                                      A-18
<PAGE>

                  (e)      Successors and Assigns. This Agreement shall inure to
the benefit of and be binding upon the successors, assigns and transferees of
each of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms of the Purchase Agreement. If any
transferee of any Holder shall acquire Registrable Securities, in any manner,
whether by operation of law or otherwise, such Registrable Securities shall be
held subject to all of the terms of this Agreement, and by taking and holding
such Registrable Securities such person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such person shall be entitled to
receive the benefits hereof.

                  (f)      Third Party Beneficiaries. The Initial Purchasers
(even if the Initial Purchasers are not Holders of Registrable Securities) shall
be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Holders, on the other hand, and shall have the
right to enforce such agreements directly to the extent they deem such
enforcement necessary or advisable to protect their rights or the rights of
Holders hereunder. Each Holder of Registrable Securities shall be a third party
beneficiary to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights hereunder.

                  (g)      Specific Performance. Without limiting the remedies
available to the Initial Purchasers and the Holders, the Company acknowledges
that any failure by the Company to comply with its obligations under Section 2
hereof may result in material irreparable injury to the Initial Purchasers or
the Holders for which there is no adequate remedy at law, that it would not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Section 2 hereof.

                  (h)      Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.

                  (i)      Headings. The headings in this Agreement are for the
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.

                  (J)      GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICT OF LAWS THEREOF.

                  (k)      Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstance,
is held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

                                      A-19
<PAGE>

                  (l)      Entire Agreement. This Agreement and other writings
referred to herein (including the Purchase Agreement) represent the entire
agreement among the parties hereto with respect to the subject matter hereof and
supercedes and replaces any and all prior agreements and understandings, whether
oral or written, with respect thereto.

                                      A-20
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                             CMS ENERGY CORPORATION

                             By: _______________________________________________
                                 Name:
                                 Title:

CONFIRMED AND ACCEPTED
AS OF THE DATE FIRST ABOVE WRITTEN:

CITIGROUP GLOBAL MARKETS INC.,
for itself and as Representative
of the Initial Purchasers

By: __________________________________
    Name:
    Title:

MERRILL LYNCH, PIERCE, FENNER & SMITH
                  INCORPORATED,

for itself and as Representative
of the Initial Purchasers

By: _________________________________
    Name:
    Title:

                                      A-21
<PAGE>

                                    EXHIBIT B

1.       The Company is a duly organized, validly existing corporation in good
standing under the laws of the State of Michigan.

2.       All legally required corporate proceedings in connection with the
authorization, issuance and validity of the Restricted Shares and the sale of
the Restricted Shares by the Company in accordance with the Purchase Agreement
have been taken; and no approval, authorization, consent or order of any
governmental regulatory body is required with respect to the issuance and sale
of the Restricted Shares (other than in connection with or in compliance with
the provisions of the securities or blue sky laws of any state, as to which I
express no opinion, and the filing with and acceptance by the Michigan
Department of Consumer and Industry Services, Bureau of Commercial Services of
the Certificate of Designation, which has been so filed and accepted).

3.       I do not know of any legal or governmental proceedings that would be
required to be described in the Offering Memorandum if it were a registration
statement filed by the Company under the Act that are not described as required,
nor of any contracts or documents of a character so required to be described in
the Offering Memorandum that are not described as required.

4.       The statements made in the Offering Memorandum under the caption
"Description of the Preferred Stock", "Registration Rights", "Description of our
Capital Stock" and "Certain Material United States Federal Income Tax
Considerations" constitute summaries of legal matters or documents referred to
therein and are accurate in all material respects; and the Restricted Shares and
the Issuable Common Stock conform as to legal matters to the descriptions
thereof and to the statements in regard thereto contained in such section of the
Offering Memorandum.

5.       Each document incorporated in the Offering Memorandum as such document
was originally filed pursuant to the Exchange Act (except for (i) the operating
statistics, financial statements and schedules contained or incorporated by
reference therein (including the notes thereto and the auditors' reports
thereon) and (ii) the other financial or statistical information contained or
incorporated by reference therein, as to which I express no opinion) complied as
to form when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder.

6.       The Purchase Agreement has been duly authorized, executed and delivered
by the Company.

7.       The Registration Rights Agreement has been duly authorized, executed
and delivered by the Company and, assuming due authorization, execution and
delivery thereof by the Initial Purchasers, is a valid and binding obligation of
the Company, enforceable against the Company in accordance with its terms,
except to the extent that enforcement thereof may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting
creditors' rights generally or by general principles of equity (regardless of
whether enforcement is considered in a proceeding at law or in equity).

                                      B-1
<PAGE>

8.       The Restricted Shares have been duly authorized, executed and delivered
by the Company and, when delivered against payment therefor as provided in the
Purchase Agreement, will have been duly and validly issued, fully paid and
non-assessable; no stamp taxes in respect of the original issue thereof are
payable; and the Restricted Shares will be convertible into Common Stock in
accordance with their terms.

9.       The issuance, sale and conversion of the Restricted Shares in
accordance with the terms of the Certificate of Designation and the Purchase
Agreement do not violate the provisions of the Restated Articles of
Incorporation or the Bylaws of the Company, and will not result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company is a party.

10.      The Company is not an "investment company" or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.

11.      The Company (i) is a "holding company", as such term is defined in the
Public Utility Holding Company Act of 1935, as amended, and (ii) is currently
exempt from all provisions of the Public Utility Holding Company Act of 1935, as
amended, except Section 9(a)(2) thereof.

12.      No registration under the Act of the Restricted Shares is required for
the sale of the Restricted Shares to the Initial Purchasers as contemplated by
the Purchase Agreement or for the Exempt Resales assuming (i) that each of the
Initial Purchasers is an Eligible Purchaser or an Accredited Investor (as
defined in Regulation D under the Act), (ii) the accuracy of, and compliance
with, the Initial Purchasers' representations and agreements contained in
Section 8 of the Purchase Agreement, and (iii) the accuracy of the
representations of the Company set forth in Sections 6(e), 6(n), 7(n), 7(p) and
7(r) of the Purchase Agreement.

13.      Except for the outstanding shares of preferred stock of Consumers
Energy Company, the 8.36% Trust Originated Preferred Securities of Consumers
Power Company Financing I, the 8.20% Trust Originated Preferred Securities of
Consumers Energy Company Financing II, the 9 1/4% Trust Originated Preferred
Securities of Consumers Energy Company Financing III and the 9.00% Trust
Preferred Securities of Consumers Energy Company Financing IV, all of the
outstanding capital stock of each of Consumers Energy Company and CMS
Enterprises Company is owned directly or indirectly by the Company, free and
clear of any security interest, claim, lien or other encumbrance (except as
disclosed in the Offering Memorandum) or preemptive rights, and there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in any of Consumers Energy
Company and CMS Enterprises Company or any contract, commitment, agreement,
understanding or arrangement of any kind relating to the issuance of any such
capital stock, any such convertible or exchangeable securities or any such
rights, warrants or options.

14.      The Company has an authorized capitalization as set forth in the
Offering Memorandum and all of the issued shares of capital stock of the Company
have been duly and validly authorized and issued and are fully paid and
non-assessable. The shares of Issuable Common

                                      B-2
<PAGE>

Stock have been duly and validly authorized and reserved for issuance by the
Company and, when issued and delivered in accordance with the provisions of the
Certificate of Designation, will be duly and validly issued, fully paid and
non-assessable and will conform in all material respects to the description of
the Common Stock contained in the Offering Memorandum and the issuance of the
Issuable Common Stock is not, and will not be, subject to any preemptive or
other similar right.

15.      Nothing has come to my attention that would lead me to believe that the
Offering Memorandum (other than (i) the operating statistics, financial
statements and schedules contained or incorporated by reference therein
(including the notes thereto and the auditors' reports thereon) and (ii) the
other financial or statistical information contained or incorporated by
reference therein, as to which I express no opinion), as of its date or at the
date hereof contained or contains 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.

                                      B-3
<PAGE>

                                   EXHIBIT C-1

1.       The offer, sale and delivery of the Restricted Shares to the Initial
Purchasers in the manner contemplated by the Purchase Agreement and the Offering
Memorandum and the initial resale of the Restricted Shares by the Initial
Purchasers in the manner contemplated in the Offering Memorandum and the
Purchase Agreement, do not require registration under the Act, it being
understood that we do not express any opinion as to any subsequent reoffer or
resale of any of the Restricted Shares.

2.       The Registration Rights Agreement is a valid and binding agreement of
the Company, enforceable against the Company in accordance with its terms.

                                     C-1-1

<PAGE>

                                   EXHIBIT C-2

No facts have come to our attention that have caused us to believe that the
Offering Memorandum, as of its date and as of the date hereof, contained or
contains 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 light of the
circumstances under which they were made, not misleading (except that in each
case we do not express any view as to the financial statements, schedules and
other financial data and financial projections included therein or excluded
therefrom). For purposes of the foregoing, we note that the Offering Memorandum
has been prepared in the context of a Rule 144A transaction and not as part of a
registration statement under the Act and does not contain all the information
that would be required in a registration statement under the Act.

                                     C-2-1

<PAGE>

                                    EXHIBIT D

               [Letterhead of officer or director of the Company]

                                __________, 2003

Citigroup Global Markets Inc.
   As Representative of the several Initial Purchasers
388 Greenwich Street
New York, New York 10013

Merrill Lynch, Pierce, Fenner & Smith
                  Incorporated

   As Representative of the several Initial Purchasers
4 World Financial Center
New York, New York 10080

Ladies and Gentlemen:

         This letter is being delivered to you in connection with a proposed
Purchase Agreement (the "Purchase Agreement") between CMS Energy Corporation, a
Michigan corporation (the "Company"), and you as representatives of a group of
Initial Purchasers named therein, whereby the Initial Purchasers have agreed to
purchase Cumulative Convertible Preferred Stock, convertible into shares of
common stock, par value $0.01 per share (the "Restricted Shares"), of the
Company pursuant to the Purchase Agreement. Terms used but not defined in this
letter shall have the meanings ascribed to such terms in the Purchase Agreement.

         In order to induce you and the other Initial Purchasers to purchase the
Restricted Shares pursuant to the Purchase Agreement, the undersigned will not,
without the prior written consent of the Representatives, offer, sell, contract
to sell, pledge or otherwise dispose of, or file (or participate in the filing
of) a registration statement with the Commission in respect of, or establish or
increase a put equivalent position or liquidate or decrease a call equivalent
position within the meaning of Section 16 of the Exchange Act, and the rules and
regulations of the Commission promulgated thereunder with respect to, any shares
of capital stock of the Company or any securities convertible or exercisable or
exchangeable for such capital stock, or publicly announce an intention to effect
any such transaction, for a period of 60 days after the date of the Purchase
Agreement, other than shares of Common Stock disposed of as bona fide gifts
approved by the Representatives, and up to 10,000 shares of Common Stock for any
one executive officer or director of the Company with an aggregate limit of
100,000 shares of Common Stock for all executive officers or directors of the
Company.

         If for any reason the Purchase Agreement shall be terminated prior to
the Time of Purchase (as defined in the Purchase Agreement), the agreement set
forth above shall likewise be terminated.

                                             Very truly yours,

                                      D-1

<PAGE>

                                             By: _______________________________
                                                 Name:
                                                 Title:

                                      D-2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(CC)
<SEQUENCE>18
<FILENAME>k82154aexv10wxccy.txt
<DESCRIPTION>ANNUAL MANAGEMENT INCENTIVE COMPENSATION PLAN
<TEXT>
<PAGE>
                                                                  EXHIBIT 10(cc)


















                           ANNUAL MANAGEMENT INCENTIVE
                  COMPENSATION PLAN FOR CMS ENERGY CORPORATION
                              AND ITS SUBSIDIARIES




















Effective January 1, 2003
Approved by Committee on May 23, 2003





                                        1

<PAGE>





                           ANNUAL MANAGEMENT INCENTIVE
              COMPENSATION PLAN FOR CMS ENERGY CORPORATION AND ITS
                                  SUBSIDIARIES



    I.   GENERAL PROVISIONS

         1.1   PURPOSE.  The purpose of the Annual Management Incentive
         Compensation Plan ("MIC Plan") is to:

               (a)  Provide an equitable and competitive level of compensation
                    that will permit CMS Energy Corporation ("Company") and its
                    subsidiaries to attract, retain and motivate certain highly
                    competent Management and Professional Employees.

               (b)  No payments to Management and Professional Employees in the
                    form of incentive compensation shall be made unless pursuant
                    to a plan approved by the Committee and after express
                    approval of the Committee.

         1.2   EFFECTIVE DATE. The predecessor to the MIC Plan was initially
               effective as of January 1, 1986 and that predecessor, as amended,
               is hereby terminated. The MIC Plan as described herein, is
               effective as of January 1, 2003.

         1.3   DEFINITIONS. As used in this MIC Plan, the following terms have
               the meaning described below:

               (a)  "Annual Award" means an annual incentive award granted under
                    the MIC Plan.

               (b)  "CMS Energy" means CMS Energy Corporation.

               (c)  "Committee" means the Committee on Organization and
                    Compensation of the Board of Directors of CMS Energy.

               (d)  "Common Stock" means the common stock of CMS Energy.

               (e)  "Company" means CMS Energy Corporation.

               (f)  "Corporate Free Cash Flow" (CFCF) means CMS Consolidated
                    Cash Flow from operating activities, excluding pension
                    contributions and adjusted for GCR Recovery, plus Cash Flow
                    from Investing Activities.

               (g)  "Earnings Per Share" (EPS) means the amount of ongoing net
                    income per outstanding CMS Energy Share.

               (h)  "Disability" means that a participant has terminated
                    employment with the Company or a Subsidiary and is entitled
                    to disability payments under the Pension Plan.

               (i)  "GCR Recovery" means actual/forecast incremental GCR
                    recovery during January and February of 2004 calculated as
                    actual/forecast GCR cycle billed sales times above budget
                    GCR factor.



                                        2



<PAGE>




               (j)  "Leave of Absence" for purposes of this MIC Plan means a
                    leave of absence that has been approved by the Plan
                    Administrator.

               (k)  "Management and Professional Employee" means an employee of
                    the Company or a Subsidiary in the salary grades specified
                    in the table contained in Article III of the MIC Plan.

               (l)  "MIC Plan" means the Annual Management Incentive
                    Compensation Plan for CMS Energy Corporation and Its
                    Subsidiaries, as effective January 1, 2003 and any
                    amendments thereto.

               (m)  "Outside Directors" means directors of CMS Energy who are
                    not employed by CMS Energy or a Subsidiary and satisfy the
                    requirements of an "Outside Director" under Code Section
                    162(m).

               (n)  "Pension Plan" means the Pension Plan for Employees of
                    Consumers Energy and Other CMS Energy Companies.

               (o)  "Performance Year" means the calendar year prior to the year
                    in which an Annual Award is made by the Committee.

               (p)  "Plan Administrator" means the Sr. Vice President - Human
                    Resources of CMS Energy, under the general direction of the
                    Outside Directors on the Committee.

               (q)  "Retirement" means that an MIC Plan participant is no
                    longer an active employee and qualifies for a retirement
                    benefit other than a deferred vested retirement benefit
                    under the Pension Plan.

               (r)  "Subsidiary" means any direct or indirect subsidiary of the
                    Company.

         1.4   ELIGIBILITY. Certain Management and Professional Employees are
               eligible for participation in the MIC Plan.

         1.5   ADMINISTRATION OF THE PLAN.

               (a)  The MIC Plan is administered by the Sr. Vice President -
                    Human Resources of CMS Energy under the general direction of
                    the Outside Directors who are members of the Committee.

               (b)  The Committee, no later than March 30th of the Performance
                    Year, will approve performance goals for the Performance
                    Year.

               (c)  The Committee, no later than March 30th of the calendar year
                    following the Performance Year, will review for approval
                    proposed Annual Awards for all MIC Plan participants, as
                    recommended by the Chairman and CEO of the Company. All
                    proposed Annual Awards are subject to approval of the
                    Committee. Before the payment of any Annual Awards, the
                    Committee will certify in writing that the performance goals
                    were in fact satisfied in accordance with Code Section
                    162(m).

               (d)  The Committee reserves the right to modify the performance
                    goals with respect to unforeseeable circumstances or
                    otherwise exercise discretion with respect to proposed
                    Annual Awards as it deems necessary to maintain the spirit
                    and intent of the MIC Plan.


                                        3


<PAGE>




               (e)  The Committee also reserves the right in its discretion to
                    not pay Annual Awards for a Performance Year. All
                    discretionary decisions of the Committee are final.

   II.   CORPORATE PERFORMANCE GOALS

         2.1 IN GENERAL. The composite Plan Performance Factor will depend on
         corporate performance in two areas: (1) the ongoing net income per
         outstanding CMS Energy share (EPS); and (2) the Corporate Free Cash
         Flow of CMS Energy (CFCF). There will be no payout under the Plan
         unless a composite Plan Performance Factor of at least 60% is achieved.
         The composite Plan Performance Factor to be used for payouts will be
         capped at a maximum of 200%. A table containing the composite Plan
         Performance Factors shall be created by the Committee for each
         Performance Year. The table for Performance Year 2003 is set forth
         below.

                    (a)  EPS COMPONENT. EPS performance shall constitute 40% of
                         the composite Plan Performance Factor. The 100% EPS
                         goal for the 2003 performance year is $.80 per share,
                         and the EPS component shall increase or decrease by 50%
                         for each $.10 per share change in performance.
                         (Mathematical interpolation shall be used for actual
                         results not shown in the table.) There will be no
                         payout under the plan unless at least $.60 per share is
                         achieved (regardless of CFCF performance).

                    (b)  CFCF COMPONENT. CFCF performance shall constitute 60%
                         of the composite Plan Performance Factor. The 100% CFCF
                         goal for the 2003 performance year is $400 million, and
                         the CFCF component shall increase or decrease by 25%
                         for each $50 million change in performance.
                         (Mathematical interpolation shall be used for actual
                         results not shown in the table.) There will be no
                         payout under the plan unless at least $250 million is
                         achieved (regardless of EPS performance).

             COMPOSITE PERFORMANCE FACTORS FOR 2003 PERFORMANCE YEAR
<TABLE>
<CAPTION>


       CFCF
     COMPONENT                $250        $300         $350        $400        $450        $500       $550
     (MILLIONS)
  ------------------------------------------------------------------------------------------------- ----------
  EPS COMPONENT
  <S>                      <C>         <C>          <C>         <C>         <C>         <C>         <C>
  $ .60                       NONE        NONE         NONE         60%         75%         90%       105%
  $ .70                       NONE        NONE          65%         80%         95%        110%       125%
  $ .80                       NONE         70%          85%        100%        115%        130%       145%
  $ .90                        75%         90%         105%        120%        135%        150%       165%
  $1.00                        95%        110%         125%        140%        155%        170%       185%
  $1.10                       115%        130%         145%        160%        175%        190%       200%
  $1.20                       135%        150%         165%        180%        195%        200%       200%
  $1.30                       155%        170%         185%        200%        200%        200%       200%
  </TABLE>
  Notes:  Mathematical interpolation shall be used for actual results not shown
  in the table.

  Target Award is Bolded 100% and Maximum Award is Bolded 200%


  III.   ANNUAL AWARD FORMULA

         3.1        ANNUAL AWARDS. Annual Awards for each eligible MIC Plan
                    participant will be based upon a standard award as set forth
                    in the table below. The total amount of an MIC participant
                    Annual Award shall be computed according to the annual award
                    formula set forth in Section 3.2.


                                        4

<PAGE>


<TABLE>
<CAPTION>
                                                                SALARY
                                POSITION                        GRADE      STANDARD AWARD AMOUNT
                      ---------------------------------         ------     ----------------------
<S>                                                          <C>          <C>
                       Senior Mangers/Directors                  E-2              $48,700
                       Senior Managers/Directors                E-1/F             $36,500
                       Managers/Directors                        13               $29,200
                       Managers/Directors                       12/E              $21,900
                       Managers/Directors & Equivalent           11               $16,400
                       Managers/Directors & Equivalent            D               $12.300
</TABLE>

         3.2        Annual Awards for MIC participants will be calculated and
                    made as follows:

       INDIVIDUAL AWARD = STANDARD AWARD AMOUNT TIMES PERFORMANCE FACTOR %

   IV.   PAYMENT OF ANNUAL AWARDS

         4.1   CASH ANNUAL AWARD. All Annual Awards for a Performance Year will
               be paid in cash no later than March 30th of the calendar year
               following the Performance Year provided that they first have been
               reviewed and approved by the Committee, and provided further that
               the Annual Award for a particular Performance Year has not been
               deferred voluntarily pursuant to Section 4.3. The amounts
               required by law to be withheld for income and employment taxes
               will be deducted from the Annual Award payments. All Annual
               Awards become the obligation of the company on whose payroll the
               Employee is enrolled at the time the Committee makes the Annual
               Award.

         4.2   VOLUNTARY DEFERRED ANNUAL AWARD

               (a) The payment of all or one-half of a cash Annual Award may be
                   deferred voluntarily at the lection of an individual MIC Plan
                   participant. A separate irrevocable election must be made in
                   the calendar year prior to the beginning of the Performance
                   Year. Any Annual Award made by the Committee after
                   termination of employment of a participant or retirement of a
                   participant is not eligible for a voluntary deferral and will
                   be paid in full in cash in the year in which the Annual Award
                   is made.

               (b) A Voluntary Deferred Annual Award may be paid out in a lump
                   sum or in five or ten annual installments beginning in the
                   first January of the calendar year following retirement or
                   termination of employment. If an Annual Award is paid in
                   annual installments, each year the payment will be a fraction
                   of the balance equal to one over the number of annual
                   installments remaining. In the event of the participant's
                   death, all deferred amounts will be paid in total in January
                   of the calendar year following the year of death.

               (c) At the time of electing to voluntarily defer payment, the
                   participant must elect whether the sum deferred will be
                   treated by the Company or Subsidiary, as applicable, in
                   accordance with Paragraph I or Paragraph II below.

                   i.   A Voluntary Deferred Annual Award will be credited with
                        sums in lieu of interest from the first day of the month
                        following the month in which the Annual Award is
                        determined to the date of payment. The interest accrual
                        rate will be equivalent to the prime rate of interest as
                        reported in The Wall Street Journal, compounded
                        quarterly as of the first business day of January,
                        April, July and October of each year during the deferral
                        period. The prime rate in effect on the first business
                        day of January, April, July and October will be the
                        prime rate (described above) in effect for that
                        quarterly period.


                                        5

<PAGE>





                  ii.   A Voluntary Deferred Annual Award will be treated as if
                        it were invested as an optional cash payment under the
                        CMS Energy Stock Purchase Plan including the
                        accumulation of any dividends. The value of the deferred
                        sum at the time of payment will be equal to the number
                        of dollars such an investment would have been worth as
                        measured by the purchase price of shares of Common Stock
                        using the average closing price, as reported in The Wall
                        Street Journal (NYSE - composite transactions) for the
                        first five trading days in the December previous to a
                        January payout.

                   The amount of any Voluntary Deferred Annual Award is to be
                   satisfied from the general corporate funds of the company on
                   whose payroll the MIC Plan participant was enrolled prior to
                   the payout beginning and are subject to the claims of general
                   creditors of that company.

         4.3  PAYMENT IN THE EVENT OF DEATH.

               (a) A participant may name the beneficiary of his or her choice
                   on a beneficiary form provided by the Company, and the
                   beneficiary shall receive payment in the event that the
                   Participant dies prior to receipt of either a cash Annual
                   Award, or a Voluntary Deferred Annual Award. If a beneficiary
                   is not named, the payment will be made to the first surviving
                   class as follows:

                            1. Widow or Widower
                            2. Children, per capita
                            3. Parents, per capita
                            4. Brothers and Sisters, per capita
                            5. Estate of the Deceased

               (b) A participant may change beneficiaries at any time, and the
                   change will be effective as of the date the participant
                   completes and signs the beneficiary form, whether or not the
                   participant is living at the time the request is received by
                   the Company. However, the Company or the applicable
                   Subsidiary will not be liable for any payments made before
                   receipt of a written request.

    V.   CHANGE OF STATUS

               Payments in the event of a change in status will not apply if no
               awards are made for the performance year.

         5.1   PRO-RATA ANNUAL AWARDS. A new MIC participant, whether hired or
               promoted to the position, or an MIC employee promoted to a higher
               salary grade during the Performance Year will receive a pro rata
               Annual Award based on the percentage of the Performance Year in
               which the employee is in a particular salary grade. An MIC
               participant whose salary grade has been lowered, but whose
               employment is not terminated during the Performance Year will
               receive a pro rata Annual Award based on the percentage of the
               Performance Year in which the employee is in a particular salary
               grade.

         5.2   TERMINATION. An MIC participant whose employment is terminated
               pursuant to a violation of the Company code of conduct or other
               corporate policies will not be considered for an Annual Award.

         5.3   RESIGNATION. An MIC participant who resigns during or after a
               Performance Year will not be eligible for an Annual Award. If the
               resignation is due to reasons such as a downsizing or


                                        6


<PAGE>




               reorganization, or the ill health of the employee or ill health
               in the immediate family, the employee may petition the Committee
               and may be considered, in the discretion of the Committee, for a
               pro rata Annual Award. The Committee's decision to approve or
               deny the request for a pro rata Annual Award shall be final.

         5.4   DEATH, DISABILITY, RETIREMENT, LEAVE OF ABSENCE. An MIC
               participant whose status as an active employee is changed during
               the Performance Year due to death, Disability, Retirement, or
               Leave of Absence will receive a pro rata Annual Award.

   VI.   MISCELLANEOUS

         6.1   IMPACT ON BENEFIT PLANS. Payments made under the Plan will be
               considered as earnings for the Supplemental Executive Retirement
               Plan (Salary Grades E-1, E-2 and F) but not for purposes of the
               Employees' Savings Plan, Pension Plan, or other employee benefit
               programs.

         6.2   IMPACT ON EMPLOYMENT. Neither the adoption of the Plan nor the
               granting of any Annual Award under the Plan will be deemed to
               create any right in any individual to be retained or continued in
               the employment of the Company or any corporation within the
               Company's control group.

         6.3   TERMINATION OR AMENDMENT OF THE PLAN. The Company at any time
               may, in writing, terminate or amend the Plan.

         6.4   GOVERNING LAW. The Plan will be governed and construed in
               accordance with the laws of the State of Michigan.

         6.5   DISPUTE RESOLUTION. Any disputes related to the Plan should first
               be brought to the Plan Administrator. If that does not result in
               a mutually agreeable resolution, then the dispute shall be
               subject to final and binding arbitration before a single
               arbitrator selected by the parties to be conducted in Jackson,
               Michigan. The arbitration will be conducted and finished within
               90 days of the selection of the arbitrator. The parties shall
               share equally the cost of the arbitrator and of conducting the
               arbitration proceeding, but each party shall bear the cost of its
               own legal counsel and experts and other out-of-pocket
               expenditures.












                                        7

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.(DD)
<SEQUENCE>19
<FILENAME>k82154aexv10wxddy.txt
<DESCRIPTION>ANNUAL EMPLOYEE INCENTIVE COMPENSATION PLAN
<TEXT>
<PAGE>
                                                                  EXHIBIT 10(dd)

                           ANNUAL EMPLOYEE INCENTIVE
                  COMPENSATION PLAN FOR CMS ENERGY CORPORATION
                              AND ITS SUBSIDIARIES























Effective January 1, 2003
Approved by Committee on May 23, 2003


                                       1
<PAGE>





                            ANNUAL EMPLOYEE INCENTIVE
                  COMPENSATION PLAN FOR CMS ENERGY CORPORATION
                              AND ITS SUBSIDIARIES



    I.   GENERAL PROVISIONS

         1.1   PURPOSE.  The purpose of the Annual Employee Incentive
               Compensation Plan ("EIC Plan") is to:


               (a) Provide an equitable and competitive level of compensation
                   that will permit CMS Energy Corporation ("Company") and its
                   subsidiaries to attract, retain and motivate their Employees.

               (b) No payments to Employees in the form of incentive
                   compensation shall be made unless pursuant to a plan approved
                   by the Committee and after express approval of the Committee.

         1.2   EFFECTIVE DATE.  The predecessor to the EIC Plan was initially
               effective as of January 1, 1986 and that predecessor, as amended,
               is hereby terminated. The EIC Plan as described herein, is
               effective as of January 1, 2003.

         1.3   DEFINITIONS.  As used in this EIC Plan, the following terms have
               the meaning described below:

               (a)  "Annual Award" means an annual incentive award granted under
                    the EIC Plan.

               (b)  "CMS Energy" means CMS Energy Corporation.

               (c)  "Committee" means the Committee on Organization and
                    Compensation of the Board of Directors of CMS Energy.

               (d)  "Common Stock" means the common stock of CMS Energy.

               (e)  "Company" means CMS Energy Corporation.

               (f)  "Corporate Free Cash Flow" (CFCF) means CMS Consolidated
                    Cash Flow from operating activities, excluding pension
                    contributions and adjusted for GCR Recovery, plus Cash Flow
                    from Investing Activities.

               (g)  "Earnings Per Share" (EPS) means the amount of ongoing net
                    income per outstanding CMS Energy Share.

               (h)  "Disability" means that a participant has terminated
                    employment with the Company or a Subsidiary and is entitled
                    to disability payments under the Pension Plan.

               (i)  "EIC Plan" means the Annual Employee Incentive Compensation
                    Plan for CMS Energy Corporation and Its Subsidiaries, as
                    effective January 1, 2003 and any amendments thereto.


                                       2
<PAGE>


               (j)  "Employee" means a regular fulltime employee of the
                    Company or a Subsidiary in the salary grades specified in
                    the table contained in Article III of the EIC Plan.

               (k)  "GCR Recovery" means actual/forecast incremental GCR
                    recovery during January and February of 2004 calculated
                    as actual/forecast GCR cycle billed sales times above
                    budget GCR factor.

               (k)  "Leave of Absence" for purposes of this EIC Plan means a
                    leave of absence that has been approved by the Company or a
                    Subsidiary.

               (l)  "Outside Directors" means directors of CMS Energy who are
                    not employed by CMS Energy or a Subsidiary and satisfy the
                    requirements of an "Outside Director" under Code Section
                    162(m).

               (m)  "Pension Plan" means the Pension Plan for Employees of
                    Consumers Energy and Other CMS Energy Companies.

               (n)  "Performance Year" means the calendar year prior to the year
                    in which an Annual Award is made by the Committee.

               (o)  "Plan Administrator" means the Sr. Vice President - Human
                    Resources of CMS Energy, under the general direction of the
                    Outside Directors on the Committee.

               (p)  "Retirement" means that an EIC Plan participant is no
                    longer an active employee and qualifies for a retirement
                    benefit other than a deferred vested retirement benefit
                    under the Pension Plan.

               (q)  "Subsidiary" means any direct or indirect subsidiary of the
                    Company.

        1.4    ELIGIBILITY.  Regular fulltime employees are eligible for
               participation in the EIC Plan.


        1.5    ADMINISTRATION OF THE PLAN.

               (a)  The EIC Plan is administered by the Sr. Vice President -
                    Human Resources of CMS Energy under the general direction of
                    the Outside Directors who are members of the Committee.

               (b)  The Committee, no later than March 30th of the Performance
                    Year, will approve performance goals for the Performance
                    Year.

               (c)  The Committee, no later than March 30th of the calendar year
                    following the Performance Year, will review for approval
                    proposed Annual Awards for all EIC Plan participants, as
                    recommended by the Chairman and CEO of the Company. All
                    proposed Annual Awards are subject to approval of the
                    Committee. Before the payment of any Annual Awards, the
                    Committee will certify in writing that the performance goals
                    were in fact satisfied in accordance with Code Section
                    162(m).

               (d)  The Committee reserves the right to modify the performance
                    goals with respect to unforeseeable circumstances or
                    otherwise exercise discretion with respect to proposed
                    Annual Awards as it deems necessary to maintain the spirit
                    and intent of the EIC Plan. The Committee also reserves the
                    right in its discretion to not pay Annual Awards for a
                    Performance Year. All discretionary decisions of the
                    Committee are final.


                                       3
<PAGE>




  II.   CORPORATE PERFORMANCE GOALS

        2.1 IN GENERAL. The composite Plan Performance Factor will depend on
        corporate performance in two areas: (1) the net ongoing income per
        outstanding CMS Energy share (EPS); and (2) the Corporate Free Cash Flow
        of CMS Energy (CFCF). There will be no payout under the Plan unless a
        composite Plan Performance Factor of at least 60% is achieved. The
        composite Plan Performance Factor to be used for payouts will be capped
        at a maximum of 200%. A table containing the composite Plan Performance
        Factors shall be created by the Committee for each Performance Year. The
        table for Performance Year 2003 is set forth below.

            (a)     EPS COMPONENT. EPS performance shall constitute 40% of the
                    composite Plan Performance Factor. The 100% EPS goal for
                    the 2003 performance year is $.80 per share, and the EPS
                    component shall increase or decrease by 50% for each $.10
                    per share change in performance. (Mathematical
                    interpolation shall be used for actual results not shown in
                    the table.) There will be no payout under the plan unless
                    at least $.60 per share is achieved (regardless of CFCF
                    performance).

            (b)     CFCF COMPONENT. CFCF performance shall constitute 60% of the
                    composite Plan Performance Factor. The 100% CFCF goal for
                    the 2003 performance year is $400 million, and the CFCF
                    component shall increase or decrease by 25% for each $50
                    million change in performance. (Mathematical interpolation
                    shall be used for actual results not shown in the table.)
                    There will be no payout under the plan unless at least $250
                    million is achieved (regardless of EPS performance).


             COMPOSITE PERFORMANCE FACTORS FOR 2003 PERFORMANCE YEAR

<TABLE>
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
      CFCF Component
      (Millions)              $250      $300         $350        $400        $450        $500       $550
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
EPS COMPONENT
<S>                      <C>         <C>          <C>         <C>         <C>         <C>         <C>

- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$.60                        NONE        NONE         NONE        60%         75%         90%        105%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$.70                        NONE        NONE         65%         80%         95%         110%       125%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$.80                        NONE         70%         85%         100%        115%        130%       145%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$.90                        75%          90%         105%        120%        135%        150%       165%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$1.00                       95%         110%         125%        140%        155%        170%       185%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$1.10                       115%        130%         145%        160%        175%        190%       200%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$1.20                       135%        150%         165%        180%        195%        200%       200%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
$1.30                       155%        170%         185%        200%        200%        200%       200%
- ------------------------ ----------- ------------ ----------- ----------- ----------- ----------- ----------
</TABLE>

    Notes:  Mathematical interpolation shall be used for actual results not
    shown in the table.
    Target Award is Bolded 100% and Maximum Award is Bolded 200%


III.     ANNUAL AWARD FORMULA

         3.1           ANNUAL AWARDS. Annual Awards for each eligible EIC Plan
                       participant will be based upon a standard award as set
                       forth in the table below. The total amount of an EIC
                       participant Annual Award shall be computed according to
                       the annual award formula set forth in Section 3.2.



                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                                   YEAR
                                                                    END
                                                                   SALARY
                                   POSITION                        GRADE           STANDARD AWARD AMOUNT
                      ----------------------------
<S>                                                                <C>             <C>
                      Sr. Consultants & Equivalent                  8-10/C                  $1,000
                      Consultants & Equivalent                       5-7/B                  $  750
                      Advisors & Equivalent                          1-4/A                  $  625
                      All Non-exempt Employees                      various                 $  500
</TABLE>


         3.2           Annual Awards for EIC participants will be calculated
                       and made as follows:

      INDIVIDUAL AWARD = STANDARD AWARD AMOUNT TIMES PERFORMANCE FACTOR %

IV.  PAYMENT OF ANNUAL AWARDS

         4.1  CASH ANNUAL AWARD. All Annual Awards for a Performance Year will
              be paid in cash no later than March 31st of the calendar year
              following the Performance Year provided that they first have been
              reviewed and approved by the Committee. The amounts required by
              law to be withheld for income and employment taxes will be
              deducted from the Annual Award payments. All Annual Awards become
              the obligation of the company on whose payroll the Employee is
              enrolled at the time the Committee makes the Annual Award.


         4.2  PAYMENT IN THE EVENT OF DEATH.

              (a) A participant may name the beneficiary of his or her choice on
                  a beneficiary form provided by the Company, and the
                  beneficiary shall receive payment in the event that the
                  Participant dies prior to receipt of a cash Annual Award. If a
                  beneficiary is not named, the payment will be made to the
                  first surviving class as follows:

                            1. Widow or Widower
                            2. Children, per capita
                            3. Parents, per capita
                            4. Brothers and Sisters, per capita
                            5. Estate of the Deceased

              (b) A participant may change beneficiaries at any time, and the
                  change will be effective as of the date the participant
                  completes and signs the beneficiary form, whether or not the
                  participant is living at the time the request is received by
                  the Company. However, the Company or the applicable Subsidiary
                  will not be liable for any payments made before receipt of a
                  written request.

V.   CHANGE OF STATUS

              Payments in the event of a change in status will not apply if no
              awards are made for the performance year.

        5.1   PRO-RATA ANNUAL AWARDS. A new EIC participant, hired during the
              Performance Year will receive a pro rata Annual Award based on
              the percentage of the Performance Year in which the employee
              is employed.



                                       5
<PAGE>




        5.2   TERMINATION. An EIC participant whose employment is terminated
              pursuant to a violation of the Company code of conduct or other
              corporate policies will not be considered for an Annual Award.

        5.3   RESIGNATION. An EIC participant who resigns during or after a
              Performance Year will not be eligible for an Annual Award. If the
              resignation is due to reasons such as a downsizing or
              reorganization, or the ill health of the employee or ill health in
              the immediate family, the employee may petition the Committee and
              may be considered, in the discretion of the Committee, for a pro
              rata Annual Award. The Committee's decision to approve or deny the
              request for a pro rata Annual Award shall be final.

        5.4   DEATH, DISABILITY, RETIREMENT, LEAVE OF ABSENCE. An EIC
              participant whose status as an active employee is changed during
              the Performance Year due to death, Disability, Retirement, or
              Leave of Absence will receive a pro rata Annual Award.

  VI.    MISCELLANEOUS

        6.1   IMPACT ON BENEFIT PLANS. Payments made under the Plan will be not
              be considered as earnings for purposes of the Employees' Savings
              Plan, Pension Plan, or other employee benefit programs.

        6.2   IMPACT ON EMPLOYMENT. Neither the adoption of the Plan nor the
              granting of any Annual Award under the Plan will be deemed to
              create any right in any individual to be retained or continued in
              the employment of the Company or any corporation within the
              Company's control group.

        6.3   TERMINATION OR AMENDMENT OF THE PLAN. The Company at any time
              may, in writing, terminate or amend the Plan.


        6.4   GOVERNING LAW. The Plan will be governed and construed in
              accordance with the laws of the State of Michigan.


        6.5   DISPUTE RESOLUTION. Any disputes related to the Plan should first
              be brought to the Plan Administrator. If that does not result in
              a mutually agreeable resolution, then the dispute shall be
              subject to final and binding arbitration before a single
              arbitrator selected by the parties to be conducted in Jackson,
              Michigan. The arbitration will be conducted and finished within
              90 days of the selection of the arbitrator. The parties shall
              share equally the cost of the arbitrator and of conducting the
              arbitration proceeding, but each party shall bear the cost of its
              own legal counsel and experts and other out-of-pocket
              expenditures.

                                       6

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.(A)
<SEQUENCE>20
<FILENAME>k82154aexv12wxay.txt
<DESCRIPTION>CMS ENERGY'S RATIO OF EARNINGS TO FIXED CHARGES
<TEXT>
<PAGE>







                                EXHIBIT (12) (a)








<PAGE>

                                                                Exhibit (12) (a)
                             CMS ENERGY CORPORATION
      Ratio of Earnings to Fixed Charges and Preferred Securities Dividends
                               and Distributions
                              (Millions of Dollars)


<TABLE>
<CAPTION>
                                                                     Years Ended December 31 -
                                                            2003      2002     2001     2000     1999
                                                         ---------------------------------------------
                                                                  Restated  Restated
                                                              (b)       (c)      (d)      (e)
Earnings as defined (a)
- -----------------------
<S>                                                        <C>       <C>      <C>      <C>      <C>
Consolidated net income                                    $ (44)    $(650)   $(459)   $   5    $ 277
Discontinued operations                                      (23)      274      128      (83)     (70)
Income taxes                                                  58       (41)     (94)      72       64
Exclude equity basis subsidiaries                            (41)      (39)      68     (171)     (45)
Fixed charges as defined, adjusted to
  exclude capitalized interest of $9, $16,
  $35, $47, and $41 million for the
  years ended December 31, 2003, 2002,
  2001, 2000, and 1999, respectively                         608       565      631      562      625
                                                         ---------------------------------------------

Earnings as defined                                        $ 558     $ 109    $ 274    $ 385    $ 851
                                                         =============================================

Fixed charges as defined (a)
- ----------------------------
Interest on long-term debt                                 $ 531       404    $ 420    $ 420    $ 502
Estimated interest portion of lease rental                     8        10       11       11       11
Other interest charges                                        59        32       83       34       58
Preferred securities dividends and
  distributions                                               19       135      152      144       95
                                                         ---------------------------------------------
Fixed charges as defined                                   $ 617     $ 581    $ 666    $ 609    $ 666
                                                         =============================================

Ratio of earnings to fixed charges and
 preferred securities dividends and distributions              -         -        -        -     1.28
                                                         =============================================
</TABLE>

NOTES:
(a) Earnings and fixed charges as defined in instructions for Item 503 of
Regulation S-K.

(b) For the year ended December 31, 2003, fixed charges exceeded earnings by $59
million. Earnings as defined include $95 million of asset impairment charges.
The ratio of earnings to fixed charges and preferred Securities dividends and
distributions would have been 1.06 excluding these amounts.

(c) For the year ended December 31, 2002, fixed charges exceeded earnings by
$472 million. Earnings as defined include $602 million of asset impairment
charges. The ratio of earnings to fixed charges and preferred securities
dividends and distributions would have been 1.22 excluding these amounts.

(d) For the year ended December 31, 2001, fixed charges exceeded earnings by
$392 million. Earnings as defined include $323 million of asset impairment
charges.

(e) For the year ended December 31, 2000, fixed charges exceeded earnings by
$224 million. Earnings as defined include a $329 million pretax impairment loss
on the Loy Yang investment. The ratio of earnings to fixed charges and preferred
securities dividends and distributions would have been 1.17 excluding this
amount.





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-12.(B)
<SEQUENCE>21
<FILENAME>k82154aexv12wxby.txt
<DESCRIPTION>COMPUTATION OF CONSUMERS' RATIO OF EARNINGS
<TEXT>
<PAGE>










                                EXHIBIT (12) (b)














<PAGE>





                                                                Exhibit (12) (b)


                            CONSUMERS ENERGY COMPANY
      Ratio of Earnings to Fixed Charges and Preferred Securities Dividends
                               and Distributions
                              (Millions of Dollars)

<TABLE>
<CAPTION>
                                                            Years Ended December 31 -
                                                2003        2002        2001        2000       1999
                                              -------------------------------------------------------
                                                             (c)          (b)
Earnings as defined (a)
- -----------------------
<S>                                           <C>           <C>        <C>         <C>       <C>
Consolidated net income                       $    196      $   363    $   199     $   284   $   340
Income taxes                                       137          180         97         137       172
Exclude equity basis subsidiaries                  (42)         (53)       (38)        (57)      (50)
Include equity basis dividends received             45           15          8          10        10
Fixed charges as defined, adjusted to              252          178        197         194       192
  exclude capitalized interest of $9,
  $12, $6, $2, and $- million for
  years ended December 31, 2003, 2002,
  2001, 2000, and 1999, respectively
                                              -------------------------------------------------------
Earnings as defined                           $    588      $   683    $   463     $   568   $   664
                                              =======================================================

Fixed charges as defined (a)
- ----------------------------
Interest on long-term debt (d)                $    241      $   153    $   151     $   141   $   140
Estimated interest portion of lease rental           7           10         11          11        11
Other interest charges                              13           27         41          44        41
Preferred securities dividends and                   3           47         44          37        30
  distributions (d)
                                              -------------------------------------------------------
Fixed charges as defined                      $    264      $   237    $   247     $   233   $   222
                                              =======================================================
Ratio of earnings to fixed charges and
  preferred securities dividends and
  distributions                                   2.23         2.88       1.87        2.44      2.99
                                              =======================================================
</TABLE>

NOTES:

(a) Earnings and fixed charges as defined in instructions for Item 503 of
Regulation S-K.

(b) Excludes a cumulative effect of change-in-accounting after-tax loss of $11
million; if included, ratio would be 1.81.

(c) Excludes a cumulative effect of change-in-accounting after-tax gain of $18
million; if included, ratio would be unchanged, since the change-in-accounting
resulted from the equity based subsidiary MCV Partnership. The total net incomes
of equity based subsidiaries are excluded from determining earnings as defined.

(d) We determined that we do not hold the controlling interest in our trust
preferred security structures. Accordingly, those securities have been
deconsolidated as of December 31, 2003. Therefore, our trust preferred
securities that were previously included in mezzanine equity, have been
eliminated due to deconsolidation and are reflected in Long-term debt -- related
parties.

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.(A)
<SEQUENCE>22
<FILENAME>k82154aexv23wxay.txt
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP FOR CMS ENERGY
<TEXT>
<PAGE>
                                                                 EXHIBIT (23)(a)



                         Consent of Independent Auditors


We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 333-32229 and No. 333-58686) pertaining to CMS Energy Corporation
Performance Incentive Stock Plan and Executive Stock Option Plan, respectively,
(Form S-8 No. 333-76347) pertaining to the Employee Savings and Incentive Plan
of Consumers Energy Company, in the Registration Statements (Form S-3 No.
333-51932, No. 333-52560, No. 333-27849, No. 333-37241, No. 333-74958 and No.
333-45556 and Form S-4 No. 33-60007) of CMS Energy Corporation and in the
related Prospectuses of our report dated February 27, 2004, with respect to the
consolidated financial statements and schedule of CMS Energy Corporation and
subsidiaries included in the Annual Report (Form 10-K) for the year ended
December 31, 2003.

                                              /s/ Ernst & Young LLP
Detroit, Michigan
March 9, 2004



..


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.(B)
<SEQUENCE>23
<FILENAME>k82154aexv23wxby.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP-MCV
<TEXT>
<PAGE>
                                                                   EXHIBIT 23(b)





                       CONSENT OF INDEPENDENT ACCOUNTANTS



We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (Nos.333-32229, 333-58686 and No. 333-76347), S-3 (Nos.
333-51932, 333-52560, 333-27849, 333-37241, 333-74958, 333-45556) and S-4 (No.
33-60007) of CMS Energy Corporation of our report dated February 18, 2004
relating to the financial statements of Midland Cogeneration Venture L.P. which
appears in the CMS Energy Corporation Form 10-K for the year ended December 31,
2003.




PricewaterhouseCoopers LLP

Detroit, Michigan
March 10, 2004


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.(C)
<SEQUENCE>24
<FILENAME>k82154aexv23wxcy.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP-JORF LASFAR
<TEXT>
<PAGE>
                                                                   EXHIBIT 23(c)








                       CONSENT OF INDEPENDENT ACCOUNTANTS



We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (Nos.333-32229, 333-58686 and No. 333-76347), S-3 (Nos.
333-51932, 333-52560, 333-27849, 333-37241, 333-74958, 333-45556) and S-4 (No.
33-60007) of CMS Energy Corporation of our report dated February 10, 2004
relating to the financial statements of Jorf Lasfar Energy Company S.C.A. which
appears in the CMS Energy Corporation Form 10-K for the year ended December 31,
2003.




Price Waterhouse

Casablanca, Morocco
March 8, 2004


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.(D)
<SEQUENCE>25
<FILENAME>k82154aexv23wxdy.txt
<DESCRIPTION>CONSENT OF ERNST & YOUNG LLP FOR CONSUMERS
<TEXT>
<PAGE>
                                                                 EXHIBIT (23)(d)



                           Consent of Independent Auditors


We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-76347) pertaining to Employee Savings and Incentive Plan of
Consumers Energy Company and in the Registration Statements (Form S-3 No.
333-73922 and Form S-4 No. 333-111220) of Consumers Energy Company and in the
related Prospectuses of our report dated February 27, 2004, with respect to the
consolidated financial statements and schedule of Consumers Energy Company and
subsidiaries included in the Annual Report (Form 10-K) for the year ended
December 31, 2003.

                                                      /s/ Ernst & Young LLP
Detroit, Michigan
March 9, 2004



..

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.(E)
<SEQUENCE>26
<FILENAME>k82154aexv23wxey.txt
<DESCRIPTION>CONSENT OF PRICEWATERHOUSECOOPERS LLP-CONSUMERS
<TEXT>
<PAGE>
                                                                   EXHIBIT 23(e)




                       CONSENT OF INDEPENDENT ACCOUNTANTS



We hereby consent to the incorporation by reference in the Registration
Statements on Forms S-8 (No. 333-76347) and S-3 (Nos. 333-73922) of Consumers
Energy Company of our report dated February 18, 2004 relating to the financial
statements of Midland Cogeneration Venture L.P. which appears in the Consumers
Energy Company Form 10-K for the year ended December 31, 2003.




PricewaterhouseCoopers LLP

Detroit, Michigan
March 10, 2004


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.(A)
<SEQUENCE>27
<FILENAME>k82154aexv24wxay.txt
<DESCRIPTION>POWER OF ATTORNEY FOR CMS ENERGY
<TEXT>
<PAGE>
                                                                   EXHIBIT 24(a)



February 27, 2004

Mr. S. Kinnie Smith, Jr.
Mr. Thomas J. Webb
Mr. Michael D. VanHemert
CMS Energy Corporation
One Energy Plaza
Jackson, MI  49201-2276

CMS Energy Corporation is required to file an Annual Report on Form 10-K for the
year ended December 31, 2003 with the Securities and Exchange Commission within
90 days after the end of the year.

We hereby make, constitute and appoint each of you our true and lawful attorney
for each of us and in each of our names, places and steads to sign and cause to
be filed with the Securities and Exchange Commission said Annual Report with any
necessary exhibits, and any amendments thereto that may be required.

Very truly yours,



        /s/ Kenneth Whipple                 /s/ Joseph F. Paquette, Jr.
- -----------------------------------    -------------------------------------
          Kenneth Whipple                     Joseph F. Paquette, Jr.


      /s/ James J. Duderstadt                  /s/ William U. Parfet
- -----------------------------------    -------------------------------------
        James J. Duderstadt                      William U. Parfet


     /s/ Kathleen R. Flaherty                   /s/ Percy A. Pierre
- -----------------------------------    -------------------------------------
       Kathleen R. Flaherty                       Percy A. Pierre


        /s/ Earl D. Holton                    /s/ S. Kinnie Smith, Jr.
- -----------------------------------    -------------------------------------
          Earl D. Holton                        S. Kinnie Smith, Jr.


         /s/ David W. Joos                       /s/ Kenneth L. Way
- -----------------------------------    -------------------------------------
           David W. Joos                           Kenneth L. Way


      /s/ Michael T. Monahan                    /s/ John B. Yasinsky
- -----------------------------------    -------------------------------------
        Michael T. Monahan                        John B. Yasinsky



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-24.(B)
<SEQUENCE>28
<FILENAME>k82154aexv24wxby.txt
<DESCRIPTION>POWER OF ATTORNEY FOR CONSUMERS
<TEXT>
<PAGE>
                                                                 EXHIBIT 24(b)


February 27, 2004

Mr. S. Kinnie Smith, Jr.
Mr. Thomas J. Webb
Mr. Michael D. VanHemert
Consumers Energy Company
One Energy Plaza
Jackson, MI  49201-2276

Consumers Energy Company is required to file an Annual Report on Form 10-K for
the year ended December 31, 2003 with the Securities and Exchange Commission
within 90 days after the end of the year.

We hereby make, constitute and appoint each of you our true and lawful attorney
for each of us and in each of our names, places and steads to sign and cause to
be filed with the Securities and Exchange Commission said Annual Report with any
necessary exhibits, and any amendments thereto that may be required.

Very truly yours,




         /s/ Kenneth Whipple                       /s/ Joseph F. Paquette, Jr.
 ------------------------------------       ------------------------------------
           Kenneth Whipple                           Joseph F. Paquette, Jr.


       /s/ James J. Duderstadt                        /s/ William U. Parfet
 ------------------------------------       ------------------------------------
         James J. Duderstadt                            William U. Parfet


      /s/ Kathleen R. Flaherty                         /s/ Percy A. Pierre
 ------------------------------------       ------------------------------------
        Kathleen R. Flaherty                             Percy A. Pierre


         /s/ Earl D. Holton                         /s/ S. Kinnie Smith, Jr.
 ------------------------------------       ------------------------------------
           Earl D. Holton                             S. Kinnie Smith, Jr.


          /s/ David W. Joos                            /s/ Kenneth L. Way
 ------------------------------------       ------------------------------------
            David W. Joos                                Kenneth L. Way


       /s/ Michael T. Monahan                         /s/ John B. Yasinsky
 ------------------------------------       ------------------------------------
         Michael T. Monahan                             John B. Yasinsky




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(A)
<SEQUENCE>29
<FILENAME>k82154aexv31wxay.txt
<DESCRIPTION>CMS ENERGY'S CERTIFICATION OF CEO TO SECTION 302
<TEXT>
<PAGE>
                                                                 Exhibit (31)(a)


                        CERTIFICATION OF KENNETH WHIPPLE


I, Kenneth Whipple, certify that:

       1.  I have reviewed this annual report on Form 10-K of CMS Energy
           Corporation;

       2.  Based on my knowledge, this report does not contain any untrue
           statement of a material fact or omit to state a material fact
           necessary to make the statements made, in light of the circumstances
           under which such statements were made, not misleading with respect to
           the period covered by this report;

       3.  Based on my knowledge, the financial statements, and other financial
           information included in this report, fairly present in all material
           respects the financial condition, results of operations and cash
           flows of the registrant as of, and for, the periods presented in this
           report;

       4.  The registrant's other certifying officer(s) and I are responsible
           for establishing and maintaining disclosure controls and procedures
           (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
           registrant and have:

                  a) Designed such disclosure controls and procedures, or caused
           such disclosure controls and procedures to be designed under our
           supervision, to ensure that material information relating to the
           registrant, including its consolidated subsidiaries, is made known to
           us by others within those entities, particularly during the period in
           which this report is being prepared;

                  b) Evaluated the effectiveness of the registrant's disclosure
           controls and procedures and presented in this report our conclusions
           about the effectiveness of the disclosure controls and procedures, as
           of the end of the period covered by this report based on such
           evaluation; and

                  c) Disclosed in this report any change in the registrant's
           internal control over financial reporting that occurred during the
           registrant's most recent fiscal quarter (the registrant's fourth
           fiscal quarter in the case of an annual report) that has materially
           affected, or is reasonably likely to materially affect, the
           registrant's internal control over financial reporting; and

       5.  The registrant's other certifying officer(s) and I have disclosed,
           based on our most recent evaluation of internal control over
           financial reporting, to the registrant's auditors and the audit
           committee of registrant's board of directors (or persons performing
           the equivalent functions):

                  a) All significant deficiencies and material weaknesses in the
           design or operation of internal control over financial reporting
           which are reasonably likely to adversely affect the registrant's
           ability to record, process, summarize and report financial
           information; and

                  b) Any fraud, whether or not material, that involves
           management or other employees who have a significant role in the
           registrant's internal control over financial reporting.



Dated:  March 11, 2004               By:        /s/ Kenneth Whipple
                                        ----------------------------------------
                                                    Kenneth Whipple
                                               Chairman of the Board and
                                               Chief Executive Officer


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(B)
<SEQUENCE>30
<FILENAME>k82154aexv31wxby.txt
<DESCRIPTION>CMS ENERGY'S CERTIFICATION OF CFO TO SECTION 302
<TEXT>
<PAGE>





                                                                 Exhibit (31)(b)


                         CERTIFICATION OF THOMAS J. WEBB


I, Thomas J. Webb, certify that:

       1.  I have reviewed this annual report on Form 10-K of CMS Energy
           Corporation;

       2.  Based on my knowledge, this report does not contain any untrue
           statement of a material fact or omit to state a material fact
           necessary to make the statements made, in light of the circumstances
           under which such statements were made, not misleading with respect to
           the period covered by this report;

       3.  Based on my knowledge, the financial statements, and other financial
           information included in this report, fairly present in all material
           respects the financial condition, results of operations and cash
           flows of the registrant as of, and for, the periods presented in this
           report;

       4.  The registrant's other certifying officer(s) and I are responsible
           for establishing and maintaining disclosure controls and procedures
           (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
           registrant and have:

                  a) Designed such disclosure controls and procedures, or caused
           such disclosure controls and procedures to be designed under our
           supervision, to ensure that material information relating to the
           registrant, including its consolidated subsidiaries, is made known to
           us by others within those entities, particularly during the period in
           which this report is being prepared;

                  b) Evaluated the effectiveness of the registrant's disclosure
           controls and procedures and presented in this report our conclusions
           about the effectiveness of the disclosure controls and procedures, as
           of the end of the period covered by this report based on such
           evaluation; and

                  c) Disclosed in this report any change in the registrant's
           internal control over financial reporting that occurred during the
           registrant's most recent fiscal quarter (the registrant's fourth
           fiscal quarter in the case of an annual report) that has materially
           affected, or is reasonably likely to materially affect, the
           registrant's internal control over financial reporting; and

       5.  The registrant's other certifying officer(s) and I have disclosed,
           based on our most recent evaluation of internal control over
           financial reporting, to the registrant's auditors and the audit
           committee of registrant's board of directors (or persons performing
           the equivalent functions):

                  a) All significant deficiencies and material weaknesses in the
           design or operation of internal control over financial reporting
           which are reasonably likely to adversely affect the registrant's
           ability to record, process, summarize and report financial
           information; and

                  b) Any fraud, whether or not material, that involves
           management or other employees who have a significant role in the
           registrant's internal control over financial reporting.




Dated:  March 11, 2004               By:        /s/ Thomas J. Webb
                                        ----------------------------------------
                                                     Thomas J. Webb
                                              Executive Vice President and
                                                Chief Financial Officer





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(C)
<SEQUENCE>31
<FILENAME>k82154aexv31wxcy.txt
<DESCRIPTION>CONSUMERS' CERTIFICATION OF CEO TO SECTION 302
<TEXT>
<PAGE>


                                                                 Exhibit (31)(c)


                        CERTIFICATION OF KENNETH WHIPPLE


I, Kenneth Whipple, certify that:

       1.  I have reviewed this annual report on Form 10-K of Consumers Energy
           Company;

       2.  Based on my knowledge, this report does not contain any untrue
           statement of a material fact or omit to state a material fact
           necessary to make the statements made, in light of the circumstances
           under which such statements were made, not misleading with respect to
           the period covered by this report;

       3.  Based on my knowledge, the financial statements, and other financial
           information included in this report, fairly present in all material
           respects the financial condition, results of operations and cash
           flows of the registrant as of, and for, the periods presented in this
           report;

       4.  The registrant's other certifying officer(s) and I are responsible
           for establishing and maintaining disclosure controls and procedures
           (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
           registrant and have:

                  a) Designed such disclosure controls and procedures, or caused
           such disclosure controls and procedures to be designed under our
           supervision, to ensure that material information relating to the
           registrant, including its consolidated subsidiaries, is made known to
           us by others within those entities, particularly during the period in
           which this report is being prepared;

                  b) Evaluated the effectiveness of the registrant's disclosure
           controls and procedures and presented in this report our conclusions
           about the effectiveness of the disclosure controls and procedures, as
           of the end of the period covered by this report based on such
           evaluation; and

                  c) Disclosed in this report any change in the registrant's
           internal control over financial reporting that occurred during the
           registrant's most recent fiscal quarter (the registrant's fourth
           fiscal quarter in the case of an annual report) that has materially
           affected, or is reasonably likely to materially affect, the
           registrant's internal control over financial reporting; and

       5.  The registrant's other certifying officer(s) and I have disclosed,
           based on our most recent evaluation of internal control over
           financial reporting, to the registrant's auditors and the audit
           committee of registrant's board of directors (or persons performing
           the equivalent functions):

                  a) All significant deficiencies and material weaknesses in the
           design or operation of internal control over financial reporting
           which are reasonably likely to adversely affect the registrant's
           ability to record, process, summarize and report financial
           information; and

                  b) Any fraud, whether or not material, that involves
           management or other employees who have a significant role in the
           registrant's internal control over financial reporting.




Dated:  March 11, 2004               By:        /s/ Kenneth Whipple
                                        ----------------------------------------
                                                    Kenneth Whipple
                                               Chairman of the Board and
                                               Chief Executive Officer





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.(D)
<SEQUENCE>32
<FILENAME>k82154aexv31wxdy.txt
<DESCRIPTION>CONSUMERS' CERTIFICATION OF CFO TO SECTION 302
<TEXT>
<PAGE>




                                                                 Exhibit (31)(d)


                         CERTIFICATION OF THOMAS J. WEBB


I, Thomas J. Webb, certify that:

       1.  I have reviewed this annual report on Form 10-K of Consumers Energy
           Company;

       2.  Based on my knowledge, this report does not contain any untrue
           statement of a material fact or omit to state a material fact
           necessary to make the statements made, in light of the circumstances
           under which such statements were made, not misleading with respect to
           the period covered by this report;

       3.  Based on my knowledge, the financial statements, and other financial
           information included in this report, fairly present in all material
           respects the financial condition, results of operations and cash
           flows of the registrant as of, and for, the periods presented in this
           report;

       4.  The registrant's other certifying officer(s) and I are responsible
           for establishing and maintaining disclosure controls and procedures
           (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the
           registrant and have:

                  a) Designed such disclosure controls and procedures, or caused
           such disclosure controls and procedures to be designed under our
           supervision, to ensure that material information relating to the
           registrant, including its consolidated subsidiaries, is made known to
           us by others within those entities, particularly during the period in
           which this report is being prepared;

                  b) Evaluated the effectiveness of the registrant's disclosure
           controls and procedures and presented in this report our conclusions
           about the effectiveness of the disclosure controls and procedures, as
           of the end of the period covered by this report based on such
           evaluation; and

                  c) Disclosed in this report any change in the registrant's
           internal control over financial reporting that occurred during the
           registrant's most recent fiscal quarter (the registrant's fourth
           fiscal quarter in the case of an annual report) that has materially
           affected, or is reasonably likely to materially affect, the
           registrant's internal control over financial reporting; and

       5.  The registrant's other certifying officer(s) and I have disclosed,
           based on our most recent evaluation of internal control over
           financial reporting, to the registrant's auditors and the audit
           committee of registrant's board of directors (or persons performing
           the equivalent functions):

                  a) All significant deficiencies and material weaknesses in the
           design or operation of internal control over financial reporting
           which are reasonably likely to adversely affect the registrant's
           ability to record, process, summarize and report financial
           information; and

                  b) Any fraud, whether or not material, that involves
           management or other employees who have a significant role in the
           registrant's internal control over financial reporting.




Dated:  March 11, 2004               By:        /s/ Thomas J. Webb
                                        ----------------------------------------
                                                     Thomas J. Webb
                                              Executive Vice President and
                                                Chief Financial Officer



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.(A)
<SEQUENCE>33
<FILENAME>k82154aexv32wxay.txt
<DESCRIPTION>CMS ENERGY'S CERTIFICATIONS PURSUANT TO SEC. 906
<TEXT>
<PAGE>
                                                                 Exhibit (32)(a)


                    CERTIFICATION OF CEO AND CFO PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report on Form 10-K of CMS Energy Corporation (the
"Company") for the annual period ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Kenneth
Whipple, as Chairman of the Board and Chief Executive Officer of the Company,
and Thomas J. Webb, as Executive Vice President and Chief Financial Officer of
the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of his knowledge:

         (1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.




   /s/ Kenneth Whipple
- -------------------------------------
Name:  Kenneth Whipple
Title: Chairman of the Board and
       Chief Executive Officer
Date:  March 11, 2004




   /s/ Thomas J. Webb
- -------------------------------------
Name:  Thomas J. Webb
Title: Executive Vice President and
       Chief Financial Officer
Date:  March 11, 2004





</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.(B)
<SEQUENCE>34
<FILENAME>k82154aexv32wxby.txt
<DESCRIPTION>CONSUMERS' CERTIFICATIONS PURSUANT TO SECTION 906
<TEXT>
<PAGE>






                                                                 Exhibit (32)(b)


                    CERTIFICATION OF CEO AND CFO PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002


In connection with the Annual Report on Form 10-K of Consumers Energy Company
(the "Company") for the annual period ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), Kenneth
Whipple, as Chairman of the Board and Chief Executive Officer of the Company,
and Thomas J. Webb, as Executive Vice President and Chief Financial Officer of
the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the
best of his knowledge:

         (1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

         (2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations of the
Company.




   /s/ Kenneth Whipple
- -------------------------------------
Name:  Kenneth Whipple
Title: Chairman of the Board and
       Chief Executive Officer
Date:  March 11, 2004




   /s/ Thomas J. Webb
- -------------------------------------
Name:  Thomas J. Webb
Title: Executive Vice President and
       Chief Financial Officer
Date:  March 11, 2004



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(A)
<SEQUENCE>35
<FILENAME>k82154aexv99wxay.htm
<DESCRIPTION>FINANCIAL STATEMENTS FOR MIDLAND COGENERATION
<TEXT>
<HTML>
<HEAD>
<TITLE>exv99wxay</TITLE>
</HEAD>
<BODY bgcolor="#FFFFFF">
<!-- PAGEBREAK -->
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P align="right"><FONT size="2"><b>Exhibit 99(a)</b>
</FONT>


<P align="center"><FONT size="2">INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="95%">
<TR valign="bottom">
    <TD width="94%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Page Reference</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>in Annual Report</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>on Form 10-K</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Report of Independent Auditors &#150; PricewaterhouseCoopers LLP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Report of Independent Public Accountants &#150; Arthur Andersen, LLP</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Balance Sheets as of December&nbsp;31, 2003 and 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Operations for the Years Ended December&nbsp;31, 2003, 2002, and 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Partners&#146; Equity for the Years Ended December&nbsp;31, 2003, 2002, and 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Consolidated Statements of Cash Flows for the Years Ended December&nbsp;31, 2003, 2002, and 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Notes to Consolidated Financial Statements</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">F-8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-1</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2">Report of Independent Auditors
</FONT>

<P align="left"><FONT size="2">To the Partners and the Management Committee of<BR>
Midland Cogeneration Venture Limited Partnership:
</FONT>

<P align="left"><FONT size="2">In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, partners&#146; equity and cash flows present
fairly, in all material respects, the financial position of the Midland
Cogeneration Limited Partnership (a Michigan limited partnership) and its
subsidiaries (MCV)&nbsp;at December&nbsp;31, 2003 and 2002, and the results of their
operations and their cash flows for the each of the two years ended December
31, 2003 and 2002 in conformity with accounting principles generally accepted
in the United States of America. These financial statements are the
responsibility of MCV&#146;s management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion. The
financial statements of MCV for the year ended December&nbsp;31, 2001, were audited
by other independent accountants who have ceased operations. Those independent
accountants expressed an unqualified opinion on those financial statements in
their report dated January&nbsp;18, 2002.
</FONT>
<P align="left"><FONT size="2">As explained in Note 2 to the financial statements, effective April&nbsp;1, 2002,
Midland Cogeneration Venture Limited Partnership changed its method of
accounting for derivative and hedging activities in accordance with Derivative
Implementation Group (&#147;DIG&#148;) Issue C-16.
</FONT>
<P align="left"><FONT size="2">Detroit, Michigan<BR>
February&nbsp;18, 2004
</FONT>

<P align="center"><FONT size="2">F-2</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2"><B>THE FOLLOWING REPORT IS A COPY OF A PREVIOUSLY ISSUED REPORT BY ARTHUR<BR>
ANDERSEN LLP (ANDERSEN). THIS REPORT HAS NOT BEEN REISSUED BY ANDERSEN, AND<BR>
ANDERSEN DID NOT CONSENT TO THE INCLUSION OF THIS REPORT INTO THIS FORM 10-K.<BR>
THE FOOTNOTE SHOWN BELOW WAS NOT PART OF ANDERSEN&#146;S REPORT.</B>
</FONT>

<P align="center"><FONT size="2">ARTHUR ANDERSEN LLP
</FONT>

<P align="center"><FONT size="2">REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
</FONT>

<P align="left"><FONT size="2">To the Partners and the Management Committee of the<BR>
Midland Cogeneration Venture Limited Partnership:
</FONT>

<P align="left"><FONT size="2">We have audited the accompanying consolidated balance sheets of the MIDLAND
COGENERATION VENTURE LIMITED PARTNERSHIP (a Michigan limited partnership) and
subsidiaries (MCV)&nbsp;as of December&nbsp;31, 2001 and 2000*, and the related
consolidated statements of operations, partners&#146; equity and cash flows for each
of the three years in the period ended December&nbsp;31, 2001*. These financial
statements are the responsibility of MCV&#146;s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
</FONT>
<P align="left"><FONT size="2">We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
</FONT>
<P align="left"><FONT size="2">In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Midland
Cogeneration Venture Limited Partnership and subsidiaries as of December&nbsp;31,
2001 and 2000*, and the consolidated results of their operations and their cash
flows for each of the three years in the period ended December&nbsp;31, 2001*, in
conformity with accounting principles generally accepted in the United States.
</FONT>
<P align="left"><FONT size="2">As explained in Note 2 to the financial statements, effective January&nbsp;1, 2001,
Midland Cogeneration Venture Limited Partnership changed its method of
accounting related to derivatives and hedging activities.
</FONT>
<P align="right"><FONT size="2">Arthur Andersen LLP</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Detroit, Michigan<BR>
January&nbsp;18, 2002</FONT></TD>
</TR>
</TABLE>
<P align="left"><FONT size="2">*The MCV&#146;s consolidated balance sheets as of December&nbsp;31, 2001 and 2000 and the
consolidated statements of operations, partners&#146; equity and cash flows for the
years ended December&nbsp;31, 1999 and 2000 are not included in this Annual Report
on Form&nbsp;10-K.
</FONT>
<P align="center"><FONT size="2">F-3</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31,<BR>
(In Thousands)
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<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
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    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="66%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
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<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CURRENT ASSETS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">173,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">160,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts and notes receivable &#150; related parties</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43,805</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,448</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">38,333</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">32,479</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gas inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,566</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unamortized property taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,672</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,355</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Derivative assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">86,825</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Broker margin accounts and prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,101</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,165</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">388,685</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">358,257</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PROPERTY, PLANT AND EQUIPMENT</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,463,931</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,449,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Pipeline</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,432</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,485,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,470,580</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accumulated depreciation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(991,556</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(920,614</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,493,807</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,549,966</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OTHER ASSETS:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Restricted investment securities held-to-maturity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">139,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">138,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Derivative assets non-current</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,037</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Deferred financing costs, net of accumulated amortization
of $17,285 and $15,930, respectively</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,680</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,035</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Prepaid gas costs, materials and supplies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">21,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,077</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total other assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">187,158</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">189,850</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL ASSETS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,069,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,098,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">LIABILITIES AND PARTNERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CURRENT LIABILITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable and accrued liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">57,368</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">58,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Gas supplier funds on deposit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">53,009</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Current portion of long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">134,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">93,928</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">249,470</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">208,394</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NON-CURRENT LIABILITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,018,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,153,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,148</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total non-current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,021,104</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,155,369</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">COMMITMENTS AND CONTINGENCIES
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL LIABILITIES</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,270,574</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,363,763</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">PARTNERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">799,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">734,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">TOTAL LIABILITIES AND PARTNERS&#146; EQUITY</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,069,650</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,098,073</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">The accompanying notes are an integral part of these statements.
</FONT>

<P align="center"><FONT size="2">F-4</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>



<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31,<BR>
(In Thousands)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="49%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING REVENUES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Capacity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">404,681</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">404,713</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">409,633</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Electric</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">162,093</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">177,569</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">184,707</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Steam</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,537</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,473</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating revenues</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">584,412</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">596,819</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">610,813</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING EXPENSES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fuel costs</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">254,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">255,142</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">288,167</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">89,437</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">88,963</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">92,176</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Operations</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,943</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,642</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,082</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Maintenance</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,666</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and single business taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30,040</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,087</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">26,410</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Administrative, selling and general</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9,959</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,195</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,404</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total operating expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">416,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">408,695</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">452,978</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OPERATING INCOME</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">167,938</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">188,124</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">157,835</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">OTHER INCOME (EXPENSE):</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest and other income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,555</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">16,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest expense</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(113,247</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(119,783</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(126,296</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total other income (expense), net</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(108,147</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(114,228</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(109,571</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET INCOME BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">59,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">73,896</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of change in method of
accounting for derivative option contracts
(to April&nbsp;1, 2002) (Note 2)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">58,131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET INCOME</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">59,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">132,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">48,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">The accompanying notes are an integral part of these statements.
</FONT>

<P align="center"><FONT size="2">F-5</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>



<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
CONSOLIDATED STATEMENTS OF PARTNERS&#146; EQUITY FOR THE YEARS ENDED DECEMBER 31,<BR>
(In Thousands)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="55%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>General</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Limited</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Partners</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Partners</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE, DECEMBER 31, 2000</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">448,100</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">79,638</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">527,738</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">42,020</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,244</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of accounting change</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,688</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,034</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,722</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unrealized loss on hedging activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(42,444</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(6,307</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(48,751</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reclassification adjustments recognized
in net income above</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,608</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,131</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,739</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(21,148</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,142</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(24,290</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">20,872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,102</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,974</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE, DECEMBER 31, 2001</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">468,972</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">82,740</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">551,712</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">114,947</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">132,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unrealized gain on hedging activities
since beginning of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,950</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">38,261</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reclassification adjustments recognized
in net income above</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,717</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,593</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44,028</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,543</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">50,571</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">158,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,623</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">182,598</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE, DECEMBER 31, 2002</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">627,947</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">106,363</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">734,310</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">52,056</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">59,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unrealized gain on hedging activities
since beginning of period</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34,484</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,125</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">39,609</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Reclassification adjustments recognized
in net income above</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(30,153</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,481</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(34,634</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total other comprehensive income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,331</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">644</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,975</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total Comprehensive Income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56,387</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,379</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">64,766</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">BALANCE, DECEMBER 31, 2003</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">684,334</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">114,742</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">799,076</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">The accompanying notes are an integral part of these statements.
</FONT>

<P align="center"><FONT size="2">F-6</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>



<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31,<BR>
(In Thousands)
</FONT>

<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="90%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="61%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CASH FLOWS FROM OPERATING ACTIVITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">59,791</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">132,027</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">48,264</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Adjustments to reconcile net income to net cash provided by
operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Depreciation and amortization</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">90,792</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">90,430</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">93,835</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cumulative effect of change in accounting principle</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(58,131</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in accounts receivable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,211</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,343</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">55,127</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in gas inventory</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(732</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">133</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(5,225</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in unamortized property taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">683</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(1,730</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(415</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in broker margin accounts and prepaid expenses</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4,778</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">31,049</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26,587</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in derivative assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,906</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(20,444</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">(Increase) decrease in prepaid gas costs, materials and supplies</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(8,704</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,376</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,414</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in accounts payable and accrued liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(712</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(43,704</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase in gas supplier funds on deposit</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,517</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Decrease in interest payable</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,377</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(3,948</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(7,082</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Increase (decrease)&nbsp;in other non-current liabilities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">311</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(24</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">245</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash provided by operating activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">141,486</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">227,855</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">122,872</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CASH FLOWS FROM INVESTING ACTIVITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Plant modifications and purchases of plant equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(33,278</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(29,529</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(30,530</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Maturity of restricted investment securities held-to-maturity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">601,225</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">377,192</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">538,327</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Purchase of restricted investment securities held-to-maturity</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(602,279</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(374,426</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(539,918</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash used in investing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(34,332</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(26,763</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(32,121</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CASH FLOWS FROM FINANCING ACTIVITIES:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Repayment of financing obligation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(93,928</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(182,084</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(155,632</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net cash used in financing activities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(93,928</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(182,084</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(155,632</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">NET INCREASE (DECREASE)&nbsp;IN CASH AND CASH EQUIVALENTS</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,226</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">19,008</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(64,881</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">160,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">141,417</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">206,298</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">CASH AND EQUIVALENTS AT END OF PERIOD</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">173,651</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">160,425</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">141,417</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">The accompanying notes are an integral part of these statements.
</FONT>

<P align="center"><FONT size="2">F-7</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>



<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(1)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">THE PARTNERSHIP AND ASSOCIATED RISKS</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV was organized to construct, own and operate a combined-cycle, gas-fired
cogeneration facility (the &#147;Facility&#148;) located in Midland, Michigan. MCV
was formed on January&nbsp;27, 1987, and the Facility began commercial operation
in 1990.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In 1992, MCV acquired the outstanding common stock of PVCO Corp., a
previously inactive company. MCV and PVCO Corp. entered into a partnership
agreement to form MCV Gas Acquisition General Partnership (&#147;MCV GAGP&#148;) for
the purpose of buying and selling natural gas on the spot market and other
transactions involving natural gas activities. Currently, MCV GAGP is not
actively engaged in any business activity.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Facility has a net electrical generating capacity of approximately 1500
MW and approximately 1.5&nbsp;million pounds of process steam capacity per hour.
MCV has entered into three principal energy sales agreements. MCV has
contracted to (i)&nbsp;supply up to 1240 MW of electric capacity (&#147;Contract
Capacity&#148;) to Consumers Energy Company (&#147;Consumers&#148;) under the Power
Purchase Agreement (&#147;PPA&#148;), for resale to its customers through 2025, (ii)
supply electricity and steam to The Dow Chemical Company (&#147;Dow&#148;) under the
Steam and Electric Power Agreement (&#147;SEPA&#148;) through 2015 and (iii)&nbsp;supply
steam to Dow Corning Corporation (&#147;DCC&#148;) under the Steam Purchase Agreement
(&#147;SPA&#148;) through 2011. From time to time, MCV enters into other sales
agreements for the sale of excess capacity and/or energy available above
MCV&#146;s internal use and obligations under the PPA, SEPA and SPA. Results of
operations are primarily dependent on successfully operating the Facility at
or near contractual capacity levels and on Consumers&#146; ability to perform its
obligations under the PPA. Sales pursuant to the PPA have historically
accounted for over 90% of MCV&#146;s revenues.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The PPA permits Consumers, under certain conditions, to reduce the capacity
and energy charges payable to MCV and/or to receive refunds of capacity and
energy charges paid to MCV if the Michigan Public Service Commission
(&#147;MPSC&#148;) does not permit Consumers to recover from its customers the
capacity and energy charges specified in the PPA (the &#147;regulatory-out&#148;
provision). Until September&nbsp;15, 2007, however, the capacity charge may not
be reduced below an average capacity rate of 3.77 cents per kilowatt-hour
for the available Contract Capacity notwithstanding the &#147;regulatory-out&#148;
provision. Consumers and MCV are required to support and defend the terms
of the PPA.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Facility is a qualifying cogeneration facility (&#147;QF&#148;) originally
certified by the Federal Energy Regulatory Commission (&#147;FERC&#148;) under the
Public Utility Regulatory Policies Act of 1978, as amended (&#147;PURPA&#148;). In
order to maintain QF status, certain operating and efficiency standards must
be maintained on a calendar-year basis and certain ownership limitations
must be met. In the case of a topping-cycle generating plant such as the
Facility, the applicable operating standard requires that the portion of
total energy output that is put to some useful purpose other than
facilitating the production of power (the &#147;Thermal Percentage&#148;) be at least
5%. In addition, the Facility must achieve a PURPA efficiency standard (the
sum of the useful power output plus one-half of the useful thermal energy
output, divided by the energy input (the &#147;Efficiency Percentage&#148;)) of at
least 45%. If the Facility maintains a Thermal Percentage of 15% or higher,
the required Efficiency Percentage is reduced to 42.5%. Since 1990, the
Facility has achieved the applicable Thermal and Efficiency Percentages.
For the twelve months ended December&nbsp;31, 2003, the Facility achieved a
Thermal Percentage of 21.0% and an Efficiency Percentage of 47.4%. The loss
of QF status could, among other things, cause the Facility to lose its
rights under PURPA to sell power to Consumers at Consumers&#146; &#147;avoided cost&#148;
and subject the Facility to additional federal and state regulatory
requirements. MCV believes that the Facility will meet the required Thermal
Percentage and the corresponding Efficiency Percentage in 2003 and beyond,
as well as the PURPA ownership limitations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Facility is wholly dependent upon natural gas for its fuel supply and a
substantial portion of the Facility&#146;s operating expenses consist of the
costs of natural gas. MCV recognizes that its existing gas contracts are
not sufficient to satisfy the anticipated gas needs over the term of the PPA
and, as such, no assurance can be given
as to the availability or price of natural gas after the expiration of the
existing gas contracts. In addition, to the extent that the costs
associated with production of electricity rise faster than the energy charge
payments, MCV&#146;s financial performance will be negatively affected. The
extent of such impact will depend upon the</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-8</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">amount of the average energy charge payable under the PPA, which is based
upon costs incurred at Consumers&#146; coal-fired plants and upon the amount of
energy scheduled by Consumers for delivery under the PPA. However, given
the unpredictability of these factors, the overall economic impact upon MCV
of changes in energy charges payable under the PPA and in future fuel costs
under new or existing contracts cannot accurately be predicted.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">At both the state and federal level, efforts continue to restructure the
electric industry. A significant issue to MCV is the potential for future
regulatory denial of recovery by Consumers from its customers of above
market PPA costs Consumers pays MCV. At the state level, the MPSC entered a
series of orders from June 1997 through February 1998 (collectively the
&#147;Restructuring Orders&#148;), mandating that utilities &#147;wheel&#148; third-party power
to the utilities&#146; customers, thus permitting customers to choose their power
provider. MCV, as well as others, filed an appeal in the Michigan Court of
Appeals to protect against denial of recovery by Consumers of PPA charges.
The Michigan Court of Appeals found that the Restructuring Orders do not
unequivocally disallow such recovery by Consumers and, therefore, MCV&#146;s
issues were not ripe for appellate review and no actual controversy
regarding recovery of costs could occur until 2008, at the earliest. In
June 2000, the State of Michigan enacted legislation which, among other
things, states that the Restructuring Orders (being voluntarily implemented
by Consumers) are in compliance with the legislation and enforceable by the
MPSC. The legislation provides that the rights of parties to existing
contracts between utilities (like Consumers) and QFs (like MCV), including
the rights to have the PPA charges recovered from customers of the
utilities, are not abrogated or diminished, and permits utilities to
securitize certain stranded costs, including PPA charges.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In 1999, the U.S. District Court granted summary judgment to MCV declaring
that the Restructuring Orders are preempted by federal law to the extent
they prohibit Consumers from recovering from its customers any charge for
avoided costs (or &#147;stranded costs&#148;) to be paid to MCV under PURPA pursuant
to the PPA. In 2001, the United States Court of Appeals (&#147;Appellate Court&#148;)
vacated the U.S. District Court&#146;s 1999 summary judgment and ordered the case
dismissed based upon a finding that no actual case or controversy existed
for adjudication between the parties. The Appellate Court determined that
the parties&#146; dispute is hypothetical at this time and the QFs&#146; (including
MCV) claims are premised on speculation about how an order might be
interpreted by the MPSC, in the future.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV continues to monitor and participate in these industry restructuring
matters as appropriate, and to evaluate potential impacts on both cash flows
and recoverability of the carrying value of property, plant and equipment.
MCV management cannot, at this time, predict the impact or outcome of these
matters.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(2)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">SIGNIFICANT ACCOUNTING POLICIES</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates. Following is a discussion of MCV&#146;s significant accounting
policies.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Principles of Consolidation</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The consolidated financial statements include the accounts of MCV and its
wholly owned subsidiaries. All material transactions and balances among
entities, which comprise MCV, have been eliminated in the consolidated
financial statements.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Revenue Recognition</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV recognizes revenue for the sale of variable energy and fixed energy when
delivered. Capacity and other installment revenues are recognized based on
plant availability or other contractual arrangements.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-9</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Fuel Costs</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV&#146;s fuel costs are those costs associated with securing natural gas,
transportation and storage services necessary to generate electricity and
steam from the Facility. These costs are recognized in the income statement
based upon actual volumes burned to produce the delivered energy. In
addition, MCV engages in certain cost mitigation activities to offset the
fixed charges MCV incurs for these activities. The gains or losses resulting
from these activities have resulted in net gains of approximately $7.7
million, $3.9&nbsp;million and $5.5&nbsp;million for the years ended 2003, 2002 and
2001, respectively. These net gains are reflected as a component of fuel
costs.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In July 2000, in response to rapidly escalating natural gas prices and
since Consumers electric rates were frozen, MCV entered into transactions
with Consumers whereby Consumers agreed to reduce MCV&#146;s dispatch level and
MCV agreed to share with Consumers the savings realized by not having to
generate electricity (&#147;Dispatch Mitigation&#148;). For the years ended 2003,
2002 and 2001, MCV estimates that Dispatch Mitigation resulted in net
savings of approximately $13.0&nbsp;million, $2.5&nbsp;million and $7.6&nbsp;million,
respectively, a portion of which will be realized in reduced maintenance
expenditures in future years.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Subsequently, on January&nbsp;1, 2004, Dispatch Mitigation ceased and Consumers
began dispatching MCV pursuant to the 915 MW Settlement and the 325 MW
Settlement &#147;availability caps&#148; provision (i.e., minimum dispatch of 1100 MW
on- and off-peak (&#147;Forced Dispatch&#148;)). On February&nbsp;12, 2004, MCV and
Consumers entered into a Resource Conservation Agreement (&#147;RCA&#148;) which,
among other things, provides that Consumers will economically dispatch MCV,
if certain conditions are met. Such dispatch is expected to reduce
electric production from what would have occurred under the Forced
Dispatch, as well as decrease gas consumption by MCV. The RCA provides
that Consumers has a right of first refusal to purchase, at market prices,
the gas conserved under the RCA. The RCA further provides for the parties
to enter into another agreement implementing the terms of the RCA including
the sharing of savings realized by not having to generate electricity. The
RCA is subject to MPSC approval and MCV and Consumers must accept the terms
of the MPSC order as a condition precedent to the RCA becoming effective.
The MPSC has not yet acted upon Consumers&#146; application for approval of the
RCA. MCV cannot predict the outcome of the MPSC proceedings necessary to
effectuate the RCA.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Inventory</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV&#146;s inventory of natural gas is stated at the lower of cost or market, and
valued using the last-in, first-out (&#147;LIFO&#148;) method. Inventory includes the
costs of purchased gas, variable transportation and storage. The amount of
reserve to reduce inventories from first-in, first-out (&#147;FIFO&#148;) basis to the
LIFO basis at December&nbsp;31, 2003 and 2002, was $8.4&nbsp;million and $7.4&nbsp;million,
respectively. Inventory cost, determined on a FIFO basis, approximates
current replacement cost.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Materials and Supplies</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Materials and supplies are stated at the lower of cost or market using the
weighted average cost method. The majority of MCV&#146;s materials and supplies
are considered replacement parts for MCV&#146;s Facility.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Depreciation</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Original plant, equipment and pipeline were valued at cost for the
constructed assets and at the asset transfer price for purchased and
contributed assets, and are depreciated using the straight-line method over
an estimated useful life of 35&nbsp;years, which is the term of the PPA, except
for the hot gas path components of the GTGs which are primarily being
depreciated over a 25-year life. Plant construction and additions, since
commercial
operations in 1990, are depreciated using the straight-line method over the
remaining life of the plant which currently is 22&nbsp;years. Major renewals and
replacements, which extend the useful life of plant and equipment</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-10</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">are capitalized, while maintenance and repairs are expensed when incurred.
Major equipment overhauls are capitalized and amortized to the next
equipment overhaul. Personal property is depreciated using the
straight-line method over an estimated useful life of 5 to 15&nbsp;years. The
cost of assets and related accumulated depreciation are removed from the
accounts when sold or retired, and any resulting gain or loss reflected in
operating income.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Federal Income Tax</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV is not subject to Federal or State income taxes. Partnership earnings
are taxed directly to each individual partner.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Statement of Cash Flows</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">All liquid investments purchased with a maturity of three months or less at
time of purchase are considered to be current cash equivalents.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Fair Value of Financial Instruments</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The carrying amounts of cash and cash equivalents and short-term investments
approximate fair value because of the short maturity of these instruments.
MCV&#146;s short-term investments, which are made up of investment securities
held-to-maturity, as of December&nbsp;31, 2003 and December&nbsp;31, 2002 have
original maturity dates of approximately one year or less. The unique
nature of the negotiated financing obligation discussed in Note 6 makes it
unnecessary to estimate the fair value of the Owner Participants&#146; underlying
debt and equity instruments supporting such financing obligation, since SFAS
No.&nbsp;107 &#147;Disclosures about Fair Value of Financial Instruments&#148; does not
require fair value accounting for the lease obligation.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Accounting for Derivative Instruments and Hedging Activities</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Effective January&nbsp;1, 2001, MCV adopted SFAS No.&nbsp;133, &#147;Accounting for
Derivative Instruments and Hedging Activities&#148; which was issued in June 1998
and then amended by SFAS No.&nbsp;137, &#147;Accounting for Derivative Instruments and
Hedging Activities &#150; Deferral of the Effective Date of SFAS No.&nbsp;133,&#148; SFAS
No.&nbsp;138 &#147;Accounting for Certain Derivative Instruments and Certain Hedging
Activities &#150; An amendment of FASB Statement No.&nbsp;133&#148; and SFAS No.&nbsp;149
&#147;Amendment of Statement 133 on Derivative Instruments and Hedging Activity
(collectively referred to as &#147;SFAS No.&nbsp;133&#148;). SFAS No.&nbsp;133 establishes
accounting and reporting standards requiring that every derivative
instrument be recorded on the balance sheet as either an asset or liability
measured at its fair value. SFAS No.&nbsp;133 requires that changes in a
derivative&#146;s fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. Special accounting for qualifying hedges
in some cases allows a derivative&#146;s gains and losses to offset related
results on the hedged item in the income statement or permits recognition of
the hedge results in other comprehensive income, and requires that a company
formally document, designate and assess the effectiveness of transactions
that receive hedge accounting.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Electric Sales Agreements</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">MCV believes that its electric sales agreements currently do not qualify
as derivatives under SFAS No.&nbsp;133, due to the lack of an active energy
market (as defined by SFAS No.&nbsp;133) in the State of Michigan and the
transportation cost to deliver the power under the contracts to the
closest active energy market at the Cinergy hub in Ohio and as such does
not record the fair value of these contracts on its balance sheet. If an
active energy market emerges, MCV intends to apply the normal purchase,
normal sales exception under SFAS No.&nbsp;133 to its electric sales
agreements, to the extent such exception is applicable.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Forward Foreign Exchange Contracts</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">An amended service agreement was entered into between MCV and Alstom
Power Company (&#147;Alstom&#148;) (the &#147;Amended Service Agreement&#148;), under which
Alstom will provide hot gas path parts for MCV&#146;s twelve</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-11</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">gas turbines. The payments due to Alstom under the Amended Service
Agreement are adjusted annually based on the U.S. dollar to Swiss franc
currency exchange rate.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">To manage this currency exchange rate risk and hedge against adverse
currency fluctuations impacting the payments under the Amended Service
Agreement, MCV maintained a foreign currency hedging program whereby MCV
periodically entered into forward purchase contracts for Swiss francs.
Under SFAS No.&nbsp;133, the forward foreign currency exchange contracts
qualified as fair value hedges, since they hedged the identifiable
foreign currency commitment of the Amended Service Agreement. As of
December&nbsp;31, 2003, MCV did not have any such transactions outstanding and
does not anticipate any future transactions since the Alstom Agreement is
expected to be terminated in the near future. As of December&nbsp;31, 2002,
MCV had a forward purchase contract involving Swiss francs in the
notional amount of $5.0&nbsp;million. This hedge was considered highly
effective, therefore, there was no material gain or loss recognized in
earnings during the twelve months ended December&nbsp;31, 2002.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Natural Gas Supply Contracts</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">MCV management believes that its long-term natural gas contracts which do
not contain volume optionality qualify under SFAS No.&nbsp;133 for the normal
purchases and normal sales exception. Therefore, these contracts are
currently not recognized at fair value on the balance sheet.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">The FASB issued DIG Issue C-16, which became effective April&nbsp;1, 2002,
regarding natural gas commodity contracts that combine an option
component and a forward component. This guidance requires either that
the entire contract be accounted for as a derivative or the components of
the contract be separated into two discrete contracts. Under the first
alternative, the entire contract considered together would not qualify
for the normal purchases and sales exception under the revised guidance.
Under the second alternative, the newly established forward contract
could qualify for the normal purchases and sales exception, while the
option contract would be treated as a derivative under SFAS No.&nbsp;133 with
changes in fair value recorded through earnings. At April&nbsp;1, 2002, MCV
had nine long-term gas contracts that contained both an option and
forward component. As such, they were no longer accounted for under the
normal purchases and sales exception and MCV began mark-to-market
accounting of these nine contracts through earnings. Based on the natural
gas prices, at the beginning of April 2002, MCV recorded a $58.1&nbsp;million
gain for the cumulative effect of this accounting change. During the
fourth quarter of 2002, MCV removed the option component from three of
the nine long-term gas contracts, which should reduce some of the
earnings volatility. Since April 2002, MCV has recorded an additional
mark-to-market gain of $16.9&nbsp;million for these gas contracts for a
cumulative mark-to-market gain through December&nbsp;31, 2003 of $75.0
million, which will reverse over the remaining life of these gas
contracts, ranging from 2004 to 2007.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">For the twelve months ended December&nbsp;31, 2003, MCV recorded in &#147;Fuel
costs&#148; a $5.0&nbsp;million net mark-to-market loss in earnings associated with
these contracts. In addition, as of December&nbsp;31, 2003 and December&nbsp;31,
2002, MCV recorded &#147;Derivative assets&#148; in Current Assets in the amount of
$56.9&nbsp;million and $48.9&nbsp;million, respectively, and for the same periods
recorded &#147;Derivative assets&#148; in Other Assets in the amount of $18.1
million and $31.0&nbsp;million, respectively, representing the mark-to-market
gain on these long-term natural gas contracts.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Natural Gas Supply Futures and Options</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">To manage market risks associated with the volatility of natural gas
prices, MCV maintains a gas hedging program. MCV enters into natural gas
futures and option contracts in order to hedge against unfavorable
changes in the market price of natural gas in future months when gas is
expected to be needed. These financial instruments are being utilized
principally to secure anticipated natural gas requirements necessary for
projected electric and steam sales, and to lock in sales prices of
natural gas previously obtained in order to optimize MCV&#146;s existing gas
supply, storage and transportation arrangements.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">These financial instruments are derivatives under SFAS No.&nbsp;133 and the
contracts that are utilized to secure the anticipated natural gas
requirements necessary for projected electric and steam sales qualify as
cash flow</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-12</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">hedges under SFAS No.&nbsp;133, since they hedge the price risk associated
with the cost of natural gas. MCV also engages in cost mitigation
activities to offset the fixed charges MCV incurs in operating the
Facility. These cost mitigation activities include the use of futures
and options contracts to purchase and/or sell natural gas to maximize the
use of the transportation and storage contracts when it is determined
that they will not be needed for Facility operation. Although these cost
mitigation activities do serve to offset the fixed monthly charges, these
cost mitigation activities are not considered a normal course of business
for MCV and do not qualify as hedges under SFAS No.&nbsp;133. Therefore, the
resulting mark-to-market gains and losses from cost mitigation activities
are flowed through MCV&#146;s earnings.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Cash is deposited with the broker in a margin account at the time futures
or options contracts are initiated. The change in market value of these
contracts requires adjustment of the margin account balances. The margin
account balance as of December&nbsp;31, 2003 and December&nbsp;31, 2002 was
recorded as a current asset in &#147;Broker margin accounts and prepaid
expenses,&#148; in the amount of $4.1&nbsp;million and $.8&nbsp;million, respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">For the twelve months ended December&nbsp;31, 2003, MCV has recognized in
other comprehensive income, an unrealized $5.0&nbsp;million increase on the
futures contracts, which are hedges of forecasted purchases for plant use
of market priced gas. This resulted in a net $31.3&nbsp;million gain in other
comprehensive income as of December&nbsp;31, 2003. This balance represents
natural gas futures and options with maturities ranging from January 2004
to December 2007, of which $21.8&nbsp;million of this gain is expected to be
reclassified into earnings within the next twelve months. MCV also has
recorded, as of December&nbsp;31, 2003, a $29.9&nbsp;million current derivative
asset in &#147;Derivative assets,&#148; representing the mark-to-market gain on
natural gas futures for anticipated projected electric and steam sales
accounted for as hedges. In addition, for the twelve months ended
December&nbsp;31, 2003, MCV has recorded a net $35.0&nbsp;million gain in earnings
included in fuel costs from hedging activities related to MCV natural gas
requirements for Facility operations and a net $1.0&nbsp;million gain in
earnings from cost mitigation activities.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">For the twelve months ended December&nbsp;31, 2002, MCV recognized an
unrealized $50.6&nbsp;million increase in other comprehensive income on the
futures contracts, which are hedges of forecasted purchases for plant use
of market priced gas, resulting in a $26.3&nbsp;million gain balance in other
comprehensive income as of December&nbsp;31, 2002. As of December&nbsp;31, 2002,
MCV had recorded a $24.9&nbsp;million current derivative asset in &#147;Derivative
assets.&#148; For the twelve months ended December&nbsp;31, 2002, MCV had recorded
a net $12.2&nbsp;million loss in earnings from hedging activities related to
MCV natural gas requirements for Facility operations and a net $.4
million gain in earnings from cost mitigation activities.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Interest Rate Swaps</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">To manage the effects of interest rate volatility on interest income
while maximizing return on permitted investments, MCV established an
interest rate hedging program. The notional amounts of the hedges are
tied directly to MCV&#146;s anticipated cash investments, without physically
exchanging the underlying notional amounts. Cash is deposited with the
broker in a margin account at the time the interest rate swap
transactions are initiated. The change in market value of these
contracts may require further adjustment of the margin account balance.
The margin account balance at December&nbsp;31, 2002, of
approximately $25,000, which was recorded as a current asset in &#147;Broker margin accounts
and prepaid expenses,&#148; was returned to MCV during the month of January
2003 since MCV currently does not have any outstanding interest rate swap
transactions.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">As of December&nbsp;31, 2002, MCV had one interest rate swap, with a notional
amount of $20.0&nbsp;million with a period of performance that extended to
December&nbsp;1, 2002, which did not qualify as a hedge under SFAS No.&nbsp;133.
The gains and losses on this swap were recorded currently in earnings.
For the twelve months ended December&nbsp;31, 2002, MCV recorded an immaterial
loss in earnings.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-13</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Reclassification</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="93%"><FONT size="2">Certain prior period amounts have been reclassified to conform to the
current year financial statement presentation.</FONT></TD>
</TR>
</TABLE>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">New Accounting Standards</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In April 2003, the FASB issued SFAS No.&nbsp;149, &#147;Amendment of Statement 133 on
Derivative Instruments and Hedging Activities.&#148; This SFAS amends SFAS No.
133 for decisions made (1)&nbsp;as part of the Derivative Implementations Group
process that effectively required amendments to SFAS No.&nbsp;133, (2)&nbsp;for other
Financial Accounting Standards Board projects dealing with financial
instruments and (3)&nbsp;for implementation issues raised in relation to the
application of this definition of a derivative. The changes in this SFAS
No.&nbsp;149 improve financial reporting by requiring that contracts with
comparable characteristics be accounted for similarly, which will result in
more consistent reporting of contracts as either derivatives or hybrid
instruments. This standard is effective for contracts entered into or
modified after June&nbsp;30, 2003, with some exceptions. MCV has adopted this
standard and does not expect the application to materially affect its
financial position or results of operations.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(3)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">RESTRICTED INVESTMENT SECURITIES HELD-TO-MATURITY</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Non-current restricted investment securities held-to-maturity have carrying
amounts that approximate fair value because of the short maturity of these
instruments and consist of the following at December&nbsp;31 (in thousands):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Funds restricted for rental payments
pursuant to the Overall Lease
Transaction</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">137,296</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">136,554</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Funds restricted for management
non-qualified plans</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,147</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">139,755</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">138,701</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(4)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">ACCOUNTS PAYABLE AND ACCRUED LIABILITIES</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Accounts payable and accrued liabilities consist of the following at
December&nbsp;31 (in thousands):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="63%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accounts payable
</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Related parties</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">7,386</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">12,224</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Trade creditors</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34,786</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">27,935</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Property and single business taxes</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,548</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,842</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Other</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,648</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,079</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">57,368</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">58,080</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(5)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">GAS SUPPLIER FUNDS ON DEPOSIT</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Pursuant to individual gas contract terms with counterparties, deposit
amounts may be required by one party to
the other based upon the net amount of exposure.  The net amount of exposure will vary with
changes in market prices, credit provisions and various other factors.  Collateral paid or
received will be posted by one party to
</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-14</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">the other based upon the net amount of exposure. The net amount of exposure
will vary with changes in market prices, credit provisions and various other
factors. Collateral paid or received will be posted by one party to the
other based on the net amount of the exposure. Interest is earned on funds
on deposit. As of December&nbsp;31, 2003 MCV was not supplying any credit
support in the form of cash or letters of credit. As of December&nbsp;31, 2003
MCV was holding $4.5&nbsp;million of cash on deposit and letters of credit
totaling $116.6&nbsp;million from two gas suppliers as collateral support.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(6)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">LONG-TERM DEBT</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Long-term debt consists of the following at December&nbsp;31 (in thousands):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="66%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="6%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Financing obligation, maturing through
2015, payable in semi-annual installments
of principal and interest, collateralized
by property, plant and equipment</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,153,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,247,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Less current portion</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(134,576</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(93,928</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total long-term debt</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,018,645</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1,153,221</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Financing Obligation</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In June 1990, MCV obtained permanent financing for the Facility by entering
into sale and leaseback agreements (&#147;Overall Lease Transaction&#148;) with a
lessor group, related to substantially all of MCV&#146;s fixed assets. Proceeds
of the financing were used to retire borrowings outstanding under existing
loan commitments, make a capital distribution to the Partners and retire a
portion of notes issued by MCV to MEC Development Corporation (&#147;MDC&#148;) in
connection with the transfer of certain assets by MDC to MCV. In
accordance with SFAS No.&nbsp;98, &#147;Accounting For Leases,&#148; the sale and
leaseback transaction has been accounted for as a financing arrangement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The financing obligation utilizes the effective interest rate method, which
is based on the minimum lease payments required through the end of the
basic lease term of 2015 and management&#146;s estimate of additional
anticipated obligations after the end of the basic lease term. The
effective interest rate during the remainder of the basic lease term is
approximately 9.4%.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Under the terms of the Overall Lease Transaction, MCV sold undivided
interests in all of the fixed assets of the Facility for approximately $2.3
billion, to five separate owner trusts (&#147;Owner Trusts&#148;) established for the
benefit of certain institutional investors (&#147;Owner Participants&#148;). U.S.
Bank National Association (formerly known as State Street Bank and Trust
Company) serves as owner trustee (&#147;Owner Trustee&#148;) under each of the Owner
Trusts, and leases undivided interests in the Facility on behalf of the
Owner Trusts to MCV for an initial term of 25&nbsp;years. CMS Midland Holdings
Company (&#147;CMS Holdings&#148;), currently a wholly owned subsidiary of Consumers,
acquired a 35% indirect equity interest in the Facility through its
purchase of an interest in one of the Owner Trusts.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Overall Lease Transaction requires MCV to achieve certain rent coverage
ratios and other financial tests prior to a distribution to the Partners.
Generally, these financial tests become more restrictive with the passage
of time. Further, MCV is restricted to making permitted investments and
incurring permitted
indebtedness as specified in the Overall Lease Transaction. The Overall
Lease Transaction also requires filing of certain periodic operating and
financial reports, notification to the lessors of events constituting a
material adverse change, significant litigation or governmental
investigation, and change in status as a qualifying facility under FERC
proceedings or court decisions, among others. Notification and approval is
required for plant modification, new business activities, and other
significant changes, as defined. In addition,</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-15</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV has agreed to indemnify various parties to the sale and leaseback
transaction against any expenses or environmental claims asserted, or
certain federal and state taxes imposed on the Facility, as defined in the
Overall Lease Transaction.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Under the terms of the Overall Lease Transaction and refinancing of the
tax-exempt bonds, approximately $25.0&nbsp;million of transaction costs were a
liability of MCV and have been recorded as a deferred cost. Financing
costs incurred with the issuance of debt are deferred and amortized using
the interest method over the remaining portion of the 25-year lease term.
Deferred financing costs of approximately $1.4&nbsp;million, $1.5&nbsp;million and
$1.7&nbsp;million were amortized in the years 2003, 2002 and 2001, respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Interest and fees incurred related to long-term debt arrangements during
2003, 2002 and 2001 were $111.9&nbsp;million, $118.3&nbsp;million and $124.6&nbsp;million,
respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Interest and fees paid during 2003, 2002 and 2001 were $115.4&nbsp;million,
$122.1&nbsp;million and $131.7&nbsp;million, respectively.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Minimum payments due under these long-term debt arrangements over the next
five years are (in thousands):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="14%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="12%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="11%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Principal</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Interest</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Total</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">134,576</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">108,233</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">242,809</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76,547</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">97,836</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">174,383</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2006</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">63,459</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">92,515</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">155,974</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2007</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">62,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">87,988</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">150,904</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2008</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">67,753</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">83,163</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">150,916</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">405,251</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">469,735</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">874,986</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Revolving Credit Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV has also entered into a working capital line (&#147;Working Capital
Facility&#148;), which expires August&nbsp;29, 2004. Under the terms of the existing
agreement, MCV can borrow up to the $50&nbsp;million commitment, in the form of
short-term borrowings or letters of credit collateralized by MCV&#146;s natural
gas inventory and earned receivables. At any given time, borrowings and
letters of credit are limited by the amount of the borrowing base, defined
as 90% of earned receivables and 50% of natural gas inventory, capped at
$15&nbsp;million. During 2003, MCV did not utilize the Working Capital
Facility. At December&nbsp;31, 2003, MCV had no outstanding borrowings or
letters of credit.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Intercreditor Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV has also entered into an Intercreditor Agreement with the Owner
Trustee, Working Capital Lender, U.S. Bank National Association as
Collateral Agent (&#147;Collateral Agent&#148;) and the Senior and Subordinated
Indenture Trustees. Under the terms of this agreement, MCV is required to
deposit all revenues derived from the operation of the Facility with the
Collateral Agent for purposes of paying operating expenses and rent. In
addition, these funds are required to pay construction modification costs
and to secure future rent payments. As of December&nbsp;31, 2003, MCV has
deposited $137.3&nbsp;million into the reserve account. The reserve account is
to be maintained at not less than $40&nbsp;million nor more than $137&nbsp;million
(or debt portion of next succeeding basic rent payment, whichever is
greater). Excess funds in the reserve account are periodically transferred
to MCV. This agreement also contains provisions governing the distribution
of revenues and rents due under the
Overall Lease Transaction, and establishes the priority of payment among
the Owner Trusts, creditors of the Owner Trusts, creditors of MCV and the
Partnership.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-16</FONT>
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<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(7)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">COMMITMENTS AND OTHER AGREEMENTS</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV has entered into numerous commitments and other agreements related to
the Facility. Principal agreements are summarized as follows:</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Power Purchase Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV and Consumers have executed the PPA for the sale to Consumers of a
minimum amount of electricity, subject to the capacity requirements of Dow
and any other permissible electricity purchasers. Consumers has the right
to terminate and/or withhold payment under the PPA if the Facility fails to
achieve certain operating levels or if MCV fails to provide adequate fuel
assurances. In the event of early termination of the PPA, MCV would have a
maximum liability of approximately $270&nbsp;million if the PPA were terminated
in the 12<SUP>th</SUP> through 24<SUP>th</SUP> years. The term of this agreement is 35&nbsp;years
from the commercial operation date and year-to-year thereafter.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Steam and Electric Power Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV and Dow executed the SEPA for the sale to Dow of certain minimum
amounts of steam and electricity for Dow&#146;s facilities.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">If the SEPA is terminated, and Consumers does not fulfill MCV&#146;s commitments
as provided in the Backup Steam and Electric Power Agreement, MCV will be
required to pay Dow a termination fee, calculated at that time, ranging
from a minimum of $60&nbsp;million to a maximum of $85&nbsp;million. This agreement
provides for the sale to Dow of steam and electricity produced by the
Facility for terms of 25&nbsp;years and 15&nbsp;years, respectively, commencing on
the commercial operation date and year-to-year thereafter.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Steam Purchase Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV and DCC executed the SPA for the sale to DCC of certain minimum amounts
of steam for use at the DCC Midland site. Steam sales under the SPA
commenced in July 1996. Termination of this agreement, prior to
expiration, requires the terminating party to pay to the other party a
percentage of future revenues, which would have been realized had the
initial term of 15&nbsp;years been fulfilled. The percentage of future revenues
payable is 50% if termination occurs prior to the fifth anniversary of the
commercial operation date and 33-1/3% if termination occurs after the fifth
anniversary of this agreement. The term of this agreement is 15&nbsp;years from
the commercial operation date of steam deliveries under the contract and
year-to-year thereafter.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Gas Supply Agreements</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV has entered into gas purchase agreements with various producers for the
supply of natural gas. The current contracted volume totals 227,561 MMBtu
per day annual average for 2004. As of January&nbsp;1, 2004, gas contracts with
U.S. suppliers provide for the purchase of 149,423 MMBtu per day while gas
contracts with Canadian suppliers provide for the purchase of 78,138 MMBtu
per day. Some of these contracts require MCV to pay for a minimum amount
of natural gas per year, whether or not taken. The estimated minimum
commitments under these contracts based on current long term prices for gas
for the years 2004 through 2008 are $267.3&nbsp;million, $338.6&nbsp;million, $344.1
million, $340.4&nbsp;million and $283.9&nbsp;million, respectively. A portion of
these payments may be utilized in future years to offset the cost of
quantities of natural gas taken above the minimum amounts.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Gas Transportation Agreements</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV has entered into firm natural gas transportation agreements with
various pipeline companies. These agreements require MCV to pay certain
reservation charges in order to reserve the transportation capacity.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-17</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV incurred reservation charges in 2003, 2002 and 2001, of $34.8&nbsp;million,
$35.1&nbsp;million and $36.2&nbsp;million, respectively. The estimated minimum
reservation charges required under these agreements for each of the years
2004 through 2008 are $34.9&nbsp;million, $33.8&nbsp;million, $30.0&nbsp;million, $21.6
million and $21.6&nbsp;million, respectively. These projections are based on
current commitments.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Gas Turbine Service Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV entered into a Service Agreement, as amended, with Alstom, which
commenced on January&nbsp;1, 1990 and was set to expire upon the earlier of the
completion of the sixth series of major GTG inspections or December&nbsp;31,
2009. Under the terms of this agreement, Alstom sold MCV an initial
inventory of spare parts for the GTGs and provides qualified service
personnel and supporting staff to assist MCV, to perform scheduled
inspections on the GTGs, and to repair the GTGs at MCV&#146;s request. Upon
termination of the Service Agreement (except for nonperformance by Alstom),
MCV must pay a cancellation payment. MCV and Alstom amended the Service
Agreement, effective December&nbsp;31, 1993, to include the supply of hot gas
path parts. Under the amended Service Agreement, Alstom provides hot gas
path parts for MCV&#146;s twelve gas turbines through the fourth series of major
GTG inspections, which were completed in 2002. In January 1998, MCV and
Alstom amended the length of the amended Service Agreement to extend
through the sixth series of major GTG inspections, which are expected to be
completed by year end 2008, for a lump sum fixed price covering the entire
term of the amended Service Agreement of $266.5&nbsp;million (in 1993 dollars,
which is adjusted based on exchange rates and Swiss inflation indices),
payable on the basis of operating hours as they occur over the same period.
MCV has made payments totaling approximately $200.7&nbsp;million under this
amended Service Agreement through December&nbsp;31, 2003.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV signed a new maintenance service and parts agreement with General
Electric International, Inc. (&#147;GEII&#148;), effective December&nbsp;31, 2002 (&#147;GEII
Agreement&#148;). GEII will provide maintenance services and hot gas path parts
for MCV&#146;s twelve GTG&#146;s. Under terms and conditions similar to the
MCV/Alstom Service Agreement, as described above the GEII Agreement will
cover four rounds of major GTG inspections, which are expected to be
completed by the year 2015, at a savings to MCV as compared to the Service
Agreement with Alstom. The GEII Agreement is expected to replace the
current Alstom Service Agreement commencing July&nbsp;1, 2004. The GEII
Agreement can be terminated by either party for cause or convenience.
Should termination for convenience occur, a buy out amount will be paid by
the terminating party with payments ranging from approximately $19.0
million to $.9&nbsp;million, based upon the number of operating hours utilized
since commencement of the GEII Agreement.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV terminated the Alstom Service Agreement in February 2004, for cause and therefore does not owe the approximately $5.8&nbsp;million termination payment to Alstom. MCV has a claim against Alstom for approximately $3.0&nbsp;million for
adjustments due to reduced equivalent operating hours experienced under the
Service Agreement, that was paid by MCV and a claim against Alstom for one set of hot gas path spare parts (valued within a
range of $3.0&nbsp;million to $7.0&nbsp;million). These matters may be disputed by
Alstom and other disputes may arise. MCV will seek final resolution of all claims that may arise between the parties. At
this time, MCV has not recognized any liability to or receivable from Alstom in connection with these claims or termination.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Steam Turbine Service Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV entered into a nine year Steam Turbine Maintenance Agreement with
General Electric Company effective January&nbsp;1, 1995, which is designed to
improve unit reliability, increase availability and minimize unanticipated
maintenance costs. In addition, this contract includes performance
incentives and penalties,
which are based on the length of each scheduled outage and the number of
forced outages during a calendar year. Effective February&nbsp;1, 2004, MCV and
GE amended this contract to extend its term through August&nbsp;31, 2007. MCV
will continue making monthly payments over the life of the contract, which
will total</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-18</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>


<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">$22.3&nbsp;million (subject to escalation based on defined indices). The
parties have certain termination rights without incurring penalties or
damages for such termination. Upon termination, MCV is only liable
for payment of services rendered or parts provided prior to
termination.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Site Lease</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In December 1987, MCV leased the land on which the Facility is located from
Consumers (&#147;Site Lease&#148;). MCV and Consumers amended and restated the Site
Lease to reflect the creation of five separate undivided interests in the
Site Lease as of June&nbsp;1, 1990. Pursuant to the Overall Lease Transaction,
MCV assigned these undivided interests in the Site Lease to the Owner
Trustees, which in turn subleased the undivided interests back to MCV under
five separate site subleases.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The Site Lease is for a term which commenced on December&nbsp;29, 1987, and ends
on December&nbsp;31, 2035, including two renewal options of five years each.
The rental under the Site Lease is $.6&nbsp;million per annum, including the two
five-year renewal terms.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Gas Turbine Generator Compressor Blade Agreement</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV entered into an agreement with MTS Machinery Tools &#038; Services AG
(&#147;MTS&#148;), in January 2002. Under this agreement MTS redesigned and will
manufacture and install new design compressor blades for MCV&#146;s twelve
GTG&#146;s, which is expected to increase the overall electrical capacity and
efficiency of each GTG. MCV has purchased three sets of such blades and
has the option to purchase an additional nine sets. The first set of
compressor blades was installed in the second quarter of 2003 for
approximately $4.2&nbsp;million. At this time, an additional two sets have been
ordered at a cost of $4.1&nbsp;million.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(8)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">PROPERTY TAXES</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In 1997, MCV filed a property tax appeal against the City of Midland at the
Michigan Tax Tribunal contesting MCV&#146;s 1997 property taxes. Subsequently,
MCV filed appeals contesting its property taxes for tax years 1998 through
2003 at the Michigan Tax Tribunal. A trial was held for tax years 1997 &#150;
2000. The appeals for tax years 2001-2003 are being held in abeyance. On
January&nbsp;23, 2004, the Michigan Tax Tribunal issued its decision in MCV&#146;s
tax appeal against the City of Midland for tax years 1997 through 2000.
MCV management has estimated that the decision will result in a refund to
MCV for the tax years 1997 through 2000 of approximately $29&nbsp;million in
taxes plus $7&nbsp;million of interest. The decision is subject to
reconsideration at the Tribunal and may be appealed to the Michigan
Appellate Court and Michigan Supreme Court. The City of Midland has filed
a motion for reconsideration at the Michigan Tax Tribunal, asking the
Tribunal to make certain technical corrections, as well as substantive
changes to the decision. MCV has opposed this motion. MCV management
cannot predict the outcome of these further legal proceedings. MCV has not
recognized any of the above stated refunds (net of approximately $15.5
million of deferred expenses) in earnings at this time.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(9)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">RETIREMENT BENEFITS</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Postretirement Health Care Plans</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">In 1992, MCV established defined cost postretirement health care plans
(&#147;Plans&#148;) that cover all full-time employees, excluding key management.
The Plans provide health care credits, which can be utilized to purchase
medical plan coverage and pay qualified health care expenses. Participants
become eligible for the
benefits if they retire on or after the attainment of age 65 or upon a
qualified disability retirement, or if they have 10 or more years of
service and retire at age 55 or older. The Plans granted retroactive
benefits for all employees hired prior to January&nbsp;1, 1992. This prior
service cost has been amortized to expense over a five</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-19</FONT>
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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">year period. MCV annually funds the current year service and interest
cost as well as amortization of prior service cost to both qualified and
non-qualified trusts. The MCV accounts for retiree medical benefits in
accordance with SFAS 106, &#147;Employers Accounting for Postretirement Benefits
Other Than Pensions.&#148; This standard required the full accrual of such
costs during the years that the employee renders service to the MCV until
the date of full eligibility. The accumulated benefit obligation of the
Plans were $3.3&nbsp;million at December&nbsp;31, 2003 and $2.7&nbsp;million at December
31, 2002. The measurement date of these Plans was December&nbsp;31, 2003.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">On December&nbsp;8, 2003, President Bush signed into law the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the &#147;Act&#148;).
The Act expanded Medicare to include, for the first time, coverage for
prescription drugs. At this time, because of various uncertainties related
to this legislation and the appropriate accounting methodology, MCV has
elected to defer financial recognition of this legislation until the FASB
issues final accounting guidance. When issued, that final guidance could
require MCV to change previously reported information. This deferral
election is permitted under SFAS 106-1.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The following table reconciles the change in the Plans&#146; benefit obligation
and change in Plan assets as reflected on the balance sheet as of December
31 (in thousands):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="70%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in benefit obligation:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Benefit obligation at beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,741.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">2,405.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Service cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">212.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">197.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">178.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">188.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Actuarial gain (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">147.4</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(44.6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Benefits paid during year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4.0</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4.6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Benefit obligation at end of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,276.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,741.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Change in Plan assets:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fair value of Plan assets at beginning of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,045.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,088.0</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Actual return on Plan assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">527.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(270.9</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Employer contribution</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">257.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">233.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Benefits paid during year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4.0</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(4.6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fair value of Plan assets at end of year</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,826.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,045.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unfunded (funded)&nbsp;status</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">449.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">696.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unrecognized prior service cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(170.3</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(184.6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Unrecognized net gain (loss)</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(278.9</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(511.5</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Accrued benefit cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Net periodic postretirement health care cost for years ending December&nbsp;31,
included the following components (in thousands):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="85%">
<TR valign="bottom">
    <TD width="64%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Components of net periodic benefit cost:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Service cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">212.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">197.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">173.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Interest cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">178.2</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">188.7</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">142.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Expected return on Plan assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(163.7</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(167.0</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(171.3</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Amortization of unrecognized net (gain)&nbsp;or loss</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">30.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">(12.6</FONT></TD>
    <TD nowrap><FONT size="2">)</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Net periodic benefit cost</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">257.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">233.3</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">132.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="center"><FONT size="2">F-20</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plans. A one-percentage-point change
in assumed health care cost trend rates would have the following effects
(in thousands):</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="75%">
<TR valign="bottom">
    <TD width="80%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>1-Percentage-Point</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>

<TD nowrap align="center" colspan="3"><FONT size="1"><B>1-Percentage-Point</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Increase</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Decrease</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect on total of service and interest cost components</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">48.6</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">41.8</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Effect on postretirement benefit obligation</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">358.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">310.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Assumptions used in accounting for the Post-Retirement Health Care Plan
were as follows:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="65%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="65%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Discount rate</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6.75</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.25</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Long-term rate of return on Plan assets</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">8.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Inflation benefit amount</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">1998 through 2004</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">0.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">2005 and later years</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.00</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The long-term rate of return on Plan assets is established based on MCV&#146;s
expectations of asset returns for the investment mix in its Plan (with some
reliance on historical asset returns for the Plans). The expected returns
for various asset categories are blended to derive one long-term
assumption.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Plan Assets. Citizens Bank has been appointed as trustee (&#147;Trustee&#148;) of
the Plan. The Trustee serves as investment consultant, with the
responsibility of providing financial information and general guidance to
the MCV Benefits Committee. The Trustee shall invest the assets of the
Plan in the separate investment options in accordance with instructions
communicated to the Trustee from time to time by the MCV Benefit Committee.
The MCV Benefits Committee has the fiduciary and investment selection
responsibility for the Plan. The MCV Benefits Committee consists of MCV
Officers (excluding the President and Chief Executive Officer).</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The MCV has a target allocation of 80% equities and 20% debt instruments.
These investments emphasis total growth return, with a moderate risk level.
The MCV Benefits Committee reviews the performance of the Plan investments
quarterly, based on a long-term investment horizon and applicable
benchmarks, with rebalancing of the investment portfolio, at the discretion
of the MCV Benefits Committee.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV&#146;s Plan&#146;s weighted-average asset allocations, by asset category are as
follows as of December&nbsp;31:</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="55%">
<TR valign="bottom">
    <TD width="5%">&nbsp;</TD>
    <TD width="69%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="4%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Asset Category:</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Cash and cash equivalents</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Fixed income</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">17</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Equity securities</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">72</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">76</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">Total</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">100</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
</TR>
<TR>
    <TD colspan="2"><DIV style="margin-left:10px; text-indent:-10px"><FONT size="2">&nbsp;</FONT></DIV></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Contributions. MCV expects to contribute approximately $.2&nbsp;million to the
Plan in 2004.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Retirement and Savings Plans</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV sponsors a defined contribution retirement plan covering all employees.
Under the terms of the plan, MCV makes contributions to the plan of either
five or ten percent of an employee&#146;s eligible annual compensation dependent
upon the employee&#146;s age. MCV also sponsors a 401(k) savings plan for
employees. Contributions and costs for this plan are based on matching an
employee&#146;s savings up to a maximum level. In</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-21</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">2003, 2002 and 2001, MCV contributed $1.3&nbsp;million, $1.2&nbsp;million and $1.1
million, respectively under these plans.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Supplemental Retirement Benefits</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">MCV provides supplemental retirement, postretirement health care and excess
benefit plans for key management. These plans are not qualified plans
under the Internal Revenue Code; therefore, earnings of the trusts
maintained by MCV to fund these plans are taxable to the Partners and trust
assets are included in the assets of MCV.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-22</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<P align="center"><FONT size="2">MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP<BR>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS<BR>
(continued)
</FONT>

<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">(10)</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">PARTNERS&#146; EQUITY AND RELATED PARTY TRANSACTIONS</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">The following table summarizes the nature and amount of each of MCV&#146;s
Partner&#146;s equity interest, interest in profits and losses of MCV at December
31, 2003, and the nature and amount of related party transactions or
agreements that existed with the Partners or affiliates as of December&nbsp;31,
2003, 2002 and 2001, and for each of the twelve month periods ended December
31 (in thousands).</FONT></TD>
</TR>
</TABLE>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="24%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="18%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="19%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Beneficial Owner, Equity Partner,</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Type of Partner and Nature of Related Party</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Equity Interest</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Interest</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>Related Party Transactions and Agreements</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2003</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2002</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center" colspan="3"><FONT size="1"><B>2001</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD colspan="3"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">CMS Energy Company</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">CMS Midland, Inc.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="left"><FONT size="2">Power purchase agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">513,774</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">557,149</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">550,477</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" rowspan="3" valign="top"><FONT size="2">General Partner; wholly-owned subsidiary of Consumers Energy
Company</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Purchases under gas transportation agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,294</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">23,552</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">24,059</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Purchases under spot gas agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">663</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,631</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,756</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Purchases under gas supply agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,330</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">11,306</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10,725</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Gas storage agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">2,563</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Land lease/easement agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">600</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Accounts receivable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">40,373</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">44,289</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">48,843</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Accounts payable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,025</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,502</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,772</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">391,546</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">49.0</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Sales under spot gas agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,260</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,084</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,107</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">El Paso Corporation</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" rowspan="3"><FONT size="2">Source Midland Limited Partnership
(&#147;SMLP&#148;) General Partner; owned by
subsidiaries of El Paso Corporation<SUP>(1)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Purchase under gas transportation agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,023</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">12,463</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">13,653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Purchases under spot gas agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">15,655</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">45,130</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Purchases under gas supply agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">54,308</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">47,136</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,912</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Gas agency agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">238</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">365</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,989</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Deferred reservation charges under gas purchase agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,728</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,880</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Accounts receivable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">523</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Accounts payable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,751</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7,706</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">5,198</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Sales under spot gas agreements</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,474</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">14,007</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">28,451</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">139,421</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">18.1</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Partner cash withdrawal (including accrued interest)<SUP>(2)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">56,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3" rowspan="2"><FONT size="2">El Paso Midland, Inc. (&#147;El Paso Midland&#148;)
General Partner; wholly-owned subsidiary
of El Paso Corporation<SUP>(1)</SUP>
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">See related party activity listed under SMLP.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">

    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">83,653</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">10.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3" nowrap><FONT size="2">MEI Limited Partnership (&#147;MEI&#148;)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">See related party activity listed under SMLP.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">A General and Limited Partner;
50% interest owned by El Paso Midland, Inc.
and 50% interest owned by SMLP<SUP>(1)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">General Partnership Interest</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">69,714</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">9.1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Limited Partnership Interest</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,969</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">.9</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3" nowrap><FONT size="2">Micogen Limited Partnership</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">34,854</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4.5</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">See related party activity listed under SMLP.</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD nowrap><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">(&#147;MLP&#148;) Limited Partner, owned
subsidiaries of El Paso Corporation<SUP>(1)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="1" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">Total El Paso Corporation</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">334,611</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">43.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">The Dow Chemical Company</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">The Dow Chemical Company</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="left"><FONT size="2">Steam and electric power agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">36,207</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">29,385</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">33,727</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom" bgcolor="#eeeeee">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2" valign="top"><FONT size="2">Limited Partner</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Steam purchase agreement - Dow Corning Corp (affiliate)</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">4,017</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,746</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,781</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Purchases under demineralized water supply agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,396</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,605</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,913</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Accounts receivable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,431</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,635</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">3,191</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Accounts payable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">610</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1,016</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">948</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Standby and backup fees</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">731</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">734</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">696</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom" bgcolor="#eeeeee">
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">72,918</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">7.5</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" align="left"><FONT size="2">Sales of gas under tolling agreement</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">6,442</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">&#151;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><FONT size="2">Alanna Corporation</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD colspan="3"><FONT size="2">Alanna Corporation</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" nowrap align="left"><FONT size="2">Note receivable</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="2"><FONT size="2">Limited Partner; wholly-owned subsidiary
of Alanna Holdings Corporation</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">$</FONT></TD>
    <TD align="right"><FONT size="2">1</FONT></TD>
    <TD nowrap><FONT size="2"><SUP>(3)</SUP></FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD nowrap align="right"><FONT size="2">&nbsp;</FONT></TD>
    <TD align="right"><FONT size="2">.00001</FONT></TD>
    <TD nowrap><FONT size="2">%</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD colspan="3"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><HR size="4" noshade></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>

</TABLE>
</CENTER>
<P align="left"><FONT size="2">Footnotes to Partners&#146; Equity and Related Party Transactions
</FONT>
<P>
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0">
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><SUP>(1)</SUP></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">On January&nbsp;29, 2001, El Paso Corporation (&#147;El Paso&#148;) announced that it
had completed its merger with The Coastal Corporation (&#147;Coastal&#148;).
Coastal was the previous parent company of El Paso Midland (formerly known
as Coastal Midland, Inc.), SMLP, MLP and, through SMLP, MEI. After the
merger, Coastal became a wholly-owned subsidiary of El Paso and has
changed its name to El Paso CGP Company.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><SUP>(2)</SUP></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">A letter of credit has been issued and recorded as a note receivable from
El Paso Midland, this amount includes their share of cash available, as
well as, cash available to MEI, MLP and SMLP.</FONT></TD>
</TR>
<TR>
    <TD><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR valign="top">
    <TD width="1%" align="left" nowrap><FONT size="2"><SUP>(3)</SUP></FONT></TD>
    <TD width="3%"><FONT size="2">&nbsp;</FONT></TD>
    <TD width="96%"><FONT size="2">Alanna&#146;s capital stock is pledged to secure MCV&#146;s obligation under the
lease and other overall lease transaction documents.</FONT></TD>
</TR>
</TABLE>
<P align="center"><FONT size="2">F-23</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>




<P align="center"><FONT size="2">SUPPLEMENTAL INFORMATION
</FONT>

<P align="left"><FONT size="2">Supplemental information is to be furnished with reports filed pursuant to
Section&nbsp;15 (d)&nbsp;of the Act by registrants, which have not registered securities
pursuant to Section&nbsp;12 of the Act. No such annual report or proxy statement
has been sent to security holders.
</FONT>
<P align="center"><FONT size="2">F-24</FONT>
<!-- PAGEBREAK -->
<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>
<!-- link1 "SIGNATURES" -->
<P align="center"><FONT size="2">SIGNATURES
</FONT>

<P align="left"><FONT size="2">Pursuant to the requirements of Section&nbsp;13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="60%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="36%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD colspan="3" valign="top" align="left"><FONT size="2">MIDLAND COGENERATION VENTURE<BR>
LIMITED PARTNERSHIP</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">Date: March&nbsp;1, 2004</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
By
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">/s/ James M. Kevra</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">James M. Kevra</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="center" valign="top"><FONT size="2">President and Chief Executive Officer</FONT></TD>
</TR>
</TABLE>
</CENTER>
<P align="left"><FONT size="2">Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
</FONT>
<CENTER>
<TABLE cellspacing="0" border="0" cellpadding="0" width="100%">
<TR valign="bottom">
    <TD width="29%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="48%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="13%">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><FONT size="1"><B>Signature</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Title</B></FONT></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><FONT size="1"><B>Date</B></FONT></TD>
</TR>
<TR valign="bottom">
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
    <TD><FONT size="1">&nbsp;</FONT></TD>
    <TD nowrap align="center"><HR size="1" noshade></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">/s/ James M. Kevra
<HR size="1" noshade>
James M. Kevra</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
President and Chief Executive Officer<BR>
(Principal Executive Officer)
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top" nowrap><FONT size="2">March&nbsp;1, 2004</FONT></TD>
</TR>

<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">/s/ James M. Rajewski
<HR size="1" noshade>
James M. Rajewski</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chief Financial Officer,
Vice President and Controller<BR>
(Principal Accounting Officer)
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">March&nbsp;1, 2004</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">/s/ John J. O&#146;Rourke
<HR size="1" noshade>
John J. O&#146;Rourke</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Chairman, Management Committee
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">March&nbsp;1, 2004</FONT></TD>
</TR>
<TR valign="bottom">
    <TD valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">&nbsp;</FONT></TD>
</TR>
<TR>
    <TD valign="top"><FONT size="2">/s/ David W. Joos
<HR size="1" noshade>
David W. Joos</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">
Member, Management Committee
</FONT></TD>
    <TD><FONT size="2">&nbsp;</FONT></TD>
    <TD align="left" valign="top"><FONT size="2">March&nbsp;1, 2004</FONT></TD>
</TR>
</TABLE>
</CENTER>

<P align="center"><FONT size="2">F-25</FONT>
</BODY>
</HTML>

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(B)
<SEQUENCE>36
<FILENAME>k82154aexv99wxby.txt
<DESCRIPTION>FINANCIAL STATEMENTS FOR JORF LASFAR
<TEXT>
<PAGE>
                                                                   EXHIBIT 99(b)


                        Jorf Lasfar Energy Company S.C.A
                                      JLEC

                        CENTRALE THERMIQUE DE JORF LASFAR
                               B P 99 SIDI BOUZID
                                    EL JADIDA
                                     MOROCCO
                              Tel : 212 23 34 53 71
                              Fax : 212 23 34 54 05








                                     US GAAP

                              FINANCIAL STATEMENTS

                                      AS OF

                        DECEMBER 31, 2003, 2002 AND 2001








                                     AUDITED










- --------------------------------------------------------------------------------
    R.C. n(degree)86655 - Patente n(degree)35511273 - Identification Fiscale
                           (I.S TVA) n(degree)1021595


<PAGE>
        JORF  LASFAR  ENERGY  COMPANY

                         INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                                                      Page(s)
                                                                                                    -------------

<S>                                                                                                    <C>
        Balance Sheet

                    As of December 31, 2003, 2002, and 2001  ........................................     4


        Statement of Income

                    For year ending December 31, 2003, 2002, and 2001  ..............................     5


        Statement of Stockholders' Equity

                    For year ending December 31, 2003, 2002, and 2001  ..............................     6


        Statement of Cash Flows

                    For year ending December 31, 2003, 2002, and 2001  ..............................     7


        Notes to US GAAP Financial Statements .......................................................  8-29
</TABLE>



<PAGE>




                         Report of Independent Auditors


     We have audited the accompanying balance sheets of Jorf Lasfar Energy
Company S.C.A (the "Company") as of December 31, 2003, 2002 and 2001, and the
related statements of income, of stockholders' equity and of cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

     We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Jorf Lasfar Energy Company
S.C.A at December 31, 2003, 2002 and 2001, and the results of its operations and
its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.

Price Waterhouse

Casablanca, Morocco,
February 10, 2004

<PAGE>
       JORF  LASFAR  ENERGY  COMPANY

BALANCE SHEET

<TABLE>
<CAPTION>
                                                                 Note     December 31, 2003  December 31, 2002   December 31, 2001
                                                                 ----     -----------------  -----------------   -----------------
                                                                          (000) U.S. Dollars (000) U.S. Dollars  (000) U.S. Dollars
<S>                                                            <C>            <C>                 <C>               <C>
ASSETS

       Current Assets
           Cash ..............................................    3.1             65,611              46,683            67,106
           Inventories .......................................  2.c & 4           38,548              40,615            31,759
           Account Receivable ................................     5              85,486              76,175            86,515
           Prepayments .......................................     6               8,138              10,431             4,477
           Net investment from $ DFL model ................... 2.b & 17.3         38,461              20,206            56,061
           Net investment from Euro DFL model ................ 2.b & 17.3         40,942              31,298            21,301
           Other .............................................                         0                  0                 0
                                                                              ----------          ----------        ----------
                  Total current assets .......................                   277,186             225,408           267,219

       Long Term Assets, net
           Restricted Cash ...................................    3.2             83,049              53,778            17,140
           Fixed Assets ......................................     7               9,603               6,554             6,284
           Net investment from $ DFL model ................... 2.b & 17.3        638,004             678,549           686,660
           Net investment from Euro DFL model ................ 2.b & 17.3        411,100             374,509           339,492
           $ Capacity Charges less than $ DFL model ..........    13.1               713                   0             9,907
           Euro Capacity Charges less than Euro DFL model ....    13.2                 0                   0             4,225
           Other Long Term Assets ............................     9              19,058              10,968             9,445
                                                                              ----------          ----------        ----------
                  Total Long Term Assets .....................                 1,161,527           1,124,357         1,073,153

                                                                              ----------          ----------        ----------
                  Total assets ...............................                 1,438,713           1,349,765         1,340,372


LIABILITIES AND STOCKHOLDERS' EQUITY

       Current Liabilities
           Accounts payable to third parties .................     10             47,851              25,498            34,764
           Accounts payable to related parties ...............     11            176,693             145,065            74,704
           VAT  Liability ....................................      8              3,972               2,871             3,078
           Taxes payable .....................................     12              7,527               4,866               873
           Current part of Long-term loans in US Dollars .....     15             25,749              25,749            24,873
           Current part of Long-term loans in Euro ...........     15             44,491              36,855            31,167
           Other current liabilities .........................     14              7,739               7,955            18,607
                                                                              ----------          ----------        ----------
                  Total current liabilities ..................                   314,023             248,859           188,066

       Non-Current Liabilities
           Long-term loans in US Dollars .....................     15            212,426             238,174           251,667
           Long-term loans in Euro ...........................     15            367,052             340,912           319,457
           $ Capacity Charges greater than $ DFL model .......    13.1                 0               2,441                 0
           Euro Capacity Charges greater than Euro DFL model..    13.2               422                 236                 0
           Deferred Tax Liability ............................     2.f                 0              13,005             6,097
           Derivative Instrument Liability ...................     20             22,050              21,410            10,665
           Unfunded Pension Obligations ......................    19.1             9,878               5,693                 0
                                                                              ----------          ----------        ----------
                  Total non-current liabilities ..............                   611,828             621,872           587,886

       Commitment and Contingencies ..........................     22

       Stockholders' Equity
           Common Stock ......................................    16.1                58                  58                58
           Convertible Stockholders' Securities ..............    16.2           201,425             201,425           201,425
           Preferred Stock ...................................    16.3           185,930             185,930           185,930
           Retained Earnings .................................    16.4           147,499             113,031           187,672
           Other Comprehensive Income or (Loss) ..............     20            (22,050)            (21,410)          (10,665)
                                                                              ----------          ----------        ----------
                  Total stockholders' equity .................                   512,862             479,033           564,420

                                                                              ----------          ----------        ----------
                  Total liabilities and stockholders' equity..                 1,438,713           1,349,765         1,340,372
</TABLE>



The accompanying Notes 1 to 23 are an integral part of these financial
statements.


                                     Page 4
<PAGE>
      JORF  LASFAR  ENERGY  COMPANY

STATEMENT OF INCOME


<TABLE>
<CAPTION>
                                                            January 1, 2003      January 1, 2002      January 1, 2001
                                                                   to                  to                   to
                                                   Note    December 31, 2003    December 31, 2002    December 31, 2001
                                                 --------  ------------------   ------------------   ------------------
                                                           (000) U.S. Dollars   (000) U.S. Dollars   (000) U.S. Dollars
<S>                                              <C>             <C>                 <C>                <C>
REVENUE


      Lease Revenue from $ DFL model .........   2.b 17.2          81,793              88,464             100,679
      Lease Revenue from Euro DFL model ......   2.b 17.2         104,635              95,078              94,545
      Energy Payments ........................                    128,981             130,446             116,709
      O&M Revenue ............................                     45,066              42,930              38,809
      Supplemental Capacity Charges ..........                      3,949               4,017               3,887
      Sale of Fly Ash ........................                        214                 247                 303
      License Tax Reimbursement ..............                      4,102                   0                   0
      Others .................................                        138               3,090               2,364
                                                                 --------            --------            --------
             TOTAL REVENUE                                        368,878             364,272             357,296



OPERATING EXPENSES

      Coal Cost ..............................                    129,935             126,957             115,066
      Fuel Oil Cost ..........................                      1,280                 910                 754
      O&M Costs ..............................                     33,554              25,057              20,329
      Operator's Incentive ...................                      2,784               3,721               2,099
      Generator Costs ........................                     11,994              11,397              12,547
      License Tax Costs ......................                      4,102                   0                   0
      Amortization of Major Maintenance ......      9.1             1,935               1,128                 261
      Depreciation of Other Assets ...........                      2,093               1,624                 470
      Provision For Future Pension Obligations                      2,902               5,427                   0
                                                                 --------            --------            --------
             TOTAL OPERATING EXPENSES                             190,580             176,222             151,525


OPERATING INCOME .............................                    178,299             188,050             205,771

FINANCIAL ITEMS

      Financial Income .......................                      2,025               1,764               4,735
      Exchange Gain (+) or Loss (-) ..........      2.d            (8,605)             (1,558)              8,197
      Financial Expenses .....................      18            (49,425)            (44,834)            (50,617)
                                                                 --------            --------            --------
             TOTAL FINANCIAL ITEMS                                (56,005)            (44,628)            (37,685)


INCOME BEFORE TAXES                                               122,293             143,422             168,086

      Income Taxes
             Current .........................      2.e            15,448               4,226                 603
             Deferred ........................      2.f           (13,005)              6,908               6,097
                                                                 --------            --------            --------

NET INCOME                                       16.4 & 21        119,850             132,288             161,386
</TABLE>




The accompanying Notes 1 to 23 are an integral part of these financial
statements.


                                     Page 5
<PAGE>
JORF LASFAR ENERGY COMPANY

STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                             January 1, 2003     January 1, 2002    January 1, 2001
                                                                                  to                  to                 to
                                                                     Note   December 31, 2003   December 31, 2002  December 31, 2001
                                                                    ------  -----------------  ------------------  -----------------

<S>                                                                  <C>    <C>                 <C>                <C>
COMMON STOCK
     At beginning and end of period in number of shares              16.1               5,500               5,500             5,500
     At beginning and end of period in thousands of USD              16.1                  58                  58                58

                                                                                       (000) U.S. Dollars
CONVERTIBLE STOCKHOLDERS' SECURITIES                                                   ------------------
     At beginning of period                                                           201,425             201,425           387,355
     Conversion of  Convertible Stockholders' Securities
        to Preferred Stock                                                                  0                   0          (185,930)
     Conversion of Convertible Stockholders' Securities
        to Common Stock                                                                     0                   0                 0
                                                                            -----------------   -----------------  ----------------
            At end of period                                         16.2             201,425             201,425           201,425

PREFERRED STOCK
     At beginning of period                                                           185,930             185,930                 0
     Conversion of  Convertible Stockholders' Securities
        to Preferred Stock                                                                  0                   0           185,930
     Conversion of Preferred Stock to Common Stock                                          0                   0                 0
                                                                            -----------------   -----------------  ----------------
            At end of period                                         16.3             185,930             185,930           185,930

RETAINED EARNINGS (DEFICIT)
         At beginning of period                                                       113,031             187,672           296,409
         Net income                                                                   119,850             132,288           161,386
         Common stock dividend                                                        (64,973)           (184,891)         (270,123)
         Preferred stock dividend                                                      (9,796)             (9,942)                0
         Convertible stockholders' securities                                         (10,613)            (12,096)                0
                                                                            -----------------   -----------------  ----------------
            At end of period                                         16.4             147,499             113,031           187,672

OTHER COMPREHENSIVE INCOME (LOSS) (a)
     Derivative Instruments
         At beginning of period                                                       (21,410)            (10,665)                0
         Reclassification of gains (losses) included in net income                      6,871               5,811               699
         Unrealized gain (loss) on derivative instruments                              (7,511)            (16,556)          (11,364)
                                                                            -----------------   -----------------  ----------------
            At end of period                                          20              (22,050)            (21,410)          (10,665)
                                                                            -----------------   -----------------  ----------------

                                                                                      512,862             479,034           564,420
                                                                            =================   =================  ================

         (a)  Disclosure of Comprehensive Income (Loss)

            Net income                                                                119,850             132,288           161,386
            Derivative instruments
                Reclassification of gains (losses) in net income                        6,871               5,811               699
                Unrealized gain (loss) on derivative instruments                       (7,511)            (16,556)          (11,364)
                                                                            -----------------   -----------------  ----------------

            Total Comprehensive Income                                                119,211             121,543           150,721
                                                                            =================   =================  ================
</TABLE>



The accompanying Notes 1 to 23 are an integral part of these financial
statements.


                                     Page 6
<PAGE>
       JORF  LASFAR  ENERGY  COMPANY

STATEMENT OF CASH FLOWS




<TABLE>
<CAPTION>
                                                                   January 1, 2003     January 1, 2002       January 1, 2001
                                                                          to                  to                   to
                                                                  December 31, 2003    December 31, 2002    December 31, 2001
                                                                  ------------------   ------------------   ------------------
                                                          Note    (000) U.S. Dollars   (000) U.S. Dollars   (000) U.S. Dollars
                                                         ------


<S>                                                       <C>         <C>                   <C>                  <C>
CASH FLOWS FROM OPERATING ACTIVITIES
       Payments received from ONE .......................             $ 426,250             $ 471,044            $ 411,872
       Interest received ................................                 1,870                 1,748                4,543
       Insurance Payments ...............................                (5,699)               (5,665)              (7,104)
       Payments of Operating Costs ......................              (233,068)             (249,255)            (228,771)
       Cash Effect of Value Added Tax ...................                 2,463                  (321)               4,430
                                                                      ---------             ---------            ---------
              Net cash provided by operating activities..  21           191,816               217,551              184,970

CASH FLOWS USED FOR INVESTING ACTIVITIES
       Net (increase) in restricted cash ................               (25,942)              (36,638)             (17,140)
       Acquisition of fixed assets ......................                (2,300)               (3,957)              (5,501)
       Payment of Major Maintenance costs ...............                (6,261)                  (93)             (21,504)
                                                                      ---------             ---------            ---------
              Net cash used in investing activities .....               (34,503)              (40,688)             (44,145)

CASH FLOWS FROM FINANCING ACTIVITIES
       Proceeds from loans ..............................                     0                     0               92,589
       Proceeds of share capital payments ...............                     0                     0                    0
       Repayment of loans ...............................               (65,639)              (57,964)             (41,961)
       Payment of Convertible Securities interest .......               (11,417)              (12,386)                   0
       Payment of Preferred Stock dividend ..............               (10,539)              (10,181)                   0
       Payment of Common Stock dividend .................               (54,877)             (121,933)            (189,600)
       Repayment of Stockholders loans ..................                     0                     0                    0
       Purchase of Preferred Stock shares ...............                     0                     0                    0
       Purchase of Common Stock shares ..................                     0                     0                    0
                                                                      ---------             ---------            ---------
              Net cash provided by financing activities..              (142,472)             (202,464)            (138,972)


       Effect of exchange rate changes on cash ..........                 4,087                 5,178               (1,950)


CASH AT BEGINNING OF PERIOD .............................                46,683                67,106               67,203

NET INCREASE (DECREASE) IN CASH DURING PERIOD ...........                18,928               (20,422)                 (97)
                                                                      ---------             ---------            ---------

CASH AT END OF PERIOD ................................... 3.1         $  65,611             $  46,683            $  67,106
                                                                      =========             =========            =========




SUPPLEMENTAL CASH FLOWS INFORMATION
Cash paid during the year-
       Interest                                                          49,136                56,054               45,486
       Income taxes                                                      12,826                 5,150                6,173
</TABLE>

The accompanying Notes 1 to 23 are an integral part of these financial
statements.


                                     Page 7
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003



1. GENERAL

A. BACKGROUND

The power station at Jorf Lasfar is located on the Atlantic coast of Morocco,
adjacent to the Port of Jorf Lasfar, in the Province of El Jadida. This location
is approximately 127 km south--west of Casablanca. Units 1 and 2 of the power
station were constructed by GEC Alstom for the Moroccan Electricity Company,
Office National de l'Electricite ("ONE"), and are now in commercial operation.
Each of these existing Units is 330 MW, fired by coal. In October of 1994, the
ONE issued a public tender for international companies to expand the power
station at Jorf Lasfar. In February of 1995, the ONE selected the "Consortium"
of ABB Energy Ventures and CMS Generation as the preferred bidder and exclusive
partner for negotiation. In April of 1996, the Consortium and the ONE reached
agreement in principle, and initialed the necessary Project Agreements.

B. ESTABLISHMENT

In order to officially conclude and implement these Project Agreements, the
Consortium established the Jorf Lasfar Energy Company (the "Company" or "JLEC")
on January 20, 1997. The Company was established as a limited partnership
("societe en commandite par actions") in accordance with the Laws of the Kingdom
of Morocco, with Commercial Registration Number 86655, Fiscal Identification
Number 1021595, and Patente Number 35511274. In accordance with its charter
documents, the Company's objective and purpose is to construct, operate, manage
and maintain the power station at Jorf Lasfar, including the development,
financing, engineering, design, construction, commissioning, testing, operation
and maintenance of two (2) new coal-fired Units, which are very similar in size
and technology to the existing Units. In order to secure its fuel supply the
Company also operates and maintains the coal-unloading pier in the Port of Jorf
Lasfar. For these activities, the Company received a "right of possession"
("droit de jouissance") for the Site, the existing Units, the new Units and coal
unloading pier. This "right of possession" will continue for the duration of the
Project Agreements, which is anticipated to be in the range from 15 to 30 years.

C. COMPANY LOAN, TRANSFER OF POSSESSION, PROJECT FINANCING AND INITIAL
DISBURSEMENT

On September 12, 1997, all Project Agreements were signed, the Company Loan
Agreement was executed and the first disbursement of the Company Loan was used
to pay the TPA fee to ONE. As a consequence, JLEC received possession of the
power station at Jorf Lasfar on September 13, 1997, and began to sell its
available capacity and net generation to ONE. All remaining requirements for
project financing were completed in November, and initial disbursement of the
Project Loans occurred on November 25, 1997.

D. CONSTRUCTION, COMMERCIAL OPERATION, PURCHASE OF COMPANY LOAN AND REPAYMENT OF
PROJECT LOANS

After a period of construction lasting 33 months and 41 months, Unit 3 and 4
began normal commercial operation on June 9, 2000, and February 2, 2001,
respectively. Consequently, the JLEC stockholders purchased 100% of the Company
Loan Notes on December 11, 2000, and JLEC began the repayment of all Project
Loans on May 15, 2001. After JLEC completes the repayment of all Project Loans
(which is scheduled for February 15, 2013), ONE has the option to pay JLEC the
Termination Amount, and then terminate all Project Agreements and retake
possession of the Site and power station at Jorf Lasfar.


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. BASIS OF PREPARATION OF FINANCIAL STATEMENTS

The Company's financial statements are prepared using the historical cost
convention. The accounting and reporting policies of the Company are in
accordance with the generally accepted accounting principles of Morocco, which
are called "Code General de Normalisation Comptable" or "CGNC". Financial
statements are prepared in accordance with these CGNC standards, and expressed
in Dirhams. In addition to and separately from Moroccan (CGNC) financial
statements in Dirhams, the Company uses the U.S Dollar as functional currency,
and has prepared these financial statements in accordance with generally
accepted accounting principles of the United States.


                                     Page 8
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


B. REVENUE RECOGNITION
On September 12, 1997, the Company and the Office National de L'Electricite
executed a set of contracts related to the power station at Jorf Lasfar. In
accordance with Statement of Financial Accounting Standard (SFAS) No. 13, these
contracts are accounted for as a direct financing lease. Accordingly, JLEC (the
"Lessor") will receive a stream of payments from ONE (the "Lessee") over the
term of the lease. The term of the lease is determined in accordance with SFAS
No. 13 Section (5)(f) which has been superseded by SFAS No. 98 Section 22(a).
The following policies are used to calculate the minimum lease payments and the
unearned income from the lease.

                  MINIMUM LEASE PAYMENTS are determined in accordance with SFAS
                  No. 13 Section 5(j), and are based on the capacity payments
                  that ONE will take to JLEC. These minimum lease payments do
                  not include reimbursable or executory costs such as the
                  reimbursement of coal costs. The sum of these capacity
                  payments equal the gross investment under the lease.

                  This gross investment minus the net investment in the plants
                  is defined to be the UNEARNED INTEREST INCOME. This unearned
                  interest income will be accreted and recognized into earnings
                  as LEASE REVENUE over the lease term using the effective
                  interest method so as to produce a constant periodic rate of
                  return on the net investment.

                  The NET INVESTMENT represents the cost of acquiring and
                  constructing the leased assets. These ACQUISITION AND
                  CONSTRUCTION COSTS include the following items which are
                  capitalized and allocated to Units 1 and 2 and Units 3 and 4
                  based upon appropriate allocation methodologies:

                           TRANSFER OF POSSESSION AGREEMENT (TPA): The TPA
                           payment is included in the cost basis of the leased
                           assets.

                           DIRECT CONSTRUCTION COSTS: All direct costs related
                           to construction are included in the cost basis of the
                           leased assets.

                           CAPITALIZED COSTS: Interest and financing costs
                           incurred during construction are capitalized and
                           included in the cost of the constructed units.

                           PROJECT DEVELOPMENT COSTS AND FEES: These costs and
                           fees are also capitalized and included in the cost
                           basis of the leased assets.

                  FINANCING COSTS: Interest expense is recognized on the
                  effective interest method over the life of the debt. Other
                  financing costs such as commitment fees, guarantee fees, etc.
                  are considered a component of the interest expense of the
                  related debt or financing. As such, they are amortized into
                  expense using the effective interest method over the life of
                  the related debt or financing.

C. INVENTORIES

The Company accounts for inventories by consistently applying the FIFO or
average cost method to each item, and uses the conservatism principle (lesser of
market value or cost) in its procedures for valuing inventories.




                                     Page 9
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003



D. FOREIGN CURRENCY TRANSACTIONS

The books and records of the Company for U.S. GAAP are maintained in U.S.
Dollars, which is both the reporting and functional currency. Transactions in
other currencies are translated to U.S. Dollars at the spot rate for current
period expenses and at the settlement rate for non-period transactions. Monetary
assets and monetary liabilities outstanding in other foreign currencies on
balance sheet dates are translated into U.S. Dollars at rates prevailing on such
balance sheet dates. Exchange gains and losses on those foreign currency
operations are included in determining net income for the period in which
exchange rates change.

E. CORPORATE TAX

Current Income tax is determined under Moroccan Income tax rules. In 1997, JLEC
signed a "tax incentive" convention with the Moroccan tax authorities. The main
principles of this convention are summarized below:

- -    Income is subject to corporate tax and "Produit de Solidarite National" tax
     (PSN)
- -    PSN tax rate is 8.75% and is not subject of any tax holiday
- -    Income tax holiday period is ten years
- -    income tax holiday period starts on the "commercial operation date" for
     each unit
- -    income tax holiday is 100% during the first five-year period then at 50% of
     the income tax rate during the second five-year period
- -    income not related to the sale of electricity is subject to a tax rate of
     35%

The "commercial operation date" for Units 1 and 2, Unit 3 and Unit 4 were
September 1997, June 2000 and February 2001, respectively. On September 13,
2002, income related to Units 1 and 2 became taxable at 17.5%. Unit 3 and Unit 4
are still in the 100% tax holiday period. The PSN tax was eliminated on January
1, 2001.

F. DEFERRED INCOME TAX

Starting September 13, 2002, JLEC tax rate on Units 1&2 is 17.5%. JLEC
determines and books the current income tax (US$ 15,448,426 for 2003 ) as
required by the tax laws and regulations of Morocco. Temporary differences
between the US GAAP and the CGNC balance sheets are creating the need to record
deferred income taxes. The main temporary differences result from the use of the
Direct Financing Lease method under US GAAP. In particular, the treatment of Net
Investment and revenue recognition (as disclosed in note 2.b above) under US
GAAP are quite different from the treatment of these items under Moroccan GAAP .
The total of all the deferred tax liabilities is $ 0 ($13,005,298 as of December
31, 2002 minus $13,005,298 for 2003).

G. OFF BALANCE SHEET COMMITMENTS

The Company discloses all off-balance sheet commitments, if any, on balance
sheet dates.

H.  USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses during the
reported period. Actual result could differ from these estimates and
assumptions.


                                     Page 10


<PAGE>

JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


3. CASH
3.1  Cash

The Company's cash as of December 31, 2003, includes the initial capital
deposits of the Company's stockholders, as explained further in Note 16.1 . Such
cash is held in Moroccan Dirhams in accounts at CITIBANK MAGHREB, which is
located at Zenith Millenium Immeuble 1, Lotissement Attaoufik, Sidi Maarouf,
Casablanca Morocco. The remainder of the company's cash is held by the Offshore
Collateral Agent, Deutsche Bank Trust Company Americas in US$ and Euro, and by
the Onshore Collateral Agent, BMCI - Banque Marocaine pour le Commerce et
l'Industrie in Morocain Dirhams and US$.





The cash balances includes the following categories:

<TABLE>
<CAPTION>
                                                                                 12/31/03             12/31/02             12/31/01
                                                                                    US$                 US$                   US$
                                                                            ---------------  -----------------  --------------------
<S>                                                                         <C>              <C>                <C>
               Off-shore Revenue in US$                                        24,426,875          22,666,875            36,223,422
               Off-shore Revenue in Euro                                        6,590,224           5,331,124             5,000,414
                                                                            --------------   -----------------  --------------------
               Total Off-Shore Revenue                                         31,017,099          27,997,998            41,223,836

               On-shore O&M Account - Generator                                 6,946,245             793,293             2,899,102
               On-shore O&M Account - Operator                                  4,279,000           3,258,836             2,298,642
               Off-shore O&M Accounts                                               4,546              10,607                 8,464
                                                                            --------------   -----------------  --------------------
               Total O&M Accounts                                              11,229,792           4,062,735             5,206,208

               Fuel & Spare Part Accounts                                      12,929,694           5,289,381            12,080,028

               On-shore Construction Accounts                                           0                   0             1,100,363

               Off-shore  Debt Service Accrual Accounts in US$                  3,734,278           3,843,187             3,540,479
               Off-shore  Debt Service Accrual Accounts in Euro                 6,637,737           5,433,301             3,898,143
                                                                            --------------   -----------------  --------------------
               Total  Debt Service Accrual Accounts                            10,372,015           9,276,488             7,438,623
               Stockholder capital deposits                                        62,863              56,624                56,624
                                                                            --------------   -----------------  --------------------
                                  Total                                        65,611,462          46,683,227            67,105,682
                                                                            ==============   =================  ====================

3.2  Restricted Cash
The Reserve Accounts are as follow:

               Major Maintenance Reserve Account in US$               3.4 a     2,500,000           2,500,000             5,000,000
               Fixed O&M Reserve Account in US$                       3.4 b     4,800,000           4,800,000             9,600,000
               Debt Service Reserve Account in US$                    3.4 c    11,200,000          11,730,000               730,000
               Super Reserve Account in US$                           3.4 d    45,600,000          18,100,000                     0
               Distribution Account in US$                                              0                   0                     0
                                                                            --------------   -----------------  --------------------
                       Off-shore Reserve Accounts in US$                       64,100,000          37,130,000            15,330,000
               Fixed O&M Reserve Account in Euro                                  243,656             197,262               161,372
               Debt Service Reserve Account in Euro                   3.4 e    18,705,220          16,450,805             1,649,031
                                                                            --------------   -----------------  --------------------
                       Off-shore Reserve Accounts in Euro                      18,948,876          16,648,067             1,810,404
                                                                            --------------   -----------------  --------------------
               Total Reserve Accounts                                          83,048,876          53,778,067            17,140,404
                                                                            ==============   =================  ====================

3.3  Total Cash

               Cash                                                     3.1    65,611,462          46,683,227            67,105,682
               Restricted Cash in Reserve Accounts                      3.2    83,048,876          53,778,067            17,140,404
                                                                            --------------   -----------------  --------------------
                                                                              148,660,339         100,461,294            84,246,086
                                                                            ==============   =================  ====================
</TABLE>

3.4  Letters of Credit

Additional liquidity is available, if needed for debt service, from
Sponsor (CMS and ABB) Letters of Credit in the following accounts:

<TABLE>
<CAPTION>
                                                                      12/31/03             12/31/02             12/31/01
                                                                 -------------------- -------------------  --------------------
<S>                                                         <C>          <C>          <C>                  <C>
               a. Major Maintenance Reserve Account          US$           2,500,000           2,500,000                     0
               b. Fixed O&M Reserve Account                  US$           4,800,000           4,800,000                     0
               c. Debt Service Reserve Account               US$          11,300,000          11,300,000            22,600,000
               d. Super Reserve Account                      US$          39,086,700          47,900,000            36,800,000
               e. Debt Service Reserve Account              Euro          15,000,000          15,000,000            30,000,000
</TABLE>


                                    Page 11

<PAGE>

JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

4. INVENTORIES
The inventories are detailed as follows for the year ending:

<TABLE>
<CAPTION>
                                                                       12/31/03              12/31/02              12/31/01
                                                                          US$                  US$                   US$
                                                                   ------------------   -------------------   -------------------
<S>                                                            <C> <C>                  <C>                   <C>
                     Stock of Coal                             4.1        24,763,321            22,499,748            23,305,684
                     Stock of Fuel-oil                         4.2         1,638,256             2,078,600             2,988,752
                     Stock of Spare Parts                      4.3        10,940,862            15,081,606             4,952,377
                     Other Stocks (Chemicals, Oils,...)                    1,205,566               954,692               512,445
                                                                   ------------------   -------------------   -------------------
                                                                          38,548,005            40,614,646            31,759,259
                                                                   ==================   ===================   ===================
</TABLE>

4.1  The stock of coal represents the value of 397,745 tones existing in the
     coal storage area plus 184,318 tones in transit to Jorf Lasfar, for a total
     inventory of 582,063 tones as of December 31, 2003 (606,115 tones total
     as of December 31, 2002 and 643,042 tones total as of December 31, 2001).

4.2  The stock of fuel oil represents 9,471 m3 existing in the fuel tanks as of
     December 31, 2003 (12,300 m3 as of December 31, 2002).

4.3  The stock of Spare Parts represents the value of spare parts as of December
     31, 2003, that were purchased after the close-out of the Net Investment on
     December 31, 2000. ($ 15,081,606 as of December 31, 2002).

5. RECEIVABLES

The "Accounts Receivables" as of  December 31, 2003 are detailed as follows:

<TABLE>
<CAPTION>
                                                                   12/31/03              12/31/02              12/31/01
                                                                      US$                  US$                   US$
                                                               ------------------   -------------------   -------------------
<S>                                                        <C> <C>                  <C>                   <C>
                     Account Receivable - ONE              5.1        85,214,510            76,098,673            85,811,099
                     Account Receivable - Others           5.2           271,345                76,097               704,024
                                                               ------------------   -------------------   -------------------
                                                                      85,485,855            76,174,769            86,515,123
                                                               ==================   ===================   ===================
</TABLE>

5.1  The account receivable - ONE includes November 2003 and December 2003
     invoices
     The account receivable balance as of December 31, 2002 was US$ 76,098,673
     (Nov. and Dec. Invoices).

5.2  The other receivables include a) invoices to Valcen Gie (association of
     Moroccan cement companies) for purchases of fly ash during 4Q 2003 (US$
     71,101), b) accrued interest earned by investment of JLEC's cash balances
     ($ 67,425), and c) other receivable (US$ 132,819).

6. PREPAYMENTS

The "Prepayments" as of  December 31, 2003 are detailed as follows:

<TABLE>
<CAPTION>
                                                                       12/31/03              12/31/02              12/31/01
                                                                          US$                  US$                   US$
                                                                    -----------------   -------------------   -------------------
<S>                                                                 <C>                 <C>                   <C>
                     Prepaid Insurance                                     3,599,349             3,582,404             3,822,746
                     Prepayments for Income Tax                            3,929,580             5,194,869                     0
                     Other Prepayments                                       609,277             1,653,537               653,896
                                                                    -----------------   -------------------   -------------------
                                                                           8,138,206            10,430,810             4,476,641
                                                                    =================   ===================   ===================
</TABLE>

7. FIXED ASSETS

The "Fixed Assets" are detailed as follows for year ending:

<TABLE>
<CAPTION>
                                                                          12/31/03              12/31/02              12/31/01
                                                                             US$                  US$                   US$
                                                                      ------------------   -------------------   -------------------
<S>                                                                   <C>                  <C>                   <C>
                     Fixed Asset - Gross                                     11,694,954             7,455,511             5,314,528
                     Depreciation                                            -2,516,437            -1,884,137              -260,099
                     Construction in Progress                                   424,902               982,455             1,229,571
                                                                      ------------------   -------------------   -------------------
                                                                              9,603,420             6,553,829             6,284,000
                                                                      ==================   ===================   ===================
</TABLE>

8.  V.A.T LIABILITY

The "V.A.T Liability" account represents the net amount of Value Added Tax as
shown below:

<TABLE>
<CAPTION>
                                                                             12/31/03           12/31/02              12/31/01
                                                                                US$               US$                   US$
                                                                         ------------------   ----------------   -------------------
<S>                                                                      <C>                  <C>                <C>
                     Value Added Tax received from ONE to be declared            5,179,969          4,805,614             8,415,330
                     Value Added Tax to be paid & declared                      -1,207,918         -1,934,168            -5,337,662
                                                                         ------------------   ----------------   -------------------
                                                                                 3,972,052          2,871,446             3,077,668
                                                                         ==================   ================   ===================
</TABLE>

9. OTHER LONG TERM ASSETS

The Other Long Term Assets are as follows:

<TABLE>
<CAPTION>
                                                                                         12/31/03        12/31/02        12/31/01
                                                                                            US$             US$             US$
                                                                                      --------------   -------------   -------------
<S>                                                                                   <C>              <C>             <C>
        Long Term Receivables  Loan                                                       3,372,930       2,754,540      2,016,161
        Long Term Ash Disposal Site                                                       1,389,307       1,913,308              0
        Major Maintenance capitalized during 2001 Unit 1 turbine overhaul outage          7,898,850       7,898,850      7,898,850
        Less: Amortization of Unit 1 Major Maintenance in 2001 and 2002                  -1,598,577        -470,170       -470,170
9.1 Less: Amortization of Unit 1 Major Maintenance in 2003                               -1,036,582      -1,128,407              0
        Less: Adjustments due to changes in methodes                                       -599,070               0              0
        Major Maintenance capitalized during 2003 - Unit 2 turbine overhaul outage       10,529,148               0              0
9.1 Less: Amortization of Unit 2 Major Maintenance in 2003                                 -898,320               0              0
                                                                                      --------------   -------------   ------------
                                                                                         19,057,685      10,968,120      9,444,841
                                                                                      ==============   =============   ============
</TABLE>

9.1    Capitalized major maintenance costs are amortized over the estimated
       useful life of the investment, which for the turbine overhauls is 7 years
       (84 months).


                                    Page 12

<PAGE>

JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

10. ACCOUNTS PAYABLE TO THIRD PARTIES

The "Account Payable to Third Parties" includes the main suppliers of JLEC as of
December 31, 2003 and are detailed as follows:

<TABLE>
<CAPTION>
                                                                                         12/31/03         12/31/02        12/31/01
                                                                                            US$              US$             US$
                                                                                       ---------------------------------------------
<S>                                                                                    <C>              <C>            <C>
                                       Billiton (coal supplier)                          2,800,790        4,119,817      16,060,510
                                       Anglo (coal supplier)                             6,320,391        2,245,218       5,281,412
                                       RAG Trading (coal supplier)                               0        4,499,958               0
                                       Glencore (coal supplier)                         20,030,571        2,187,744               0
                                       BULK (coal supplier)                              4,470,349                0               0
                                       Total (coal supplier)                                     0                0       2,267,178
                                       Alstom Power                                      1,507,931        2,845,357       2,607,834
                                       ONE - Rebate                                      4,139,908        2,767,010       3,547,774
                                       Other suppliers                                   8,581,419        6,832,615       4,999,250
                                                                                       ---------------------------------------------
                                                    Total                               47,851,359       25,497,718      34,763,957
                                                                                       =============================================
</TABLE>


11. RELATED PARTY TRANSACTIONS

During the year 2003, JLEC has booked a number of related parties transactions
as follows:

<TABLE>
<CAPTION>
                              -----------------------------------------------------------------------------------------------------
                                ABB                   ABB                CMS          CMS              CMS              Total
                                EV                   MAROC              MOPCO        MOPCO          RD & GEN
Currencies                      US$                   MAD                MAD          MAD              US$               US$
<S>                           <C>                 <C>               <C>            <C>              <C>               <C>
Acc. Payable 12/31/02           105,764             125,880          -1,452,394      46,253,345       82,686

2003:
Management Fees                                                      32,938,795
Incentive Accrual                                                                    29,320,319
Other                           214,644             237,916           3,582,315

Total Payments 2003             230,400             363,796          30,311,126      46,253,688       82,686
Acc. Payable                     90,007                   0           4,757,590      29,319,976            0
Acc. Pay. in US$                 90,007                   0             542,101       3,340,851            0            3,972,960
</TABLE>

<TABLE>
<CAPTION>
                                Jorf Lasfar     Jorf Lasfar                 Tre Kronor
     Common Stock               Energiaktie-   Power Energy   Jorf Lasfar  Investment   AB Cythere 61   AB Cythere 63
                                   bolag           AB         Handelsbolag     AB                                          Total
Currencies                          MAD            MAD            MAD          MAD          MAD             MAD             MAD
<S>                             <C>            <C>            <C>          <C>          <C>           <C>              <C>
Acc. Payable 12/31/02            220,166,565   202,553,239    17,613,325   39,682,115    2,164,464      950,199,532    1,432,379,240
Dividend Payable Oct 30, 2003    151,250,000   139,150,000    12,100,000   12,100,000      660,000      289,740,000      605,000,000
Total Payments 2003              156,487,853   143,968,825    12,519,028    8,343,124      455,079      199,779,902      521,553,812
Acc. Payable                     214,928,711   197,734,415    17,194,297   43,438,991    2,369,384    1,040,159,631    1,515,825,428
B/S FX Rate MAD/USD                    8.776         8.776         8.776        8.776        8.776            8.776            8.776
Acc. Pay. in US$                  24,489,951    22,530,755     1,959,196    4,949,635      269,978      118,520,502      172,720,019
</TABLE>


<TABLE>
<CAPTION>

Preferred Stock & Convertible              Jorf Lasfar   Jorf Lasfar                Tre Kronor    AB           AB
       Securities                          Energiaktie-  Power Energy  Jorf Lasfar  Investment   Cythere 61   Cythere 63   Total
                                              bolag          AB         Handelsbolag     AB
Currencies                                     MAD           MAD          MAD          MAD         MAD         MAD          MAD
<S>                                      <C>            <C>           <C>           <C>          <C>       <C>          <C>
Preferred Stock Dividend payable                   0             0            0             0    226,840   99,666,957    99,893,797
Convertible Securities Interest payable   52,028,019    47,865,778    4,162,242     4,162,242          0            0   108,218,281
Total Payments 2003                       52,028,019    47,865,778    4,162,242     4,162,242    226,840   99,666,957   208,112,078
Acc. Payable                                       0             0            0             0          0            0             0
B/S FX Rate MAD/USD                            8.776         8.776        8.776         8.776      8.776        8.776         8.776
Acc. Pay. in US$                                   0             0            0             0          0            0             0


                                                                                                                        -----------
                                                     Total Accounts Payable to Related Parties                          176,692,979
</TABLE>



                                    Page 13
<PAGE>



JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


11. RELATED PARTY TRANSACTIONS (CONTINUED)

During 2002, related party transactions consisted of the following:

<TABLE>
<CAPTION>
                                        ABB            ABB          CMS               CMS                CMS          Total
                                         EV           MAROC        MOPCO             MOPCO             RD & GEN
Currencies                              US$            MAD          MAD               MAD                US$           US$
<S>                                 <C>             <C>          <C>               <C>              <C>            <C>
Acc. Payable 12/31/01                 137,581         78,576      7,726,314        44,598,493         76,753
Management Fees                                                  35,654,033
Incentive Accrual                                                                  46,253,517
Other                                 207,059        778,086      6,139,521                          114,510
Total Payments 2002                   238,876        730,782     38,693,220        44,598,665        108,577
Acc. Payable 12/31/02                 105,764        125,880      1,452,394        46,253,345         82,686
Acc. Pay. in US$ 12/31/02             105,764         12,345        142,433         4,535,976         82,686         4,594,337
</TABLE>


<TABLE>
<CAPTION>
                                Jorf Lasfar    Jorf Lasfar                 Tre Kronor
     Common Stock               Energiaktie-   Power Energy   Jorf Lasfar  Investment   AB Cythere 61   AB Cythere 63      Total
                                   bolag           AB         Handelsbolag     AB
Currencies                          MAD            MAD            MAD         MAD           MAD             MAD             MAD
<S>                             <C>            <C>            <C>          <C>          <C>           <C>              <C>
Acc. Payable 12/31/01            202,826,993  186,600,834     16,226,160   16,226,160      885,063   388,542,764      811,307,973
Dividend Payable Oct 29, 2002    495,000,000  455,400,000     39,600,000   39,600,000    2,160,000   948,240,000    1,980,000,000
Total Payments 2002              477,660,429  439,447,594     38,212,834   16,144,045      880,600   386,583,232    1,358,928,734
Acc. Payable 12/31/02            220,166,565  202,553,239     17,613,325   39,682,115    2,164,464   950,199,532    1,432,379,240
B/S FX Rate MAD/USD                   10.197       10.197         10.197       10.197       10.197        10.197           10.197
Acc. Pay. in US$ 12/31/02         21,591,308   19,864,003      1,727,305    3,891,548      212,265    93,184,224      140,470,652
</TABLE>

<TABLE>
<CAPTION>
   Preferred Stock &        Jorf Lasfar   Jorf Lasfar                    Tre Kronor
Convertible Securities      Energiaktie-  Power Energy    Jorf Lasfar    Investment    AB Cythere 61   AB Cythere 63      Total
                               bolag           AB         Handelsbolag       AB
Currencies                      MAD            MAD             MAD           MAD            MAD             MAD            MAD
<S>                        <C>            <C>            <C>          <C>          <C>           <C>              <C>
Preferred Stock
Dividend payable                    0              0              0           0          261,774       115,016,078      115,277,852
Convertible Securities
Interest payable            63,882,171     58,771,597      5,110,574     5,110,574         16,749        7,359,167      140,250,832
Total Payments 2002         63,882,171     58,771,597      5,110,574     5,110,574        278,523      122,375,245      255,528,684
Acc. Payable 12/31/02                0              0              0             0              0                0                0
B/S FX Rate MAD/USD             10.197         10.197         10.197        10.197         10.197           10.197           10.197
Acc. Pay. in US$ 12/31/02            0              0              0             0              0                0                0

                                                     Total Accounts Payable to Related Parties                          145,064,990
</TABLE>



During 2001, related party transactions consisted of the following:

<TABLE>
<CAPTION>

                              ABB        ABB          ABB         ABB            CMS           CMS             CMS          Total
                              EV       Secheron     Secheron     MAROC          MOPCO         MOPCO         RD & GEN
Currencies                    US$        DEM          CHF         MAD            MAD           MAD             US$           US$
<S>                         <C>        <C>          <C>        <C>          <C>            <C>            <C>           <C>
Acc. Payable 12/31/00         43,545      -             -          -         16,747,904     96,757,074      200,667
Management Fees                                                              35,287,098
Incentive Accrual                                                                           44,314,093
Other                        331,716    375,000      25,200      469,461      5,873,718                     471,870
Total Payments 2001          237,679    375,000      25,200      390,885     38,434,970     96,472,673      595,784
Acc. Payable 12/31/01        137,581      -             -         78,576      7,726,314     44,598,493       76,753
Acc. Pay. in US$ 12/31/01    137,581      -             -          6,777        666,349      3,846,356       76,753       4,733,816
</TABLE>



<TABLE>
<CAPTION>

                                                   Jorf Lasfar     Jorf Lasfar   Tre Kronor    Jorf Lasfar    AB
                                   AB Cythere 63   Energiaktie-   Power Energy   Investment     Handels-    Cythere        Total
                                                      bolag           AB            AB            bolag       61
Currencies                             MAD             MAD           MAD            MAD           MAD         MAD           MAD
<S>                                <C>             <C>            <C>            <C>          <C>         <C>          <C>
Dividend Payable Apr 24, 2001        790,200,000   412,500,000    379,500,000    33,000,000   33,000,000   1,800,000   1,650,000,000
Dividend Payable Oct 29, 2001        650,598,000   339,625,000    312,455,000    27,170,000   27,170,000   1,482,000   1,358,500,000
Total Payments 2001                1,052,255,236   549,298,007    505,354,166    43,943,841   43,943,841   2,396,937   2,197,192,027
Acc. Payable 12/31/01                388,542,764   202,826,993    186,600,834    16,226,160   16,226,160     885,063     811,307,973
B/S FX Rate MAD/USD                        11.60         11.60          11.60         11.60        11.60       11.60           11.60
Acc. Pay. in US$ 12/31/01             33,509,510    17,492,626     16,093,216     1,399,410    1,399,410      76,331      69,970,502

                                                            Total Accounts Payable to Related Parties                     74,704,318

</TABLE>



                                    Page 14


<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

12. TAXES PAYABLE:

The "taxes payable" includes the following items as of December 31, 2003:

<TABLE>
<CAPTION>
                                                                            12/31/03            12/31/02            12/31/01
                                                                              US$                  US$                 US$
                                                                         ---------------     ----------------     --------------
<S>                                                                      <C>                 <C>                  <C>
                   Value Added Tax on behalf of foreign suppliers               309,190              299,199            312,044
                   Income Tax 2001                                                    0                    0            186,202
                   Income Tax 2002                                                    0            4,226,098                  0
                   Income Tax 2003                                            5,393,931                    0                  0
                   Withholding Tax                                              260,841              155,281            192,380
                   Payroll Tax                                                  237,358              185,575            182,715
                   Licence Tax                                                1,325,971                    0                  0
                                                                         ---------------     ----------------     --------------
                             Total                                            7,527,291            4,866,153            873,340
                                                                         ===============     ================     ==============
</TABLE>


13. CAPACITY CHARGES

<TABLE>
<CAPTION>
13.1 $ Capacity Charges greater than $ DFL Model                             Actual             DFL model
                                                                         ---------------     ----------------
                                                                           $ Capacity           Min Lease
                                                                         ---------------     ----------------
                                                                            Charges             Payments           Difference
                                                                         ---------------     ----------------     --------------
                                                                              CGNC               US GAAP             US GAAP
                                                                         ---------------     ----------------     --------------
                                                                              USD                  USD                 USD
                                                                         ---------------     ----------------     --------------
<S>                <C>                                                   <C>                 <C>                  <C>
                   $ Capacity Charges                                       103,690,956          104,516,335           -825,379
                   $ O.N.E Rebate                                            -2,761,910           -2,874,199            112,289
                                                                         ---------------     ----------------     --------------
2003 in USD                                                                 100,929,046          101,642,136           -713,090

$ Capacity Charges greater than $ DFL Model                                                                            -713,090
                                                                                                                       --------
</TABLE>

<TABLE>
<CAPTION>
                                                                             Actual             DFL model
                                                                         ---------------     ----------------
13.2 Euro Capacity Charges greater than Euro DFL Model                    Euro Capacity         Min Lease
                                                                         ---------------     ----------------
                                                                            Charges             Payments           Difference
                                                                         ---------------     ----------------     --------------
                                                                              CGNC               US GAAP             US GAAP
                                                                         ---------------     ----------------     --------------
                                                                              Euro                Euro              Euro/USD
                                                                         ---------------     ----------------     --------------
<S>                                                                      <C>                 <C>                  <C>
                   Euro Capacity Charges                                    125,149,979          124,917,610            232,369
                   Euro O.N.E Rebate                                         -3,333,492           -3,435,234            101,742
                                                                         ---------------     ----------------     --------------
2003 in Euro                                                                121,816,487          121,482,376            334,111
           B/S FX Rate                                                                                               X 1.263417
                                                                                                                  --------------
Euro Capacity Charges greater than Euro DFL Model in USD                                                                422,122
</TABLE>

<TABLE>
<CAPTION>
13.1 $ Capacity Charges greater than $ DFL Model                             Actual             DFL model
                                                                         ---------------     ----------------
                                                                           $ Capacity           Min Lease
                                                                         ---------------     ----------------
                                                                            Charges             Payments           Difference
                                                                         ---------------     ----------------     --------------
                                                                              CGNC               US GAAP             US GAAP
                                                                         ---------------     ----------------     --------------
                                                                              USD                  USD                 USD
                                                                         ---------------     ----------------     --------------
<S>                                                                      <C>                 <C>                  <C>
                   $ Capacity Charges                                       152,243,461          148,653,918          3,589,543
                   $ O.N.E Rebate                                            -7,466,514           -6,317,791         -1,148,723
                                                                         ---------------     ----------------     --------------
2002 in USD                                                                 144,776,947          142,336,127          2,440,820

$ Capacity Charges greater than $ DFL Model                                                                           2,440,820
                                                                                                                      ---------
</TABLE>

<TABLE>
<CAPTION>
                                                                             Actual             DFL model
                                                                         ---------------     ----------------
13.2 Euro Capacity Charges greater than Euro DFL Model                    Euro Capacity         Min Lease
                                                                         ---------------     ----------------
                                                                            Charges             Payments           Difference
                                                                         ---------------     ----------------     --------------
                                                                              CGNC               US GAAP             US GAAP
                                                                         ---------------     ----------------     --------------
                                                                              Euro                Euro              Euro/USD
                                                                         ---------------     ----------------     --------------
<S>                                                                      <C>                 <C>                  <C>
                   Euro Capacity Charges                                    131,283,947          130,150,792          1,133,155
                   Euro O.N.E Rebate                                         -6,438,591           -5,531,409           -907,183
                                                                         ---------------     ----------------     --------------
2002 in Euro                                                                124,845,355          124,619,384            225,971
- ------------
           B/S  FX Rate                                                                                            X 1.046582
                                                                                                                  --------------
Euro Capacity Charges greater than Euro DFL Model in USD                                                                236,497
</TABLE>


                                    Page 15
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

13. CAPACITY CHARGES (CONTINUED)


<TABLE>
<CAPTION>
13.1 $ Capacity Charges greater than $ DFL Model                             Actual               DFL model
                                                                         ---------------       ----------------
                                                                           $ Capacity             Min Lease
                                                                         ---------------       ----------------
                                                                            Charges               Payments            Difference
                                                                         ---------------       ----------------     ---------------
                                                                              CGNC                 US GAAP             US GAAP
                                                                         ---------------       ----------------     ---------------
                                                                              USD                    USD                 USD
                                                                         ---------------       ----------------     ---------------
<S>                                                                      <C>                   <C>                  <C>
                   $ Capacity Charges                                       167,725,226            174,863,943          -7,138,718
                   $ O.N.E Rebate                                            -4,643,978             -1,876,144          -2,767,834
                                                                         ---------------       ----------------     ---------------
2001 in USD                                                                 163,081,248            172,987,799          -9,906,551

$ Capacity Charges greater than $ DFL Model                                                                             -9,906,551
                                                                                                                        ----------
</TABLE>

<TABLE>
<CAPTION>
                                                                             Actual               DFL model
                                                                         ---------------       ----------------
13.2 Euro Capacity Charges greater than Euro DFL Model                    Euro Capacity           Min Lease
                                                                         ---------------       ----------------
                                                                            Charges               Payments            Difference
                                                                         ---------------       ----------------     ---------------
                                                                              CGNC                 US GAAP             US GAAP
                                                                         ---------------       ----------------     ---------------
                                                                              Euro                  Euro               Euro/USD
                                                                         ---------------       ----------------     ---------------
<S>                                                                      <C>                   <C>                  <C>
                   Euro Capacity Charges                                    114,874,856            117,731,467          -2,856,611
                   Euro O.N.E Rebate                                         -3,180,600             -1,263,161          -1,917,440
                                                                         ---------------       ----------------     ---------------
2001 in Euro                                                                111,694,256            116,468,307          -4,774,051
- ------------
           B/S  FX Rate                                                                                                  X 0.88504
                                                                                                                    ---------------
Euro Capacity Charges greater than Euro DFL Model in USD                                                                -4,225,210
</TABLE>




14. OTHER CURRENT LIABILITIES

The "Other Current Liabilities" as of December 31, 2003 are detailed as follows:

<TABLE>
<CAPTION>
                                                                            12/31/03              12/31/02             12/31/01
                                                                              US$                    US$                 US$
                                                                         ---------------       ----------------     ---------------
<S>                                                                 <C>  <C>                   <C>                  <C>
                   Accrued Expenses: interest, swaps and fees       14.1      5,904,937              6,072,924          17,293,488
                   Accrued salaries expense                                   1,198,164              1,390,179             986,669
                   Liability for Compensated Absences                           298,523                307,449             108,027
                   Other Liabilities                                            337,780                184,470             218,670
                                                                         ---------------       ----------------     ---------------
                                                                              7,739,404              7,955,022          18,606,854
                                                                         ===============       ================     ===============
</TABLE>

14.1 The accrued interests and fee expenses are detailed by loans as follows:

<TABLE>
<CAPTION>
                                                                            12/31/03              12/31/02             12/31/01
                                                                              US$                    US$                 US$
                                                                         ---------------       ----------------     ---------------
<S>                                                                      <C>                   <C>                  <C>
                             OPIC                                               728,141                807,914             907,733
                             SACE                                             1,586,760              1,522,740           1,413,325
                             WB                                               1,712,739              1,629,541           1,146,864
                             US EXIM - Exposure Fees                                  0                      0          12,255,922
                             US EXIM                                          1,574,138              1,823,435           1,370,400
                             ERG                                                303,158                289,295             199,245
                                                                         ---------------       ----------------     ---------------
                                                                              5,904,937              6,072,924          17,293,488
                                                                         ===============       ================     ===============
</TABLE>


                                    Page 16
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

15. LONG TERM LOANS

Long term loans are detailed as follows as of December 31, 2003:

<TABLE>
<CAPTION>
                                                               Interest                           Reimbursement
                Borrowing                    Principal     ---------------      Interest   --------------------------
Loan              Date        Currency         Amount      Type     Rate        Payment       Maturity    Periodicity
- ----            ---------     --------       ---------     ----     ----        -------       --------    -----------

<S>             <C>           <C>          <C>             <C>     <C>         <C>         <C>            <C>
US EXIM          9/12/02        US$         181,363,762    Fixed   7.2000%     Quarterly   Feb. 15, 2013   Quarterly
OPIC Note A     11/25/97        US$          46,635,417    Fixed   10.2300%    Quarterly   Feb. 15, 2013   Quarterly
OPIC Note B     02/11/98        US$          10,175,000    Fixed   9.9200%     Quarterly   Feb. 15, 2013   Quarterly
                                            -----------
                                             56,810,417
                                            -----------
                Total L.T  loan in US$      238,174,179
                                            -----------
                Current part in USD          25,748,560
                                            -----------
                Non-Current part in USD     212,425,619
                                            -----------
</TABLE>



<TABLE>
<CAPTION>
                                                               Interest                           Reimbursement
                Borrowing                    Principal     ---------------      Interest   --------------------------
Loan               Date       Currency         Amount      Type      Rate        Payment       Maturity    Periodicity
- ----            ---------     --------       ---------     ----      ----        -------       --------    -----------

<S>             <C>           <C>          <C>             <C>       <C>         <C>         <C>            <C>

SACE             11/17/03       Euro         179,332,929   Fixed     5.7300%     Quarterly   Feb. 15, 2013  Quarterly
ERG              11/17/03       Euro          23,045,939   Variable  4.16888%    Quarterly   Feb. 15, 2013  Quarterly
World Bank       11/17/03       Euro         123,359,818   Variable  3.9189%     Quarterly   Feb. 15, 2013  Quarterly
                                             -----------
                Total L.T  loan in Euro      325,738,687
                                             -----------
                B/S FX Rate Euro/USD             1.26342
                                             -----------
                Total L.T  loan in USD       411,543,784
                                             -----------
                Current part in USD           44,491,219
                                             -----------
                Non-Current part in USD      367,052,565
                                             -----------
</TABLE>


Total principal repayments for the next five years are detailed below. Forecasts
of interest payments, interest-rate swap payments and guarantee fees are also
shown below. For further information regarding swaps, see Note 20.

<TABLE>
<CAPTION>
                                                                                         Remaining       Remaining      Remaining
                Principal      Principal      Principal      Principal      Principal     Interest          Swap         Guarantee
              Repayment in   Repayment in   Repayment in   Repayment in   Repayment in    Payments        Payments         Fees
                  2004           2005           2006           2007           2008       2004-2013       2004-2013       2004-2013

<S>             <C>           <C>            <C>           <C>            <C>            <C>             <C>             <C>
In USD
US EXIM         19,606,893    19,606,893     19,606,893      19,606,893    19,606,893    62,017,946              0              0
OPIC A           5,041,667     5,041,666      5,041,666       5,041,666     5,041,666    22,657,888              0              0
OPIC B           1,100,000     1,100,000      1,100,000       1,100,000     1,100,000     4,793,735              0              0
Total in USD    25,748,560    25,748,559     25,748,559      25,748,559    25,748,559    89,469,569              0              0


In Euro

SACE            19,387,344    19,387,344     19,387,344      19,387,344    19,387,344    49,481,105              0              0
ERG              2,491,452     2,491,452      2,491,452       2,491,452     2,491,452     4,730,553      4,774,063              0
WB              13,336,197    13,336,197     13,336,197      13,336,197    13,336,197    22,600,374     25,202,063      5,472,842
Total in Euro   35,214,993    35,214,993     35,214,993      35,214,993    35,214,993    76,812,032     29,976,126      5,472,842
B/S FX Rate
Euro/USD           1.26342       1.26342        1.26342         1.26342       1.26342       1.26342        1.26342        1.26342
Total in USD    44,491,219    44,491,219     44,491,219      44,491,219    44,491,219    97,045,624     37,872,347      6,914,481
</TABLE>



                                    Page 17
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


15.  LONG TERM LOANS (CONTINUED)

Long term loans are detailed as follows as of  December 31, 2002:


<TABLE>
<CAPTION>
                                                               Interest                           Reimbursement
                Borrowing                   Principal      ----------------    Interest    ---------------------------
Loan              Date      Currency         Amount        Type       Rate      Payment       Maturity     Periodicity

<S>             <C>         <C>            <C>             <C>       <C>       <C>         <C>            <C>
US EXIM           9/12/02      US$          200,971,655    Fixed      7.2%     Quarterly   Feb. 15, 2013   Quarterly
OPIC Note A      11/25/97      US$           51,677,083    Fixed     10.23%    Quarterly   Feb. 15, 2013   Quarterly
OPIC Note B      02/11/98      US$           11,275,000    Fixed      9.92%    Quarterly   Feb. 15, 2013   Quarterly
                                           -----------
                                            62,952,083
                                           -----------
                Total L.T  loan in US$     263,923,738
                                           -----------
                Current part in USD         25,748,560
                                           -----------
                Non-Current part in USD    238,175,178
                                           -----------


<CAPTION>
                                                               Interest                           Reimbursement
                Borrowing                   Principal      ----------------    Interest    ---------------------------
Loan              Date      Currency         Amount        Type       Rate      Payment       Maturity     Periodicity

<S>             <C>         <C>            <C>             <C>       <C>       <C>         <C>            <C>
SACE            11/15/02      Euro        198,720,273    Fixed       5.73%     Quarterly   Feb. 15, 2013    Quarterly
ERG             11/15/02      Euro         25,537,392    Variable    5.14%     Quarterly   Feb. 15, 2013    Quarterly
World Bank      11/15/02      Euro        136,696,015    Variable    4.89%     Quarterly   Feb. 15, 2013    Quarterly
                                          -----------
                Total L.T  loan in Euro   360,953,680
                                          -----------
                B/S FX Rate Euro/USD          1.04658
                                          -----------
                Total L.T  loan in USD    377,767,743
                                          -----------
                Current part in USD        36,855,389
                                          -----------
                Non-Current part in USD   340,912,354
                                          -----------
</TABLE>


Total principal repayments for the next five years are detailed below. Forecasts
of interest payments, interest-rate swap payments and guarantee fees are also
shown below. For further information regarding swaps, see Note 20.



<TABLE>
<CAPTION>
                                                                                           Remaining    Remaining     Remaining
                 Principal     Principal     Principal      Principal      Principal        Interest       Swap       Guarantee
               Repayment in  Repayment in   Repayment in   Repayment in   Repayment in      Payments     Payments        Fees
                   2003          2004           2005           2006           2007         2003-2013    2003-2013     2003-2013
<S>            <C>           <C>            <C>            <C>          <C>             <C>             <C>          <C>

In USD
US EXIM         19,606,893    19,606,893     19,606,893    19,606,893     19,606,893       76,033,383            0            0
OPIC A           5,041,667     5,041,666      5,041,666     5,041,666      5,041,666       27,754,052            0            0
OPIC B           1,100,000     1,100,000      1,100,000     1,100,000      1,100,000        5,871,955            0            0
Total in USD    25,748,560    25,748,559     25,748,559    25,748,559     25,748,559      109,659,390            0            0

In Euro
SACE            19,387,344    19,387,344     19,387,344    19,387,344     19,387,344       60,663,342            0            0
ERG              2,491,452     2,491,452      2,491,452     2,491,452      2,491,452        7,093,552    4,535,473            0
WB              13,336,197    13,336,197     13,336,197    13,336,197     13,336,197       36,148,188   23,844,995    6,757,469
Total in Euro   35,214,993    35,214,993     35,214,993    35,214,993     35,214,993      103,905,082   28,380,468    6,757,469
B/S FX Rate
Euro/USD           1.04658       1.04658        1.04658       1.04658        1.04658          1.04658      1.04658      1.04658
Total in USD    36,855,389    36,855,389     36,855,389    36,855,389     36,855,389      108,745,223   29,702,496    7,072,248
</TABLE>






                                    Page 18
<PAGE>



JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


15. LONG TERM LOANS (CONTINUED)

Long term loans are detailed as follows as of December 31, 2001:


<TABLE>
<CAPTION>

                 Drawdown                 Drawdown         Interest           Interest    Reimbursement
    Loan           Date      Currency      Amount       Type       Rate       Payment       Maturity       Periodicity
<S>             <C>         <C>         <C>           <C>         <C>       <C>           <C>              <C>
US EXIM         11/15/2001     US$      207,446,204    Variable    4.14%     Quarterly    Feb. 15, 2013     Quarterly
OPIC Note A      11/25/97      US$       56,718,750     Fixed     10.48%     Quarterly    Feb. 15, 2013     Quarterly
OPIC Note B      02/11/98      US$       12,375,000     Fixed     10.17%     Quarterly    Feb. 15, 2013     Quarterly
                                         69,093,750
            Total L.T loan in US$       276,539,954
            Current part in USD          24,873,137
            Non-Current part in USD     251,666,817

</TABLE>

<TABLE>
<CAPTION>


                 Drawdown                 Drawdown           Interest         Interest    Reimbursement
    Loan           Date      Currency      Amount         Type      Rate      Payment       Maturity       Periodicity
<S>            <C>           <C>        <C>            <C>        <C>       <C>           <C>             <C>
SACE            11/15/2001     Euro     218,107,617       Fixed     5.73%    Quarterly    Feb. 15, 2013     Quarterly
ERG             11/15/2001     Euro      28,028,845     Variable    5.34%    Quarterly    Feb. 15, 2013     Quarterly
World Bank      11/15/2001     Euro     150,032,211     Variable    5.09%    Quarterly    Feb. 15, 2013     Quarterly


            Total L.T loan in Euro      396,168,673
            B/S FX Rate Euro/USD              0.885
            Total L.T loan in USD       350,623,797
            Current part in USD          31,166,559
            Non-Current part in USD     319,457,237


</TABLE>

Total principal repayments for the next five years are detailed below. Forecast
interest payments, interest-rate swap payments and guarantee fees are also
shown below. For further information regarding swaps, see Note 20.



<TABLE>
<CAPTION>

                    Principal    Principal     Principal      Principal      Principal       Remaining     Remaining     Remaining
                  Repayment in  Repayment in   Repayment in   Repayment in   Repayment in    Interest        Swap        Guarantee
                      2002          2003          2004            2005          2006         Payments      Payments        Fees
                                                                                             2002-2013     2002-2013     2002-2013
<S>              <C>           <C>            <C>            <C>            <C>            <C>           <C>            <C>
In USD
US EXIM           18,731,470   19,606,893      19,606,893      19,606,893    19,606,893     87,235,810             0     1,176,315
OPIC A             5,041,667    5,041,666       5,041,666       5,041,666     5,041,666     33,499,497             0             0
OPIC B             1,100,000    1,100,000       1,100,000       1,100,000     1,100,000      7,088,426             0             0
Total in USD      24,873,137   25,748,559      25,748,559      25,748,559    25,748,559    127,823,733             0     1,176,315
In Euro
SACE              19,387,344   19,387,344      19,387,344      19,387,344    19,387,344     72,907,871             0             0
ERG                2,491,452    2,491,452       2,491,452       2,491,452     2,491,452      8,830,924     4,982,063             0
WB                13,336,197   13,336,197      13,336,197      13,336,197    13,336,197     45,081,853    25,824,728     8,173,329
Total in Euro     35,214,993   35,214,993      35,214,993      35,214,993    35,214,993    126,820,648    30,806,791     8,173,329
B/S FX Rate
USD/Euro             0.88504      0.88504         0.88504         0.88504       0.88504        0.88504       0.88504       0.88504
Total in USD      31,166,559   31,166,559      31,166,559      31,166,559    31,166,559    112,240,922    27,265,139     7,233,696


</TABLE>


                                    Page 19

<PAGE>


JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

15. LONG TERM LOANS (CONTINUED)

PLEADGE OF STOCK AND OTHER ASSETS
As security for the repayment of the loans, and the payment of all related
interest, fees and swap obligations, JLEC and its stockholders have entered into
various pledge agreements with Deutsche Bank Trust Company Americas, as Offshore
Collateral Agent, and with Banque Marocaine pour le Commerce et l'Industrie, as
Onshore Collateral Agent, for the benefit of such lenders and other secured
parties. Such security shall continue in effect until the repayment in full of
all outstanding principal amounts and the payment in full of all related
interest, fee and swap obligations, which is scheduled to occur in February of
2013. The principle pledge agreements are:

1. The Stockholder Pledge and Security Agreements, in which each of JLEC's
stockholders pledges all of its shares, claims, rights and interests in JLEC to
the Offshore Collateral Agent.
2. The Security and Assignment Agreement, in which JLEC assigns to the Offshore
Collateral Agent a security interest in all of JLEC's rights, title and interest
in the following collateral, among others:
  a. all of JLEC's contractual rights,
  b. all rents, profits, income and revenues derived by JLEC from its ownership
     of the Project,
  c. all cash deposits and other assets in any of JLEC's accounts with financial
     institutions,
  d. all permits, licenses and other governmental authorizations obtained by
     JLEC in connection with its ownership of the Project,
  e. all of JLEC's insurance policies and related claims and proceeds, and
  f. all personal property and inventories of JLEC.
3. The Agreement for Pledge of Shares, in which each of JLEC's stockholders
pledges all of its shares, claims, rights and interests in JLEC to the Onshore
Collateral Agent, and assigns to the Onshore Collateral Agent the direct payment
by JLEC of all dividends and other stockholder distributions if and whenever a
Default has occurred and is continuing.
4. The General Delegation of Contract Claims, in which JLEC assigns to the
Onshore Collateral Agent the direct payment of any and all contract claims due
to JLEC if and whenever a Default has occurred and is continuing.
5. The Pledge over General Operating Accounts, in which JLEC pledges to the
Onshore Collateral Agent any and all monies in JLEC's accounts with the Onshore
Collateral Agent.
6. The Master Agreement for Assignment of Accounts Receivable as Security, in
which JLEC assigns to the Onshore Collateral Agent a security interest in all of
the accounts receivable payable by ONE to JLEC under the Power Purchase
Agreement.

COVENANTS
The covenants on the loans also place restrictions on JLEC's payment of
dividends and other distributions to JLEC's stockholders.

Specifically, JLEC may not:
        1.  Pay any dividends to its stockholders, or
        2.  Make any distribution, payment or delivery of property or cash to
            its stockholders, or
        3.  Redeem, retire, purchase or otherwise acquire any shares of its
            capital stock, or
        4.  Purchase or redeem any subordinated debt except, on quarterly
            repayment dates and only then after first satisfying all debt
            service obligations and satisfying all of the following conditions,
            among others:
a.  No default shall have occurred,
b.  The cash balance in all JLEC reserve and accrual accounts shall equal or
    exceed required levels,
c.  JLEC's actual debt service coverage ratios for the current quarter and
preceding four quarters have all been greater than 1.3, and
d.  JLEC's forecasted debt service coverage ratios for the next succeeding two
quarters are greater than 1.3 JLEC has complied with these covenants since May
2001, when the loans began to be repaid.

                                    Page 20



<PAGE>




JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

16. STOCKHOLDERS' EQUITY


The composition of Stockholders' Equity as of  December 31, 2003 was:

16.1 COMMON STOCK

<TABLE>
<CAPTION>
                                                        Common Stock
                                        ---------------------------------------------
                                            Number        Par value         Par value
Stockholders                               of Shares        Dirham          US Dollar
- -----------------------                 ---------------------------------------------
<S>                                     <C>               <C>               <C>
AB Cythere 63, Sweden..................        2,634          263,400         27,668
Jorf Lasfar Energiaktiebolag, Sweden...        1,375          137,500         14,443
Jorf Lasfar Power Energy AB, Sweden....        1,265          126,500         13,288
Tre Kronor Investment AB, Sweden.......          110           11,000          1,155
Jorf Lasfar Handelsbolag, Sweden.......          110           11,000          1,155
AB Cythere 61, Sweden                              6              600             63
                                        ---------------------------------------------
                 Total                         5,500          550,000         57,773
</TABLE>


16.2 CONVERTIBLE STOCKHOLDERS' SECURITIES

On December 11, 2000, the JLEC stockholders purchased 100% of all Company Loan
Notes for $387,355,000, and amended the Company Loan Agreement to make such
stockholder securities convertible into Preferred Stock or Common Stock. On
January 1, 2001, the convertible securities (Company Loan Principal) held by AB
Cythere 61 and AB Cythere 63 were converted into Preferred Stock as shown below
on Note 16.3. Such conversions shall be made into a fixed number of JLEC shares
as listed below:

<TABLE>
<CAPTION>


                                          ----------------------------------------------
                                             Number          Par value       Par value
Stockholders                               of Shares           Dirham        US Dollar
- ----------------------                    ----------------------------------------------
<S>                                        <C>             <C>             <C>
AB Cythere 63, Sweden...................              0                0              0
Jorf Lasfar Energiaktiebolag, Sweden....     10,537,024    1,053,702,400     96,838,750
Jorf Lasfar Power Energy AB, Sweden.....      9,694,062      969,406,200     89,091,650
Tre Kronor Investment AB, Sweden........        842,962       84,296,200      7,747,100
Jorf Lasfar Handelsbolag, Sweden........        842,962       84,296,200      7,747,100
AB Cythere 61, Sweden...................              0                0              0
                                          ----------------------------------------------
                 Total                       21,917,010    2,191,701,000    201,424,600

</TABLE>

Under the terms of the amended Company Loan Agreement summarized below, these
convertible securities constitute an hybrid instrument which are delt with in
accordance with the substance of the transaction, i.e. as a Preferred Stock
equivalent:

(a) Expression of the Loan in MAD
The outstanding USD 201,424,600 principal amount is expressed as MAD
2,191,701,000 for the purpose of computing interest and principal payments due
under this Agreement. However, interest and principal payments will be paid to
the stockholders in USD, provided that the Company is not responsible for any
losses realized by the stockholders resulting from the depreciation of the value
of the MAD relative to the USD.
(b) Repayment or conversion into Stock
Under the terms of the amended Agreement:
- - the Security may only be repaid, in whole or in part, at the Company's option;
- - the part of the Security principal held by other Company Lenders listed above
may be converted into Common Stock at any time, using the same conversion ratio
used for the conversion of the parts of AB Cythere 61 and AB Cythere 63;
- - the shares of Preferred Stock issued to AB Cythere 61 and AB Cythere 63 may be
converted into Common Stock. In this case, all outstanding Security principal
held by other Company Lenders will be mandatorily converted into Common Stock at
the same conversion ratio.
(c) Interest payment and accruals as Retained Earning
In accordance with Amendment N(degree).2, the Company will pay interest on the
unpaid principal amount once per year, at the interest rate per annum equal to
the greater of (1) the Moroccan maximum deductible rate, and (2) 4.00%. The
applicable interest rate for 2003 is 4.00%. Accruals for such interest payments
are reported as part of the Retained Earning allocation in Note 16.4, and are
not expensed.


                                    Page 21


<PAGE>




JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


16.3 PREFERRED STOCK

In accordance with Section 3.01 par.(b) of the amended Company Loan Agreement
(see note 16.2 above), the Company as converted on January 1, 2001, all
outstanding Company Loan principal held by AB Cythere 61 and AB Cythere 63, at
the conversion ratio of one (1) share of Preferred Stock for each one hundred
(100) MAD of such Company Loan principal converted into Preferred Stock, as
follows:


<TABLE>
<CAPTION>



                                                                                  Preferred Stock
                                                               -------------------------------------------------
                                                                     Number        Par value        Par value
              Stockholders                                          of Shares        Dirham         US Dollar
              --------------------------------------------     -------------------------------------------------
              <S>                                              <C>              <C>               <C>

              AB Cythere 63, Sweden.......................          20,185,145   2,018,514,500      185,508,183
              Jorf Lasfar Energiaktiebolag, Sweden .......                   0               0                0
              Jorf Lasfar Power Energy AB, Sweden.........                   0               0                0
              Tre Kronor Investment AB, Sweden............                   0               0                0
              Jorf Lasfar Handelsbolag, Sweden............                   0               0                0
              AB Cythere 61, Sweden.......................              45,941       4,594,100          422,217
                                                               -------------------------------------------------
                             Total                                  20,231,086   2,023,108,600      185,930,400

</TABLE>


Such shares are non-participating voting shares of convertible Preferred Stock
of the Company, and:
- - are convertible at any moment into shares of Common Stock;
- - give right to the collection of a minimum priority dividend, at least equal to
4% of the aggregate par value of the preferred shares,
- - do not participate in the distribution of the remaining balance of Retained
Earning, which is divided among the shares of Common Stock as shown in Note
16.4.


16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS

<TABLE>
<CAPTION>
                                                                                                           US$
                                                                                                   ----------------
    2003
    ----
    <S>                                                                                            <C>

              Retained Earnings as of December 31, 2002                                                113,030,506
              Retained Earnings increase during 2003                                                   119,850,319
              Retained Earnings decrease during 2003
                      Convertible Securities interest payable as of January 1, 2003                    -10,612,757
                                       108,218,281 Dirhams
                                           10.1970 Dirhams per US Dollar

                      Preferred Stock Dividend payable as of January 1, 2003                            -9,796,391
                                        99,893,797 Dirhams
                                           10.1970 Dirhams per US Dollar

                      Common Stock Dividend payable as of October 30, 2003                             -64,972,722
                                             5,500 Common Stock Shares
                                           110,000 Dirhams per share
                                       605,000,000 Dirhams
                                            9.3116 Dirhams per US Dollar on October 30, 2003

                                                                                                   ----------------
              Total Retained Earnings                                                                  147,498,955

</TABLE>


The Retained Earnings are allocated among the stockholders as follows:


<TABLE>
<CAPTION>
                                                                                                          Common
                                                Convertible Securities            Preferred Stock         Stock         Total
                                          ---------------------------------------------------------------------------------------
Stockholders                                  Dirhams        US Dollars       Dirhams      US Dollars   US Dollars    US Dollars
- ----------------------------------------- ---------------------------------------------------------------------------------------
<S>                                         <C>           <C>               <C>            <C>         <C>            <C>
AB Cythere 63, Sweden....................             0               0      81,861,977     9,327,725   61,310,884    70,638,608

Jorf Lasfar Energiaktiebolag, Sweden.....    42,733,486       4,869,247               0             0   32,005,492    36,874,739

Jorf Lasfar Power Energy AB, Sweden......    39,314,807       4,479,707               0             0   29,445,052    33,924,760

Tre Kronor Investment AB, Sweden.........     3,418,679         389,540               0             0    2,560,439     2,949,979

Jorf Lasfar Handelsbolag, Sweden.........     3,418,679         389,540               0             0    2,560,439     2,949,979

AB Cythere 61, Sweden....................             0               0         186,316        21,230      139,660       160,890
                                          ---------------------------------------------------------------------------------------
         Total                               88,885,652      10,128,034      82,048,293     9,348,954  128,021,967   147,498,955
</TABLE>



The allocations for Convertible Securities (88,885,652 Dirhams) and Preferred
Stock (82,048,293 Dirhams) are payable as of January 1, 2004, and are scheduled
for payment on May 17, 2004.


                                    Page 22
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

16.4 RECONCILIATION AND ALLOCATION OF RETAINED EARNINGS (CONTINUED)

<TABLE>
<CAPTION>
    2002                                                                                                         US$
    ----                                                                                                   --------------

<S>                                                                                                        <C>
              Retained Earnings as of December 31, 2001                                                       187,671,644
              Retained Earnings increase during 2002                                                          132,287,908
              Retained Earnings decrease during 2002:
                             Convertible Securities interest payable as of January 1, 2002                    -12,095,803
                                                  140,250,832 Dirhams
                                                      11.5950 Dirhams per US Dollar

                             Preferred Stock Dividend payable as of January 1, 2002                            -9,942,031
                                                  115,277,852 Dirhams
                                                      11.5950 Dirhams per US Dollar

                             Common Stock Dividend payable as of October 29, 2002                            -184,891,213
                                                        5,500 Common Stock Shares
                                                      360,000 Dirhams per share
                                                1,980,000,000 Dirhams
                                                      10.7090 Dirhams per US Dollar on October 29, 2002

                                                                                                           --------------
              Total Retained Earnings                                                                         113,030,506
</TABLE>

The Retained Earnings are allocated among the shareholders as follows:
<TABLE>
<CAPTION>
                                                                                                            Common
                                              Convertible Securities           Preferred Stock               Stock         Total
                                          ------------------------------------------------------------------------------------------
Shareholders                                 Dirhams       US Dollars      Dirhams        US Dollars       US Dollars    US Dollars
- ------------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>              <C>            <C>              <C>             <C>           <C>
AB Cythere 63, Sweden....................            0              0     99,666,957       9,774,145       44,357,210     54,131,355

Jorf Lasfar Energiaktiebolag, Sweden.....   52,028,019      5,102,287              0               0       23,155,340     28,257,626

Jorf Lasfar Power Energy AB, Sweden......   47,865,778      4,694,104              0               0       21,302,912     25,997,016

Tre Kronor Investment AB, Sweden.........    4,162,242        408,183              0               0        1,852,427      2,260,610

Jorf Lasfar Handelsbolag, Sweden.........    4,162,242        408,183              0               0        1,852,427      2,260,610

AB Cythere 61, Sweden                                0              0        226,840          22,246          101,041        123,287
                                          ------------------------------------------------------------------------------------------
              Total                        108,218,281     10,612,757     99,893,797       9,796,391       92,621,358    113,030,506
</TABLE>




<TABLE>
<CAPTION>
    2001                                                                                                        USD
    ----                                                                                                   --------------

<S>                                                                                                        <C>
              Retained Earnings as of December 31, 2000                                                       296,408,600
              Retained Earnings increase during 2001                                                          161,385,686
              Retained Earnings decrease during 2001
                             Common Stock dividend declared payable on April 24, 2001                        -151,362,260
                                                        5,500 Common Stock Shares
                                                      300,000 Dirhams per share
                                                1,650,000,000 Dirhams
                                                      10.9010 Dirhams per US Dollar on April 24, 2001

                             Common Stock dividend declared payable on October 29, 2001                      -118,760,381
                                                        5,500 Common Stock Shares
                                                      247,000 Dirhams per share
                                                1,358,500,000 Dirhams
                                                      11.4390 Dirhams per US Dollar on October 29, 2001

                                                                                                           --------------
              Total Retained Earnings                                                                         187,671,644
</TABLE>

The Retained Earnings are allocated among the shareholders as follows:
<TABLE>
<CAPTION>
                                                                                                          Common
                                            Convertible Securities              Preferred Stock             Stock          Total
                                         -------------------------------------------------------------------------------------------
Shareholders                               Dirhams         US Dollars      Dirhams        US Dollars      US Dollars      US Dollars
- ------------------------------------------------------------------------------------------------------------------------------------

<S>                                      <C>              <C>         <C>               <C>            <C>             <C>
AB Cythere 63, Sweden..................     7,359,167        634,685     115,016,078       9,919,455      79,323,538      89,877,677

Jorf Lasfar Energiaktiebolag, Sweden...    63,882,171      5,509,458               0               0      41,408,453      46,917,911

Jorf Lasfar Power Energy AB, Sweden....    58,771,597      5,068,702               0               0      38,095,776      43,164,478

Tre Kronor Investment AB, Sweden.......     5,110,574        440,757               0               0       3,312,676       3,753,433

Jorf Lasfar Handelsbolag, Sweden.......     5,110,574        440,757               0               0       3,312,676       3,753,433

AB Cythere 61, Sweden..................        16,749          1,445         261,774          22,576         180,691         204,712
                                         -------------------------------------------------------------------------------------------
              Total                       140,250,833     12,095,803     115,277,852       9,942,031     165,633,810     187,671,644
</TABLE>




                                    Page 23
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

17.  DIRECT FINANCING LEASE - (D.F.L)

As explained in Note 2b, JLEC is using the Direct Financing Lease methodology.
Specific accounts were created to reflect this method. These accounts are
detailed below.


Direct Financing Lease - (D.F.L) as of December 31, 2003


17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2003
<TABLE>
<CAPTION>
                                                                               US$                 Euro
                                                                         ----------------    ------------------
                                                                            Units 1 to 4          Units 1 to 4
                                                                         ----------------    ------------------
<S>                                                             <C>      <C>                <C>
            Total Minimum Lease Payments                                   1,283,596,155           956,285,785
            Minimum Lease Payments for 2003                                 -101,642,136          -121,482,375
                                                                         ---------------     -----------------
            Total of Future Minimum Lease Payments                         1,181,954,019           834,803,410
                                                                                                    X 1.263417
                                                                         ---------------     -----------------
            Total of Future Minimum Lease Payments in US$       17.3       1,181,954,019         1,054,704,794
                                                                           =============         =============
</TABLE>

The minimum lease payments under the US GAAP model for the next five years are
as follows:

<TABLE>
<CAPTION>
                                                                               US$                 Euro
                                                                         ----------------    ----------------
                 Year                                                       Units 1 to 4        Units 1 to 4
            ---------------                                              ----------------    ----------------
<S>                                                                        <C>                 <C>
                 2004                                                        116,664,592         116,635,941
                 2005                                                        116,371,118         107,167,144
                 2006                                                        108,749,430          92,362,540
                 2007                                                         96,617,923          85,060,254
                 2008                                                        104,467,842          84,500,888
</TABLE>


17.2 UNEARNED INCOME AS OF DECEMBER 31, 2003
<TABLE>
<CAPTION>
                                                                      US$                Euro
                                                                ----------------   ----------------
                                                                   Units 1 to 4       Units 1 to 4
                                                                ----------------   ----------------
<S>                                                      <C>    <C>                <C>                         <C>
            Total Unearned Income                                   587,282,368        568,767,180
                                                                                                               ----------------
            Lease Revenue 2003                                      -81,792,828        -91,756,966 X 1.14035        104,635,053
                                                                ---------------    ---------------             ----------------
                                                                    505,489,540        477,010,214
                                                                                        X 1.263417
                                                                ---------------    ---------------
            Total Remaining Unearned Income in US$       17.3       505,489,540        602,662,799
                                                                    ===========        ===========
</TABLE>

The minimum lease payments under the US GAAP model for the next five years are
as follows:
<TABLE>
<CAPTION>
                                                                                US$                 Euro
                                                                         ----------------    ----------------
                 Year                                                       Units 1 to 4        Units 1 to 4
            ---------------                                              ----------------    ----------------
<S>                                                                       <C>                 <C>
                 2004                                                         78,203,985          84,230,456
                 2005                                                         73,392,008          76,117,547
                 2006                                                         68,172,214          69,587,224
                 2007                                                         64,172,868          64,534,124
                 2008                                                         59,591,568          58,711,491
</TABLE>


17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2003

<TABLE>
<CAPTION>
                                                                               US$                Euro
                                                                         ----------------   ----------------
                                                                            Units 1 to 4       Units 1 to 4
                                                                         ----------------   ----------------

<S>                                                                <C>   <C>                 <C>
            Total of Future Minimum Lease Payments in US$          17.1    1,181,954,019      1,054,704,794
            Total Remaining Unearned Income in US$                 17.2     -505,489,540       -602,662,799
                                                                          --------------    ---------------
            Net investment in direct financing leases in US$                 676,464,479        452,041,995
                                                                             ===========        ===========

            Current part in US$                                               38,460,607         40,941,639
            Non-Current part in US$                                          638,003,872        411,100,356
</TABLE>



                                    Page 24
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


Direct Financing Lease - (D.F.L) as of December 31, 2002


17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                                               US$                 Euro
                                                                         ----------------   -----------------
                                                                            Units 1 to 4        Units 1 to 4
                                                                         ----------------   -----------------
<S>                                                               <C>    <C>                <C>
            Total Minimum Lease Payments                                   1,426,008,468       1,081,037,348
            Minimum Lease Payments for 2002                                 -142,336,127        -124,619,384
                                                                         ---------------    ----------------
            Total of Future Minimum Lease Payments                         1,283,672,341         956,417,964
                                                                           -------------         -----------
                                                                                                  X 1.046582
                                                                         ---------------    ----------------
            Total of Future Minimum Lease Payments in US$         17.3     1,283,672,341       1,000,970,139
                                                                           =============       =============
</TABLE>

The minimum lease payments under the US GAAP model for the next five years are
as follows:

<TABLE>
<CAPTION>
                                                                               US$                Euro
                                                                         ----------------   ----------------
                 Year                                                       Units 1 to 4       Units 1 to 4
            ---------------                                              ----------------   ----------------
<S>                                                                       <C>                <C>
                 2003                                                        101,642,136        121,482,376
                 2004                                                        116,664,592        116,635,941
                 2005                                                        116,371,118        107,167,144
                 2006                                                        106,872,046         90,768,049
                 2007                                                         96,617,923         85,060,254
</TABLE>


17.2 UNEARNED INCOME AS OF DECEMBER 31, 2002
<TABLE>
<CAPTION>
                                                                       US$                 Euro
                                                                 ----------------   -----------------
                                                                    Units 1 to 4        Units 1 to 4
                                                                 ----------------   -----------------
<S>                                                       <C>    <C>                <C>                          <C>
            Total Unearned Income                                    673,381,447         668,603,895
                                                                                                                 ----------------
            Lease Revenue 2002                                       -88,463,713         -99,930,507 X 0.95144         95,077,872
                                                                 ---------------    ----------------             ----------------
                                                                     584,917,734         568,673,388
                                                                     -----------         -----------
                                                                                          X 1.046582
                                                                 ---------------    ----------------
            Total Remaining Unearned Income in US$        17.3       584,917,734         595,163,517
                                                                     ===========         ===========
</TABLE>

The Lease Revenue under the US GAAP model for the next five years are as
follows:
<TABLE>
<CAPTION>
                                                                               US$                Euro
                                                                         ----------------   ----------------
                 Year                                                       Units 1 to 4        Units 1 to 4
            ---------------                                              ----------------   ----------------
<S>                                                                       <C>                 <C>
                 2003                                                         81,436,213          91,576,926
                 2004                                                         77,831,811          84,020,822
                 2005                                                         73,012,360          75,871,769
                 2006                                                         67,896,425          69,487,000
                 2007                                                         64,019,517          64,661,480
</TABLE>


17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2002

<TABLE>
<CAPTION>
                                                                               US$                Euro
                                                                         ----------------   -----------------
                                                                            Units 1 to 4        Units 1 to 4
                                                                         ----------------   -----------------

<S>                                                                <C>   <C>                <C>
Total of Future Minimum Lease Payments in US$                      17.1    1,283,672,341       1,000,970,139
Total Remaining Unearned Income in US$                             17.2     -584,917,734        -595,163,517
                                                                         ---------------    ----------------
Net investment in direct financing leases in US$                             698,754,607         405,806,622
                                                                             ===========         ===========

Current part in US$                                                           20,205,960          31,298,090
Non-Current part in US$                                                      678,548,647         374,508,532
</TABLE>


                                    Page 25
<PAGE>
JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003


Direct Financing Lease - (D.F.L) as of December 31, 2001


17.1 LONG TERM RECEIVABLES AS OF DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                                     US$                Euro
                                                                               ----------------    ----------------
                                                                                  Units 1 to 4         Units 1 to 4
                                                                               ----------------    ----------------
<S>                                                                 <C>        <C>                 <C>
                 Total Minimum Lease Payments                                    1,638,683,000        1,210,483,496
                 Minimum Lease Payments for 2001                                  -172,987,799         -116,468,307
                                                                               ---------------     ----------------
                 Total of Future Minimum Lease Payments                          1,465,695,201        1,094,015,189
                                                                                 -------------        -------------
                                                                                                     X 0.88504
                                                                               ---------------     ----------------
                 Total of Future Minimum Lease Payments in US$      17.3         1,465,695,201          968,243,542
                                                                                 =============          ===========
</TABLE>

The minimum lease payments under the US GAAP model for the next five years are
as follows:

<TABLE>
<CAPTION>
                                                                                     US$                 Euro
                                                                               ----------------    ----------------
                      Year                                                        Units 1 to 4        Units 1 to 4
                 ---------------                                               ----------------    ----------------
<S>                                                                             <C>                <C>
                      2002                                                         147,453,739         125,654,878
                      2003                                                         108,352,169         125,448,188
                      2004                                                         121,415,209         118,233,920
                      2005                                                         120,444,202         108,413,086
                      2006                                                         109,842,978          91,398,693
</TABLE>


17.2 UNEARNED INCOME AS OF DECEMBER 31, 2001
<TABLE>
<CAPTION>
                                                                               US$                Euro
                                                                         ----------------    ----------------
                                                                            Units 1 to 4        Units 1 to 4
                                                                         ----------------    ----------------
<S>                                                          <C>         <C>                 <C>                        <C>
                 Total Unearned Income                                       823,653,897         792,223,192
                                                                                                                        ------------
                 Lease Revenue 2001                                         -100,679,205        -105,867,406 X 0.89305    94,544,727
                                                                         ----------------    ----------------           ------------
                                                                             722,974,692         686,355,786
                                                                             -----------         -----------
                                                                                                  91,398,693
                                                                         ----------------    ----------------
                 Total Remaining Unearned Income in US$      17.3            722,974,692         607,450,028
                                                                             ===========         ===========
</TABLE>



The Lease Revenue under the US GAAP model for the next five years are as
follows:
<TABLE>
<CAPTION>
                                                                                     US$                Euro
                                                                               ----------------    ----------------
                      Year                                                        Units 1 to 4        Units 1 to 4
                 ---------------                                               ----------------    ----------------
<S>                                                                             <C>                <C>
                      2002                                                          91,392,805         101,298,144
                      2003                                                          87,462,185          94,047,617
                      2004                                                          83,519,951          86,014,881
                      2005                                                          78,375,499          77,627,453
                      2006                                                          73,017,083          71,189,178
</TABLE>


17.3 NET INVESTMENT IN DIRECT FINANCING LEASES AS OF DECEMBER 31, 2001

<TABLE>
<CAPTION>
                                                                                     US$                Euro
                                                                               ----------------    ----------------
                                                                                  Units 1 to 4        Units 1 to 4
                                                                               ----------------    ----------------

<S>                                                              <C>           <C>                 <C>
Total of Future Minimum Lease Payments in US$                    17.1            1,465,695,201         968,243,542
Total Remaining Unearned Income in US$                           17.2             -722,974,692        -607,450,028
                                                                               ----------------    ----------------
Net investment in direct financing leases in US$                                   742,720,509         360,793,514
                                                                                   ===========         ===========

Current part in US$                                                                 56,060,930          21,301,261
Non-Current part in US$                                                            686,659,570         339,492,340
</TABLE>


                                    Page 26
<PAGE>
JORF LASFAR ENERGY COMPANY


NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

18. FINANCIAL EXPENSES

The Financial Expenses are detailed as follows, for the year ending:
<TABLE>
<CAPTION>
                                                                         12/31/03      12/31/02      12/31/01
                                                                            US$           US$           US$
                                                                        -----------   -----------   -----------
<S>                                                                    <C>           <C>           <C>
Interest, Fees and Swaps incurred from inception to December 31, 2003

  Up-Front Fees                                                          25,609,073    25,609,073    25,609,073
  Interest Costs                                                        287,290,576   246,526,514   210,187,205
  Premiums                                                               23,808,481    23,808,481    23,808,481
  Commitment Fees                                                        19,312,672    19,312,672    18,136,357
  Arrangement Fees                                                        2,396,273     2,396,273     2,396,273
  Other Fees (acceptance fees, Agent fees...etc)                          9,754,617     9,297,751     8,875,953
  Guarantee Fees                                                         20,598,822    19,101,732     5,496,128
  Swaps                                                                  37,238,114    30,362,978    25,851,201
                                                                        -----------   -----------   -----------
                                                                        426,008,628   376,415,474   320,360,671
  Accrued Interest, Fees, Swaps (see Note 14.1)                           5,904,937     6,072,924    17,293,488
                                                                        -----------   -----------   -----------
  Total Interest, Fees and Swaps                                        431,913,565   382,488,398   337,654,159
  Interest, fees and swaps capitalized as part of
  the project construction for Units 3&4                               -210,949,363  -210,949,363  -210,949,363
                                                                        -----------   -----------   -----------
  Interest and swaps expensed - Total                                   220,964,202   171,539,035   126,704,796
  Interest and swaps expensed from 1997 through 2002                   -171,539,035  -126,704,796   -76,088,286
                                                                        -----------   -----------   -----------

  Interest and swaps expensed                                            49,425,167    44,834,239    50,616,510
                                                                        ===========   ===========   ===========
</TABLE>



19. PENSION PLANS

JLEC contributes to the following pension plans:

19.1 COMMON FUND FOR RETIREMENT (CAISSE COMMUNE DES RETRAITES OR CCR)

As required by PPA Section 23.2.4, most of JLEC's employees (259 employees of
313, or 84%) plus 1 recent retiree are participants in the CCR defined benefit
pension plan. This plan is funded by employee payroll deductions equal to 9% of
the employee's gross pay, plus JLEC contributions equal to 18% of the
participating employee's gross pay. In 2003, 2002 and 2001, JLEC contributed to
the CCR US$ 350,071, US$ 291,036 and US$ 266,972, respectively.

Benefits provided under this plan include pension and retiree health insurance.
As of December 31, 2003, the benefit obligation totalled US$ 14,584,092 (MAD
127,992,907/8.7762). The fair value of assets contributed to the CCR was US$
4,705,965 (MAD 41,300,493/8.7762) as of December 31, 2003. The net unfunded
benefit obligation as of December 31, 2003 reflected in the accompanying balance
sheet was US$ 9,878,126 (MAD 86,692,413/8.7762).

The following assumptions were used to perform the actuarial valuations:

<TABLE>
<CAPTION>
                                                              2003              2002             2001
                                                              ----              ----             ----
<S>                                                           <C>               <C>              <C>
                           Discount rate                      6.00%             7.58%            7.58%
                           Rate of compensation increase      6.50%             6.50%            6.50%
</TABLE>

19.2 MOROCCAN RETIREMENT FUND FOR PROFESSIONALS (CAISSE INTERPROFESSIONNELLE
MAROCAINE DE RETRAITES OR CIMR)

Employees of JLEC not covered by CCR participate in a fund to which the employer
contributes an amount equal to 12 percent of the employee's gross pay. This fund
is carried in the employee's name, and the pension benefits an employee will
receive depend only on the amount contributed to this account and the returns
earned on investments of those contributions. In 2003, JLEC's contribution to
that fund amounted to USD 145,677 (USD 109,147 in 2002, and USD 105,912 in 2001)




                                    Page 27
<PAGE>
JORF  LASFAR  ENERGY  COMPANY


NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

     20. DERIVATIVE INSTRUMENT LIABILITY / OTHER COMPREHENSIVE INCOME

     JLEC adopted SFAS N(degree). 133 on January 1, 2001. This standard requires
     JLEC to recognize at fair value on the balance sheet, as assets or
     liabilities, all contracts that meet the definition of a derivative
     instrument. Details of all JLEC derivative instruments (interest rate
     swaps) are provided in the following table as of December 31, 2003, and all
     such swaps qualify with 100% effectiveness as cash flow hedge for JLEC's
     variable interest rate loans. Therefore, in accordance with SFAS N(degree).
     133, the changes in fair value of these interest rate swaps are reflected
     directly in Stockholders' Equity under "Other Comprehensive Income or
     (Loss)". JLEC determines fair value based upon market price estimations
     provided by the swap providers.


<TABLE>
<CAPTION>
2003
- ------------------------------------------------------------------------------------------------------------------------------------
                               Fixed Rate    Current       Current        Settlement                      Forecast of      Valuation
  Credit      Swap              Paid by     Libor Paid     Notional          and        Termination        Remaining          in
 Facility  Providers Currency    JLEC        to JLEC        Amount       Amortization       Date           Payments          Euro
- ------------------------------------------------------------------------------------------------------------------------------------
<S>        <C>        <C>      <C>         <C>          <C>             <C>              <C>             <C>             <C>
World Bank    BNP     Euro      6.4115%     2.16888%      41,119,939     Quarterly        2/15/2013        8,400,358      4,942,789
              ABN     Euro      6.4175%     2.16888%      41,119,939     Quarterly        2/15/2013        8,412,238      4,940,969
              CSFB    Euro      6.4060%     2.16888%      41,119,939     Quarterly        2/15/2013        8,389,468      4,733,058
                                                         -----------                                      ----------     ----------
                                                         123,359,818                                      25,202,063     14,616,816


- ------------------------------------------------------------------------------------------------------------------------------------
ERG           BNP     Euro     6.4700%      2.16888%       7,681,980     Quarterly        2/15/2013        1,590,984        942,887
              ABN     Euro     6.4750%      2.16888%       7,681,980     Quarterly        2/15/2013        1,592,834        942,179
              CSFB    Euro     6.4680%      2.16888%       7,681,980     Quarterly        2/15/2013        1,590,245        950,471
                                                         -----------                                      ----------     ----------
                                                          23,045,940                                       4,774,063      2,835,537
- -----------------------------------------------------------------------------------------------------------------------------------

                                                                                                      Total in Euro      17,452,353
                                                                                                                         ----------
                                                                                                     B/S FX rate  X         1.26342
                                                                                                       Total in USD      22,049,599
                                                                                                                         ==========
</TABLE>


<TABLE>
<CAPTION>
2002

- ------------------------------------------------------------------------------------------------------------------------------------
                               Fixed Rate    Current       Current        Settlement                      Forecast of      Valuation
  Credit      Swap              Paid by     Libor Paid     Notional          and        Termination        Remaining          in
 Facility  Providers Currency    JLEC        to JLEC        Amount       Amortization       Date           Payments          Euro
- ------------------------------------------------------------------------------------------------------------------------------------
<S>        <C>        <C>     <C>          <C>          <C>            <C>              <C>             <C>              <C>
World Bank    BNP      Euro     6.4115%      3.13725%     45,565,338     Quarterly     2/15/2013          7,947,927       5,729,083
              ABN      Euro     6.4175%      3.13725%     45,565,338     Quarterly     2/15/2013          7,962,491       5,739,581
              CSFB     Euro     6.4060%      3.13725%     45,565,338     Quarterly     2/15/2013          7,934,576       5,719,459
                                                         -----------                                     ----------      ----------
                                                         136,696,014                                     23,844,995      17,188,122



- -----------------------------------------------------------------------------------------------------------------------------------
ERG           BNP      Euro     6.4700%      3.13725%      8,512,464     Quarterly     2/15/2013          1,511,371       1,089,437
              ABN      Euro     6.4750%      3.13725%      8,512,464     Quarterly     2/15/2013          1,513,638       1,091,072
              CSFB     Euro     6.4680%      3.13725%      8,512,464     Quarterly     2/15/2013          1,510,464       1,088,783
                                                         -----------                                     ----------      ----------
                                                          25,537,392                                      4,535,473       3,269,292
- ------------------------------------------------------------------------------------------------------------------------------------


                                                                                                     Total in Euro       20,457,415
                                                                                                                         ----------
                                                                                                    B/S FX rate  X          1.04658
                                                                                                       Total in USD      21,410,369
                                                                                                                         ==========
</TABLE>


<TABLE>
<CAPTION>
2001

- ------------------------------------------------------------------------------------------------------------------------------------
                               Fixed Rate    Current       Current        Settlement                      Forecast of      Valuation
  Credit      Swap              Paid by     Libor Paid     Notional          and        Termination        Remaining          in
 Facility  Providers Currency    JLEC        to JLEC        Amount       Amortization       Date           Payments          Euro
- ------------------------------------------------------------------------------------------------------------------------------------
<S>        <C>       <C>     <C>          <C>             <C>           <C>             <C>             <C>              <C>
World Bank    BNP      Euro       6.4300%      3.34000%     48,899,387     Quarterly     12/17/2012         8,614,748      3,369,696
              ABN      Euro       6.4300%      3.34000%     48,899,387     Quarterly     12/17/2012         8,614,748      3,369,696
              CSFB     Euro       6.4230%      3.34000%     48,899,387     Quarterly     12/17/2012         8,595,232      3,362,062
                                                           -----------                                     ----------     ----------
                                                           146,698,162                                     25,824,728     10,101,454



- -----------------------------------------------------------------------------------------------------------------------------------
ERG           BNP      Euro       6.3600%      3.34000%      9,654,551    Quarterly      12/17/2012         1,662,339        650,231
              ABN      Euro       6.3600%      3.34000%      9,654,551    Quarterly      12/17/2012         1,662,339        650,231
              CSFB     Euro       6.3510%      3.34000%      9,654,551    Quarterly      12/17/2012         1,657,385        648,293
                                                           -----------                                     ----------     ----------
                                                            28,963,653                                      4,982,063      1,948,755
- ------------------------------------------------------------------------------------------------------------------------------------


                                                                                                        Total in Euro     12,050,209
                                                                                                                          ----------
                                                                                                       B/S FX rate  X        0.88504
                                                                                                         Total is USD     10,664,877
                                                                                                                          ==========
</TABLE>



                                    Page 28
<PAGE>

JORF LASFAR ENERGY COMPANY

NOTES TO US GAAP FINANCIAL STATEMENTS DATED DECEMBER 31, 2003

21. CASH FLOWS FOR 2003

Reconciliation of net income to net cash from operating activities under the
Direct Method is as follows :

<TABLE>
<CAPTION>
                                                                                       2003           2002              2001
                                                                                        US$            US$               US$
                                                                                   --------------------------------------------
<S>                                                                                <C>             <C>            <C>
Net Income .....................................................................    119,850,319     132,287,908     161,385,686
Adjustment to reconcile Net Income to cash provided from operating activities :

         Depreciation and amortization .........................................      4,028,115       2,752,641         731,003
         Deferred taxes ........................................................    (13,005,297)      6,908,298       6,097,093
         Lease Revenue .........................................................   (186,427,881)   (183,541,585)   (195,223,932)
         Finance tariff cash revenue ...........................................    246,405,730     263,559,812     262,829,803
         Changes in operating assets and liabilities:
         Inventories ...........................................................      2,066,641      (8,855,387)     (9,242,424)
         Accounts receivable ...................................................     (9,311,086)     10,340,353     (22,975,149)
         Prepayments ...........................................................      2,292,604      (5,954,169)        979,429
         Accounts payable ......................................................     22,353,640      (9,266,000)    (20,701,000)
         Unfunded pension obligation ...........................................      4,185,183       5,692,943            --
         Other liabilities .....................................................     (2,445,519)       (608,934)      3,093,490
         Effect of exchange rate changes .......................................      1,824,028       4,235,487      (2,003,877)
                                                                                   --------------------------------------------
Net cash provided by operating activities ......................................    191,816,478     217,551,367     184,970,122
</TABLE>


22. UNCERTAINTIES AS OF DECEMBER 31, 2003

22.1 JLEC's corporate tax return, payroll tax and VAT returns for the years 2000
to 2003 are open to audit by the Moroccan Tax Authorities. JLEC is periodically
involved in other legal, tax and other proceedings regarding matters arising in
the ordinary course of business. JLEC believes that the outcome of these matters
will not materially affect its results of operations or liquidity.

22.2 Discussions are currently underway between JLEC and ONE, which may result
in amendments of the Power Purchase Agreement (PPA) and the Transfer of
Possession Agreement (TPA). As currently drafted, such amendments would
eliminate ONE's right of termination for convenience (which right ONE could
otherwise exercise starting on September 13, 2012) and reduce ONE's right of
termination due to adverse economic circumstances (which right ONE might
otherwise be entitled to exercise after all of the principal amount of JLEC's
indebtedness to the project lenders has been repaid); and thereby, the proposed
amendments would increase the likelihood that the PPA and TPA continue in effect
until their scheduled expiration on September 13, 2027. In exchange, it is
proposed that the PPA's gross capacity charges be reduced by means of a new
rebate (to be paid by JLEC to ONE on a quarterly basis, and calculated starting
from September 13, 2003) and future tariff reductions (starting from September
13, 2014). These possible PPA and TPA amendments are still under negotiation,
and such negotiations may or may not converge on agreements acceptable to both
JLEC and ONE. Furthermore, any potential PPA and TPA amendments agreed between
JLEC and ONE would still be subject to change by and the approval of ONE's Board
of Directors, JLEC's shareholders and JLEC's lenders before coming into effect.
This process of negotiation, review and approval will require several months at
least, and may possibly never result in any amendments. This uncertainty exists
as of the date of these financial statements.

23. NEW ACCOUNTING STANDARDS

In June 2002, FASB issued SFAS No 146, "Accounting for Costs Associated with
Exit or Disposal Activities.". This statement addresses the recognition,
measurement and reporting of costs that are associated with exit and disposal
activities and nullifies EITF 94-3 "Liability Recognition for Certain Employee
Termination Benefits and Other Costs to exit an Activity (Including Certain
costs incurred in a Restructuring)". Under SFAS 146, the cost associated with an
exit or disposal activity is recognized in the periods in which it is incurred
rather than at the date the company committed to the exit plan. This statement
became effective for exit or disposal activities initiated after December 31,
2002. The adoption of SFAS No 146 did not have a material impact on JLEC's
results of operations or its financial position.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity." The Standard
specifies that instruments within its scope embody obligations of the issuer and
that, therefore, the issuer must classify them as liabilities. The Standard is
effective for interim or fiscal periods ending after June 15, 2003. JLEC is
currently assessing the new standard and has not yet determined the impact on
its financial statements.


                                    Page 29

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(C)
<SEQUENCE>37
<FILENAME>k82154aexv99wxcy.txt
<DESCRIPTION>REPRESENTATION OF FINANCIAL STATEMENTS
<TEXT>
<PAGE>

                                                                   EXHIBIT 99(c)


         Pursuant to Regulation S-X, Rule 3-09, the financial statements for the
fiscal years ended December 31, 2001, 2002 and 2003 for Emirates CMS Power
Company, which is a foreign business, will be filed by June 30, 2004.



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.(D)
<SEQUENCE>38
<FILENAME>k82154aexv99wxdy.txt
<DESCRIPTION>REPRESENTATION OF FINANCIAL STATEMENTS
<TEXT>
<PAGE>

                                                                   EXHIBIT 99(d)


         Pursuant to Regulation S-X, Rule 3-09, the financial statements for the
fiscal years ended June 30, 2002, 2003 and 2004 for SCP Investments (1) PTY.
LTD., which is a foreign business, will be filed by December 31, 2004.


</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
