Underwriting Agreement, Dated October 7, 2004

28,500,000 Shares


CMS ENERGY CORPORATION


Common Stock ($0.01 par value)


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Underwriting Agreement


October 7, 2004


To the Representatives named in Schedule I hereto
of the Underwriters named in Schedule II hereto


Ladies and Gentlemen:


CMS Energy Corporation, a Michigan corporation (the "Company"), proposes to issue and sell to the several Underwriters (as defined in Section 12 hereof) the respective number of shares of Common Stock ($0.01 par value per share) ("Common Stock") of the Company (the "Initial Securities") set forth in Schedule II hereto, subject to the terms and conditions set forth herein. The Underwriters have designated the Representatives (as defined in Section 12 hereof) to execute this Agreement on their behalf and to act for them in the manner provided in this Agreement.


The Company has agreed to grant to the Underwriters, severally and not jointly, an option (the "Option") to purchase all or any part of 4,275,000 additional shares of Common Stock (the "Option Securities"), at a price per Option Security equal to the price per Initial Security. The Option shall expire 30 days after the Time of Purchase (as defined in Section 2 hereof), and may be exercised in whole or in part from time to time. The Option may be exercised upon notice by the Representatives to the Company setting forth the aggregate number of Option Securities as to which the several Underwriters are then exercising the option and the time, date and place of payment and delivery for such Option Securities. 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, 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 Securities, each of the Underwriters, severally and not jointly, will purchase that proportion of the aggregate number of Option Securities then being purchased which the aggregate number of Initial Securities each such Underwriter has severally agreed to purchase as set forth on Schedule II bears to the aggregate number of Initial Securities. As used herein, the term "Securities" shall include the Initial Securities and all or any portion of any Option Securities.


The Company has prepared and filed with the Securities and Exchange Commission (the "Commission"), in accordance with the provisions of the Securities Act of 1933, as amended (the "Act"), a registration statement on Form S-3 (Registration No. 333-51932) including a prospectus relating to the Securities, and such registration statement has become effective under


the Act. The registration statement, at the time the most recent post-effective amendment thereto became effective and as it may have been thereafter amended to the date of this Agreement (including the documents then incorporated by reference therein) is herein referred to as the "Registration Statement". If the Company has filed, or will file, an abbreviated registration statement to register additional Securities pursuant to Rule 462(b) under the Act (the "Rule 462(b) Registration Statement"), then any reference herein to the term "Registration Statement" shall be deemed to include such Rule 462(b) Registration Statement. The prospectus forming a part of the Registration Statement at the time the Registration Statement became effective (including the documents then incorporated by reference therein) is herein referred to as the "Basic Prospectus"; provided, that, in the event that the Basic Prospectus shall have been amended or revised prior to the date of this Agreement, or if the Company shall have supplemented the Basic Prospectus by filing any documents pursuant to Section 13, 14 or 15 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), after the time the Registration Statement became effective and prior to the date of this Agreement, which documents are deemed to be incorporated in the Basic Prospectus, the term "Basic Prospectus" shall also mean such prospectus as so amended, revised or supplemented. The Basic Prospectus, as it shall be revised or supplemented to reflect the final terms of the offering and sale of the Securities by a prospectus supplement relating to the Securities, and in the form to be filed with the Commission pursuant to Rule 424 under the Act, is hereinafter referred to as the "Prospectus". The Basic Prospectus as supplemented by the Preliminary Prospectus Supplement dated October 4, 2004 relating to the Securities, in the form filed with the Commission pursuant to Rule 424 under the Act, is hereinafter referred to as the "Preliminary Prospectus". Any reference herein to the terms "amend", "amendment" or "supplement" with respect to the Registration Statement or the Prospectus shall be deemed to include amendments or supplements to the Registration Statement or Prospectus, as the case may be, and documents incorporated by reference therein, after the date of this Agreement and prior to the termination of the offering of the Securities by the Underwriters.


1. 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 Underwriters, severally and not jointly, and the respective Underwriters, severally and not jointly, agree to purchase from the Company, at the purchase price of $9.10 per share, the respective number of shares of Initial Securities set opposite their names in Schedule II hereto and the respective number of Option Securities determined as set forth above if and to the extent the Option is exercised by the Representatives.


The Company is advised by the Representatives that the Securities may be offered by the Underwriters from time to time in one or more transactions on the New York Stock Exchange ("NYSE") or on other national securities exchanges on which the Company's Common Stock is traded, in the over-the-counter market, through negotiated transactions or otherwise at market prices prevailing at the time of the sale or at prices otherwise negotiated.


2. Payment and Delivery. Payment for the Securities 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 Securities at the offices of Pillsbury Winthrop LLP, 1540 Broadway, New York, New York (or such other place or places of delivery as shall be agreed upon by the


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Company and the Representatives) to the Representatives for the respective accounts of the Underwriters against receipt therefor signed by the Representatives on behalf of themselves and as agent for the Underwriters. Such payment and delivery shall be made at 10:00 A.M., New York time on October 13, 2004 (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 8 hereof. The day and time at which payment and delivery for the Securities (without regard to any Option Securities) are to be made is herein called the "Time of Purchase".


In addition, in the event that the Underwriters have exercised their Option to purchase any or all of the Option Securities, payment of the purchase price for, and delivery of, such Option Securities 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 Securities shall be made in definitive, fully registered form 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 the respective Underwriters for the respective number of shares of Securities, set forth opposite the name of each Underwriter in Schedule II hereto, in denominations selected by the Company. The certificates evidencing the Securities shall be delivered at the Time of Purchase for the account of the Underwriters, with any transfer taxes payable by the Company duly paid.


The Company agrees to make the Securities available for inspection by the Underwriters at least 24 hours prior to the Time of Purchase, in definitive, fully registered form, and as requested pursuant to the preceding paragraph.


3. Conditions of Underwriters' Obligations. The several obligations of the Underwriters hereunder are subject to the accuracy of the warranties and representations on the date hereof and at and as of the Time of Purchase and any Date of Option Delivery, 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 Securities shall be reasonably satisfactory in form and substance to Pillsbury Winthrop LLP, counsel to the Underwriters.


(b) That, at the Time of Purchase, the Representatives shall be furnished with the following opinions or letter, as the case may be, dated the day of the Time of Purchase:


(1) opinion of Robert C. Shrosbree, Esq., Assistant General Counsel of the Company, substantially to the effect set forth in Exhibit A attached hereto;


(2) letter of Skadden, Arps, Slate, Meagher & Flom LLP, special counsel to the Company, substantially to the effect set forth in Exhibit B attached hereto; and


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(3) opinion of Pillsbury Winthrop LLP, counsel to the Underwriters, as to such matters relating to the Securities and the transactions contemplated hereby as the Underwriters may reasonably request.


(c) (i) That, on the date hereof and on the date of the Time of Purchase, the Representatives shall have received a letter from Ernst & Young LLP ("E&Y") in form and substance satisfactory to the Underwriters, dated as of such date, (A) confirming that they are an independent registered public accounting firm with respect to the Company within the meaning of the Act and the applicable published rules and regulations of the Commission thereunder, (B) stating that in their opinion the financial statements examined by them and incorporated by reference in the Prospectus complied as to form in all material respects with the applicable accounting requirements of the Commission and (C) covering, as of a date not more than five days prior to the date of such letter, such other matters as the Underwriters reasonably request.


(ii) That, on the date hereof and, with respect to PricewaterhouseCoopers LLP only, on the date of 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 Underwriters, dated as of such date, confirming that (A)(i) in the case of PricewaterhouseCoopers LLP, they are an independent registered public accounting firm with respect to the Company and the Midland Cogeneration Venture Limited Partnership and (ii) in the case of Price Waterhouse, they are independent public accountants with respect to the Company and Jorf Lasfar Energy Company S.C.A., each within the meaning of the Act and the applicable published rules and regulations of the Commission thereunder, (B) stating that in each of their opinions the financial statements examined by them and incorporated by reference in the Prospectus 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 (C) covering, as of a date not more than five days prior to the date of such letter, such other matters as the Underwriters reasonably request.


(d) That, subsequent to the date hereof or, if earlier, the dates as of which information is given in the Prospectus (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 3(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 Prospectus (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 Securities as contemplated in the Prospectus (exclusive of any amendment or supplement thereto).


(e) That no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or threatened by the Commission.


(f) 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


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of his knowledge, information and belief, (i) there shall have been no material adverse change in the condition (financial or otherwise), earnings, business, properties or prospects of the Company from that set forth in the Prospectus (other than changes referred to in or contemplated by the Prospectus) 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.


(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 any additional documents or agreements reasonably requested by the Underwriters or their counsel to permit the Underwriters to perform their obligations or permit their counsel to deliver opinions hereunder shall have been provided to them.


(i) That the Company shall have complied with the provisions of Section 4(e) hereof with respect to the furnishing of the Prospectus.


(j) That between the date hereof and the day of the Time of Purchase there has been no downgrading of the investment ratings of any of the Company's securities or of Consumers Energy Company's first mortgage bonds by Standard & Poor's Ratings Group, a division of The McGraw Hill Companies, Inc., Moody's Investors Service, Inc. or Fitch, Inc., and neither the Company nor Consumers Energy Company shall have been placed on "credit watch" or "credit review" with negative implications by any of such statistical rating organizations if any of such occurrences shall, in the reasonable judgment of the Representatives, after reasonable inquiries on the part of the Representatives, impair the marketability of the Securities.


(k) That any filing of the Prospectus and any supplements thereto required pursuant to Rule 424 under the Act have been made in compliance with Rule 424 under the Act in the time periods provided by Rule 424 under the Act.


(l) That the Securities, at the Time of Purchase, shall have been duly listed, subject to notice of issuance, on the NYSE.


(m) That, at the Time of Purchase, the Company shall have furnished to the Representatives a letter substantially in the form of Exhibit C hereto addressed to the Representatives from each person listed in Schedule III hereto.


(n) That, in the event that the Underwriters exercise their Option to purchase all or any portion of the Option Securities, 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 receive:


(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 3(f) hereof remains true and correct as of such Date of Option Delivery;


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(2) opinions or a letter, as the case may be, of Robert C. Shrosbree, Esq., Assistant General Counsel of the Company, Skadden, Arps, Slate, Meagher & Flom LLP, counsel to the Company, and Pillsbury Winthrop LLP, counsel to the Underwriters, dated such Date of Option Delivery, relating to the Option Securities and otherwise to the same effect as the opinions and letter required by Section 3(b) hereof; and


(3) letters from E&Y, PricewaterhouseCoopers LLP and Price Waterhouse, each dated such Date of Option Delivery, substantially in the same form and substance as the letters furnished to the Representatives pursuant to Section 3(c) hereof, except that the date specified in Section 3(c)(i)(C) and 3(c)(ii)(C) hereof shall be a date not more than five days prior to such Date of Option Delivery.


4. Certain Covenants of the Company. In further consideration of the agreements of the Underwriters herein contained, the Company covenants as follows.


(a) To promptly transmit copies of the Prospectus, and any amendments or supplements thereto, to the Commission for filing pursuant to Rule 424 under the Act.


(b) During the period when a prospectus relating to any of the Securities is required to be delivered under the Act by any Underwriter or any dealer, the Company will file promptly all documents required to be filed with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act; and the Company will promptly notify the Underwriters of any written notice given to the Company by any of the rating organizations referred to in Section 3(j) hereof of any intended decrease in any rating of any securities of the Company or of any intended change in any such rating that does not indicate the direction of the possible change of any such rating, in each case by any such rating organization.


(c) To deliver to each of the Representatives a conformed copy of the Registration Statement and any amendments thereto (including all exhibits thereto) and full and complete sets of all comments, if any, of the Commission or its staff and all responses thereto with respect to the Registration Statement and any amendments thereto and to furnish to the Representatives, for each of the Underwriters, conformed copies of the Registration Statement and any amendments thereto without exhibits.


(d) As soon as the Company is advised thereof, the Company will advise the Representatives and confirm the advice in writing of: (i) the effectiveness of any amendment to the Registration Statement (and the Company agrees to use its best efforts to cause any post-effective amendments to the Registration Statement to become effective as promptly as possible); (ii) any request made by the Commission for amendments to the Registration Statement or Prospectus or for additional information with respect thereto; (iii) the suspension of qualification of the Securities for sale under blue sky or state securities laws; and (iv) the entry of a stop order suspending the effectiveness of the Registration Statement or of the initiation or threat or any proceedings for that purpose and the Company will use every reasonable effort to prevent the issuance of any such stop order and, if such a stop order should be entered by the Commission, to make every reasonable effort to obtain the lifting or removal thereof.


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(e) To deliver to the Underwriters, without charge, as soon as practicable, and from time to time during such period of time after the date of the Prospectus as they are required by law to deliver a prospectus, as many copies of the Prospectus (as supplemented or amended if the Company shall have made any supplements or amendments thereto) as the Representatives may reasonably request; and in case any Underwriter is required to deliver a prospectus after the expiration of nine months after the date of the Prospectus, to furnish to the Representatives, upon request, at the expense of such Underwriter, a reasonable quantity of a supplemental prospectus or of supplements to the Prospectus complying with Section 10(a)(3) of the Act.


(f) For such period of time as the Underwriters are required by law or customary practice to deliver a prospectus in respect of the Securities, if any event shall have occurred as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it becomes necessary to amend or supplement the Prospectus to comply with law, to forthwith prepare and file with the Commission (subject to Section 4(l) hereof) an appropriate amendment or supplement to the Prospectus and deliver to the Underwriters, without charge, such number of copies thereof as may be reasonably requested.


(g) During the period when a prospectus relating to any of the Securities is required to be delivered under the Act by any Underwriter or any dealer, the Company will comply, at its own expense, with all requirements imposed on the Company by the Act, as now and hereafter amended, and by the rules and regulations of the Commission thereunder, as from time to time in force, so far as necessary to permit the continuance of sales of or dealing in the Securities during such period in accordance with the provisions hereof and as contemplated by the Prospectus.


(h) To make generally available to the Company's security holders, as soon as practicable, an "earning statement" (which need not be audited by independent public accountants) covering a twelve-month period commencing after the effective date of the Registration Statement and ending not later than 15 months thereafter, which shall comply in all material respects with and satisfy the provisions of Section 11(a) of the Act and Rule 158 under the Act.


(i) To use its best efforts to qualify the Securities for offer and sale under the securities or blue sky laws of such jurisdictions as the Representatives may designate and to pay (or cause to be paid), or reimburse (or cause to be reimbursed) the Underwriters and their counsel for, reasonable filing fees and expenses in connection therewith (including the reasonable fees and disbursements of counsel to the Underwriters 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.


(j) To pay all expenses, fees and taxes (other than transfer taxes on sales by the respective Underwriters and the expenses referred to in Section 5 hereof), in connection with the issuance and delivery of the Securities, including, without limitation, (i) the fees and expenses of the Company's counsel and independent accountants, (ii) the cost of preparing stock certificates,


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(iii) the costs and charges of any transfer agent and any registrar, (iv) all expenses incurred by the Company in connection with any "road show" presentation to potential investors and (v) all expenses and application fees related to the listing of the Securities on the NYSE, except that the Company shall be required to pay the fees and disbursements (other than disbursements referred to in Section 4(i) hereof) of Pillsbury Winthrop LLP, counsel to the Underwriters only in the events provided in Section 4(k) hereof, the Underwriters hereby agreeing to pay such fees and disbursements in any other event, and that except as provided in Section 4(k) hereof, the Company shall not be responsible for any out-of-pocket expenses of the Underwriters in connection with their services hereunder.


(k) If the Underwriters shall not take up and pay for the Securities (i) due to the failure of the Company to comply with any of the conditions specified in Section 3 hereof, to pay the reasonable fees and disbursements of Pillsbury Winthrop LLP, counsel to the Underwriters and to reimburse the Underwriters for their other reasonable out-of-pocket expenses not to exceed a total of $75,000, incurred in connection with the financing contemplated by this Agreement, such amounts including all amounts incurred in connection with any roadshow, provided that such amounts are documented in writing to the Company, or (ii) due to termination in accordance with the provisions of Section 9 hereof prior to the Time of Purchase, to pay the reasonable fees and disbursements of Pillsbury Winthrop LLP, counsel to the Underwriters.


(l) Prior to the termination of the offering of the Securities, to not amend or supplement the Registration Statement or Prospectus (including the Basic Prospectus) unless the Company has furnished the Representatives and counsel to the Underwriters with a copy for their review and comment a reasonable time prior to filing and has reasonably considered any comments of the Representatives, 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 Representatives.


(m) To furnish the Representatives with copies of all documents required to be filed with the Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act subsequent to the time the Registration Statement becomes effective and prior to the termination of the offering of the Securities.


(n) So long as may be required by law for distribution of the Securities by the Underwriters or by any dealers that participate in the distribution thereof, the Company will comply with all requirements under the Exchange Act relating to the timely filing with the Commission of its reports pursuant to Section 13 of the Exchange Act and of its proxy statements pursuant to Section 14 of the Exchange Act.


(o) The Company will use its best efforts to effect the listing of the Securities prior to the Time of Purchase, on the NYSE subject only to official notice of issuance.


(p) The Company will not for a period of 60 days following the date hereof, without the prior written consent of the Representatives: offer, pledge, sell or contract to sell any Common Stock; sell any option or contract to purchase any Common Stock; purchase any option or contract to sell any Common Stock; grant any option, right or warrant to sell any Common


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Stock; lend or otherwise dispose of or transfer any Common Stock; file a registration statement related to the Common Stock; or enter into any swap or other agreement or transaction that transfers, in whole or in part, the economic consequence of ownership of Common Stock whether any such swap or transaction is to be settled by delivery of common stock, in cash or otherwise; provided, however, that the Company may issue shares of Common Stock upon conversion or settlement of any warrants outstanding, the Compan ...