<PAGE> 1
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
REGISTRANTS; STATE OF
COMMISSION INCORPORATION; I.R.S. EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- --------------------------------- -------------------
<S> <C> <C>
1-11607 DTE Energy Company 38-3217752
(a Michigan corporation)
2000 2nd Avenue
Detroit, Michigan 48226-1279
313-235-4000
1-2198 The Detroit Edison Company 38-0478650
(a Michigan corporation)
2000 2nd Avenue
Detroit, Michigan 48226-1279
313-235-8000
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ----------------------------------------------- -----------------------------------------------
<S> <C>
DTE Energy Company
Common Stock, without par value New York and Chicago Stock Exchanges
The Detroit Edison Company
Preferred Stock (7.74% and 7.75% Series),
Cumulative, $100 par value New York Stock Exchange
General and Refunding Mortgage Bonds
(only Series R and S) New York Stock Exchange
Quarterly Income Debt Securities (QUIDS)
(Junior Subordinated Deferrable Interest
Debentures - 8.50% and 7-5/8% Series) New York Stock Exchange
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
----------------------------
(TITLE OF CLASS)
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have 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 registrants' 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. [X]
* DTE Energy Company was formed in connection with the restructuring of The
Detroit Edison Company into a holding company structure. DTE Energy Company
became subject to the reporting requirements of the Securities Exchange Act of
1934, as amended, on January 2, 1996, when its Registration Statement on Form
8-B was declared effective by the Securities and Exchange Commission.
- --------------------------------------------------------------------------------
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(Over for continuation of cover page.)
At February 29, 1996, 145,119,875 shares of DTE Energy's Common Stock,
substantially all held by non-affiliates, were outstanding, with an aggregate
market value of approximately $5,169,895,547 based upon the closing price on the
New York Stock Exchange.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in DTE Energy's definitive proxy statement dated March 15,
1996 in connection with its Annual Meeting of Shareholders to be held on April
22, 1996 is incorporated herein by reference in Part III, Items 10, 11, 12 and
13 hereof.
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[This page intentionally left blank.]
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CROSS REFERENCE TO INFORMATION CONTAINED IN
DTE ENERGY COMPANY'S DEFINITIVE PROXY STATEMENT
DATED MARCH 15, 1996
(INCORPORATED HEREIN BY REFERENCE)
<TABLE>
<CAPTION>
ANNUAL REPORT
ON FORM 10-K LOCATION OF INFORMATION
FOR DTE ENERGY COMPANY IN PROXY STATEMENT
- ------------------------------------------ ---------------------------------------
<S> <C>
Part III, Item 10 - Directors and "The Election of Directors" - Pages 1-5
Executive Officers of the Registrant
"Compliance with Section 16(a) of the
Securities Exchange Act of 1934" -
Page 21
Part III, Item 11 - Executive Compensation "Board Compensation Committee Report
on Executive Compensation" - Pages
8-15
Part III, Item 12 - Security Ownership of "Security Ownership of Management" -
Certain Beneficial Owners and Management Page 6
Part III, Item 13 - Certain Relationships "Compensation Committee Interlocks and
and Related Transactions Insider Participation" - Page 15
</TABLE>
2
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DTE ENERGY COMPANY
AND
THE DETROIT EDISON COMPANY
FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
This document contains the Annual Reports on Form 10-K for the fiscal year
ended December 31, 1995 for each of DTE Energy Company and The Detroit Edison
Company. Information contained herein relating to an individual registrant is
filed by such registrant on its own behalf. Accordingly, except for its
subsidiaries, The Detroit Edison Company makes no representation as to
information relating to any other companies affiliated with DTE Energy Company.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions ............................................................................... 5
ANNUAL REPORT ON FORM 10-K FOR DTE ENERGY COMPANY:
Part I - Items 1 and 2 - Business and Properties ....................................... 6
General ....................................................................... 6
Non-Regulated Operations ...................................................... 6
Utility Operations ............................................................ 7
Certain Factors Affecting Public Utilities .................................. 8
Capital Expenditure Program ................................................. 10
Financing ................................................................... 10
Properties .................................................................. 11
Fuel Costs and Supply ....................................................... 13
Coal ....................................................................... 13
Oil ........................................................................ 14
Gas ........................................................................ 14
Nuclear .................................................................... 14
Regulation and Rates ........................................................ 15
Michigan Public Service Commission ........................................ 15
Federal Energy Regulatory Commission ...................................... 18
Nuclear Regulatory Commission ............................................. 19
Environmental Matters ....................................................... 19
Air ....................................................................... 19
Water ..................................................................... 20
Wastes and Toxic Substances ............................................... 21
Employees and Executive Officers ............................................ 23
Employees .................................................................. 23
Executive Officers ......................................................... 24
Other Information .......................................................... 24
Item 3 - Legal Proceedings .............................................. 25
Item 4 - Submission of Matters to a Vote of Security Holders ............ 25
</TABLE>
3
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TABLE OF CONTENTS (CONCLUDED)
<TABLE>
<S> <C> <C>
Part II - Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters ................................ 25
Item 6 - Selected Financial Data .............................. 26
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 27
Item 8 - Financial Statements and Supplementary Data .......... 33
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ................ 58
Part III - Item 10 - Directors and Executive Officers of the Registrant ... 58
Item 11 - Executive Compensation ............................... 58
Item 12 - Security Ownership of Certain Beneficial Owners and
Management ......................................... 59
Item 13 - Certain Relationships and Related Transactions ....... 59
ANNUAL REPORT ON FORM 10-K FOR THE DETROIT EDISON COMPANY:
Part I - Items 1 and 2 - Business and Properties ................................. 60
Item 3 - Legal Proceedings .................................... 61
Item 4 - Submission of Matters to a Vote of Security Holders .. 61
Part II - Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters ................................. 61
Item 6 - Selected Financial Data .............................. 61
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 61
Item 8 - Financial Statements and Supplementary Data .......... 62
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure ............... 62
Part III - Item 10 - Directors and Executive Officers of the Registrant ... 62
Item 11 - Executive Compensation ............................... 62
Item 12 - Security Ownership of Certain Beneficial Owners and
Management ........................................ 62
Item 13 - Certain Relationships and Related Transactions ....... 62
</TABLE>
<TABLE>
<S> <C>
ANNUAL REPORTS ON FORM 10-K FOR DTE ENERGY COMPANY
AND THE DETROIT EDISON COMPANY:
Part IV - Item 14- Exhibits, Financial Statement Schedules and Reports on
Form 8-K .................................................... 63
Signature Page to DTE Energy Company Annual Report on Form 10-K ....................... 75
Signature Page to The Detroit Edison Company Annual Report on Form 10-K ............... 76
</TABLE>
4
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DEFINITIONS
<TABLE>
<S> <C>
ABATE ........... Association of Businesses Advocating Tariff Equity
AFUDC ........... Allowance for Funds Used During Construction (both
borrowed and other funds)
BTU ............. British Thermal Unit
CERCLA .......... Federal Comprehensive Environmental Response,
Compensation and Liability Act of 1980
Company ......... DTE Energy Company and Subsidiary Companies
Consumers ....... Consumers Power Company (a wholly owned subsidiary of
CMS Energy Corporation)
Detroit Edison .. The Detroit Edison Company (a wholly owned subsidiary of
DTE Energy Company) and Subsidiary Companies
DOE ............. United States Department of Energy
DSM ............. Demand-Side Management
EPA ............. Environmental Protection Agency
ERA ............. Department of Energy's Economic Regulatory Administration
FERC ............ Federal Energy Regulatory Commission
IRP ............. Integrated Resource Plan
kWh ............. Kilowatthour
Ludington ....... Ludington Hydroelectric Pumped Storage Plant (owned jointly
with Consumers)
MDEQ ............ Michigan Department of Environmental Quality (formerly part
of MDNR)
MDNR ............ Michigan Department of Natural Resources
MJC ............. Michigan Jobs Commission
Mortgage Bonds .. Detroit Edison's General and Refunding Mortgage Bonds
MPSC ............ Michigan Public Service Commission
MW .............. Megawatt
MWh ............. Megawatthour
MWRC ............ Michigan Water Resources Commission
Note ............ Notes to Consolidated Financial Statements of the Company
and Detroit Edison
NPDES ........... National Pollutant Discharge Elimination System
NRC ............. Nuclear Regulatory Commission
PCB's ........... Polychlorinated Biphenyls
PRP ............. Potentially Responsible Party
PSCR ............ Power Supply Cost Recovery
Registrant ...... Company or Detroit Edison, as the case may be
Renaissance ..... Renaissance Energy Company (an unaffiliated company)
RFP ............. Request for Proposal
SEC ............. Securities and Exchange Commission
</TABLE>
5
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ANNUAL REPORT ON FORM 10-K FOR DTE ENERGY COMPANY
PART I
ITEMS 1 AND 2 - BUSINESS AND PROPERTIES.
GENERAL
DTE Energy Company, a Michigan corporation incorporated in 1995, is an
exempt holding company under the Public Utility Holding Company Act. On
January 1, 1996, the holders of Detroit Edison's common stock exchanged such
stock on a share-for-share basis for the common stock of the Company. Also on
January 1, 1996, Detroit Edison declared a dividend to the Company in the form
of the stock of five subsidiaries: DE Energy Services, Inc., DTE Capital
Corporation, Edison Development Corporation, Syndeco Realty Corporation and UTS
Systems, Inc. As a result of this corporate restructuring, DTE Energy became
the parent holding company of Detroit Edison and five other subsidiaries. The
new holding company structure is designed to provide financial flexibility for
the development of new energy-related businesses. It is also a mechanism for
separating the regulated utility business of Detroit Edison from non-regulated
businesses, thereby protecting the utility business from the potential
volatility of non-utility operations.
The Company has no significant operations of its own. Detroit Edison is
the Company's principal operating subsidiary, comprising substantially all of
the Company's assets and liabilities. Certain of the Company's wholly-owned
subsidiaries and affiliates are engaged in non-regulated energy-related
businesses that are still in the formative stages.
NON-REGULATED OPERATIONS
Four wholly owned subsidiaries, along with various affiliates, of the
Company are engaged in non-regulated businesses, including energy-related
services. Such services include the operation of landfill gas-to-energy
facilities, providing expertise in the application of new energy technologies,
real estate development and specialty engineering services. A fifth wholly
owned subsidiary, DTE Capital Corporation, provides financial services to the
Company's non-utility affiliates.
On March 8, 1996, DTE Capital entered into a syndicated three-year $200
million bank revolving credit agreement. Borrowings pursuant to this agreement
will be utilized to provide funds for affiliate projects expected to commence
in 1996. Since DTE Capital did not have an established credit history, the
Company agreed to provide credit support during the term of the agreement or
until such earlier time as DTE Capital had been assigned investment-grade
ratings.
Expenditures for 1996 non-regulated investments are estimated to range
from $100 million to $200 million.
6
<PAGE> 8
UTILITY OPERATIONS
Detroit Edison, incorporated in Michigan since 1967, is a regulated public
utility engaged in the generation, purchase, transmission, distribution and sale
of electric energy in a 7,600 square mile area in Southeastern Michigan. Detroit
Edison's service area includes about 13% of Michigan's total land area and about
half of its population (approximately five million people). Detroit Edison's
residential customers reside in urban and rural areas, including an extensive
shoreline along the Great Lakes and connecting waters. See operating revenues,
sales and customer data by rate class below.
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- --------------------- -------------------
Percent Percent Percent
Operating Revenues Amount of Total Amount of Total Amount of Total
------------------ ------ -------- ------ --------- ------ -----------
(Thousands, except percentages)
<S> <C> <C> <C> <C> <C> <C>
Electric
Residential..................... $1,210,925 33.3% $ 1,136,169 32.3% $ 1,125,624 31.7%
Commercial...................... 1,495,820 41.1 1,473,309 41.9 1,428,321 40.2
Industrial...................... 728,088 20.0 736,339 20.9 720,002 20.2
Sales for resale and other (1).. 125,637 3.5 102,534 2.9 193,410 5.4
---------- ----- ------------ ------ ------------ -----
Total System................. 3,560,470 97.9 3,448,351 98.0 3,467,357 97.5
Interconnection................. 50,979 1.4 43,141 1.2 60,363 1.7
---------- ----- ------------ ------ ------------ -----
Total Electric.................. 3,611,449 99.3 3,491,492 99.2 3,527,720 99.2
Steam Heating..................... 24,095 0.7 27,849 0.8 27,491 0.8
---------- ----- ------------ ------ ------------ -----
Total Operating Revenues..... $3,635,544 100.0% $ 3,519,341 100.0% $ 3,555,211 100.0
========== ===== ============ ===== ============ =====
</TABLE>
(1) Primary pumping operating revenues, sales and customers are included in
commercial in 1995 and 1994 and in the other category in 1993.
<TABLE>
<CAPTION>
1995 1994 1993
---------------------- --------------------- -------------------
Increase Increase Increase
(Decrease) (Decrease) (Decrease)
From Prior From Prior From Prior
Sales Amount Year Amount Year Amount Year
----- ------ ---- ------ ---- ------ ----
<S> <C> <C> <C> <C> <C> <C>
Electric (thousands of kWh)
Residential............... 13,006,210 6.9 % 12,169,417 1.1 % 12,032,342 6.4 %
Commercial................ 17,470,922 2.5 17,041,446 6.5 15,996,307 4.0
Industrial................ 13,825,456 3.5 13,356,351 5.9 12,618,018 6.7
Sales for resale and
other (1) ............... 1,670,409 5.3 1,586,162 (31.6) 2,317,793 6.5
----------- ---------- ----------
Total System............. 45,972,997 4.1 44,153,376 2.8 42,964,460 5.6
Interconnection........... 2,968,706 50.1 1,978,135 (45.2) 3,611,455 12.7
----------- ---------- ----------
Total Electric........... 48,941,703 6.1 % 46,131,511 (1.0) % 46,575,915 6.1 %
=========== ========== ==========
Steam Heating
(thousands of lbs.)....... 2,968,324 (4.5)% 3,109,596 3.5 % 3,004,394 - %
=========== ========== ==========
</TABLE>
(1) See footnote reference above.
7
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<TABLE>
<CAPTION>
Customers (at Year-End) 1995 1994 1993
- ----------------------- --------- --------- ----------
<S> <C> <C> <C>
Electric
Residential ..................... 1,824,917 1,805,141 1,790,197
Commercial ...................... 173,651 172,221 170,453
Industrial ...................... 956 889 850
Other (1) ....................... 1,979 1,967 2,034
--------- --------- ---------
Total System .................. 2,001,503 1,980,218 1,963,534
Interconnection ................. 7 7 7
--------- --------- ---------
Total Electric ................ 2,001,510 1,980,225 1,963,541
========= ========= =========
Steam Heating...................... 344 367 378
========= ========= =========
</TABLE>
(1) See footnote reference on Page 7.
During 1995, sales to automotive and automotive-related customers
accounted for approximately 11% of total operating revenues. Detroit Edison's
30 largest industrial customers accounted for approximately 17% of total
operating revenues in 1995, 18% in 1994 and 1993 and no one customer accounted
for more than 3%.
Set forth below are comparisons of total system sales by year and quarter.
<TABLE>
<CAPTION>
1995 1994 1993
---------- ---------- ----------
(Thousands of kWh)
<S> <C> <C> <C>
First Quarter ................... 11,032,446 10,892,135 10,583,641
Second Quarter .................. 11,004,935 10,696,503 10,170,611
Third Quarter ................... 12,685,866 11,790,735 11,606,908
Fourth Quarter .................. 11,249,750 10,774,003 10,603,300
---------- ---------- ----------
Total System .................... 45,972,997 44,153,376 42,964,460
========== ========== ==========
</TABLE>
Detroit Edison generally experiences its peak load and highest total
system sales during the third quarter of the year as a result of air
conditioning and cooling-related loads. In 1995 a new all-time peak of 10,049
MW was reached in August.
For information on an interruptible rate, commonly known as R-10, and the
special manufacturing contracts which are expected to reduce revenues and peak
demand, see "Regulation and Rates" and for information on Detroit Edison's
future sales growth which may be limited by the economic base in Detroit
Edison's service territory, see Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations.
For further information on financial results of the Company's operations,
see Item 6 - Selected Financial Data, Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations, Item 8 - Financial
Statements and Supplementary Data and Item 14 - Exhibits, Financial Statement
Schedules and Reports on Form 8-K.
CERTAIN FACTORS AFFECTING PUBLIC UTILITIES
Detroit Edison, in common with other domestic public utilities, is
addressing efforts at both the Federal and state levels to make the energy
markets competitive. Federal
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legislation, as well as administrative proceedings, dealing with competitive
issues and the effects of competition on both public utilities and consumers is
pending and proposed. Issues under consideration include: (1) the
recovery of stranded costs by public utilities now recovering capital costs
under traditional ratemaking principles, (2) retail wheeling and open
transmission access, and (3) revisions to (and the possible repeal of all or
portions of) various federal energy-related statutes such as the Federal Power
Act, the Federal Public Utility Regulatory Policy Act and the Federal Public
Utility Holding Company Act.
On January 8, 1996, Michigan Governor John Engler forwarded to the MPSC a
report on economic development recommendations for electric and gas utility
reform in Michigan prepared by the MJC. The essential component of the MJC's
recommended strategy for lowering energy costs is the promotion of competition
and customer choice. The Governor strongly encouraged the MPSC to use the
report as guiding principles in its continued efforts to promote competition
within reasonably established time frames.
The MJC's recommendations, if implemented would: (1) allow new industrial
and commercial load to purchase energy from providers of their choice beginning
January 1, 1997 assuming that the Michigan public utilities subject to the new
rules would be permitted to sell power on a reciprocal basis, (2) establish a
Michigan statewide wholesale power pool by January 1, 1998, and (3) permit all
industrial and commercial customers to be able to choose their energy providers
by January 1, 2001. The proposals recognize that the transition to a more
competitive market requires that the recovery of stranded costs be addressed.
In addition, the proposals favor the unbundling of rate tariffs into functional
components.
The MPSC has not yet taken action with respect to the MJC's
recommendations. However, the Michigan House Public Utilities Committee and
the Michigan Senate Technology and Energy Committee have recognized the need
for a review of existing Michigan energy-related statutes regulating public
utilities. These Committees have announced a two-part legislative approach:
(1) preparing for competition and (2) an examination of regulatory flexibility
and any industry realignment necessary to produce an efficient, competitive and
deregulated industry.
Detroit Edison is monitoring the progress and development of Federal and
Michigan legislative and administrative efforts, but is unable to predict, at
this time, the form of legislative and administrative revisions.
In a preliminary response to competitive pressures, Detroit Edison has
developed an interruptible rate for industrial customers and has, also, entered
into special manufacturing contracts with Chrysler Corporation, Ford Motor
Company and General Motors Corporation. These competitive responses are
expected to reduce revenues.
Nevertheless, Detroit Edison continues to believe that, based on current
conditions, it operates under cost-based-rate regulation.
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<PAGE> 11
On February 12, 1996, Detroit Edison and five other Midwest utilities
announced an agreement to develop an independent organization to plan and
operate the combined regional transmission systems of the utilities under
proposed new federal rules promoting competition at the wholesale level. Plans
for the independent organization, known as the Independent System Operator, are
expected to be filed with the FERC later in 1996 and will be implemented in
stages.
In addition, Detroit Edison, in common with other domestic public
utilities, is subject to extensive environmental regulation. Additional costs
may result as the effects of various chemicals on the environment (including
nuclear waste) are studied and governmental regulations are developed and
implemented. The costs of future nuclear decommissioning activities are the
subject of increased regulatory attention.
See Notes 1, 2 and 3, Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
and "Regulation and Rates - Federal Energy Regulatory Commission" herein.
CAPITAL EXPENDITURE PROGRAM
Detroit Edison has no current plans to construct additional generating
plants. However, an IRP, reviewed by the MPSC biennially, recognizes that the
need for additional capacity may be satisfied by the return to service of
certain units in economy reserve status and various DSM programs. See
"Regulation and Rates - Michigan Public Service Commission - Integrated
Resource Plan."
Capital expenditures in 1995, 1994 and 1993 were $454 million (including
$4 million of AFUDC), $366 million (including $4 million of AFUDC) and $396
million (including $3 million of AFUDC), respectively. Also, the purchase of
leased equipment totaled $11.5 million in 1994 and $2.4 million in 1993.
Projections for the 1996-2000 period contemplate capital expenditures of
approximately $2.1 billion (including an estimated $20 million of AFUDC). The
1996 capital expenditure program is budgeted at $484 million (including $6
million of AFUDC). The 1996 capital expenditure program includes planned
expenditures for production plant improvement projects ($99 million),
transmission and distribution facilities ($198 million), general plant projects
($92 million) and miscellaneous construction and construction overheads
capitalized ($95 million).
FINANCING
Orders of the MPSC permit Detroit Edison to issue approximately $2.03
billion of securities for the purpose of refinancing debt and equity and to
replace funds used for those purposes. Detroit Edison also has MPSC authority
to refinance a substantial portion of its non-taxable debt obligations.
10
<PAGE> 12
Detroit Edison's outstanding MPSC orders authorizing securities issuances
remain effective. However, as a result of a change in the law, the MPSC no
longer has the authority to issue new securities orders. As such, all future
requests for authority to issue securities will be made to FERC.
Detroit Edison has an effective Shelf Registration Statement on file with
the SEC pursuant to which it may issue up to $165 million in debt securities
after taking into account debt issuances of $185 million in February 1996.
In May 1995, FERC issued its order authorizing the continuation of Detroit
Edison's $1 billion of short-term borrowing authority. This authority will be
in effect through May 31, 1997. At February 29, 1996, Detroit Edison had
short-term credit arrangements of $452 million under which no borrowings were
outstanding.
At December 31, 1995, the book value of the Company's common stock was
$23.62 per share as compared to $22.89 per share at December 31, 1994.
See Notes 7, 8, 10 and 16.
PROPERTIES
The summer net rated capability of Detroit Edison's generating units is as
follows:
<TABLE>
<CAPTION>
Summer Net
Location By Rated Capability (2) (3)
Michigan ------------------------ Year
Plant Name (1) County (MW) % in Service
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fossil-fueled Steam-Electric
Belle River (4) St. Clair 1,026 10.3% 1984 and 1985
Greenwood St. Clair 785 7.8 1979
Harbor Beach Huron 103 1.0 1968
Marysville St. Clair 167 1.7 1930, 1943 and 1947
Monroe Monroe 3,000 30.0 1971, 1973 and 1974
River Rouge Wayne 500 5.0 1957 and 1958
St. Clair St. Clair 1,379 13.8 1953, 1954, 1961 and 1969
Trenton Channel Wayne 725 7.2 1949, 1950 and 1968
------ -----
7,685 76.8%
Oil or Gas-fueled Peaking Units Various 525 5.2 1966-1971 and 1981
Nuclear-fueled Steam-Electric
Fermi 2 (5) Monroe 876 8.8 1988
Hydroelectric Pumped Storage
Ludington (6) Mason 917 9.2 1973
------ -----
10,003 100.0%
====== =====
</TABLE>
(1) See Note 10.
(2) Summer net rated capabilities of generating units in service are based on
periodic load tests and are changed depending on operating experience, the
physical condition of units, environmental control limitations and
customer requirements for steam, which otherwise would be used for
electric generation.
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<PAGE> 13
(3) Excludes two oil-fueled units, River Rouge Unit No. 1 (206 MW) and St.
Clair Unit No. 5 (250 MW), and one coal-fueled power plant, Conners Creek
(236 MW), all in economy reserve status.
(4) The Belle River capability represents Detroit Edison's entitlement to
81.39% of the capacity and energy of the plant. See Note 4.
(5) Fermi 2 has a design electrical rating (net) of 1,139 MW. However due to
certain equipment limitations, the plant is operating at a reduced
capability. See Note 2.
(6) Represents Detroit Edison's 49% interest in Ludington with a total
capability of 1,872 MW. Detroit Edison will lease 312 MW to The Toledo
Edison Company for the six-year period June 1, 1996 through May 31, 2002.
The four Monroe units, two Belle River units, Fermi 2 and one unit at each
of the Trenton Channel and St. Clair Power Plants account for 5,852 MW of
Detroit Edison's summer net rated capability. These units, which commenced
commercial operation during the period 1968 through 1988, are Detroit Edison's
larger, more efficient generating units. The Monroe, Belle River, St. Clair
and Fermi 2 Power Plants provided approximately 42%, 16%, 15% and 11%,
respectively, of Detroit Edison's total 1995 power plant generation.
Sources of electric energy were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(Thousands of MWh)
<S> <C> <C> <C>
Power plant generation
Fossil .......................... 41,636 42,410 38,882
Nuclear ......................... 5,092 - 8,274
Purchased power ................... 5,423 6,599 2,211
------ ------ ------
Net system output ................. 52,151 49,009 49,367
====== ====== ======
</TABLE>
Detroit Edison and Consumers are parties to an Electric Coordination
Agreement providing for emergency assistance, coordination of operations and
planning for bulk power supply, with energy interchanged at nine
interconnections. Detroit Edison and Consumers also have interchange
agreements to exchange electric energy through 12 interconnections with The
Toledo Edison Company, Indiana Michigan Power Company, Northern Indiana Public
Service Company and Ontario Hydro. In addition, Detroit Edison has interchange
agreements for the exchange of electric energy with Michigan South Central
Power Agency, Rouge Steel Company and the City of Wyandotte.
Detroit Edison also purchases energy from cogeneration facilities and
other small power producers. Energy purchased from cogeneration facilities and
small power producers amounted to $20.6 million, $16.7 million and $13.9
million for 1995, 1994 and 1993, respectively, and is currently estimated at
$27.1 million for 1996.
An all time peak demand of 10,049 MW was experienced for Detroit Edison's
system on August 14, 1995, with a reserve margin of 2.3%. Previous peaks were
9,878 MW set in June 1995 and 9,684 MW set in June 1994. Based on the current
load forecast and planned generating capability, Detroit Edison estimates that
its summer reserve margin,
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<PAGE> 14
expressed as a percentage of peak demand, will be approximately 12% for 1996
and 1997. Included as part of the 1996 and 1997 reserve margin projections are
Detroit Edison's present and projected capacity purchases and anticipated peak
reductions due to the implementation of various DSM programs, including the
R-10 interruptible rate. The 1996 and 1997 reserve margins meet Detroit
Edison's current planning criterion, which specifies a minimum reserve margin
of 12%.
Detroit Edison's electric generating plants are interconnected by a
transmission system operating at 24 to 345 kilovolts through 94 transmission
stations. As of December 31, 1995, electric energy was being distributed in
Detroit Edison's service area through 579 substations over 2,987 distribution
circuits.
See Note 5 for information on an agreement providing for the sale,
assignment and repurchase, from time to time, of an undivided ownership
interest in $200 million of Detroit Edison's customer accounts receivable and
unbilled revenues.
See Note 14 for information on the write-off of the remaining net book
value of Detroit Edison's steam heating plant assets.
FUEL COSTS AND SUPPLY
Detroit Edison's 1991 through 1995 generating capability was primarily
dependent upon coal. Fuel information for these periods is shown below.
<TABLE>
<CAPTION>
Percent of
Cents Per Million BTU Total Fuel Consumed Average
---------------------------------------------------------- ---------------------------------- Cost
Per Ton
All of Coal
Coal Nuclear Oil Gas Fuels Coal Nuclear Oil Gas Consumed
---- ------- --- --- ----- ---- ------- --- --- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 139cents 108cents 359cents 204cents 137cents 85% 14% -% 1% $ 28.78
1994 153 - 337 285 157 99 - - 1 32.25
1993 154 111 358 259 148 81 18 - 1 31.68
1992 160 97 403 212 150 81 17 - 2 32.88
1991 159 109 409 196 153 84 14 1 1 33.21
</TABLE>
COAL. Detroit Edison estimates that it will require approximately 600
million tons of coal over the next 35 years for its coal-fueled generating
units. Detroit Edison expects to obtain a significant portion of its
requirements through long-term contracts and the balance through short-term
agreements and spot purchases. Detroit Edison has contracts with five coal
suppliers for a total purchase of up to 85 million tons of low-sulfur western
coal to be delivered during the period from 1996 through 2005. It also has
several contracts for the purchase of approximately 16 million tons of
Appalachian coal with varying contract expiration dates through 1999. These
existing long-term coal contracts include provisions for market price reopeners
and price escalation as well as de-escalation.
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<PAGE> 15
The low-sulfur western coal contracts have a maximum sulfur content of
0.55%. The Appalachian coal contracts range in maximum sulfur content from
0.80% to 2.8%. As required by the Michigan Air Pollution Control Commission,
Detroit Edison's aggregate consumption of both types of coal averages below 1%
sulfur content.
For further information on environmental matters, see "Environmental
Matters" and Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations.
OIL. Detroit Edison purchases No. 2 oil, used principally for peaking
units and start-up for other units, and No. 6 oil, used principally by
Greenwood Unit No. 1, through short-term agreements and spot market purchases.
GAS. Natural gas is used principally at one of Detroit Edison's steam
heating plants and Greenwood Unit No. 1. Natural gas requirements are met
through short-term agreements and spot market purchases.
NUCLEAR. Renaissance holds title to the nuclear fuel utilized at Fermi 2.
Under the terms of a heat purchase contract between Detroit Edison and
Renaissance, Detroit Edison makes quarterly payments to Renaissance for the
cost of the nuclear fuel consumed and interest expense. For information on
nuclear fuel financing, see Notes 8 and 9.
Detroit Edison has sufficient supplies to meet 1996 plant refueling
requirements. Also, Detroit Edison believes that adequate uranium supplies
exist to supplement existing contracts to meet plant requirements beyond 1996.
Detroit Edison has a contract with the DOE for the future storage and disposal
of spent nuclear fuel from Fermi 2. Under the terms of the contract, Detroit
Edison makes quarterly payments to the DOE based upon a fee of 1 mill per kWh
applied to the Fermi 2 electricity generated and sold. Fees levied for 1995
totaled $5 million. The spent nuclear fuel will be stored on site until the
DOE accepts it for disposal. The DOE has stated that it will be unable to
store spent nuclear fuel at a permanent repository until after 2010. However,
the DOE and utilities with nuclear units are pursuing other interim storage
options. On September 7, 1995, Detroit Edison, along with two other utilities,
filed a petition for review in the United States Circuit Court of Appeals for
the District of Columbia. The petition seeks to overturn a decision of the DOE
that it does not have a legal obligation to begin accepting spent nuclear fuel
from nuclear utilities commencing January 31, 1998. The petition seeks to
affirm that such an obligation exists and to establish court oversight of the
development of a schedule by the DOE to accept spent nuclear fuel by that date.
This action has been consolidated with existing litigation brought by a number
of other utilities as well as a number of states. It is estimated that
existing temporary storage capacity at Fermi 2 will be sufficient until the
year 2001, or until 2019 with the expansion of such storage capacity.
14
<PAGE> 16
REGULATION AND RATES
MICHIGAN PUBLIC SERVICE COMMISSION. Detroit Edison is subject to the
general regulatory jurisdiction of the MPSC, which, from time to time, issues
its orders pertaining to Detroit Edison's conditions of service, rates and
recovery of certain costs, accounting and various other matters.
As a result of a change in the law, the MPSC no longer has the authority
to issue new securities orders. As such, all future requests for authority to
issue securities will be made to FERC.
MPSC orders issued in December 1988 and on January 21, 1994 are currently
in effect with respect to Detroit Edison's rates and certain other revenue and
operating-related matters.
On January 21, 1994, the MPSC issued an order reducing Detroit Edison's
rates in the amount of $78 million annually. The order is the subject of
various appeals before the Michigan Court of Appeals. See Note 3 for a
discussion of the provisions of the January 21, 1994 order.
On March 30, 1995, Detroit Edison submitted its 1994 PSCR reconciliation
filing with the MPSC. On December 7, 1995, the MPSC approved a partial
settlement agreement resolving most of the issues regarding the 1994 PSCR
reconciliation and the Fermi 2 capacity factor performance standard
disallowance for 1994. A January 1996 refund of $7.7 million plus interest was
made to PSCR customers. Also, Interruptible Supply Rider (R-10) customers
received a refund of $2.6 million. This partial settlement is the culmination
of several settlement agreements whose intent is to hold customers harmless
from the effects of the December 1993 turbine-generator failure at Fermi 2.
The final MPSC order is still pending regarding unresolved issues. The
Administrative Law Judge has recommended an additional refund of $4 million.
Conservation and Demand-Side Management Programs - As the result of a
generic review of Michigan conservation programs, the MPSC in June 1988 ordered
each Michigan gas and electric utility to file a biennial energy conservation
report, including a three-year plan. Detroit Edison continues to operate
programs in compliance with the generic order and the more recent order on
January 21, 1994.
On April 11, 1994, the MPSC issued an order approving a partial settlement
agreement covering Detroit Edison's energy conservation programs for the period
1994-1996. The order authorizes Detroit Edison to collect $21.2 million
through a surcharge for the three-year program to install energy conservation
measures in low-income customer households.
Also, as discussed in Note 3, the January 21, 1994 MPSC order authorized a
three-year DSM program of up to $41.5 million ($7.6 million in 1994, $14.9
million in 1995 and $19 million in 1996). Detroit Edison collected
approximately $7 million for the 1994 DSM
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<PAGE> 17
program. In September 1994, Detroit Edison filed for approval of a reduced DSM
surcharge and programs totaling $4.9 million in 1995, which were approved by an
MPSC order issued on July 31, 1995. In September 1995, Detroit Edison filed
testimony with the MPSC outlining its proposed $4 million 1996 DSM plan to
implement customer-focused demand reduction programs that will lower customer
rates, and to eliminate the customer surcharge for the plan. An MPSC order
approving the 1996 DSM plan is expected in May 1996.
Integrated Resource Plan - Detroit Edison's IRP is designed to provide
resource plans which have adequate flexibility to react to major changes and at
the same time address the concerns of its customers. It attempts to minimize
risks and costs to customers and shareholders alike, while maintaining an
appropriate balance between demand-side and supply-side alternatives. Detroit
Edison's first IRP proposed to meet future load requirements by utilizing
existing power plant units that are in economy reserve status rather than
building new plants.
On September 1, 1994, Detroit Edison filed its biennial third IRP with the
MPSC. This IRP, which covered a 15-year (1994-2008) study period, called for
the return to service of existing plant and a DSM program that will continue to
provide for interruptible service to large primary customers which is expected
to reduce peak demand by 500 MW. The recommended IRP indicated that the
restart of the Conners Creek coal-fired units that are currently in economy
reserve is the most economic supply-side option for use as the avoided unit for
future capacity solicitations.
Competitive Bidding - In July 1992, the MPSC issued an order establishing
a competitive bidding framework for future electric capacity solicitations for
Detroit Edison. The MPSC directed Detroit Edison to proceed with a capacity
solicitation proceeding based on its 1992 IRP, which outlined Detroit Edison's
long-range plan for meeting its customers' electricity needs, and to submit a
RFP to meet the need for any future electrical capacity. On May 1, 1995,
Detroit Edison filed its preliminary RFP to solicit bids for the acquisition of
new capacity starting in the year 2004. The filing describes Detroit Edison's
future requirements for additional generating capacity and addresses the role
competitive bidding will play in meeting that capacity need. To better serve
its customers in an increasingly competitive marketplace, Detroit Edison is
proposing customer load management options which have the potential to provide
an additional 500 MW of peak reduction by the year 2003. On July 14, 1995,
Detroit Edison updated its case to reflect the MPSC's June 19, 1995 Retail
Wheeling order.
Retail Wheeling - The MPSC has been considering the propriety of retail
wheeling programs. On June 19, 1995, the MPSC issued a final order finding
that an experimental retail wheeling program is in the public interest and
established rates and charges for the five-year experimental program. Under
the program, retail wheeling customers would make their own arrangements to
procure power. Implementation of the experimental program would be limited to
90 MW for Detroit Edison and will be coordinated with Detroit Edison's next
solicitation of new capacity. On July 14, 1995, Detroit Edison filed testimony
supporting its proposal for implementing the MPSC's experimental retail
16
<PAGE> 18
wheeling program including requirements for collecting data and evaluating the
experiment. Detroit Edison's identified need date for new capacity is 2004.
The MPSC Staff supported a need date of 1997 and recommended that the
experiment should begin in 1998. Briefs were filed on February 9, 1996 and
Reply Briefs on February 28, 1996. The MPSC Staff is now recommending that the
MPSC open a new docket to consider a much larger retail wheeling experiment
than the 90 MW ordered previously. The MPSC Staff, ABATE and Energy Michigan
are requesting that the retail wheeling experiment begin immediately,
regardless of the MPSC's determination of the capacity need date.
On July 19, 1995, Detroit Edison filed a claim of appeal of the MPSC's
April 11, 1994 interim order and June 19, 1995 final order with the Michigan
Court of Appeals. Along with other claims, Detroit Edison asserts that the
MPSC lacks authority to compel Detroit Edison to undertake retail wheeling
involuntarily and that the rates, terms and conditions for retail wheeling
transmission service are subject to federal rather than state jurisdiction.
Appeals and/or cross appeals of the MPSC's retail wheeling orders have also
been filed by Consumers, Dow Chemical Company, ABATE and the Michigan Attorney
General.
On March 1, 1996, MascoTech Forming Technologies, Inc., a Detroit Edison
industrial customer currently purchasing approximately 25 MW of electricity
annually (with the potential for an additional 6 MW annually), petitioned the
MPSC to establish a "cost based fair and pro-competitive transportation rate"
for its new and existing electric load. On March 19, 1996, Detroit Edison
filed a motion to dismiss with the MPSC, asserting that the MPSC lacks
jurisdiction to establish the requested rate.
Special Manufacturing Contracts - As part of a continuing response to the
challenge of competition, Detroit Edison entered into 10-year special
manufacturing contracts with Chrysler Corporation, Ford Motor Company and
General Motors Corporation, covering 54 of the Big Three automakers' largest
manufacturing locations in Southeastern Michigan. These long-term contracts
are expected to reduce annual operating revenues in amounts ranging from about
$30 million in 1995 to $50 million in 1999 through 2004. Detroit Edison
expects to offset these reductions by further reducing operating expenses. On
March 23, 1995, the MPSC issued an order approving the special manufacturing
contracts. The MPSC also found that Detroit Edison should assume full
responsibility for negotiating the discounted prices and that its shareholders
should expect to absorb much, if not all, of any revenue shortfall caused by
the pricing and other contract provisions that Detroit Edison negotiates.
Therefore, unless Detroit Edison can make a compelling showing why a different
ratemaking treatment is justified, the MPSC will not permit Detroit Edison to
reallocate the costs of serving contract customers to other ratepayer classes.
In addition, the MPSC agreed that other ratepayers should be protected from any
under-recoveries of PSCR costs and the other Detroit Edison surcharges as a
result of the contracts.
Capacity and Energy Purchase - On October 25, 1995, the MPSC issued an
order approving Detroit Edison's long-term capacity and energy purchase from
Ontario Hydro. On November 27, 1995, the Michigan Attorney General filed an
application for leave to appeal the order in the Michigan Court of Appeals.
The purchase is for 300 MW, on a
17
<PAGE> 19
seasonal basis from mid-May through mid-September for the years 1996 through
2001. This purchase will offset a concomitant agreement to lease 312 MW of
Detroit Edison's 917 MW Ludington capacity entitlement, to The Toledo
Edison Company for essentially the same time period. The net economic effect
of the Ludington lease and the Ontario Hydro purchase will be to provide
Detroit Edison's customers with an estimated reduction in PSCR expense of $74
million which will be passed through to customers through the PSCR clause.
For further information on regulation, rates and proposed policy changes,
see "Certain Factors Affecting Public Utilities" herein, Note 3 and Item 7 -
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
FEDERAL ENERGY REGULATORY COMMISSION. Detroit Edison is subject to the
general jurisdiction of the FERC with respect to accounting, sales for resale
in interstate commerce, issuances of securities, the licensing of Ludington and
other matters. Detroit Edison's electric transmission facilities,
interconnected with those of Ontario Hydro at the United States - Canada
border, are subject to safety regulation by various departments of the United
States government and to a permit administered by the ERA. The transmission of
electric energy to Ontario Hydro is subject to regulation by the FERC and the
ERA.
On March 29, 1995, the FERC issued a Notice of Proposed Rulemaking seeking
comments on several proposals for encouraging more competitive wholesale
electric power markets. The proposals address several fundamental issues
facing the electric power industry including transmission open access, stranded
costs, jurisdiction over transmission in interstate commerce including retail
wheeling, pricing of transmission service including ancillary services, the
"bright-line" between transmission and local distribution, real-time
information networks and the implementation of open access pro-forma tariffs.
The FERC is also considering guidelines for the operation of power pools and
requiring the use of an independent system operator to ensure comparability of
service and the mitigation of market power. Final rules are expected to be
issued in the second quarter of 1996.
In 1986, the Michigan Attorney General and the Michigan Natural Resources
Commission filed a state lawsuit against Detroit Edison and Consumers as
co-owners of Ludington for claimed aquatic losses. Detroit Edison is a 49%
co-owner of Ludington. On October 5, 1994, Detroit Edison and all other
parties to the state lawsuit and a related FERC proceeding reached a tentative
settlement. The settlement was contingent upon FERC and MPSC approval. In
January 1996, the FERC approved the settlement agreement, and in February 1996,
the MPSC approved those portions of the settlement agreement related to
Consumers. In February 1996, Detroit Edison waived prior MPSC approval for the
settlement to become effective, but reserved the right to seek rate recovery in
the next main rate case or other MPSC proceeding covering the subject matter of
the settlement. See Note 12.
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<PAGE> 20
NUCLEAR REGULATORY COMMISSION. The NRC has regulatory jurisdiction over
all phases of the operation, construction (including plant modifications),
licensing and decommissioning of Fermi 2. Reports on plant operation are filed
with the NRC on a periodic basis. The scope of regulation is such that from
time to time assertions may be made that deviations from prescribed standards
and the unit's operating license have occurred. Assertions of such a nature
are subject to the NRC's investigative, administrative and appeal procedures
and are considered to be pending until such time as review within the NRC is
completed. At the conclusion of an investigation, the NRC may assess a fine
which should, in accordance with NRC regulations, be calculated in a manner
designed to take into account the severity, length and safety significance of
the alleged infraction. No fines were assessed by the NRC to Detroit Edison in
1995.
In May 1996, the NRC is expected to issue the fifteenth Systematic
Assessment of Licensee Performance which covers Fermi 2 operations during the
period from April 1994 through March 1996.
See Note 2 for further information on matters related to Fermi 2.
ENVIRONMENTAL MATTERS
Detroit Edison, in common with other electric utilities, is subject to
applicable permit requirements and to increasingly stringent federal, state and
local standards covering, among other things, particulate and gaseous stack
emission limitations, the discharge of effluents (including heated cooling
water) into lakes and streams and the handling and disposal of waste material.
In November 1990, the federal Clean Air Act was amended to further strengthen
federal regulations governing air emissions. For further information on
matters related to the 1990 Amendments to the federal Clean Air Act, see Item 7
- - Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Through 1995, Detroit Edison's capital expenditures for environmental
control and protection facilities were approximately $2.9 billion, including
expenditures of $15 million in 1995. Detroit Edison's 1996 capital expenditure
budget for environmental protection is approximately $9 million.
In 1995, the MDNR split into two organizations, the MDNR, with
responsibilities for land and wildlife issues, and the MDEQ, with
responsibilities for air and water discharge permitting, waste and other
industrial compliance issues. Detroit Edison will be regulated by both
departments.
AIR. Detroit Edison's operations are subject to environmental regulations
of the EPA, the State of Michigan and Wayne County. Under the federal Clean
Air Act of 1970, as amended, the EPA has the authority to adopt and implement
additional regulations in support or in substitution of state and local
enactments where the EPA deems such enactments to be deficient in relation to
its regulations.
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<PAGE> 21
A May 1992 EPA rule provides an exemption from new source review for major
modifications at utility facilities associated with pollution control projects
unless the EPA administrator determines the modification renders the unit "less
environmentally beneficial."
Title III of the Clean Air Act Amendments of 1990, Hazardous Air
Pollutants, requires EPA to conduct two studies specifically related to
emissions from electric utility steam generating units and report the results
to Congress. In the first utility study, EPA must assess the hazards to public
health reasonably anticipated to occur from these emissions. The administrator
can regulate utility emissions if the study results indicate it is appropriate
and necessary to do so. The report to Congress was to be submitted November
15, 1993. It has not yet been completed. EPA's second utility study is
specific for mercury and was to have been completed by November 15, 1994. The
report to Congress for this study has also been delayed. In May 1993, the
Michigan Environmental Science Board recommended that the Governor direct the
MPSC to require utilities to compile an accurate emission inventory. Detroit
Edison has submitted such information to the MPSC. Until studies are completed
and resulting regulations, if any, are promulgated, the impact on Detroit
Edison cannot be determined. Michigan's Mercury Pollution Prevention Task
Force is expected to release its final report in early 1996.
WATER. NPDES permits for Detroit Edison's power plants are issued by the
MDEQ pursuant to delegation by the EPA under the federal Clean Water Act. One
renewal permit application will be filed in 1996. Six permit applications
(submitted in 1994 and earlier) remain pending; the expired permits remain
effective until new permits are issued or denied.
In an effort to streamline the industrial facility permitting process, in
1993 the MDEQ created a program to issue general storm water discharge permits
for various types of facilities across the state. Instead of applying for
individual permits, companies are now required to notify the state of the
operating facilities which should be included under the general permits. In
1994, Detroit Edison filed Notices of Intent with the MDEQ for coverage for ten
facilities under the NPDES general permit for storm water discharges associated
with industrial activity. Detroit Edison received Certificates of Coverage for
the facilities in late 1994 and early 1995. These certificates are valid for
the life of the general permit, which expires on January 31, 1999. A Storm
Water Discharge Permit fee program was implemented by the MDEQ in January 1996
and requires the annual payment of $200 per facility.
Detroit Edison is required to demonstrate that the cooling water intake
structures at all of its facilities reflect the "best technology available for
minimizing adverse environmental impact." Detroit Edison filed such
demonstrations in July 1976 and the MDEQ Staff accepted all except those
relating to the St. Clair and Monroe Power Plants. The MDEQ Staff rejected the
St. Clair demonstration and requested additional information, which was
submitted. The MDEQ Staff never made a formal initial decision about the
intake at Detroit Edison's Monroe Power Plant but requested additional
information which was
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<PAGE> 22
submitted on alternative intake technologies. In the event of a final
adverse decision, Detroit Edison may be required to install additional control
technologies to further minimize the impact.
Detroit Edison was required under its Monroe Power Plant NPDES permit to
demonstrate that thermal discharge from the plant does not cause an adverse
environmental impact on Lake Erie. Such demonstration was submitted to the
MWRC and subsequently approved in 1976. The demonstration has been under
review by the EPA which indicated that it was unable to concur in the
acceptability of the demonstration until additional information had been
provided with respect to the cooling water intake effects of the plant.
Additional information was submitted, but it is unknown at this time when this
issue will be resolved, or what the impact, if any, upon Detroit Edison will
be.
WASTES AND TOXIC SUBSTANCES. The Michigan Solid Waste and Hazardous Waste
Management Acts, the Michigan Environmental Response Act and the Federal
Resource Conservation and Recovery Act, Toxic Substances Control Act, and
Comprehensive Environmental Response, Compensation and Liability Act regulate
Detroit Edison's handling, storage and disposal of its waste materials.
A nationwide environmental problem is the discovery of improperly disposed
of, hidden or buried hazardous wastes. Detroit Edison has extensive property
holdings, including approximately 400 miles of transmission corridors which are
accessible to the public. Detroit Edison could be responsible for clean-up of
wastes found on its property, despite the fact that the dumping may have
occurred without Detroit Edison's permission.
On June 5, 1995, Governor John Engler signed P.A. 71 of 1995, which
amended the Michigan Environmental Response Act, now part of the Natural
Resources and Environmental Protection Act. Among other changes, P.A. 71
amended the liability standards to hold a person liable for remediation only if
they are responsible for an activity causing a release of a substance to the
environment. Since the previous standard of liability was simply ownership of
the property, Detroit Edison believes the amendment will remove deterrences to
development in its service territory and more fairly allocate clean-up costs to
those responsible. However, companies are still liable under federal law.
Detroit Edison's Lulu-Milan transmission corridor in northwestern Monroe
County was used as a dump site for drums of paint sludges, solvents and some
PCB's and a portion of the corridor and adjoining property is listed on the
State's "Priority List of Environmental Contamination Sites." Although not
responsible for placing the drums there, Detroit Edison has spent approximately
$550,000 on clean-up and disposal costs. In June 1993, Detroit Edison and the
MDEQ reached an agreement to hire contractors to perform additional
investigative and remedial work at the site. While the costs will be shared
between Detroit Edison and the state, it is impossible at this time to predict
what impact this will have upon Detroit Edison.
See Note 12 for information on the Carter Industrials site matter.
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<PAGE> 23
A landfill site abandoned by the South Macomb Disposal Authority and now
owned in part by Detroit Edison is being surveyed by the MDEQ for possible
contamination. Detroit Edison could be required to contribute toward clean-up
costs, if any occur. It is unknown at this time what impact, if any, this
situation will have upon Detroit Edison.
Detroit Edison has received letters from the EPA requesting information
about its involvement with the following sites of identified contamination in
Michigan: Rasmussen Dump site in Green Oak Township, Livingston County;
Metamora Landfill site in Lapeer County; and the Pioneer Equipment Company site
in Detroit. Detroit Edison has examined its records and finds no evidence of
any involvement at these sites. This information has been communicated to the
EPA, but it remains unknown what impact, if any, the EPA's ongoing
investigations will have upon Detroit Edison.
In February 1992, Detroit Edison received formal notice from the MDEQ that
the Port of Monroe Landfill Site had been identified as a site of environmental
contamination. Also in February 1992, after an investigation of its records,
Detroit Edison sent a letter to the MDEQ stating its belief that it has never
disposed of hazardous material at the Port of Monroe Landfill Site. On March
14, 1994, the MDEQ sent formal notice to the PRPs (but not to Detroit Edison)
that it is seeking reimbursement for its past costs and interest totaling
$750,000. The PRPs sent a letter to Detroit Edison on April 8, 1994 advising
that they will seek a contribution from Detroit Edison on grounds that they
believe it to be a party despite the MDEQ's decision not to include it. It is
unknown what impact, if any, this situation will have upon Detroit Edison.
In March 1989, the EPA served Detroit Edison with an investigative
subpoena requesting extensive information regarding Detroit Edison's PCB
activities. Detroit Edison responded to the investigative subpoena in June
1989. It is unknown at this time what impact, if any, the investigation will
have upon Detroit Edison.
EPA rules for underground storage tanks became effective in December 1988.
These rules are now administered by the State of Michigan and contain
requirements on new tank system installations, leak detection monitoring,
notification and clean-up of leaks, corrosion resistance for new and existing
tank systems and spill prevention. Of the original 90, Detroit Edison now has
66 remaining regulated underground storage tanks containing petroleum products.
Although most of the tanks have been upgraded to "new tank standards," in
accordance with further review of the rules, six tanks and 23 piping systems
still need upgrading or replacement by December 22, 1998. It is estimated that
it will cost Detroit Edison approximately $1.25 million to complete the
underground storage tanks program.
On July 1, 1991, the Michigan Environmental Response Act ("Act 307")
became effective. The law is patterned after the CERCLA and gives the MDEQ
authority to list sites of environmental contamination and bring about
environmental clean-ups within the State of Michigan. Several Detroit
Edison-owned properties are on the Act 307 list as a result of diesel oil
releases or dredged disposal operations, including portions of the Superior
Station and portions of the St. Clair and Monroe Power Plants. Detroit Edison
is
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<PAGE> 24
addressing these issues and it is unknown what impact, if any, they will
have upon Detroit Edison.
In 1993, Detroit Edison received a letter from the MDEQ requesting
information regarding the Satterlee-Sumpter Township landfill site in Wayne
County. In April 1994, Detroit Edison received a letter formally naming it as
a PRP in the case and requesting Detroit Edison, along with the other PRPs, to
conduct a remedial investigation of the site and to pay past costs incurred by
the State. The PRPs have met with the MDEQ to clarify the extent of the
desired investigation. At this time, it is impossible to predict what the
impact upon Detroit Edison will be.
In July 1994, Detroit Edison received a Third Party summons and complaint
from Oakland Disposal, Inc., Bestway Recycling, Inc., Aero Disposal, Inc., and
Oakland Disposal No. 1 regarding the use of the Waterford Hills Sanitary
Landfill for disposal of hazardous waste or hazardous waste constituents. On
September 6, 1995, Detroit Edison paid $5,000 as a deminimis settlement.
Detroit Edison received approval from the MDEQ on October 5, 1993 to close
its hazardous waste storage facility at its Warren Service Center. The
facility's hazardous waste storage area has been closed but the issue of
corrective actions at solid waste management units has not yet been addressed
by the MDEQ or the EPA.
The federal Low-Level Radioactive Waste Policy Act makes each state
responsible for the disposal of low-level radioactive waste situated within
each state's borders. In June 1992, the United States Supreme Court upheld
most of the provisions of this statute. The Court upheld the responsibility of
each state to develop low-level waste facilities, but declared a provision
requiring the state to take title to low-level radioactive waste in 1996 to be
unconstitutional.
For further information on nuclear waste disposal, see "Fuel Costs and
Supply - Nuclear."
For further information on environmental matters, see Notes 2 and 12 and
Item 7 - Management's Discussion and Analysis of Financial Condition and
Results of Operations.
EMPLOYEES AND EXECUTIVE OFFICERS
EMPLOYEES. The total number of employees of the Company was 8,340 (of
which 8,258 employees were employed by Detroit Edison) with an average length
of service of approximately 18 years. Of these, 3,253 employees are
represented by unions under two collective bargaining agreements. One
agreement expires in June 1999 for 2,720 employees and the other agreement
expires in August 2000 for 533 employees.
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<TABLE>
<CAPTION>
EXECUTIVE OFFICERS. PRESENT
POSITION
NAME AGE(a) PRESENT POSITION HELD SINCE (b)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John E. Lobbia 54 Chairman of the Board and Chief Executive Officer 1-26-95
Anthony F. Earley, Jr. 46 President and Chief Operating Officer 1-26-95
Larry G. Garberding 57 Executive Vice President and Chief Financial Officer 1-26-95
Susan M. Beale 47 Vice President and Corporate Secretary 12-11-95
Ronald W. Gresens 62 Vice President and Controller 12-11-95
Leslie L. Loomans 52 Vice President and Treasurer 1-26-95
Christopher C. Nern 51 Vice President and General Counsel 1-26-95
</TABLE>
(a) As of March 1, 1996
(b) The Company was incorporated in January 1995, and, at that time,
certain officers of Detroit Edison were appointed officers of the
Company.
Under the Company's By-Laws, the officers of the Company are elected
annually by the Board of Directors at a meeting held for such purpose, each
to serve until the next annual meeting of shareholders or until their
respective successors are chosen and qualified.
Pursuant to Article VI of the Company's Articles of Incorporation,
directors of the Company will not be personally liable to the Company or
its shareholders in the performance of their duties to the full extent
permitted by law.
Article VII of the Company's Articles of Incorporation provides that
each person who is or was or had agreed to become a director or officer of
the Company, or each such person who is or was serving or who had agreed to
serve at the request of the Board of Directors as an employee or agent of
the Company or as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise
(including the heirs, executors, administrators or estate of such person),
shall be indemnified by the Company to the full extent permitted by the
Michigan Business Corporation Act or any other applicable laws as presently
or hereafter in effect. In addition, the Company has entered into
indemnification agreements with all of its officers and directors, which
agreements set forth procedures for claims for indemnification as well as
contractually obligating the Company to provide indemnification to the
maximum extent permissible by law.
The Company and its directors and officers in their capacities as such
are insured against liability for wrongful acts (to the extent defined)
under three insurance policies providing aggregate coverage in the amount
of $85 million.
OTHER INFORMATION. Pursuant to the provisions of the Company's
By-Laws, the Board of Directors has by resolution set the number of
directors comprising the full Board, effective as of December 29, 1995, at
thirteen.
24
<PAGE> 26
ITEM 3 - LEGAL PROCEEDINGS.
Detroit Edison in the ordinary course of its business, is involved in
a number of suits and controversies including claims for personal injuries
and property damage and matters involving zoning ordinances and other
regulatory matters. As of December 31, 1995, Detroit Edison was named as
defendant in 129 lawsuits involving claims for personal injuries and
property damage and had been advised of 25 other potential claims not
evidenced by lawsuits.
From time to time Detroit Edison has paid nominal penalties which were
administratively assessed by the United States Coast Guard, United States
Department of Transportation under the Federal Water Pollution Control Act,
as amended, with respect to minor accidental oil spills at Detroit Edison's
power plants into navigable waters of the United States. Payment of such
penalties represents full disposition of these matters.
Detroit Edison in its 1982 main electric rate case requested the MPSC
to recognize the costs associated with the abandoned Greenwood Unit Nos. 2
and 3 for ratemaking purposes. In March 1983, the MPSC, consistent with
past precedent, granted Detroit Edison authority to defer, amortize and
recover these costs (over a period of 10 years) through the ratemaking
process. The Michigan Attorney General appealed the MPSC's order. In
August 1990, the Ingham County Circuit Court remanded this matter to the
MPSC for additional findings of fact. On November 1, 1991, the MPSC issued
its final order on remand affirming the earlier decision to allow rate
recovery of the costs. The Ingham County Circuit Court has removed this
case from the assigned judges docket pending resolution of issues
determined favorable to Detroit Edison's position in a Michigan Supreme
Court proceeding. Detroit Edison has amortized the costs associated with
the abandoned Greenwood Unit Nos. 2 and 3 in accordance with the MPSC's
order. The amortization was completed in 1993.
See Note 12.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5 - MARKET FOR REGISTRANT's COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange, which
is the principal market for such stock, and the Chicago Stock Exchange. The
following table indicates the reported high and low sales prices of the
Company's Common Stock on the Composite Tape of the New York Stock Exchange and
dividends paid per share for each quarterly period during the past two years:
25
<PAGE> 27
<TABLE>
<CAPTION>
PRICE RANGE DIVIDENDS
----------- PAID
CALENDAR QUARTER HIGH LOW PER SHARE
---------------- ---- --- ---------
<S> <C> <C> <C> <C>
1994 First 30-1/4 26 $0.515
Second 27-1/4 24-1/4 0.515
Third 27-1/2 24-1/4 0.515
Fourth 27-1/2 24-3/4 0.515
1995 First 29-5/8 25-3/4 $0.515
Second 30-7/8 27-1/8 0.515
Third 32-5/8 28-1/4 0.515
Fourth 34-7/8 32-1/8 0.515
</TABLE>
At December 31, 1995, there were 145,119,875 shares of the Company's
Common Stock outstanding. These shares were held by a total of 143,177
shareholders.
The Company's By-Laws provide that Chapter 7B of the Michigan Business
Corporation Act ("Act") does not apply to the Company. The Act regulates
shareholder rights when an individual's stock ownership reaches at least 20
percent of a Michigan corporation's outstanding shares. As a result of the
amendment, a shareholder seeking control of the Company cannot require the
Company's Board of Directors to call a meeting to vote on issues related to
corporate control within 10 days, as stipulated by the Act.
The level of dividends is dependent on earnings and other business
conditions, each of which is periodically reviewed by the Company's Board of
Directors.
ITEM 6 - SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------- ------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ----- ----
(Thousands, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues ................... $ 3,635,544 $ 3,519,341 $ 3,555,211 $ 3,558,143 $ 3,591,537
Net Income ........................... $ 405,914 $ 390,269 $ 491,066 $ 557,549 $ 535,205
Earnings Per Common Share ............ $ 2.80 $ 2.67 $ 3.34 $ 3.79 $ 3.64
Dividends Declared Per
Share of Common Stock .............. $ 2.06 $ 2.06 $ 2.06 $ 1.98 $ 1.88
At year end:
Total Assets ...................... $11,130,591 $10,992,978 $11,134,879 $10,309,061 $10,463,624
Long-Term Debt
Obligations (including
capital leases) and
Redeemable Preferred and
Preference Stock Outstanding .... $ 4,004,247 $ 3,979,763 $ 4,007,622 $ 4,525,504 $ 4,900,020
</TABLE>
26
<PAGE> 28
ITEM 7- MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION &
RESULTS OF OPERATIONS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes thereto, contained
herein.
CORPORATE STRUCTURE
Effective January 1, 1996, DTE Energy Company became the parent holding company
of The Detroit Edison Company ("Detroit Edison"). On January 1, 1996, the
holders of Detroit Edison's common stock exchanged such stock on a
share-for-share basis for the common stock of DTE Energy Company ("Company").
In addition, certain non-utility subsidiaries of Detroit Edison were
transferred to the Company.
Detroit Edison is the principal subsidiary of the Company and, as such,
this discussion explains material changes in results of operations of both the
Company and Detroit Edison and identifies recent trends and events affecting
both the Company and Detroit Edison. For the periods presented, the Company's
operations and those of Detroit Edison are substantially the same.
RESULTS OF OPERATIONS
For the year ended December 31, 1995, the Company's net income was $405.9
million, or $2.80 per common share, up 4% from the $390.3 million, or $2.67 per
common share earned in 1994. The increase in net income was due to higher
sales of electricity in 1995. The sales increase was partially offset by
higher operating expenses, including a non-cash loss of $42 million ($32
million after-tax), or $0.22 per common share, on Detroit Edison's steam
heating business due to the Company's adoption in the fourth quarter of 1995 of
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" ("SFAS No. 121").
For the year ended December 31, 1994, the Company's net income was $390.3
million, or $2.67 per common share, a decrease of 20.5% from the $491.1
million, or $3.34 per common share earned in 1993. The decrease in net income
was due in part to a January 21, 1994 order by the Michigan Public Service
Commission ("MPSC"), which reduced Detroit Edison's rates by $78 million
annually and increased depreciation and operation expenses by $84 million
annually. In addition, accretion income decreased and amortization of the
Fermi 2 nuclear power plant phase-in plan increased significantly in 1994.
Also, Detroit Edison incurred additional one-time charges at the Fermi 2
nuclear power plant, which was out of service in 1994 due to equipment failure,
for maintenance expenses and the establishment of a reserve for estimated
Fermi 2 capacity factor performance disallowances in 1994-1998. The decrease
in net income was limited by higher system sales and lower interest expense due
to the early redemption and refinancing of higher cost debt and the redemption
of maturing debt.
For the year ended December 31, 1993, the Company's net income was
$491.1 million, or $3.34 per common share, a decrease of 11.9% from the $557.5
million, or $3.79 per common share earned in 1992. The decrease in net income
was due to a 5% reduction in Detroit Edison's rates, effective January 1, 1993,
which reduced 1993 operating revenues by $169 million, or $0.75 per common
share, higher operating expenses (including amortization of Fermi 2 nuclear
power plant phase-in plan deferrals and higher federal income tax expense of
$10.4 million for the full year 1993, or $0.07 per common share, due to an
increase in the corporate income tax rate from 34% to 35% retroactive to
January 1, 1993) and lower non-operating income, partially offset by higher
sales and lower interest expense due to the early redemption and refinancing of
higher cost debt and the redemption of maturing debt. The reduction in
electric rates was due to reinstatement of the Power Supply Cost Recovery
Clause, which was suspended for a four-year period, resulting in lower billings
to customers of $106 million in 1993 due to lower fuel expenses, and the
expiration of an expense stabilization procedure surcharge on January 1, 1993
which provided annual revenues of $63 million in 1992 for the effects of
inflation. Warm summer weather and improved economic conditions in
Southeastern Michigan contributed to the sales increase.
At December 31, 1995, the book value of the Company's common stock was
$23.62 per share, an increase of 3.2% since December 31, 1994. Return on
average total common shareholders' equity was 11.8% in 1995, 11.6% in 1994 and
15.2% in 1993.
Detroit Edison's ratio of earnings to fixed charges for 1995, 1994 and
1993 was 3.21, 3.13, and 3.25, respectively. Detroit Edison's ratio of
earnings to fixed charges and preferred and preference stock dividends for
1995, 1994 and 1993 was 2.82, 2.73, and 2.88, respectively.
<TABLE>
<CAPTION>
OPERATING REVENUES
Total operating revenues increased (decreased) due to the following factors:
1995 1994
---- ----
(Millions)
<S> <C> <C>
Rate Changes
MPSC rate reduction $ (5) $(81)
Special Manufacturing Contracts (26) -
Power Supply Cost Recovery Clause (6) (5)
---------------------------------
(37) (86)
System sales volume and mix 149 103
Interconnection sales 8 (17)
Fermi 2 capacity factor performance
standard reserve (1) (31)
Other -- net (3) (5)
---------------------------------
Total $116 $(36)
=================================
</TABLE>
RATE CHANGES
The January 21, 1994 MPSC rate order reduced Detroit Edison's rates by $78
million annually. In keeping with the MPSC's recognition of the need for
industrial customers to be competitive, the January 1994 rate reduction was
allocated among the various classes of customers approximately as follows:
Industrial-$43 million, Commercial-$24 million, Residential-$10 million and
Governmental-$1 million.
27
<PAGE> 29
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION &
RESULTS OF OPERATIONS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
On March 23, 1995, the MPSC issued an order approving Detroit Edison's
10-year special manufacturing contracts with Chrysler Corporation, Ford Motor
Company and General Motors Corporation. The revenue reductions from these
contracts initially will amount to approximately $30 million annually and
increase to $50 million annually in 1999-2004, which Detroit Edison expects to
offset by further reducing its operating expenses.
<TABLE>
KILOWATTHOUR SALES
Kilowatthour sales increased (decreased) as follows:
<CAPTION>
1995 1994
- -------------------------------------------------------------------------------
<S> <C> <C>
Residential 6.9% 1.1%
Commercial 2.5 3.5
Industrial 3.5 5.9
Other (includes primarily sales for resale) 5.3 (14.1)
Total System 4.1 2.8
Interconnection 50.1 (45.2)
Total 6.1 (1.0)
- -------------------------------------------------------------------------------
</TABLE>
1995
Residential and commercial sales increased due to substantially warmer summer
weather increasing air conditioning and cooling-related loads and colder fall
weather increasing heating-related loads in the fourth quarter. Improved
economic conditions spurred higher sales to commercial, automotive and other
industrial customers. Sales to other customers increased due to higher sales
to wholesale for resale customers.
1994
Residential sales increased due to substantially warmer weather in the second
quarter resulting in increased air conditioning and cooling-related loads,
partially offset by lower cooling-related loads in the third quarter. The
increased heating-related loads in the first quarter were offset by decreased
heating-related loads in the fourth quarter. Commercial sales increased due
primarily to improved economic conditions and increased cooling-related loads.
Industrial sales increased as a result of higher sales to automotive, steel and
other manufacturing customers reflecting the improvement in the economy. The
decreased sales to other customers reflect lower sales to wholesale for resale
customers.
INTERCONNECTION SALES
Interconnection sales represent sales between utilities to meet energy needs as
a result of demand and/or generating unit availability.
1995
Interconnection sales increased due to improved availability of energy for sale
and lower dispatch prices in meeting the increased demand for energy during the
warmer summer and colder fall period.
1994
Interconnection sales decreased due to the reduced availability of energy for
sale as a result of the Fermi 2 outage and lower sales to Consumers Power
Company.
FERMI 2 CAPACITY FACTOR PERFORMANCE STANDARD RESERVE
This reserve is discussed in Note 3 of the Notes to Consolidated Financial
Statements.
OPERATING EXPENSES
FUEL AND PURCHASED POWER
Fuel and purchased power expenses increased (decreased) due to the following
factors:
<TABLE>
<CAPTION>
1995 1994
- -----------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Net system output $53 $ (6)
Average unit cost (86) 59
Fermi 2 business interruption
insurance 48 (65)
Other (2) 6
----------------------------
Total $13 $ (6)
============================
- -----------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
Net system output and average unit costs were as follows:
- -----------------------------------------------------------------------------------------------------
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
(Thousands of Megawatthours)
<S> <C> <C> <C>
Power plant generation
Fossil 41,636 42,410 38,882
Nuclear 5,092 - 8,274
Purchased power 5,423 6,599 2,211
-------------------------------------------------------
Net system output 52,151 49,009 49,367
=======================================================
Average unit cost ($/Megawatthour) $15.29 $16.94 $15.73
=======================================================
- -----------------------------------------------------------------------------------------------------
</TABLE>
1995
The decrease in average unit cost was due to declining fuel prices resulting
from greater use of lower-cost Western low-sulfur coal, lower coal contract
buyout expense and increased lower-cost nuclear generation.
1994
The increase in average unit cost resulted from replacing lower-cost nuclear
generation with higher-cost fossil generation and purchased power due to the
Fermi 2 outage in 1994 as a result of a turbine-generator failure in December
1993.
OTHER OPERATION
1995
Other operation expense increased due primarily to higher incentive award
expenses related to a shareholder value improvement plan ($14.5 million), higher
storm expenses ($13.1 million), an increase in a reserve for the write-off of
obsolete and excess stock material ($9 million), demand-side management expenses
($8.6 million) and a reserve for settlement of the Ludington fish mortality case
($8.4 million). These expenses were partially offset by lower nuclear plant
expenses ($15.5 million), expenses recorded in the year-earlier period for
service quality claims ($8.7 million) and lower uncollectible expense
($6.9 million).
1994
Other operation expense increased due primarily to other postretirement health
care and life insurance benefits expense ($48.3 million), service quality
claims expense ($8.7 million) and higher nuclear plant ($8.1 million),
transmission and
28
<PAGE> 30
distribution ($9.7 million) and demand-side management expenses ($4.3
million). These increases were partially offset by lower incentive award
expenses related to a shareholder value improvement plan ($18.7 million),
expenses recorded in the year-earlier period for the write-off of obsolete and
excess stock material ($12.4 million) and a reserve for steam purchases under
the agreement with the Greater Detroit Resource Recovery Authority ($11
million), lower uncollectible ($9.9 million) and employee reorganization ($6.5
million) expenses and lower injuries and damages expense ($8.1 million).
MAINTENANCE
1995
Maintenance expense decreased due primarily to lower nuclear ($17 million) and
fossil ($4.3 million) plant expenses.
1994
Maintenance expense increased due primarily to higher nuclear plant ($17.6
million) and storm ($8.9 million) expenses, partially offset by lower fossil
plant ($8.7 million) and line clearance ($5.3 million) expenses. While Fermi 2
was down for repair in 1994, Detroit Edison elected to upgrade various plant
facilities which resulted in higher nuclear plant maintenance expense.
STEAM PLANT IMPAIRMENT LOSS
1995
As the result of continuing losses in the operation of its steam heating
business, upon adoption of SFAS No. 121 in the fourth quarter of 1995, Detroit
Edison wrote off the remaining net book value of its steam heating plant assets
of $42 million.
DEPRECIATION AND AMORTIZATION
1995 AND 1994
Depreciation and amortization expense increased due to increases in plant in
service, including internally developed software costs, and increased Fermi 2
decommissioning costs authorized by a January 1994 MPSC rate order.
DEFERRED FERMI 2 AMORTIZATION
1995 AND 1994
Deferred Fermi 2 amortization, a non-cash item of income, was recorded
beginning with Detroit Edison's purchase of the Wolverine Power Supply
Cooperative, Inc.'s ownership interest in Fermi 2 in February 1990. The annual
amount deferred decreases each year through 1999.
AMORTIZATION OF DEFERRED FERMI 2 DEPRECIATION AND RETURN
1995 AND 1994
Deferred Fermi 2 depreciation and return, non-cash items of income, were
recorded beginning with the implementation of the Fermi 2 rate phase-in plan in
January 1988. The annual amounts of deferred depreciation and return decreased
each year through 1992. Beginning in 1993 and continuing through 1998, these
deferred amounts will be amortized to operating expense as the cash recovery is
realized through revenues.
TAXES OTHER THAN INCOME TAXES
1995
Taxes other than income taxes decreased due to lower payroll and property
taxes.
1994
Taxes other than income taxes decreased due primarily to lower property taxes,
partially offset by higher Michigan Single Business Tax ("MSBT").
INCOME TAXES
1995
Income taxes increased due primarily to higher pretax income.
1994
Income taxes decreased due primarily to lower pretax income, partially offset
by higher prior years' federal income tax accrual. In March 1994, the Company
and the Internal Revenue Service ("IRS") reached a settlement of the Company's
income tax returns for the years 1987 and 1988.
OTHER INCOME AND (DEDUCTIONS) - NET
1995
Other deductions increased due to higher promotional practices expense ($8.3
million), expenses incurred in the formation of a holding company ($3.1
million) and joint-use contract costs ($2.7 million), partially offset by lower
expenses related to the sale of accounts receivable and unbilled revenues ($6.1
million) and a decrease in the write-off of premiums and expenses related to
the portion of Detroit Edison's 1989 Series A Mortgage Bonds not refinanced
($3.5 million).
1994
Other deductions increased slightly due primarily to the write-off of premiums
and expenses related to the portion of Detroit Edison's 1989 Series A Mortgage
Bonds not refinanced ($5.2 million) and an accrual for a contribution to the
Detroit Edison Foundation ($5 million), partially offset by an expense recorded
in 1993 for decommissioning of Fermi 1 ($7.6 million), an experimental nuclear
unit that has been shut down since 1972.
ACCRETION INCOME
1995 AND 1994
Accretion income, a non-cash item of income, was recorded beginning in January
1988 to restore to income, over the period 1988-1998, losses recorded due to
discounting indirect disallowances for Greenwood Unit No. 1 for the period that
plant was not allowed in rate base (1988-1993) and for $300 million of Fermi 2
plant costs being recovered from 1989 to 1998 with no return. The annual
amount of accretion income recorded decreases each year through 1998. In
January 1994, accretion income decreased due to the return to rate base of
Greenwood Unit No. 1.
LONG-TERM DEBT INTEREST CHARGES
1995
Long-term debt interest charges increased due to the issuance of Quarterly
Income Debt Securities ("QUIDS") and the timing of the early redemption and
refinancing of securities when economic.
1994
Long-term debt interest charges decreased due to the early redemption and
refinancing of securities when economic and the redemption of maturing
securities.
29
<PAGE> 31
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY
COMPANIES
OTHER INTEREST CHARGES
1995
Other interest charges decreased due primarily to lower levels of short-term
borrowings.
1994
Other interest charges increased due to higher levels of short-term borrowings,
accruals for prior years' MSBT audits and the settlement of 1987 and 1988 IRS
audits.
PREFERRED AND PREFERENCE STOCK DIVIDENDS OF SUBSIDIARY
1995
Preferred stock dividends of subsidiary decreased due to the exchange of a
portion of Cumulative Preferred Stock 7.75% Series for QUIDS and the conversion
and redemption of Cumulative Preferred Stock 5 1/2% Convertible Series.
1994
Preferred and preference stock dividends of subsidiary decreased slightly due
to the optional and mandatory redemption of outstanding shares in 1993.
LIQUIDITY AND CAPITAL RESOURCES
COMPETITION
FORMATION OF A HOLDING COMPANY
The business of energy supply is experiencing rapid change as competition,
coupled with statutory reform, is being introduced into the public utility
sector. Competition is viewed by legislators and regulators, at both the
federal and state levels, as a method of reducing utility rates while
stimulating overall economic growth.
In order to position itself for potential changes in the electric utility
industry, Detroit Edison adopted a holding company structure, effective January
1, 1996. The new holding company structure, under which Detroit Edison is a
wholly-owned subsidiary of the Company, is designed to provide financial
flexibility for the development of new energy-related businesses. It is also a
mechanism for separating the regulated utility business of Detroit Edison from
non-regulated businesses thereby protecting the utility business from the
potential volatility of non-utility operations.
The Company has no significant operations of its own. Detroit Edison is
the Company's principal operating subsidiary, comprising substantially all of
the Company's assets. Certain of the Company's wholly-owned subsidiaries are
engaged in non-regulated energy-related businesses that are still in the
formative stages.
DTE Capital Corporation ("DTE Capital") was incorporated in 1995 to act as
the financing vehicle for the Company's non-utility affiliates. DTE Capital is
in the process of negotiating a $200 million bank revolving credit agreement.
Since DTE Capital does not have an established credit history, the Company
anticipates that it will be asked to provide credit support for DTE Capital's
initial financing activities.
THE DETROIT EDISON COMPANY
The electric utility industry is facing serious issues as legislators and
regulators consider various proposals designed to reduce rates and promote
economic growth through competition. Municipalization, deregulation,
cogeneration, independent power production, open access to transmission lines,
competitive bulk power supply markets and the unbundling of utility products
and services are issues under consideration. There is also a recognition by
legislators and regulators that the stranded costs of utilities must be
addressed as deregulation proceeds.
In March 1995, the Federal Energy Regulatory Commission ("FERC") issued a
Notice of Proposed Rulemaking on Promoting Wholesale Competition Through Open
Access Non-discriminatory Transmission Services by Public Utilities. According
to the FERC, the goals of the proposed new rules are to facilitate the
development of a competitive market by ensuring that wholesale buyers and
sellers can reach each other and to eliminate anticompetitive and
discriminatory practices in transmission services which, in turn, should lead
to lower electric rates.
On January 8, 1996, Michigan Governor John Engler forwarded to the MPSC a
report on economic development recommendations for electric and gas utility
reform in Michigan prepared by the Michigan Jobs Commission ("MJC"). The
essential component of the MJC's recommended strategy for lowering energy costs
is the promotion of competition and customer choice. The Governor strongly
encouraged the MPSC to use the report as guiding principles in its continued
efforts to promote competition within reasonably established time frames.
The MJC's recommendations, if implemented would:
(1) allow new industrial and commercial load to purchase energy from providers
of their choice beginning January 1, 1997 assuming that the Michigan public
utilities subject to the new rules would be permitted to sell power on a
reciprocal basis,
(2) establish a Michigan statewide power pool by January 1, 1998, and (3)
permit all industrial and commercial customers to be able to choose their
energy providers by January 1, 2001. The proposals recognize that the
transition to a more competitive market requires that the recovery of stranded
costs be addressed. In addition, the proposals favor the unbundling of rate
tariffs into functional components. The MPSC has not yet taken action with
respect to the MJC's recommendations.
While Detroit Edison is unable to predict the outcome of the FERC
rulemaking and the Michigan proposals, increased wholesale competition is
anticipated.
On June 19, 1995, the MPSC issued a final order finding that an
experimental retail wheeling program is in the public interest and establishing
rates and charges for the five-year experimental program. Under the program,
retail wheeling customers would make their own arrangements to procure power.
Implementation of the experimental program would be limited to 90 megawatts
("MW") for Detroit Edison and will be coordinated with Detroit Edison's next
solicitation of new capacity. On July 19, 1995, Detroit Edison filed a claim
of appeal with the Michigan Court of Appeals claiming that the MPSC does not
have the authority to order Detroit Edison to participate in retail wheeling
and that jurisdiction over transmission rates for wheeling resides with the
FERC.
In response to the changing market for electricity, Detroit Edison has
developed a number of programs designed to increase its efficiency and
competitive status and address customer needs, which include implementing an
interruptible rate for large industrial customers. The January 21, 1994 MPSC
rate order provided that up to 650 MW may be sold under this interruptible
rate, with Detroit Edison absorbing revenue losses associated with 250 MW.
30
<PAGE> 32
Competitive status and customer needs were also addressed when, Detroit
Edison entered into 10-year special manufacturing contracts with Chrysler
Corporation, Ford Motor Company and General Motors Corporation, covering 54 of
the Big Three automakers' largest manufacturing locations in Southeastern
Michigan. These special manufacturing contracts are available to customers
with a total connected load of 100 MW or more for specific locations of 5 MW
and over. Service under the special manufacturing contracts includes both firm
and interruptible service, which is priced to provide customers with
competitively-based electric rates.
Detroit Edison continues to review potential energy services as a method
of remaining competitive while diversifying within the scope of its core
business. In addition, the Company anticipates that its affiliates may also
assist in overall customer satisfaction by offering energy-related services.
CASH GENERATION AND CASH REQUIREMENTS
CONSOLIDATED STATEMENT OF CASH FLOWS
The Company generates substantial cash flows from operating activities as shown
in the Consolidated Statement of Cash Flows. Net cash from operating
activities, which is the Company's primary source of liquidity, was $913
million in 1995, $923 million in 1994 and $1,110 million in 1993. Net cash
from operating activities decreased slightly in 1995 as a result of the
repurchase of $200 million of customer accounts receivable and unbilled
revenues, partially offset by higher non-cash charges to income and higher net
income. Net cash from operating activities decreased in 1994 due to lower net
income and changes in current assets and liabilities, partially offset by
higher non-cash charges to income for the Fermi 2 phase-in plan and
depreciation and amortization.
Net cash used for investing activities increased in 1995 due primarily to
higher plant and equipment expenditures. Net cash used for investing
activities increased in 1994 due primarily to increased funding of nuclear
decommissioning trust funds, the purchase of leased equipment and non-utility
investments, partially offset by lower plant and equipment expenditures.
Detroit Edison has engaged in an extensive debt refinancing program in
recent years. Assuming favorable economic conditions, Detroit Edison expects
that it will continue to refinance existing higher-cost
debt and equity securities. Also, in 1994, as a result of a plan change,
Detroit Edison entered into the one-time purchase of common stock from the
trustee of the Detroit Edison Savings & Investment Plans.
ADDITIONAL INFORMATION
In May 1995, FERC issued its order authorizing the continuation of Detroit
Edison's $1 billion of short-term borrowing authority. This authority will be
in effect through May 31, 1997.
An MPSC order permits Detroit Edison to issue approximately $3.5 billion
of securities for the purpose of refinancing debt and preferred and/or
preference stock (issued prior to 1993) prior to maturity (when economic) and
at maturity, and to replace funds used for those purposes. Detroit Edison also
has MPSC authority to refinance substantially all non-taxable debt obligations.
Detroit Edison has an effective Shelf Registration Statement on file with
the Securities and Exchange Commission pursuant to which it may issue up to
$350 million in debt securities. On February 13, 1996, Detroit Edison issued
$185 million of 7 5/8% Quarterly Income Debt Securities. Also, Detroit Edison
called for redemption all of the outstanding Cumulative Preferred Stock, 7.68%
Series, 7.45% Series and 7.36% Series, totaling $185 million, at per share
redemption prices of $101 plus accrued dividends. Such redemption will occur
on March 21, 1996.
Cash requirements for scheduled long-term debt redemptions are expected to
be $119 million, $144 million, $169 million, $219 million and $194 million for
1996, 1997, 1998, 1999 and 2000, respectively.
Detroit Edison's cash requirements for capital expenditures are expected
to be approximately $2.1 billion for the period 1996 through 2000. In 1996,
cash requirements for capital expenditures are estimated at $478 million.
Environmental expenditures are expected to approximate $102 million for the
period 1996 through 2000, including expenditures for Clean Air Act compliance
requirements. See "Environmental Matters" herein.
Detroit Edison's internal cash generation is expected to be sufficient to
meet cash requirements for capital expenditures as well as scheduled long-term
debt redemption requirements.
Detroit Edison had total short-term credit arrangements of approximately
$432 million at December 31, 1995, under which $37 million of borrowings were
outstanding.
CAPITALIZATION
The Company's capital structure ratios (excluding long-term debt due within one
year) were as follows:
<TABLE>
<CAPTION>
December 31
----------------------------------------------------------------
1995 1994 1993
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Shareholders' Equity 45.7% 44.2% 43.9%
Cumulative Preferred Stock
of Subsidiary 4.3 5.0 5.1
Long-Term Debt 50.0 50.8 51.0
- -------------------------------------------------------------------------------------------------
100.0% 100.0% 100.0%
================================================================
</TABLE>
FERMI 2
Detroit Edison's liquidity has improved since the 1988 commercial operation of
Fermi 2, a nuclear generating unit comprising 27% of total assets and 9% of
summer net rated capability, and lower levels of capital expenditures.
The commercial operation of Fermi 2 completed Detroit Edison's power plant
construction program. Detroit Edison has no current plans for additional
generating plants. Ownership of an operating nuclear generating unit such as
Fermi 2 subjects Detroit Edison to significant additional risks. Nuclear
plants are highly regulated by a number of governmental agencies concerned with
public health and safety as well as the environment, and consequently, are
subject to greater risks and scrutiny than conventional fossil-fueled plants.
Fermi 2 was out of service in 1994 and part of 1995 due to a December 1993
turbine-generator failure. Major repairs were completed in 1994 and early
1995. These repair costs are approximately $80 million for which to date
Detroit Edison has received partial insurance payments of $55 million for
property
31
<PAGE> 33
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY
COMPANIES
damage. In addition, Detroit Edison has received partial insurance
payments of $74.2 million for replacement power costs through December 31,
1995.
Fermi 2 was operating at 874 MW at the end of December 1995 and the unit's
capacity factor was 51.4% for 1995. Detroit Edison is currently operating
Fermi 2 without the large seventh and eighth stage turbine blades on the three
low-pressure turbines. The new turbine shafts and blades for these
low-pressure turbines are being manufactured and will be installed during the
next refueling outage in 1996.
The expected cost of replacing the major turbine components in 1996 is
between $45 million and $50 million. These costs will not be covered by
insurance. These costs will be capitalized and are expected to be recovered in
rates because such costs are less than the cumulative amount available under
the cap on Fermi 2 capital expenditures, a provision of the MPSC's December
1988 order.
At December 31, 1995, Fermi 2 was insured for property damage in the
amount of $2.75 billion and Detroit Edison had available approximately $8.5
billion in public liability insurance. To the extent that insurable claims for
replacement power, property damage, decontamination, repair and replacement and
other costs arising from a nuclear incident at Fermi 2 exceed the policy limits
of insurance, or to the extent that such insurance becomes unavailable in the
future, Detroit Edison will retain the risk of loss.
The Financial Accounting Standards Board is reviewing the accounting for
removal costs, including decommissioning of nuclear power plants. If current
electric utility industry accounting practices for such decommissioning are
changed: (1) annual provisions for decommissioning could increase, and (2) the
estimated cost for decommissioning could be recorded as a liability rather than
as accumulated depreciation.
FUTURE SALES GROWTH
Since 1980, the compound annual sales growth was 1.8% and peak demand growth
was 2.4% (after adjusting for the effects of unusual weather). System sales
are expected to grow at a compound annual rate of about 1.5% per year and
system demand at about 1.3% per year for the next 15 years.
MEETING ENERGY DEMANDS
Detroit Edison expects to meet its near-term demand for energy through the
implementation of new load management programs, and eventually through the
return to service, subject to environmental regulations, of power plant units
currently in economy reserve status when energy demand and consumption
requirements provide economic justification. The return to service of these
units is conditioned upon the outcome of a competitive bidding process which
was established by an MPSC order issued in July 1992. On May 1, 1995, Detroit
Edison filed its preliminary Request for Proposal to solicit bids for the
acquisition of new capacity starting in the year 2004. Detroit Edison is
proposing customer load management options which have the potential to provide
an additional 500 MW of peak reduction by the year 2003. Detroit Edison has
filed a proposed retail wheeling tariff and proposal for implementing the
experimental retail wheeling program. See "Competition" herein. The need for
capacity will determine the retail wheeling program start date. On October 13,
1995, the MPSC Staff submitted its direct testimony suggesting that Detroit
Edison will need more capacity by 1997 and that the experiment should begin in
1998. On December 5, 1995, Detroit Edison filed rebuttal testimony indicating
that the most recent resource plan still indicates that capacity will not be
required prior to 2003.
INFLATION
Inflation is a measure of the purchasing power of the dollar. In 1995, the
inflation rate, as defined by the Consumer Price Index, was 2.5%. Although the
current inflation rate is relatively low, its compound effect through time can
be significant, primarily in its effect on Detroit Edison's ability to replace
its investment in utility plant.
The regulatory process limits the amount of depreciation expense
recoverable through revenues to the historical cost of Detroit Edison's
investment in utility plant. Such amount produces cash flows which are
inadequate to replace such property in future years. However, Detroit Edison
believes that it will be able to recover the increased cost of replacement
facilities when, and if, replacement occurs.
ENVIRONMENTAL MATTERS
Protecting the environment from damage, as well as correcting past
environmental damage, continues to be the focus of state and federal
regulators. Committees at both the state and federal level are studying the
effects of a wide array of chemicals and electromagnetic fields as well as
global warming (as potentially affected by carbon dioxide emissions).
Legislation and/or rulemaking resulting from these and any future studies could
further impact the electric utility industry including Detroit Edison.
The Environmental Protection Agency and the Michigan Department of
Environmental Quality have aggressive programs regarding the clean-up of
contaminated property. Detroit Edison anticipates that it will be periodically
included in these types of environmental proceedings. Further, additional
environmental expenditures, although difficult to quantify, will be necessary
as Detroit Edison prepares to comply with the phase-in of the 1990 Amendments
to the federal Clean Air Act. Detroit Edison currently meets the first phase
of sulfur dioxide emissions and nitrogen oxides emissions requirements. The
second phase begins in the year 2000. Detroit Edison currently burns some
level of low-sulfur coal (less than 1% sulfur) at all its coal-fired units and
believes it can meet the second phase sulfur dioxide emission requirements by
either increasing the amount of low-sulfur coal used at certain units, by
purchasing sulfur dioxide emission allowances, or by doing some combination of
both, depending upon which strategy proves to be the best economic choice.
Current projections indicate that annual fuel costs may increase by $13 million
to $20 million in the period 2000-2009 in order to comply with new sulfur
dioxide emissions requirements. In addition, approximately $59 million in
capital expenditures may be necessary for nitrogen oxides emissions
requirements.
Detroit Edison expects that substantially all of the costs of
environmental compliance will be recovered through the ratemaking process.
The Company has accrued for settlements in environmental matters discussed
in Note 12 of the Notes to Consolidated Financial Statements.
32
<PAGE> 34
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and schedules are included
herein.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report..........................................34
Report of Independent Accountants.....................................35
DTE Energy Company and Subsidiary Companies:
Consolidated Statement of Income....................................36
Consolidated Statement of Cash Flows................................37
Consolidated Balance Sheet..........................................38
Consolidated Statement of Common Shareholders' Equity...............40
The Detroit Edison Company and Subsidiary Companies:
Consolidated Statement of Income....................................41
Consolidated Balance Sheet..........................................42
Consolidated Statement of Cash Flows................................44
Consolidated Statement of Common Shareholders' Equity...............45
Notes to Consolidated Financial Statements............................46
Schedule II - Valuation and Qualifying Accounts.......................74
</TABLE>
Note: Detroit Edison's financial statements are presented here for ease
of reference and are not considered to be part of Part II - Item 8 of the
Company's report.
33
<PAGE> 35
INDEPENDENT AUDITORS' REPORT
To the Boards of Directors and Shareholders of
DTE Energy Company and
The Detroit Edison Company
We have audited the consolidated balance sheets of DTE Energy Company and
subsidiary companies and of The Detroit Edison Company and subsidiary companies
(together, the "Companies") as of December 31, 1995, and the related
consolidated statements of income, cash flows, and common shareholders' equity
for the year then ended. Our audits also included the financial statement
schedule listed in the Index at Item 8. These financial statements and
financial statement schedule are the responsibility of the Companies'
management. Our responsibility is to express an opinion on the financial
statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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, such consolidated financial statements referred to above
present fairly, in all material respects, the financial position of DTE Energy
Company and subsidiary companies and of The Detroit Edison Company and
subsidiary companies at December 31, 1995, and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements of the Companies taken as a whole, presents fairly in all material
respects the information set forth therein.
DELOITTE & TOUCHE LLP
Detroit, Michigan
January 22, 1996
34
<PAGE> 36
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
DTE Energy Company and
The Detroit Edison Company
In our opinion, the consolidated balance sheet, and the related
consolidated statements of income, common shareholders' equity and of cash
flows present fairly, in all material respects, the financial position of DTE
Energy Company and subsidiary companies and of The Detroit Edison Company and
subsidiary companies at December 31, 1994 and the results of their operations
and their cash flows for each of the two years in the period ended December 31,
1994, in conformity with generally accepted accounting principles. 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 of these statements in accordance with
generally accepted auditing standards 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 the
opinion expressed above. We have not audited the consolidated financial
statements of DTE Energy Company and subsidiary companies and of The Detroit
Edison Company and subsidiary companies for any period subsequent to December
31, 1994.
PRICE WATERHOUSE LLP
Detroit, Michigan
January 23, 1995 except for
Note 1, paragraph one and three,
which is as of January 1, 1996.
35
<PAGE> 37
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
OPERATING REVENUES
Electric - System $3,560,470 $3,448,351 $3,467,357
Electric - Interconnection 50,979 43,141 60,363
Steam 24,095 27,849 27,491
--------- --------- ---------
Total Operating Revenues $3,635,544 $3,519,341 $3,555,211
--------- --------- ---------
OPERATING EXPENSES
Operation
Fuel $ 715,967 $ 719,215 $ 750,127
Purchased power 133,557 116,947 91,747
Other operation 635,297 621,066 604,882
Maintenance 240,115 262,409 251,149
Steam plant impairment loss 42,029 - -
Depreciation and amortization 500,611 476,415 432,512
Deferred Fermi 2 amortization (5,972) (7,465) (8,959)
Amortization of deferred Fermi 2
depreciation and return 92,990 84,828 30,888
Taxes other than income 251,941 255,874 261,449
Income taxes 289,687 270,657 297,469
--------- --------- ---------
Total Operating Expenses $2,896,222 $2,799,946 $2,711,264
--------- --------- ---------
OPERATING INCOME $ 739,322 $ 719,395 $ 843,947
--------- --------- ---------
OTHER INCOME AND (DEDUCTIONS)
Allowance for other funds used
during construction $ 1,408 $ 1,684 $ 2,055
Other income and
(deductions) - net (30,246) (24,973) (24,961)
Income taxes 9,789 8,111 8,594
Accretion income 11,041 13,644 44,130
Income taxes - disallowed plant
costs and accretion income (3,355) (4,252) (14,062)
--------- --------- ---------
Net Other Income
and (Deductions) $ (11,363) $ (5,786) $ 15,756
--------- --------- ---------
INTEREST CHARGES
Long-term debt $ 275,599 $ 273,763 $ 325,194
Amortization of debt discount,
premium and expense 11,312 10,832 9,114
Other 9,666 11,170 4,928
Allowance for borrowed funds used
during construction (credit) (2,269) (2,065) (1,436)
--------- --------- ---------
Net Interest Charges $ 294,308 $ 293,700 $ 337,800
--------- --------- ---------
PREFERRED AND PREFERENCE STOCK
DIVIDENDS OF SUBSIDIARY $ 27,737 $ 29,640 $ 30,837
--------- --------- ---------
NET INCOME $ 405,914 $ 390,269 $ 491,066
========= ========= =========
COMMON SHARES OUTSTANDING - AVERAGE 144,939,875 146,151,505 147,031,446
----------- ----------- -----------
EARNINGS PER COMMON SHARE $2.80 $2.67 $3.34
========= ========= =========
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
36
<PAGE> 38
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1994 1993
----------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 405,914 $ 390,269 $ 491,066
Adjustments to reconcile net income to net cash from
operating activities:
Accretion income (11,041) (13,644) (44,130)
Depreciation and amortization 500,611 476,415 432,512
Deferred Fermi 2 depreciation, amortization and return - net 87,018 77,363 21,929
Deferred income taxes and investment tax credit - net 62,523 93,287 85,574
Fermi 2 refueling outage - net 13,075 (19,507) 17,856
Steam plant impairment loss 42,029 - -
Other 5,113 (31,091) 32,367
Changes in current assets and liabilities:
Customer accounts receivable and unbilled revenues (218,579) (505) 10,733
Other accounts receivable (3,452) (7,593) (2,247)
Inventories (18,837) (1,774) 33,839
Accounts payable 18,049 (13,858) 21,364
Taxes payable (2,649) (18,031) (6,499)
Interest payable 1,914 (6,174) (19,769)
Other 31,255 (2,189) 35,350
-------- -------- ----------
Net cash from operating activities $ 912,943 $ 922,968 $ 1,109,945
-------- -------- ----------
INVESTING ACTIVITIES
Plant and equipment expenditures $(453,844) $(366,392) $ (396,407)
Purchase of leased equipment - (11,500) (2,402)
Nuclear decommissioning trust funds (43,351) (46,563) (5,346)
Non-utility investments 1,865 (12,843) 182
Other changes in current assets and liabilities 5,774 5,042 10,225
Other (32,845) (11,537) (19,988)
-------- -------- ----------
Net cash used for investing activities $(522,401) $(443,793) $ (413,736)
-------- -------- ----------
FINANCING ACTIVITIES
Sale of cumulative preferred stock $ - $ - $ 200,000
Sale of general and refunding mortgage bonds - 200,000 1,510,000
Funds received from Trustees: Installment sales contracts
and loan agreements 201,525 50,470 76,510
Increase (decrease) in short-term borrowings (2,499) (98,715) 109,210
Redemption of long-term debt (220,739) (258,034) (2,024,289)
Redemption of preferred and preference stock (955) - (164,158)
Premiums on reacquired long-term debt and preferred and preference
stock (5,946) (11,563) (81,453)
Purchase of common stock - (59,855) -
Dividends on common stock (298,502) (301,801) (299,938)
Other (6,600) (2,626) (20,434)
-------- -------- ----------
Net cash used for financing activities $(333,716) $(482,124) $ (694,552)
-------- -------- ----------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS $ 56,826 $ (2,949) $ 1,657
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF THE PERIOD 8,122 11,071 9,414
-------- -------- ----------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF THE PERIOD $ 64,948 $ 8,122 $ 11,071
======== ======== ==========
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 274,413 $ 289,375 $ 346,542
Income taxes paid 230,537 183,172 233,542
New capital lease obligations 26,850 9,328 36,606
Exchange of preferred stock of subsidiary for long-term debt 49,878 - -
-------- -------- ----------
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
37
<PAGE> 39
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
December 31
---------------
ASSETS 1995 1994
----------------------------------
<S> <C> <C>
UTILITY PROPERTIES
Plant in service
Electric $13,303,992 $12,941,414
Steam - 69,813
---------- ----------
$13,303,992 $13,011,227
Less: Accumulated depreciation and amortization (4,928,316) (4,529,692)
---------- ----------
$ 8,375,676 $ 8,481,535
Construction work in progress 142,726 104,431
---------- ----------
Net utility properties $ 8,518,402 $ 8,585,966
---------- ----------
Property under capital leases (less accumulated amortization
of $99,633 and $94,678, respectively) $ 137,206 $ 134,542
Nuclear fuel under capital lease (less accumulated amortization
of $427,831 and $374,405, respectively) 145,463 193,411
---------- ----------
Net property under capital leases $ 282,669 $ 327,953
---------- ----------
Total owned and leased properties $ 8,801,071 $ 8,913,919
---------- ----------
OTHER PROPERTY AND INVESTMENTS
Non-utility property $ 21,576 $ 11,281
Investments and special funds 29,058 18,722
Nuclear decommissioning trust funds 119,843 76,492
---------- ----------
$ 170,477 $ 106,495
---------- ----------
CURRENT ASSETS
Cash and temporary cash investments $ 64,948 $ 8,122
Customer accounts receivable and unbilled revenues (less allowance
for uncollectible accounts of $22,000 and $30,000, respectively) 414,403 195,824
Other accounts receivable 37,664 34,212
Inventories (at average cost)
Fuel 162,796 136,331
Materials and supplies 142,782 155,921
Prepayments 12,910 10,516
---------- ----------
$ 835,503 $ 540,926
---------- ----------
DEFERRED DEBITS
Regulatory assets $ 1,155,482 $ 1,277,628
Prepaid pensions 81,865 54,066
Unamortized debt expense 40,936 42,876
Other 45,257 57,068
---------- ----------
$ 1,323,540 $ 1,431,638
---------- ----------
TOTAL $11,130,591 $10,992,978
========== ==========
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
38
<PAGE> 40
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
December 31
----------------
LIABILITIES 1995 1994
----------------------------------
<S> <C> <C>
CAPITALIZATION
Common stock - without par value, 400,000,000 shares authorized;
(145,119,875 and 144,863,447 shares outstanding, respectively) $ 1,951,437 $ 1,946,999
Retained earnings used in the business 1,484,871 1,379,081
---------- ----------
Total common shareholders' equity $ 3,436,308 $ 3,326,080
Cumulative preferred stock of subsidiary 326,604 380,283
Long-term debt 3,756,094 3,825,296
---------- ----------
Total Capitalization $ 7,519,006 $ 7,531,659
---------- ----------
OTHER NON-CURRENT LIABILITIES
Obligations under capital leases $ 128,362 $ 126,076
Other postretirement benefits 24,381 37,143
Other 58,424 48,707
---------- ----------
$ 211,167 $ 211,926
---------- ----------
CURRENT LIABILITIES
Short-term borrowings $ 36,990 $ 39,489
Amounts due within one year
Long-term debt 119,214 19,214
Obligations under capital leases 154,307 201,877
Accounts payable 165,148 147,020
Property and general taxes 34,416 31,608
Income taxes - 5,304
Accumulated deferred income taxes 51,697 32,625
Interest payable 62,128 60,214
Dividends payable 81,102 82,012
Payrolls 72,164 71,958
Fermi 2 refueling outage 14,342 1,267
Other 130,689 97,215
---------- ----------
$ 922,197 $ 789,803
---------- ----------
DEFERRED CREDITS
Accumulated deferred income taxes $ 2,052,875 $ 2,014,821
Accumulated deferred investment tax credits 330,085 346,379
Other 95,261 98,390
---------- ----------
$ 2,478,221 $ 2,459,590
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 1, 2, 3, 4, 9, 12 and 13)
---------- ----------
TOTAL $11,130,591 $10,992,978
========== ==========
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
39
<PAGE> 41
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
Retained Total
Common Stock Earnings Common
------------------------- Used in the Shareholders'
Shares Amount Business Equity
------ ------ ----------- -------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 147,016,691 $1,975,728 $1,138,159 $3,113,887
Issuance of common stock on conversion of
convertible cumulative preferred stock of
subsidiary, 5-1/2% series 31,227 542 542
Expense associated with subsidiary preferred
and preference stock redeemed (6,634) (6,634)
Net income 491,066 491,066
Cash dividends declared on
Common stock - $2.06 per share (302,894) (302,894)
Other (12) (12)
----------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1993 147,047,918 $1,976,270 $1,319,685 $3,295,955
Issuance of common stock on conversion of
convertible cumulative preferred stock of
subsidiary, 5-1/2% series 22,164 386 386
Common stock reacquired from Detroit Edison
Savings & Investment Plans, August 4, 1994 (2,206,635) (29,657) (30,198) (59,855)
Net income 390,269 390,269
Cash dividends declared on
Common stock - $2.06 per share (300,676) (300,676)
Other 1 1
----------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1994 144,863,447 $1,946,999 $1,379,081 $3,326,080
Issuance of common stock on conversion of
convertible cumulative preferred stock of
subsidiary, 5-1/2% series 256,428 4,438 4,438
Expense associated with subsidiary preferred
stock redeemed (1,645) (1,645)
Net income 405,914 405,914
Cash dividends declared on
Common stock - $2.06 per share (298,635) (298,635)
Other 156 156
----------- ---------- ---------- ----------
BALANCE AT DECEMBER 31, 1995 145,119,875 $1,951,437 $1,484,871 $3,436,308
=========== ========== ========== ==========
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
40
<PAGE> 42
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
1995 1994 1993
-----------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Electric - System $3,560,470 $3,448,351 $3,467,357
Electric - Interconnection 50,979 43,141 60,363
Steam 24,095 27,849 27,491
- ------------------------------------------------------------------------------------------------------
Total Operating Revenues $3,635,544 $3,519,341 $3,555,211
- ------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Operation
Fuel $ 715,967 $ 719,215 $ 750,127
Purchased power 133,557 116,947 91,747
Other operation 635,297 621,066 604,882
Maintenance 240,115 262,409 251,149
Steam plant impairment loss 42,029 - -
Depreciation and amortization 500,611 476,415 432,512
Deferred Fermi 2 amortization (5,972) (7,465) (8,959)
Amortization of deferred Fermi 2 depreciation and return 92,990 84,828 30,888
Taxes other than income 251,941 255,874 261,449
Income taxes 289,687 270,657 297,469
- ------------------------------------------------------------------------------------------------------
Total Operating Expenses $2,896,222 $2,799,946 $2,711,264
- ------------------------------------------------------------------------------------------------------
OPERATING INCOME $ 739,322 $ 719,395 $ 843,947
- ------------------------------------------------------------------------------------------------------
OTHER INCOME AND (DEDUCTIONS)
Allowance for other funds used during construction $ 1,408 $ 1,684 $ 2,055
Other income and (deductions) - net (30,246) (24,973) (24,961)
Income taxes 9,789 8,111 8,594
Accretion income 11,041 13,644 44,130
Income taxes - disallowed plant costs and accretion income (3,355) (4,252) (14,062)
- ------------------------------------------------------------------------------------------------------
Net Other Income and (Deductions) $ (11,363) $ (5,786) $ 15,756
- ------------------------------------------------------------------------------------------------------
INTEREST CHARGES
Long-term debt $ 275,599 $ 273,763 $ 325,194
Amortization of debt discount, premium and expense 11,312 10,832 9,114
Other 9,666 11,170 4,928
Allowance for borrowed funds used during construction (credit) (2,269) (2,065) (1,436)
- ------------------------------------------------------------------------------------------------------
Net Interest Charges $ 294,308 $ 293,700 $ 337,800
- ------------------------------------------------------------------------------------------------------
NET INCOME $ 433,651 $ 419,909 $ 521,903
PREFERRED AND PREFERENCE STOCK DIVIDENDS $27,737 $ 29,640 $ 30,837
- ------------------------------------------------------------------------------------------------------
NET INCOME AVAILABLE FOR COMMON STOCK $ 405,914 $ 390,269 $ 491,066
======================================================================================================
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
41
<PAGE> 43
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
December 31
-------------------------
ASSETS 1995 1994
-------------------------
<S> <C> <C>
UTILITY PROPERTIES
Plant in service
Electric $13,303,992 $12,941,414
Steam - 69,813
- -----------------------------------------------------------------------------------------------
$13,303,992 $13,011,227
Less: Accumulated depreciation and amortization (4,928,316) (4,529,692)
- -----------------------------------------------------------------------------------------------
$ 8,375,676 $ 8,481,535
Construction work in progress 142,726 104,431
- -----------------------------------------------------------------------------------------------
Net utility properties $ 8,518,402 $ 8,585,966
- -----------------------------------------------------------------------------------------------
Property under capital leases (less accumulated amortization
of $99,633 and $94,678, respectively) $ 137,206 $ 134,542
Nuclear fuel under capital lease (less accumulated amortization
of $427,831 and $374,405, respectively) 145,463 193,411
- -----------------------------------------------------------------------------------------------
Net property under capital leases $ 282,669 $ 327,953
- -----------------------------------------------------------------------------------------------
Total owned and leased properties $ 8,801,071 $ 8,913,919
- -----------------------------------------------------------------------------------------------
OTHER PROPERTY AND INVESTMENTS
Non-utility property $ 21,576 $ 11,281
Investments and special funds 29,058 18,722
Nuclear decommissioning trust funds 119,843 76,492
- -----------------------------------------------------------------------------------------------
$ 170,477 $ 106,495
- -----------------------------------------------------------------------------------------------
CURRENT ASSETS
Cash and temporary cash investments $ 64,948 $ 8,122
Customer accounts receivable and unbilled revenues (less allowance
for uncollectible accounts of $22,000 and $30,000, respectively) 414,403 195,824
Other accounts receivable 37,664 34,212
Inventories (at average cost)
Fuel 162,796 136,331
Materials and supplies 142,782 155,921
Prepayments 12,910 10,516
- -----------------------------------------------------------------------------------------------
$ 835,503 $ 540,926
- -----------------------------------------------------------------------------------------------
DEFERRED DEBITS
Regulatory assets $ 1,155,482 $ 1,277,628
Prepaid pensions 81,865 54,066
Unamortized debt expense 40,936 42,876
Other 45,257 57,068
- -----------------------------------------------------------------------------------------------
$ 1,323,540 $ 1,431,638
- -----------------------------------------------------------------------------------------------
TOTAL $11,130,591 $10,992,978
===============================================================================================
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
42
<PAGE> 44
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
December 31
-------------------------
LIABILITIES 1995 1994
-------------------------
<S> <C> <C>
CAPITALIZATION
Common stock - $10 par value, 400,000,000 shares authorized;
145,119,875 and 144,863,447 shares outstanding, respectively $ 1,451,199 $ 1,448,635
Premium on common stock 547,799 545,825
Common stock expense (47,561) (47,461)
Retained earnings used in the business 1,484,871 1,379,081
- -------------------------------------------------------------------------------------------
Total common shareholders' equity $ 3,436,308 $ 3,326,080
Cumulative preferred stock 326,604 380,283
Long-term debt 3,756,094 3,825,296
- -------------------------------------------------------------------------------------------
Total Capitalization $ 7,519,006 $ 7,531,659
- -------------------------------------------------------------------------------------------
OTHER NON-CURRENT LIABILITIES
Obligations under capital leases $ 128,362 $ 126,076
Other postretirement benefits 24,381 37,143
Other 58,424 48,707
- -------------------------------------------------------------------------------------------
$ 211,167 $ 211,926
- -------------------------------------------------------------------------------------------
CURRENT LIABILITIES
Short-term borrowings $ 36,990 $ 39,489
Amounts due within one year
Long-term debt 119,214 19,214
Obligations under capital leases 154,307 201,877
Accounts payable 165,148 147,020
Property and general taxes 34,416 31,608
Income taxes - 5,304
Accumulated deferred income taxes 51,697 32,625
Interest payable 62,128 60,214
Dividends payable 81,102 82,012
Payrolls 72,164 71,958
Fermi 2 refueling outage 14,342 1,267
Other 130,689 97,215
- -------------------------------------------------------------------------------------------
$ 922,197 $ 789,803
- -------------------------------------------------------------------------------------------
DEFERRED CREDITS
Accumulated deferred income taxes $ 2,052,875 $ 2,014,821
Accumulated deferred investment tax credits 330,085 346,379
Other 95,261 98,390
- -------------------------------------------------------------------------------------------
$ 2,478,221 $ 2,459,590
- -------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 1, 2, 3, 4, 9, 12 and 13)
- -------------------------------------------------------------------------------------------
Total $11,130,591 $10,992,978
===========================================================================================
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
43
<PAGE> 45
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1995 1994 1993
-------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 433,651 $ 419,909 $ 521,903
Adjustments to reconcile net income to net cash from operating activities:
Accretion income (11,041) (13,644) (44,130)
Depreciation and amortization 500,611 476,415 432,512
Deferred Fermi 2 depreciation, amortization and return - net 87,018 77,363 21,929
Deferred income taxes and investment tax credit - net 62,523 93,287 85,574
Fermi 2 refueling outage - net 13,075 (19,507) 17,856
Steam plant impairment loss 42,029 - -
Other 5,113 (31,091) 32,367
Changes in current assets and liabilities:
Customer accounts receivable and unbilled revenues (218,579) (505) 10,733
Other accounts receivable (3,452) (7,593) (2,247)
Inventories (18,837) (1,774) 33,839
Accounts payable 18,049 (13,858) 21,364
Taxes payable (2,649) (18,031) (6,499)
Interest payable 1,914 (6,174) (19,769)
Other 31,255 (2,189) 35,350
- --------------------------------------------------------------------------------------------------------------------
Net cash from operating activities $ 940,680 $ 952,608 $1,140,782
- --------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures $ (453,844) $ (366,392) $ (396,407)
Purchase of leased equipment - (11,500) (2,402)
Nuclear decommissioning trust funds (43,351) (46,563) (5,346)
Non-utility investments 1,865 (12,843) 182
Other changes in current assets and liabilities 5,774 5,042 10,225
Other (32,845) (11,537) (19,988)
- --------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities $ (522,401) $ (443,793) $ (413,736)
- --------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Sale of cumulative preferred stock $ - $ - $ 200,000
Sale of general and refunding mortgage bonds - 200,000 1,510,000
Funds received from Trustees: Installment sales contracts
and loan agreements 201,525 50,470 76,510
Increase (decrease) in short-term borrowings (2,499) (98,715) 109,210
Redemption of long-term debt (220,739) (258,034) (2,024,289)
Redemption of preferred and preference stock (955) - (164,158)
Premiums on reacquired long-term debt and preferred
and preference stock (5,946) (11,563) (81,453)
Purchase of common stock - (59,855) -
Dividends on common, preferred and preference stock (326,239) (331,441) (330,775)
Other (6,600) (2,626) (20,434)
- --------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities $ (361,453) $ (511,764) $ (725,389)
- --------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS $ 56,826 $ (2,949) $ 1,657
CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF THE PERIOD $ 8,122 $ 11,071 $ 9,414
- --------------------------------------------------------------------------------------------------------------------
CASH AND TEMPORARY CASH INVESTMENTS AT END OF THE PERIOD $ 64,948 $ 8,122 $ 11,071
====================================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 274,413 $ 289,375 $ 346,542
Income taxes paid 230,537 183,172 233,542
New capital lease obligations 26,850 9,328 36,606
Exchange of preferred stock for long-term debt 49,878 - -
</TABLE>
(See accompanying Notes to Consolidated Financial Statements.)
44
<PAGE> 46
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
Common Stock Premium Retained Total
----------------------- on Common Earnings Common
$10 Par Common Stock Used in the Shareholders'
Shares Value Stock Expense Business Equity
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1992 147,016,691 $1,470,167 $553,724 $(48,163) $1,138,159 $3,113,887
Issuance of common stock on
conversion of convertible
cumulative preferred stock,
5-1/2% series 31,227 312 242 (12) 542
Expense associated with preferred
and preference stock redeemed (6,634) (6,634)
Net income 521,903 521,903
Cash dividends declared
Common stock - $2.06 per share (302,894) (302,894)
Cumulative preferred and
preference stock* (30,837) (30,837)
Other (12) (12)
- -------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1993 147,047,918 $1,470,479 $553,966 $(48,175) $1,319,685 $3,295,955
Issuance of common stock on
conversion of convertible
cumulative preferred stock,
5-1/2% series 22,164 222 173 (9) 386
Common stock reacquired from
Detroit Edison Savings &
Investment Plans, August 4, 1994 (2,206,635) (22,066) (8,314) 723 (30,198) (59,855)
Net income 419,909 419,909
Cash dividends declared
Common stock - $2.06 per share (300,676) (300,676)
Cumulative preferred stock* (29,640) (29,640)
Other 1 1
- -------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1994 144,863,447 $1,448,635 $545,825 $(47,461) $1,379,081 $3,326,080
Issuance of common stock on
conversion of convertible
cumulative preferred stock,
5-1/2% series 256,428 2,564 1,974 (100) 4,438
Expense associated with preferred
stock redeemed (1,645) (1,645)
Net income 433,651 433,651
Cash dividends declared
Common stock - $2.06 per share (298,635) (298,635)
Cumulative preferred stock* (27,737) (27,737)
Other 156 156
- -------------------------------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1995 145,119,875 $1,451,199 $547,799 $(47,561) $1,484,871 $3,436,308
=============================================================================================================
</TABLE>
*At established rate for each series.
(See accompanying Notes to Consolidated Financial Statements.)
45
<PAGE> 47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
CORPORATE STRUCTURE AND PRINCIPLES OF CONSOLIDATION - DTE Energy Company
("Company") is a Michigan corporation, incorporated in 1995, and an exempt
holding company under the Public Utility Holding Company Act. The Company has
no significant operations of its own, holding instead the stock of an electric
utility and other energy-related businesses. The Detroit Edison Company
("Detroit Edison"), a public utility incorporated in Michigan since 1967, is the
Company's largest operating subsidiary. Detroit Edison represents substantially
all of the Company's assets.
As a regulated public utility, Detroit Edison is engaged in the
generation, purchase, transmission, distribution and sale of electric energy in
a 7,600 square mile area in Southeastern Michigan. The Company's service area
includes about 13% of Michigan's total land area, and about half of its
population (approximately five million people), electric energy consumption and
industrial capacity.
On January 1, 1996, the holders of Detroit Edison's common stock
exchanged such stock on a share-for-share basis for the common stock of the
Company. Also on January 1, 1996, Detroit Edison declared a dividend to the
Company in the form of the stock of five subsidiaries: DE Energy Services,
Inc., DTE Capital Corporation, Edison Development Corporation, Syndeco Realty
Corporation and UTS Systems, Inc. Accordingly, the consolidated financial
statements presented herein include the financial results of operations of the
Company and its wholly-owned subsidiaries as if the Company's current holding
company structure form had existed in all periods shown. For the periods
presented, the Company's operations and those of Detroit Edison are
substantially the same.
All significant intercompany balances and transactions have been
eliminated. Investments in 50%-owned limited liability corporations,
partnerships and joint ventures are accounted for using the equity method. All
non-utility operating transactions are included in the section titled Other
Income and (Deductions) in the Consolidated Statement of Income.
Certain amounts in prior years' consolidated financial statements have
been reclassified to conform to the current year presentation.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS - 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 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.
REGULATION AND REGULATORY ASSETS AND LIABILITIES - Detroit Edison is
subject to regulation by the Michigan Public Service Commission ("MPSC") and the
Federal Energy Regulatory Commission ("FERC") with respect to accounting matters
and maintains its accounts in accordance with Uniform Systems of Accounts
prescribed by these agencies. As a regulated entity, taking into account the
cost recovery restrictions contained in the December 1988 and January 21, 1994
MPSC rate orders and the provisions of the Energy Policy Act of 1992 ("Energy
Act"), Detroit Edison meets the criteria of Statement of Financial Accounting
Standards ("SFAS") No. 71, "Accounting for the Effects of Certain Types of
Regulation." This accounting standard recognizes the ratemaking process which
results in differences in the application of generally accepted accounting
principles between regulated and non-regulated businesses. Detroit Edison has
recorded the regulatory assets listed below. These regulatory assets are
deferred costs, which are normally treated as expenses in non-regulated
businesses, and are being amortized to expense as these costs are included in
rates and recovered from customers. Continued applicability of SFAS No. 71
requires that rates be designed to recover specific costs of providing regulated
services and products, including regulatory assets, and that it be reasonable to
assume that rates are set at levels that will recover a utility's costs and can
be charged and collected from customers. If the criteria of SFAS No. 71 are no
longer met due to various factors, including deregulation of all or part of the
business, a change in the method of regulation or a change in the competitive
environment for the regulated services, the regulatory assets would have to be
written off to expense at that time. Detroit Edison anticipates that it will
continue to recover costs associated with its regulatory assets and continue to
apply SFAS No. 71.
Detroit Edison has recorded the following regulatory assets at
December 31:
<TABLE>
<CAPTION>
1995 1994
-------------------------------------
(Thousands)
<S> <C> <C>
Unamortized loss on reacquired debt $ 124,692 $ 123,996
Recoverable income taxes 641,361 663,101
Other postretirement benefits 23,221 36,562
Fermi 2 phase-in plan 297,774 390,764
Fermi 2 deferred amortization 58,231 52,259
United States Department of Energy
decontamination and decommissioning 10,203 10,946
--------- ---------
Total $1,155,482 $1,277,628
========= =========
</TABLE>
At December 31, 1995 and 1994, Detroit Edison had the following
regulatory liabilities: (1) $330 million and $346 million, respectively, for
unamortized accumulated deferred investment tax credits, (2) $53 million and $31
million, respectively, for Fermi 2 capacity factor disallowances (see Note 3),
and (3) $22 million at December 31, 1995 and 1994 for other liabilities.
TEMPORARY CASH INVESTMENTS - For purposes of the Consolidated Statement
of Cash Flows, the Company considers investments purchased with a maturity of
three months or less to be cash equivalents.
UNAMORTIZED LOSS ON REACQUIRED DEBT - In accordance with MPSC
regulations applicable to Detroit Edison, the discount, premium and expense
related to debt redeemed with refunding are amortized over the life of the
replacement issue.
RECOVERABLE INCOME TAXES - See Note 6.
OTHER POSTRETIREMENT BENEFITS - See Note 13.
FERMI 2 PHASE-IN PLAN - An MPSC authorized phase-in plan, effective in
January 1988, for Fermi 2, a nuclear generating unit, provided for gradual rate
increases in the early years of plant operation rather than a one-time
substantial rate increase which conventional ratemaking would provide. SFAS No.
92, "Regulated Enterprises - Accounting for Phase-in Plans," permits the
capitalization of costs deferred for future recovery under a phase-in plan.
Accordingly, Detroit Edison recorded non-cash income of deferred depreciation
and deferred return totaling $506.5 million through 1992. Beginning in 1993 and
continuing through 1998, these deferred amounts will be amortized to operating
expense as the cash recovery is realized through revenues. Amortization of
these deferred amounts totaled $93 million, $84.8 million and $30.9 million in
1995, 1994 and 1993, respectively.
46
<PAGE> 48
FERMI 2 DEFERRED AMORTIZATION - The December 1988 MPSC rate order provides for
Detroit Edison's February 1990 purchase of Wolverine Power Supply Cooperative,
Inc.'s ("Cooperative") ownership interest in Fermi 2 for $513 million with a
19-year principal amortization and associated interest of 8%, which is the
composite average of the Cooperative debt assumed by Detroit Edison at the time
of the purchase. Since the straight-line amortization of the asset exceeds the
revenues provided for such amortization during the first 10 years of the
recovery period, Detroit Edison is recording deferred amortization, a non-cash
item of income, totaling $67.2 million through 1999. For 1995, 1994 and 1993,
the amounts deferred were $6 million, $7.5 million and $9 million, respectively.
The deferred amounts will be amortized to operating expense as the cash recovery
is realized through revenues during the years 2000 through 2008.
UNITED STATES DEPARTMENT OF ENERGY ("DOE") DECONTAMINATION AND DECOMMISSIONING -
The Energy Act provided for a fund to be established for the decommissioning and
decontamination of existing DOE uranium enrichment facilities. Utilities with
nuclear units are required to pay for a portion of the cost by making annual
payments into the fund over a 15-year period. The law directs state regulators
to treat these payments as a necessary and reasonable cost of fuel. Detroit
Edison recovers these costs through the Power Supply Cost Recovery ("PSCR")
Clause.
REVENUES - Detroit Edison records unbilled revenues for electric and steam
heating services provided after cycle billings through month-end.
PROPERTY, RETIREMENT AND MAINTENANCE, DEPRECIATION AND AMORTIZATION - Utility
properties are recorded at original cost less regulatory disallowances and an
impairment loss. In general, the cost of properties retired in the normal
course of business is charged to accumulated depreciation. Expenditures for
maintenance and repairs are charged to expense, and the cost of new property
installed, which replaces property retired, is charged to property accounts.
The annual provision for utility property depreciation is calculated on the
straight-line remaining life method by applying annual rates approved by the
MPSC to the average of year-beginning and year-ending balances of depreciable
property by primary plant accounts. Provision for depreciation of Fermi 2,
excluding decommissioning expense, was 3.26% of average depreciable property for
1995 and 1994 and 2.63% for 1993, except for $300 million being amortized over
10 years commencing in 1989 and $513 million being amortized over 19 years
commencing in 1990. See Note 3. Provision for depreciation of all other
utility plant, as a percent of average depreciable property, was 3.2% for 1995
and 1994 and 3.4% for 1993.
SOFTWARE COSTS - Detroit Edison capitalizes internally developed software costs.
These costs are amortized on a straight-line basis over a five-year period
beginning with a project's completion.
PROPERTY TAXES - Property taxes are accrued monthly during the fiscal period of
the applicable taxing authority.
INCOME TAXES - Deferred income taxes are provided for temporary differences
between book and tax bases of assets or liabilities to the extent authorized by
the MPSC. For federal income tax purposes, depreciation is computed using
accelerated methods and shorter depreciable lives. Investment tax credits
utilized which relate to utility property were deferred and are amortized over
the estimated composite service life of the related property. See Note 6.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION ("AFUDC") - AFUDC, a non-operating
non-cash item, is defined in the FERC Uniform System of Accounts to include "the
net cost for the period of construction of borrowed funds used for construction
purposes and a reasonable rate on other funds when so used." AFUDC involves an
accounting procedure whereby the approximate interest expense and the cost of
other (common, preferred and preference shareholders' equity) funds applicable
to the cost of construction are transferred from the income statement to
construction work in progress in the balance sheet. The cash recovery of AFUDC,
as well as other costs of construction, occurs as completed projects are placed
in service and related depreciation is authorized to be recovered through
customer rates. Detroit Edison capitalized AFUDC at 7.66% in 1995 and 1994 and
9.65% in 1993.
ACCRETION INCOME - In 1988, Detroit Edison adopted SFAS No. 90, "Regulated
Enterprises - Accounting for Abandonments and Disallowances of Plant Costs." As
a result, indirect losses were recorded for Greenwood Unit No. 1 for the period
that plant was not allowed in rate base (1988-1993), and for the indirect loss
related to the $300 million of Fermi 2 plant costs recovered from 1989 to 1998
with no return. The net after-tax losses originally totaled $198 million based
on the discounting required by SFAS No. 90. These amounts are being restored to
income over the respective discount periods as Detroit Edison records a non-cash
return (accretion income). The net after-tax income recorded was $7.2 million,
$8.9 million and $29.5 million in 1995, 1994 and 1993, respectively.
CAPITALIZATION - DISCOUNT, PREMIUM AND EXPENSE - The discount, premium and
expense related to the issuance of long-term debt are amortized over the life of
each issue. In accordance with MPSC regulations applicable to Detroit Edison,
the discount, premium and expense related to debt redeemed without refunding are
written off to other income and deductions. Capital stock premium and expense
related to redeemed preferred and preference stock of Detroit Edison are written
off against retained earnings used in the business.
FERMI 2 REFUELING OUTAGES - Detroit Edison recognizes the cost of Fermi 2
refueling outages over periods in which related revenues are recognized. Under
this procedure, it records a provision for incremental costs anticipated to be
incurred during the next scheduled Fermi 2 refueling outage.
See Note 2.
LEASES - See Note 9.
EMPLOYEE BENEFITS - See Note 13.
NOTE 2
FERMI 2
GENERAL - Fermi 2, a nuclear generating unit, began commercial operation in
January 1988. Fermi 2 has a design electrical rating (net) of 1,139 megawatts
("MW"). However, due to certain equipment limitations, Fermi 2 is rated at
1,116 MW until modifications can be made to achieve the design rating. This
unit represents approximately 27% of total assets, 10% of total operation and
maintenance expenses and 9% of summer net rated capability.
MPSC rate orders issued in April 1986, January 1987, December 1988 and
January 1994 contain provisions with respect to the recovery of Fermi 2 costs.
See Note 3 for a discussion of Fermi 2 rate matters and the MPSC's treatment of
Fermi 2's original project costs of $4.858 billion.
47
<PAGE> 49
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
LICENSING AND OPERATION - The Nuclear Regulatory Commission ("NRC") maintains
jurisdiction over the licensing and operation of Fermi 2.
Fermi 2 was out of service in 1994 and part of 1995. On December 25,
1993, the reactor automatically shut down following a turbine-generator
failure. Safety systems responded within design and regulatory specifications.
The turbine suffered mechanical damage, the exciter and generator incurred
mechanical and fire damage, and the condenser had some internal damage. The
fire was contained in the turbine building, and there was no release of
radioactive contaminants during the event. The nuclear part of the plant was
not damaged.
Major repairs were completed in 1994 and early 1995. These repair
costs are approximately $80 million for which to date Detroit Edison has
received partial insurance payments of $55 million for property damage. In
addition, Detroit Edison has received partial insurance payments of $74.2
million for replacement power costs through December 31, 1995.
The unit was operating at 874 MW at the end of December 1995 and the
unit's capacity factor was 51.4% for 1995. Detroit Edison is currently
operating Fermi 2 without the large seventh and eighth stage turbine blades on
the three low-pressure turbines. The new turbine shafts and blades for these
low-pressure turbines are being manufactured and will be installed during the
next refueling outage in 1996.
The expected cost of replacing the major turbine components in 1996 is
between $45 million and $50 million. These costs will not be covered by
insurance. These costs will be capitalized and are expected to be recovered in
rates because such costs are less than the cumulative amount available under
the cap on Fermi 2 capital expenditures, a provision of the MPSC's December
1988 order. See Note 3.
INSURANCE - Detroit Edison insures Fermi 2 with property damage insurance
provided by Nuclear Mutual Limited ("NML") and Nuclear Electric Insurance
Limited ("NEIL"). The NML and NEIL insurance policies provide $500 million of
composite primary coverage (with a $1 million deductible) and $2.25 billion of
excess coverage, respectively, for stabilization, decontamination and debris
removal costs, repair and/or replacement of property and decommissioning.
Accordingly, the combined limits provide total property damage insurance of
$2.75 billion.
Detroit Edison maintains an insurance policy with NEIL providing for
extra expenses, including certain replacement power costs necessitated by Fermi
2's unavailability due to an insured event. This policy, which has a 21-week
waiting period, provides for three years of coverage.
Under the NML and NEIL policies, Detroit Edison could be liable for
maximum retrospective assessments of up to approximately $28 million per loss
if any one loss should exceed the accumulated funds available to NML or NEIL.
As required by federal law, Detroit Edison maintains $200 million of
public liability insurance for a nuclear incident. Further, under the
Price-Anderson Amendments Act of 1988, deferred premium charges of $75.5
million could be levied against each licensed nuclear facility, but not more
than $10 million per year per facility. On December 31, 1995, there were 110
licensed nuclear facilities in the United States. Thus, deferred premium
charges in the aggregate amount of approximately $8.3 billion could be levied
against all owners of licensed nuclear facilities in the event of a nuclear
incident. Accordingly, public liability for a single nuclear incident is
currently limited to approximately $8.5 billion.
DECOMMISSIONING - The NRC has jurisdiction over the decommissioning of nuclear
power plants. An NRC rule requires decommissioning funding based upon a
site-specific estimate or a predetermined NRC formula. Using the NRC's formula,
plus an additional allowance for decommissioning the non-nuclear portion of the
plant, it is estimated that the cost of decommissioning Fermi 2 when its license
expires in the year 2025 is $514 million in current 1995 dollars and $3 billion
in future 2025 dollars. The assumed annual inflation rate used to increase the
cost to decommission is 6%, compounded annually.
The MPSC and FERC regulate the recovery of costs of decommissioning
nuclear power plants and both require the use of external trust funds to
finance the decommissioning of Fermi 2. The MPSC's January 1994 order includes
an increase in rates for the decommissioning of Fermi 2. The FERC has approved
the recovery of decommissioning expense in base rates in its June 1993 order.
Detroit Edison believes that the MPSC and FERC orders will be adequate to fund
the estimated cost of decommissioning using the NRC formula. See Note 3.
Detroit Edison has established external trust funds to hold
decommissioning and low-level radioactive waste disposal funds collected from
customers. During 1995, 1994 and 1993, Detroit Edison collected $32.1 million,
$26.9 million and $3.7 million, respectively, from customers for
decommissioning Fermi 2. Also, in 1995 and 1994, Detroit Edison collected $4.1
million and $3.3 million, respectively, from customers for low-level
radioactive waste disposal. Such amounts were recorded as components of
depreciation and amortization expense in the Consolidated Statement of Income
and accumulated depreciation and amortization in the Consolidated Balance
Sheet. Earnings on the external decommissioning trust funds assets during
1995, 1994 and 1993 were $3.3 million, $1.3 million and $1.2 million,
respectively. Earnings on the external low-level radioactive waste disposal
trust funds assets were $0.6 million and $0.2 million in 1995 and 1994,
respectively. Trust fund earnings are recorded as an investment with a
corresponding credit to accumulated depreciation and amortization. Trust fund
assets are assumed to earn an after-tax rate of return of 7%, compounded
annually. In accordance with SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities", net unrealized gains of $4.6 million and $0.7
million in 1995 and 1994, respectively, were recorded as increases to the
nuclear decommissioning trust funds and accumulated depreciation and
amortization in the Consolidated Balance Sheet.
During 1995 shipment of low-level radioactive waste to a permanent
disposal site resumed. Detroit Edison incurred disposal costs of $5.7 million
during 1995 which costs were reimbursed by the external trust funds.
At December 31, 1995, Detroit Edison had a reserve of $91.5 million for
the future decommissioning of Fermi 2 and $9.8 million for low-level
radioactive waste disposal costs. These reserves are included in accumulated
depreciation and amortization in the Consolidated Balance Sheet with a like
amount deposited in external trust funds.
Detroit Edison also had a reserve of $18.5 million at December 31, 1995
for the future decommissioning of Fermi 1, an experimental nuclear unit on the
Fermi 2 site that has been shut down since 1972. This reserve is included in
other deferred credits in the Consolidated Balance Sheet with a like amount
deposited in an external trust fund. Detroit Edison estimates that the cost of
decommissioning Fermi 1 in the year 2025 is $20 million in current 1995 dollars
and $114 million in future 2025 dollars.
48
<PAGE> 50
The Financial Accounting Standards Board is reviewing the accounting
for removal costs, including decommissioning of nuclear power plants. If
current electric utility industry accounting practices for such decommissioning
are changed: (1) annual provisions for decommissioning could increase, and (2)
the estimated cost for decommissioning could be recorded as a liability rather
than as accumulated depreciation.
NUCLEAR FUEL DISPOSAL COSTS - Detroit Edison has a contract with the DOE for the
future storage and disposal of spent nuclear fuel from Fermi 2. Under the terms
of the contract, Detroit Edison makes quarterly payments to the DOE based upon a
fee of 1 mill per kilowatthour applied to the Fermi 2 electricity generated and
sold. The spent nuclear fuel disposal cost is included as a component of
Detroit Edison's nuclear fuel expense. The DOE has stated that it will be
unable to store spent nuclear fuel at a permanent repository until after 2010.
However, the DOE and utilities with nuclear units are pursuing other interim
storage options. On September 7, 1995, Detroit Edison, along with two other
utilities, filed a petition for review in the United States Court of Appeals for
the District of Columbia Circuit. The petition seeks to overturn a decision of
the DOE that it does not have a legal obligation to begin accepting spent
nuclear fuel from nuclear utilities commencing January 31, 1998. The petition
seeks to affirm that such an obligation exists and to establish court oversight
of the development of a schedule by the DOE to accept spent nuclear fuel by that
date. This action has been consolidated with existing litigation brought by a
number of other utilities as well as a number of states. It is estimated that
existing temporary storage capacity at Fermi 2 will be sufficient until the year
2001, or until 2019 with the expansion of such storage capacity.
NOTE 3
RATE MATTERS
Detroit Edison is subject to the primary regulatory jurisdiction of the MPSC,
which, from time to time, issues its orders pertaining to Detroit Edison's
conditions of service, rates and recovery of certain costs including the costs
of generating facilities. MPSC orders issued in December 1988 and on January
21, 1994 are currently in effect with respect to Detroit Edison's rates and
certain other revenue and operating-related matters.
On January 21, 1994, the MPSC issued an order reducing Detroit Edison's
rates in the amount of $78 million annually. The rate reduction was determined
by using a 1994 test year and an overall rate of return of 7.66%, incorporating
an 11% return on common equity and a capital structure comprised of 40% common
equity, 55.01% long-term debt and 4.99% preferred stock. The MPSC order
includes the recovery of (1) increased Fermi 2 decommissioning costs of $28.1
million annually, which includes the recovery of low-level radioactive waste
disposal costs, (2) full recovery of 1994 other postretirement benefit costs
plus recovery and amortization of the 1993 deferred cost (see Note 13), (3)
costs associated with the return to rate base of Greenwood Unit No. 1, (4)
Fermi 2 phase-in plan revenue requirements of $70.8 million in 1994 and (5)
costs associated with a three-year $41.5 million ($7.6 million in 1994, $14.9
million in 1995 and $19 million in 1996) demand-side management program. In
keeping with the MPSC's recognition of the need for industrial customers to be
competitive, the January 1994 rate reduction was allocated among the various
classes of customers approximately as follows: Industrial-$43 million,
Commercial-$24 million, Residential-$10 million and Governmental-$1 million.
The order was effective for service rendered on and after January 22, 1994 and
is the subject of various appeals before the Michigan Court of Appeals.
INDUSTRIAL RATES - In August 1994, Detroit Edison entered into 10-year special
manufacturing contracts which were approved by the MPSC on March 23, 1995.
These contracts will lower costs for Detroit Edison's three largest customers
(Chrysler Corporation, Ford Motor Company and General Motors Corporation).
Annual revenue reductions will range in amounts from about $30 million in 1995
to $50 million for 1999 through 2004. Detroit Edison expects to offset these
reductions by further reducing operating expenses.
FERMI 2 - The December 1988 MPSC order established, for the period January 1989
through December 2003, (1) a cap on Fermi 2 capital additions of $25 million per
year, in 1988 dollars adjusted by the Consumers Price Index ("CPI"), cumulative,
(2) a cap on Fermi 2 non-fuel operation and maintenance expenses adjusted by the
CPI and (3) a capacity factor performance standard based on a three-year rolling
average commencing in 1991. For a capital investment of $200 million or more
(in 1988 dollars adjusted by the CPI), Detroit Edison must obtain prior MPSC
approval to be included in rate base.
Under the cap on Fermi 2 capital expenditures, the cumulative amount
available totals $54 million (in 1995 dollars) at December 31, 1995. Under the
cap on non-fuel operation and maintenance expenses, the cumulative amount
available totals $52 million (in 1995 dollars) at December 31, 1995.
Under the capacity factor performance standard, a disallowance of net
incremental replacement power cost will be imposed for the amount by which the
Fermi 2 three-year rolling average capacity factor is less than the greater of
either the average of the top 50% of U.S. boiling water reactors or 50%. For
purposes of the capacity factor performance standard, the capacity for Fermi 2
for the period 1989-1993 shall be 1,093 MW, and 1,139 MW for each year
thereafter until December 31, 2003.
As discussed in Note 2, Fermi 2 was out of service in 1994 and part of
1995 and will operate at a reduced power output until the installation of major
turbine components during the next refueling outage in 1996. Therefore, the
three-year rolling average capacity factor utilized in the Fermi 2 performance
standard calculation will be unfavorably affected in 1994-1998. The plant's
three-year rolling average capacity factor was 53.7% for 1994 and 45.4% for
1995 utilizing a capacity of 1,093 MW for 1992 and 1993 and 1,139 MW for 1994
and 1995. The three-year rolling average capacity factor for the top 50% of
U.S. boiling water reactors was 78.6% for 1994 and 81.2% for the 36-month
period ending September 30, 1995.
Detroit Edison incurred a capacity factor disallowance totaling $19.2
million for 1994. In accordance with an MPSC order, three times this amount
was used to determine the net refund to customers in the 1994 PSCR
reconciliation case, resulting in banked credits of $38.5 million which will
reduce future capacity factor disallowance amounts owing to customers. It is
estimated that a net liability in the range of $40 million to $60 million will
be required for capacity factor disallowances in the period 1995-1998. At
December 31, 1995, Detroit Edison had accrued $53 million (capacity factor
disallowances of $91.5 million, less banked credits of $38.5
49
<PAGE> 51
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
million) for the Fermi 2 capacity factor performance standard disallowances
that are expected to be imposed by the MPSC during the period 1995-1998, based
on the following assumptions:
a. Fermi 2 three-year rolling average capacity factor of 45.4% in 1995
and an estimated 35.6% in 1996, 65.1% in 1997 and 72.6% in 1998;
b. Estimated three-year rolling average capacity factor for the top 50%
of U.S. boiling water reactors of 80% in 1995-1998;
c. Estimated incremental cost of replacement power of $8 per megawatthour
in 1995 and increasing to $11 per megawatthour in 1998.
In accordance with April 1986 and December 1988 MPSC rate orders,
ratemaking treatment of Detroit Edison's Fermi 2 original project costs of
$4.858 billion is as follows:
(1) $3.018 billion in rate base with recovery and return,
(2) $300 million amortized over 10 years with no return,
(3) $513 million amortized over 19 years with associated interest of 8% and (4)
$1.027 billion disallowed and written off in 1988.
At December 31, 1995, Detroit Edison's net plant investment in Fermi 2 was
$2.9 billion ($3.9 billion less accumulated depreciation and amortization
of $1 billion).
Under the December 1988 MPSC order, if nuclear operations at Fermi 2
permanently cease, amortization in rates of the $300 million and $513 million
investments in Fermi 2 would continue and the remaining net rate base
investment amount shall be removed from rate base and amortized in rates,
without return, over 10 years with such amortization not to exceed $290 million
per year. In this event, unamortized amounts of deferred depreciation and
deferred return, recorded in the Consolidated Balance Sheet under the phase-in
plan prior to the removal of Fermi 2 from rate base, will continue to be
amortized, with a full return on such unamortized balances, so that all amounts
deferred are recovered during the period ending no later than December 31,
1998. The December 1988 and January 1994 rate orders do not address the costs
of decommissioning if operations at Fermi 2 prematurely cease.
Detroit Edison has and believes it will continue to operate under the
terms of all applicable MPSC orders with no significant adverse effects as a
result of any cost recovery restrictions contained therein.
NOTE 4
JOINTLY-OWNED UTILITY PLANT
Detroit Edison's portion of jointly-owned utility plant is as follows:
<TABLE>
<CAPTION>
Ludington
Pumped
Belle River Storage
- --------------------------------------------------------------------------------
<S> <C> <C>
In-service date 1984-1985 1973
Undivided ownership interest * 49%
Investment (millions) $1,028.4 $174.3
Accumulated depreciation (millions) $ 321.6 $ 72.2
</TABLE>
* Detroit Edison's undivided ownership interest is 62.78% in Unit No. 1,
81.39% of the portion of the facilities applicable to Belle River used
jointly by the Belle River and St. Clair Power Plants, 49.59% in certain
transmission lines and, at December 31, 1995, 75% in facilities used in
common with Unit No. 2.
BELLE RIVER - The Michigan Public Power Agency ("MPPA") has an undivided
ownership interest in Belle River Unit No. 1 and certain other related
facilities. MPPA is entitled to 18.61% of the capacity and energy of the entire
plant and is responsible for the same percentage of the plant's operation and
maintenance expenses and capital improvements. Detroit Edison is obligated to
provide MPPA with backup power when either unit is out of service.
Detroit Edison was required to purchase MPPA's capacity and energy
entitlement through 1994. Such purchases were 20% for 1993 and 10% for 1994.
The cost for the buyback of power was based on MPPA's plant-related
investment, interest costs incurred by MPPA on its original project financing
plus 2.5%, and certain other costs such as depreciation and operation and
maintenance expenses. Buyback payments to MPPA were $12.5 million for 1993
and $6 million for 1994.
LUDINGTON PUMPED STORAGE - Operation, maintenance and other expenses of
the Ludington Pumped Storage Plant ("Ludington") are shared by Detroit
Edison and Consumers Power Company ("Consumers") in proportion to their
respective interests in the plant. See Note 12.
NOTE 5
SALE OF ACCOUNTS RECEIVABLE AND UNBILLED REVENUES
Detroit Edison has an agreement providing for the sale, assignment and
repurchase, from time to time, of an undivided ownership interest in $200
million of its customer accounts receivable and unbilled revenues.
At December 31, 1994, customer accounts receivable and unbilled revenues
in the Consolidated Balance Sheet were reduced by $200 million reflecting the
sale. However, at December 31, 1995, customer accounts receivable and
unbilled revenues increased as Detroit Edison repurchased the $200 million.
Therefore at December 31, 1995, there were no sales under this agreement. All
expenses associated with the program were charged to other income and
(deductions) in the Consolidated Statement of Income.
NOTE 6
INCOME TAXES
Total income tax expense as a percent of income before tax varies from the
statutory federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
Percent of Income Before Tax
----------------------------
1995 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory income tax rate 35.0% 35.0% 35.0%
Deferred Fermi 2 depreciation
and return 3.7 3.5 1.1
Investment tax credit (2.1) (1.9) (1.7)
Depreciation 3.3 5.5 3.9
Other - net (0.4) (3.2) (1.6)
------------------------------------
Effective income tax rate 39.5% 38.9% 36.7%
====================================
</TABLE>
50
<PAGE> 52
Components of income taxes were applicable to the following:
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C>
Operating expenses
Current $247,676 $195,848 $243,480
--------------------------------------
Deferred-net
Borrowed funds component
of AFUDC (1,081) (1,081) (1,081)
Depreciation and amortization 75,248 52,873 74,567
Property taxes 4,117 (23,640) (9,590)
Alternative minimum tax - - 28,174
Fermi 2 capitalized labor and
expenses (1,598) (1,998) (1,692)
Nuclear fuel (298) 14,645 (1,543)
Fermi 2 performance reserve (4,501) (10,850) -
Reacquired debt losses 253 43,162 -
Indirect construction costs (1,268) (1,268) (1,268)
Uncollectible accounts 3,614 1,380 (700)
Contributions in aid of
construction (5,405) (6,898) (3,756)
Fermi 2 refueling outage (4,576) 6,798 (6,136)
Shareholder value
improvement plan 1,170 2,244 559
Coal contract buyouts (164) (401) (1,411)
Injuries and damages - (1,071) (5,855)
Steam purchase reserve - - (3,850)
Employee reorganization
expenses (557) 4,200 (4,200)
Pensions and benefits 7,808 10,130 4,925
Steam plant impairment loss (8,741) - -
Over/under recoveries 3,923 (1,017) 298
Inventory write-off (5,705) 2,065 -
Fermi 2 nonqualified
decommissioning fund (2,045) (2,153) (485)
Ludington fish mortality (2,947) - -
Other (198) 515 1,260
--------------------------------------
57,049 87,635 68,216
--------------------------------------
Investment tax credit-net
Utilized - 2,612 250
Amortized (15,038) (15,438) (14,477)
--------------------------------------
(15,038) (12,826) (14,227)
--------------------------------------
Total 289,687 270,657 297,469
--------------------------------------
Other income and deductions
Current (8,574) (8,083) (7,712)
Investment tax credit-amortized (1,256) - -
Deferred-net 41 (28) (882)
--------------------------------------
Total (9,789) (8,111) (8,594)
--------------------------------------
Disallowed plant costs and
accretion income
Current (18,372) (18,384) (18,405)
Deferred-net
Disallowed plant costs 17,863 17,863 17,863
Accretion income 3,864 4,773 14,604
--------------------------------------
Total 3,355 4,252 14,062
--------------------------------------
Total income taxes $283,253 $266,798 $302,937
======================================
</TABLE>
The Fermi 2 phase-in plan required Detroit Edison to record additional
deferred income tax expense related to deferred depreciation totaling $33.5
million, with this amount amortized to income over the six-year period ending
December 31, 1998.
In January 1993, SFAS No. 109, "Accounting for Income Taxes," which
requires an asset and liability approach for financial accounting and reporting
for income taxes was adopted. At January 1, 1993, an increase in accumulated
deferred income tax liabilities of $740 million was recorded which represented
(a) the tax effect of temporary differences not previously recognized and (b)
the recomputing of its tax liability at the current tax rate. The liability
increase was offset by a regulatory asset of equal value, titled "Recoverable
Income Taxes." This regulatory asset represents the future revenue recovery
from customers for these taxes as they become payable, with no effect on net
income. In August 1993, the Omnibus Budget Reconciliation Act of 1993
increased the federal corporate income tax rate from 34% to 35% retroactive to
January 1, 1993. As a result, (1) an increase of $88.1 million in accumulated
deferred income tax liabilities, offset by a corresponding increase in
"Recoverable Income Taxes," and (2) an increase of $10.4 million in income tax
expense were recorded.
In 1993, the MPSC issued an order, in a generic proceeding, authorizing
accounting procedures consistent with SFAS No. 109 and providing assurance that
the effects of previously flowed-through tax benefits will continue to be
allowed rate recovery.
Deferred income tax assets (liabilities) are comprised of the following
at December 31:
<TABLE>
<CAPTION>
1995 1994
----------- -----------
(Thousands)
<S> <C> <C>
Property $(2,166,152) $(2,070,943)
Fermi 2 deferred depreciation
and return (130,048) (170,668)
Property taxes (57,030) (52,913)
Investment tax credit 178,000 187,000
Reacquired debt losses (43,414) (43,162)
Contributions in aid of construction 41,589 36,184
Other 72,483 67,056
-------------------------
$(2,104,572) $(2,047,446)
=========================
Deferred income tax liabilities $(2,659,441) $(2,566,578)
Deferred income tax assets 554,869 519,132
-------------------------
$(2,104,572) $(2,047,446)
=========================
</TABLE>
The federal income tax returns of the Company are settled through the
year 1988. The Company believes that adequate provisions for federal income
taxes have been made through December 31, 1995.
51
<PAGE> 53
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
NOTE 7
COMMON STOCK AND CUMULATIVE PREFERRED AND PREFERENCE STOCK
At December 31, 1995, the Company had Cumulative Preferred Stock, without par
value, 5,000,000 shares authorized with 5,000,000 shares unissued.
At December 31, 1995, Detroit Edison had Cumulative Preference Stock of
$1 par value, 30,000,000 shares authorized with 30,000,000 shares unissued.
At December 31, 1995, Detroit Edison had Cumulative Preferred Stock of
$100 par value, 6,747,484 shares authorized with 1,539,827 shares unissued, and
3,351,223 shares and 3,905,470 shares outstanding at December 31, 1995 and
1994, respectively.
Cumulative Preferred Stock outstanding at December 31 was:
<TABLE>
<CAPTION>
Date of
Issuance 1995 1994
-------- ---- ----
(Thousands)
<S> <C> <C> <C>
CUMULATIVE PREFERRED STOCK
5 1/2% Convertible Series,
55,470 shares Oct. 1967 $ - $ 5,547
7.68% Series, 500,000 shares Mar. 1971 50,000 50,000
7.45% Series, 600,000 shares Nov. 1971 60,000 60,000
7.36% Series, 750,000 shares Dec. 1972 75,000 75,000
7.75% Series, 1,001,223 and
1,500,000 shares, respectively Feb. 1993 100,122 150,000
7.74% Series, 500,000 shares Apr. 1993 50,000 50,000
Preferred stock expense (8,518) (10,264)
---------------------
Total Cumulative Preferred Stock $326,604 $380,283
=====================
</TABLE>
On October 15, 1995, Detroit Edison redeemed the remaining outstanding
9,539 shares of 5 1/2% Series, $100 par value Convertible Cumulative Preferred
Stock at a price of $100 per share plus accrued dividends. This series was
convertible into shares of Detroit Edison Common Stock until the close of
business on the date of the redemption. The number of shares converted during
1995, 1994 and 1993 was 45,931, 3,949 and 5,563, respectively.
Detroit Edison's 7.68% Series, 7.45% Series and 7.36% Series Cumulative
Preferred Stock are redeemable solely at the option of Detroit Edison at a per
share redemption price of $101 plus accrued dividends. See Note 16.
On August 15, 1995, Detroit Edison exchanged 1,995,108 depositary
shares, each representing a one-quarter interest in a share of the Cumulative
Preferred Stock, 7.75% Series, for $49,877,700 aggregate principal amount of
Detroit Edison's Deeply Subordinated Quarterly Income Debt Securities
("QUIDS"), 8.50% Series. See Note 10 for further discussion on the QUIDS.
Detroit Edison's 7.75% Series and 7.74% Series Cumulative Preferred
Stock are redeemable solely at the option of Detroit Edison at a per share
redemption price of $100 (equivalent to $25 per Depositary Share), plus accrued
dividends, on and after April 15, 1998 and July 15, 1998, respectively.
Apart from MPSC or FERC approval and the requirement that common,
preferred and preference stock be sold for at least par value, there are no
legal restrictions on the issuance of additional authorized shares of such
stock by Detroit Edison.
There are no legal restrictions on the issuance of additional
authorized shares of the Company's common and preferred stock.
In August 1994, Detroit Edison purchased 2,206,635 shares of its Common
Stock at a price of $27.125 per share, totaling $59.9 million, from the trustee
of the Detroit Edison Savings & Investment Plans. These shares were canceled
and reverted to the status of authorized but unissued shares.
NOTE 8
SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At December 31, 1995, Detroit Edison had total short-term credit arrangements
of approximately $432 million. At December 31, 1995 and December 31, 1994,
$37 million and $39.5 million, respectively, of short-term borrowings were
outstanding with a weighted average interest rate of 6.2% in 1995 and 1994.
Detroit Edison had bank lines of credit of $200 million, all of which
had commitment fees in lieu of compensating balances. Commitment fees incurred
in 1995 for bank lines of credit were approximately $0.3 million. Detroit
Edison uses bank lines of credit to support the issuance of commercial paper
and bank loans. All borrowings are at prevailing money market rates which are
below the banks' prime lending rates.
Detroit Edison has a nuclear fuel financing arrangement (heat purchase
contract) with Renaissance Energy Company ("Renaissance"), an unaffiliated
company. Renaissance may issue commercial paper or borrow from participating
banks on the basis of promissory notes. To the extent the maximum amount of
funds available to Renaissance (currently $400 million) is not needed by
Renaissance to purchase nuclear fuel, such funds may be loaned to Detroit
Edison for general corporate purposes pursuant to a separate Loan Agreement.
At December 31, 1995, approximately $232 million was available to Detroit
Edison under such Loan Agreement. See Note 9 for a discussion of Detroit
Edison's heat purchase contract with Renaissance.
Renaissance entered into five-year interest rate swap agreements,
guaranteed by Detroit Edison, in December 1990, with five banks for a notional
amount of $125 million. These agreements were used to reduce the potential
impact of increases in interest rates on the variable rate debt by exchanging
the receipt of variable rate amounts for fixed interest payments at rates
ranging from 8.12% to 8.145% over the life of the agreements. The differential
paid or received was recognized as an adjustment to the interest component
included as part of nuclear fuel expense. In December 1995, all swap agreements
expired and were not renewed.
52
<PAGE> 54
NOTE 9
LEASES
Future minimum lease payments under long-term noncancellable leases, consisting
of nuclear fuel ($170 million computed on a projected units of production
basis), lake vessels ($42 million), locomotives and coal cars ($166 million),
office space ($17 million) and computers, vehicles and other equipment ($5
million) at December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(Millions) (Millions)
------------ ------------
<S> <C> <C> <C>
1996 $80 1999 $ 40
1997 79 2000 22
1998 51 Remaining years 128
----
Total $400
====
</TABLE>
Detroit Edison has a heat purchase contract with Renaissance which
provides for the purchase by Renaissance for Detroit Edison of up to $400
million of nuclear fuel, subject to the continued availability of funds to
Renaissance to purchase such fuel. Title to the nuclear fuel is held by
Renaissance. Detroit Edison makes quarterly payments under the heat purchase
contract based on the consumption of nuclear fuel for the generation of
electricity. Renaissance's investment in nuclear fuel was $145 million and
$193 million at December 31, 1995 and 1994, respectively. The decrease in 1995
from 1994 of $48 million includes additions of $6 million (purchases of $5
million and capitalized interest of $1 million) less $54 million for the
amortization of nuclear fuel consumed in 1995.
Under SFAS No. 71, amortization of Detroit Edison's leased assets is
modified so that the total of interest on the obligation and amortization of
the leased asset is equal to the rental expense allowed for ratemaking
purposes. For ratemaking purposes, the MPSC has treated all leases as
operating leases. Net income is not affected by capitalization of leases.
Rental expenses for both capital and operating leases were $97 million
(including $67 million for nuclear fuel), $49 million (including $8 million for
nuclear fuel) and $126 million (including $89 million for nuclear fuel) for
1995, 1994 and 1993, respectively.
NOTE 10
LONG-TERM DEBT
Detroit Edison's 1924 Mortgage and Deed of Trust ("Mortgage"), the lien of
which covers substantially all of Detroit Edison's properties, provides for the
issuance of additional bonds. At December 31, 1995, approximately $3.2 billion
principal amount of Mortgage Bonds could have been issued on the basis of
property additions, combined with an earnings test provision, assuming an
interest rate of 7% on any such additional Mortgage Bonds. An additional $1.1
billion principal amount of Mortgage Bonds could have been issued on the basis
of bond retirements.
Long-term debt outstanding at December 31 was:
<TABLE>
<CAPTION>
Interest
Rate 1995 1994
---------- -------- --------
(Thousands)
<S> <C> <C> <C>
GENERAL AND REFUNDING
MORTGAGE BONDS
Series R, due 12/1/96 6 % $ 100,000 $ 100,000
Series S, due 10/1/98 6.4 150,000 150,000
1990 Series A, due 3/31/20 7.904 156,975 163,254
1990 Series B, due 3/31/16 7.904 199,836 209,352
1990 Series C, due 3/31/14 8.357 64,961 68,380
1992 Series D, due 8/1/02
and 8/1/22 7.605* 290,000 290,000
1992 Series E, due 12/15/99 6.83 50,000 50,000
1993 Series B, due 12/15/99 6.83 50,000 50,000
1993 Series C, due 1/15/03
and 1/13/23 7.939* 225,000 225,000
1993 Series D, due 4/1/99 6.45 100,000 100,000
1993 Series E, due 3/15/00,
3/17/03 and 3/15/23 6.854* 390,000 390,000
1993 Series G, due 5/1/97
and 5/1/01 5.921* 225,000 225,000
1993 Series J, due 6/1/18 7.74 270,000 270,000
Less: Unamortized net discount (143) (182)
Amount due within one year (119,214) (19,214)
----------------------
$2,152,415 $2,271,590
----------------------
REMARKETED NOTES
Secured by corresponding
amounts of General and
Refunding Mortgage Bonds
1993 Series H, due 7/15/28 6.4** $ 50,000 $ 50,000
1993 Series K, due 8/15/33 4 5/8** 160,000 160,000
1994 Series C, due 8/15/34 6.745** 200,000 200,000
Less: Unamortized net discount (172) (177)
----------------------
$ 409,828 $ 409,823
----------------------
TAX EXEMPT REVENUE BOND
OBLIGATIONS
Secured by corresponding
amounts of General and
Refunding Mortgage Bonds
Installment Sales Contracts,
due 9/1/04 - 9/1/24 7.12* $ 282,155 $ 302,155
Less: Unamortized net discount (191) (279)
----------------------
$ 281,964 $ 301,876
----------------------
Loan Agreements,
due 7/15/08 - 9/1/25 6.657* $ 606,670 $ 487,495
Less: Unamortized net discount (71) (73)
----------------------
$ 606,599 $ 487,422
----------------------
Unsecured
Installment Sales Contracts,
due 12/1/04 - 12/1/19 7.53* $ 142,060 $ 314,060
----------------------
Loan Agreements,
due 4/15/10 - 9/1/30 5.97* $ 113,350 $ 40,525
----------------------
$1,143,973 $1,143,883
----------------------
DEEPLY SUBORDINATED DEBT
Quarterly Income Debt Securities
(QUIDS), due 9/30/25 8.50 $ 49,878 $ -
----------------------
Total Long-Term Debt $3,756,094 $3,825,296
======================
</TABLE>
* Weighted average interest rate at December 31, 1995.
**Variable rate at December 31, 1995.
53
<PAGE> 55
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
The QUIDS (see Note 7) provide that interest will be payable quarterly
provided that, so long as an event of default has not occurred and is not
continuing with respect to the QUIDS, Detroit Edison will have the right, upon
prior notice by public announcement given in accordance with New York Stock
Exchange rules at any time, to extend the interest payment period at any time
and from time to time on the QUIDS for up to 20 consecutive quarterly interest
payment periods. As a consequence, quarterly interest payments on the QUIDS
would be deferred but would continue to accrue during any deferral period. In
the event that Detroit Edison exercises this right, Detroit Edison may not
declare or pay dividends on, or redeem, purchase or acquire, any of its capital
stock during such deferral period, other than redemptions of any series of
capital stock of Detroit Edison pursuant to the terms of any sinking fund
provisions with respect thereto. In addition, during any deferral period,
Detroit Edison may not make any advance or loan to, or purchase any securities
of, or make any other investment in, any affiliate of Detroit Edison, including
DTE Energy Company, for the purpose of, or to enable the payment of, directly
or indirectly, dividends on any equity securities of DTE Energy Company.
In June 1992, Detroit Edison entered into a three-year interest rate
swap agreement matched to a $31 million variable rate tax exempt revenue bond.
This agreement was used to reduce the potential impact of increases in interest
rates on the variable rate debt by exchanging the receipt of variable rate
amounts for fixed interest payments at a rate of 4.32% over the life of the
agreement. The differential paid or received was recognized as an adjustment
to interest expense related to the debt. In June 1995, the swap agreement
expired and was not renewed.
In 1996, 1997, 1998, 1999 and 2000, Detroit Edison's long-term debt
maturities consist of $119 million, $144 million, $169 million, $219 million
and $194 million, respectively.
NOTE 11
FAIR VALUE OF FINANCIAL INSTRUMENTS
The estimated fair values of financial instruments at December 31 are as
follows:
<TABLE>
<CAPTION>
1995 1994
---------------------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
- -------------------------------------------------------------------------------
(Thousands)
<S> <C> <C> <C> <C>
Investments and
special funds $ 29,058 $ 29,058 $ 18,722 $ 18,722
Nuclear decommis-
sioning trust funds 119,843 119,843 76,492 76,492
Sale of accounts
receivable and
unbilled revenues - - 200,000 200,000
Cumulative preferred
stock 335,122 335,651 390,547 336,249
Long-term debt 3,875,308 4,115,228 3,844,510 3,511,459
Short-term borrowings 36,990 36,990 39,489 39,489
Customer surety
deposits 9,885 9,885 10,870 10,870
</TABLE>
The investments in debt and equity securities are classified as
"available for sale." The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for which it is
practicable to estimate that value:
OTHER INVESTMENTS - The carrying amount of other investments approximates
fair value.
NUCLEAR DECOMMISSIONING TRUST FUNDS - The fair value of nuclear decommissioning
trust funds is estimated based on quoted market prices for securities and
carrying amount for the cash equivalents.
SALE OF ACCOUNTS RECEIVABLE AND UNBILLED REVENUES - The carrying amount
approximates fair value because of the short maturity of accounts receivable and
unbilled revenues pledged for sale.
CUMULATIVE PREFERRED STOCK, LONG-TERM DEBT - The fair value of Detroit Edison's
preferred stock outstanding and long-term debt is estimated based on the quoted
market prices where available. The fair values of all other long-term debt are
estimated using discounted cash flow analysis. The discount rates used are the
Company's incremental borrowing costs for similar types of securities.
SHORT-TERM BORROWINGS, CUSTOMER SURETY DEPOSITS - The carrying amount
approximates fair value because of the short maturity of those instruments.
NOTE 12
COMMITMENTS AND CONTINGENCIES
COMMITMENTS - Detroit Edison has entered into purchase commitments of
approximately $561 million at December 31, 1995, which includes, among other
things, line construction and clearance costs and the costs of major turbine
components to be replaced at Fermi 2. Detroit Edison also has entered into
substantial long-term fuel supply and transportation commitments.
Detroit Edison has an Energy Purchase Agreement ("Agreement") for the
purchase of steam and electricity from the Detroit Resource Recovery Facility.
Under the Agreement, Detroit Edison will purchase steam through the year 2008
and electricity through June 30, 2024. Purchases of steam and electricity were
$28.2 million, $24.5 million and $23.6 million for 1995, 1994 and 1993,
respectively, and annual purchase commitments are approximately $32.6 million,
$35 million, $36.1 million, $37.3 million and $38.5 million for 1996, 1997,
1998, 1999 and 2000, respectively.
On October 25, 1995, the MPSC issued an order approving Detroit Edison's
long-term capacity and energy purchase from Ontario Hydro. On November 27,
1995, the Michigan Attorney General filed an application for leave to appeal the
order in the Michigan Court of Appeals. The purchase is for 300 MW, on a
seasonal basis from mid-May through mid-September for the years 1996 through
2001. This purchase will offset a concomitant agreement to lease 312 MW, of
Detroit Edison's 917 MW Ludington capacity entitlement, to the Toledo Edison
Company for essentially the same time period. The net economic effect of the
Ludington lease and the Ontario Hydro purchase will be to provide Detroit
Edison's customers with an estimated reduction in PSCR expense of $74 million
which will be passed through to customers through the PSCR clause.
54
<PAGE> 56
CONTINGENCIES - LUDINGTON PUMPED STORAGE PLANT - In 1986, the Michigan
Attorney General and the Michigan Natural Resources Commission filed a
state lawsuit against Detroit Edison and Consumers as co-owners of
Ludington for claimed aquatic losses. Detroit Edison is a 49% co-owner
of Ludington. The suit, which alleges violations of the Michigan
Environmental Protection Act and the common law for claimed aquatic
losses, seeks past damages (including interest) of approximately $148
million and future damages (from the time of the filing of the lawsuit)
in the amount of approximately $89,500 per day (of which 49% would be
applicable to Detroit Edison).
In October 1994, Detroit Edison and all other parties to the state
action except certain Indian tribes, reached a tentative settlement. On
February 28, 1995, Detroit Edison and Consumers jointly submitted to
FERC the Ludington Pumped Storage Project Settlement Agreement - FERC
Offer of Settlement. In March 1995, the Circuit Court for Ingham
County, Michigan entered an order adopting the settlement as final upon
the receipt of regulatory approvals. On January 17, 1996, the FERC
issued an order approving the settlement agreement. The settlement
provides for damages and use of a barrier net around the plant intakes
to protect fish. Also, the FERC order requires Detroit Edison and
Consumers to examine new fish mortality abatement technologies, monitor
local fish populations and create a scientific advisory team to review
these matters. Detroit Edison is taking steps to implement the terms of
the settlement and is waiving prior MPSC approval for the settlement to
become effective. The net present value of Detroit Edison's portion of
the settlement is estimated to be approximately $30 million which will
be paid over a 24-year period, including $10 million to enhance
recreational opportunities on Detroit Edison-owned and donated property.
Detroit Edison has recorded a charge to other operation expense in the
Consolidated Statement of Income in 1995 of $8.4 million for its share
of the settlement through December 31, 1995.
CARTER INDUSTRIALS - In January 1989, the Environmental Protection
Agency ("EPA") issued an administrative order under the Comprehensive
Environmental Response, Compensation and Liability Act ordering Detroit
Edison and 23 other potentially responsible parties to begin removal
activities at the Carter Industrials superfund site. In June 1993, a
Consent Decree was entered by the U.S. District Court for the Eastern
District of Michigan. Clean-up of the Carter Industrials site began in
1995 and is expected to be completed in 1996. There is the possibility
that EPA may, through subsequent proceedings, require an additional
clean-up of the sewer and sewer outfall emptying into the Detroit River.
At December 1995, a remaining liability of $3.3 million is included in
other deferred credits in the Consolidated Balance Sheet for completion
of the Carter Industrials site clean-up costs in 1996 and the proposed
clean-up of the sewer and sewer outfall.
OTHER - The Energy Policy Act became effective in October 1992.
While Detroit Edison is unable to predict the ultimate impact of this
legislation on its operations, Detroit Edison expects that, over time,
non-utility generation resources will be developed which will result in
greater competition for power sales. On March 29, 1995, the FERC issued
a Notice of Proposed Rulemaking seeking comment on several proposals for
encouraging more competitive electric power markets. The proposals
address several fundamental issues facing the electric power industry
including transmission open access, stranded costs, jurisdiction over
transmission in interstate commerce including retail wheeling and over
local distribution, real-time information networks and implementation of
open access. Final rules are expected to be issued early in 1996.
While Detroit Edison is unable to predict the ultimate impact of this
rulemaking on its operations, Detroit Edison expects that it will result
in substantially increased wholesale competition.
In addition to the matters reported herein, the Company and its
subsidiaries are involved in litigation and environmental matters
dealing with the numerous aspects of their business operations. The
Company believes that such litigation and the matters discussed above
will not have a material effect on its financial position or results of
operations.
See Notes 2 and 3 for a discussion of contingencies related to Fermi 2.
NOTE 13
EMPLOYEE BENEFITS
RETIREMENT PLAN - Detroit Edison has a trusteed and non-contributory
defined benefit retirement plan ("Plan") covering all eligible employees who
have completed six months of service. The Plan provides retirement benefits
based on the employee's years of benefit service, average final compensation
and age at retirement. Detroit Edison's policy is to fund pension cost
calculated under the projected unit credit actuarial cost method, provided
that this amount is at least equal to the minimum funding requirement of the
Employee Retirement Income Security Act of 1974, as amended, and is not
greater than the maximum amount deductible for federal income tax purposes.
Contributions were made to the Plan totaling $29.6 million, $45.8 million
and $29.4 million for 1995, 1994 and 1993, respectively.
Net pension cost included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
------ ------ ------
(Thousands)
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 22,210 $ 25,146 $ 22,945
Interest cost on projected
benefit obligation 78,592 75,922 74,490
Actual return on Plan assets (164,144) (3,272) (119,037)
Net deferral and amortization:
Deferral of net gain (loss)
during current period 64,461 (90,069) 33,435
Amortization of unrecog-
nized prior service cost 5,188 3,613 3,297
Amortization of unrecog-
nized net asset resulting
from initial application (4,507) (4,507) (4,507)
-------------------------------------
Net pension cost $ 1,800 $ 6,833 $ 10,623
=====================================
</TABLE>
Assumptions used in determining net pension cost are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Discount rate 8.0% 7.5% 8.0%
Annual increase in future
compensation levels 4.5 4.5 5.0
Expected long-term rate of
return on Plan assets 9.5 9.5 9.5
</TABLE>
55
<PAGE> 57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
The following reconciles the funded status of the Plan to the amount
recorded in the Consolidated Balance Sheet:
<TABLE>
<CAPTION>
December 31
----------------------------
1995 1994
(Thousands)
<S> <C> <C>
Plan assets at fair value, primarily
equity and debt securities $1,170,000 $1,054,048
-----------------------------
Less actuarial present value of
benefit obligation:
Accumulated benefit obligation,
including vested benefits of $966,765
and $852,374, respectively 991,248 872,530
Increase in future compensation levels 138,127 138,411
-----------------------------
Projected benefit obligation 1,129,375 1,010,941
-----------------------------
Plan assets in excess of projected benefit
obligation 40,625 43,107
Unrecognized net asset resulting from
initial application (28,781) (33,288)
Unrecognized net loss 21,288 3,856
Unrecognized prior service cost 48,733 40,391
-----------------------------
Asset recorded in the Consolidated Balance Sheet $ 81,865 $ 54,066
=============================
Assumptions used in determining the projected benefit obligation are as follows:
</TABLE>
<TABLE>
<CAPTION>
December 31
-----------------
1995 1994
---- ----
<S> <C> <C>
Discount rate 7.5% 8.0%
Annual increase in future compensation levels 4.5 4.5
</TABLE>
The unrecognized net asset at date of initial application
is being amortized over approximately 15.4 years, which
was the average remaining service period of employees at January 1,
1987.
In addition to the Plan, there are several supplemental non-qualified,
non-contributory, retirement benefit plans for certain management
employees.
LONG-TERM INCENTIVE COMPENSATION PLAN - The Company has adopted a long-term
incentive plan ("Incentive Plan"). Under the Incentive Plan, certain key
employees may be granted stock options, stock appreciation rights, restricted
common stock, performance shares and performance units. In 1995, 66,500
shares of restricted common stock, valued at approximately $1.9 million, were
granted to officers of Detroit Edison. Compensation cost of $571,000 in 1995
was recorded based on the award that was expected to vest and recognized over
the period to which the related employee services were to be rendered. The
shares for officers are restricted for a period of approximately one to four
years and all shares are subject to forfeiture if specified performance
measures are not met. There are no exercise prices related to these shares.
During the applicable restriction period, the officer-recipient has all the
voting, dividends and other rights of a record holder except that the shares
are nontransferable, and non-cash distributions paid upon the shares would be
subject to transfer restrictions and risk of forfeiture to the same extent as
the shares themselves. All shares awarded pursuant to this program were
purchased on the open market. Common stock granted under the Incentive Plan
may not exceed 7.2 million shares. Performance units (which have a face
amount of $1) granted under the Incentive Plan may not exceed 25 million in
the aggregate. No stock options, stock appreciation rights, performance
shares or performance units have been granted under this plan.
SAVINGS & INVESTMENT PLANS - Detroit Edison has contributory defined
contribution plans qualified under Section 401 (a) and (k) of the
Internal Revenue Code for all eligible employees. Matching
contributions were $13.7 million, $12.5 million, $10.6 million for 1995,
1994 and 1993, respectively.
OTHER POSTRETIREMENT BENEFITS - Detroit Edison provides certain
postretirement health care and life insurance benefits for retired
employees. Substantially all of Detroit Edison's employees will become
eligible for such benefits if they reach retirement age while working
for Detroit Edison. These benefits are provided principally through
insurance companies and other organizations.
Effective January 1, 1993, Detroit Edison adopted the provisions of SFAS
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions." The standard required Detroit Edison to change its
accounting for postretirement benefits from the pay-as-you-go (cash)
basis to the accrual of such benefits during the active service periods
of employees to the date they attain full eligibility for benefits. The
transition obligation at the time of adoption is being amortized over 20
years. Detroit Edison's incremental cost upon adoption of the standard
was $49 million for 1993 which is being deferred in accordance with the
January 21, 1994 MPSC rate order. See Note 3. This amount is being
amortized and recovered in rates over the estimated four-year period
1994-1997.
Net other postretirement benefits cost included the following
components:
<TABLE>
<CAPTION>
1995 1994 1993
-----------------------------------
(Thousands)
<S> <C> <C> <C>
Service cost - benefits earned
during the period $ 17,295 $16,267 $15,312
Interest cost on accumulated
postretirement benefit obligation 40,156 33,459 33,787
Actual return on assets (17,793) (208) (18)
Deferral of net gain (loss) during
current period 11,368 (833) -
Amortization of unrecognized transition
obligation 20,525 20,633 21,685
------------------------------------
Net other postretirement benefits cost $71,551 $69,318 $70,766
====================================
Assumptions used in determining net other postretirement benefits cost are as follows:
</TABLE>
<TABLE>
<CAPTION>
1995 1994 1993
------- ------- -------
<C> <C> <C> <C>
Discount rate 8.0% 7.5% 8.0%
Annual increase in future compensation levels 4.5 4.5 5.0
Expected long-term rate of return on assets 8.5 9.5 9.5
</TABLE>
56
<PAGE> 58
The following reconciles the funded status to the amount recorded in
the Consolidated Balance Sheet:
<TABLE>
<CAPTION>
December 31
-------------------------------
1995 1994
-------- ----------
(Thousands)
<S> <C> <C>
Actuarial present value of benefit obligation:
Retirees $ 314,311 $ 256,370
Fully eligible active participants 69,281 67,581
Other active participants 168,335 140,710
------------------------------
Accumulated postretirement
benefit obligation 551,927 464,661
Less assets at fair value, primarily
equity and debt securities 133,147 58,080
------------------------------
Benefit obligation in excess of assets 418,780 406,581
Unrecognized transition obligation (348,934) (369,459)
Unrecognized net gain (loss) (45,465) 21
------------------------------
Liability recorded as Other
Non-Current Liabilities in the
Consolidated Balance Sheet $ 24,381 $ 37,143
==============================
</TABLE>
Assumptions used in determining the accumulated benefit obligation are
as follows:
<TABLE>
<CAPTION>
December 31
-----------
1995 1994
----------------------------------------------------------
<S> <C> <C>
Discount rate 7.5% 8.0%
Annual increase in future compensation levels 4.5 4.5
</TABLE>
Benefit costs were calculated assuming health care cost trend rates
beginning at 11.8% for 1995 and decreasing to 6% in 2008 and thereafter for
persons under age 65 and decreasing from 7.2% to 6% for persons age 65 and over.
For 1996, health care cost trend rates are assumed to begin at 10.5% and 6.5%,
respectively, with both rates decreasing to 5.5% in 2008 and thereafter. A
one-percentage-point increase in health care cost trend rates would increase the
aggregate of the service cost and interest cost components of benefit costs by
$8 million for 1995 and increase the accumulated benefit obligation by $69
million at December 31, 1995.
NOTE 14
NEW ACCOUNTING STANDARD
In March 1995, the Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of." This statement requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.
The Company adopted SFAS No. 121 in the fourth quarter of 1995. As the
result of continuing losses in the operation of its steam heating business, upon
adoption of SFAS No. 121, Detroit Edison wrote off the remaining net book value
of its steam heating plant assets. This resulted in a non-cash loss of $42
million ($32 million after-tax) or $0.22 per common share.
Based on current market conditions, the steam heating operations
continue to generate losses. Therefore, Detroit Edison will continue to review
its steam heating operations to determine what actions, if any, may be
necessary.
The application of SFAS No. 121 to the electric plant and regulatory
assets of Detroit Edison does not result in an impairment as of this time based
on the existing MPSC and FERC regulations. However, this may change in the
future as deregulation, competitive factors and restructuring take effect in the
electric utility industry.
NOTE 15
SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION
(UNAUDITED)
<TABLE>
<CAPTION>
1995 Quarter Ended
-----------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
-------- -------- ---------- --------
(Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $880,274 $855,955 $1,032,289 $867,026
Operating Income 194,164 165,714 225,114 154,330
Net Income 106,083 84,152 141,412 74,267
Earnings Per
Common Share 0.73 0.58 0.98 0.51
<CAPTION>
1994 Quarter Ended
-----------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
-------- -------- ---------- --------
(Thousands, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $899,589 $872,690 $944,389 $802,673
Operating Income 189,319 161,832 200,298 167,946
Net Income 105,458 79,872 116,972 87,967
Earnings Per
Common Share 0.72 0.54 0.80 0.61
</TABLE>
The fourth quarter of 1995 includes the write-off of the remaining net
book value of Detroit Edison's steam heating plant assets when the Company
adopted SFAS No. 121. This resulted in a non-cash loss of $42 million ($32
million after-tax) or $0.22 per common share. See Note 14.
The fourth quarter of 1994 includes a decrease in operating revenues of
$59 million, a decrease in operation expense of $65 million and a decrease in
maintenance expense of $1 million related to a settlement agreement, with the
parties intervening in the 1994 PSCR reconciliation case with the MPSC, for
business interruption insurance proceeds associated with the December 25, 1993
outage at Fermi 2. See Note 2.
NOTE 16
SUBSEQUENT EVENTS (UNAUDITED)
On February 13, 1996, Detroit Edison issued $185 million of 7 5/8% Quarterly
Income Debt Securities. See Note 10 for information on the right of Detroit
Edison to defer payment of interest on the QUIDS and the related consequences.
Also, Detroit Edison called for redemption all of the outstanding Cumulative
Preferred Stock, 7.68% Series, 7.45% Series and 7.36% Series, totaling $185
million, at per share redemption prices of $101 plus accrued dividends. Such
redemption will occur on March 21, 1996.
57
<PAGE> 59
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
The Board of Directors, upon the recommendation of the Board's Audit
Committee, appointed Deloitte & Touche LLP as independent accountants for the
year 1995. The appointment was ratified by the Common Stock Shareholders at
the Annual Meeting of Common Stock Shareholders held on April 24, 1995.
Deloitte & Touche LLP's report on the financial statements for the year ending
December 31, 1995 did not contain an adverse opinion or a disclaimer of
opinion, nor was it qualified or modified as to uncertainty, audit scope or
accounting principles.
In prior years, Price Waterhouse LLP served as independent accountants of
the Company. During the Company's two fiscal years ending December 31, 1994,
there were no disagreements with Price Waterhouse LLP on any matter of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which, if not resolved to its satisfaction, would have
caused Price Waterhouse LLP to make reference thereto in their report on the
financial statements for such years. None of Price Waterhouse LLP's reports on
the financial statements for the years ended December 31, 1994 and 1993
contained an adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope or accounting principles.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding the Company's executive officers is incorporated
herein by reference to Items 1 and 2 - Business and Properties, "Employees and
Executive Officers" on pages 23-24 hereof; information regarding compliance
with section 16(a) of the Securities Exchange Act of 1934 is incorporated
herein by reference to the data under the heading "Compliance with Section
16(a) of the Securities Exchange Act of 1934" on page 21 of the Company's
definitive proxy statement dated March 15, 1996, in connection with its Annual
Meeting of Shareholders to be held on April 22, 1996; and information regarding
directors is incorporated herein by reference to the data under the heading
"The Election of Directors" on pages 1-5 of the Company's definitive proxy
statement dated March 15, 1996, in connection with its Annual Meeting of
Shareholders to be held on April 22, 1996.
ITEM 11 - EXECUTIVE COMPENSATION.
Information regarding "Executive Compensation" is incorporated herein by
reference to the data under the heading "Board Compensation Committee Report on
Executive Compensation" on pages 8-15 of the Company's definitive proxy
statement dated March 15, 1996, in connection with its Annual Meeting of
Shareholders to be held on April 22, 1996.
58
<PAGE> 60
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding ownership of equity securities is incorporated
herein by reference to the heading "Security Ownership of Management" on page 6
of the Company's definitive proxy statement dated March 15, 1996, in connection
with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions is
incorporated herein by reference to the heading "Compensation Committee
Interlocks and Insider Participation" on page 15 of the Company's definitive
proxy statement dated March 15, 1996, in connection with its Annual Meeting of
Shareholders to be held on April 22, 1996.
59
<PAGE> 61
ANNUAL REPORT ON FORM 10-K FOR THE DETROIT EDISON COMPANY
PART I
ITEMS 1 AND 2 - BUSINESS AND PROPERTIES.
See the Company's "Items 1 and 2 - Business and Properties" (other than
the paragraphs under the headings "Non-Regulated Operations" and "Executive
Officers"), which is incorporated herein by this reference.
<TABLE>
<CAPTION>
EXECUTIVE OFFICERS. PRESENT
POSITION
NAME AGE(a) PRESENT POSITION HELD SINCE
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John E. Lobbia .......... 54 Chairman of the Board and Chief Executive Officer 5- 1-90
Anthony F. Earley, Jr. .. 46 President and Chief Operating Officer 3- 1-94
Larry G. Garberding ..... 57 Executive Vice President and Chief Financial Officer 8- 1-90
Frank E. Agosti ......... 59 Senior Vice President-Power Supply 2- 1-90
Robert J. Buckler ....... 46 Senior Vice President-Energy Marketing and 12- 1-92
Distribution
Douglas R. Gipson ....... 48 Senior Vice President-Nuclear Generation 4- 1-93
Gerard M. Anderson ...... 37 Vice President for Non-Utility Business Ventures 12- 1-93
Susan M. Beale .......... 47 Vice President and Corporate Secretary 3-27-95
Michael E. Champley ..... 47 Vice President-Bulk Energy Sourcing and Marketing 2- 1-96
Haven E. Cockerham ...... 48 Vice President-Human Resources 6- 1-94
Ronald W. Gresens ....... 62 Vice President and Controller 5- 1-87
Leslie L. Loomans ....... 52 Vice President and Treasurer 10 -1-89
Christopher C. Nern ..... 51 Vice President and General Counsel 6- 1-93
S. Martin Taylor ........ 55 Vice President-Corporate and Public Affairs 11-28-94
</TABLE>
(a) As of March 1, 1996
Under Detroit Edison By-Laws, the officers of Detroit Edison are
elected annually by the Board of Directors at a meeting held for such
purpose, each to serve until the next annual meeting of shareholders or
until their respective successors are chosen and qualified. With the
exception of Messrs. Anderson, Cockerham and Earley, all of the above
officers have been employed by Detroit Edison in one or more management
capacities during the past five years.
Gerard M. Anderson was a senior engagement manager at McKinsey &
Company, Inc., a management consulting firm, from 1988 to 1993. Effective
December 1, 1993, he was elected Vice President of Detroit Edison.
Haven E. Cockerham, from 1991 until 1994, was president of Cockerham,
McCain & Associates, Inc., a management, business development and human
resources consulting firm in Columbia, South Carolina. From 1989 to 1991,
Mr. Cockerham owned Cockerham Chevrolet-Oldsmobile, an automobile
dealership in Newberry, South Carolina. Prior to 1989, Mr. Cockerham was
employed by General Motors in various executive positions in the human
resources area. Effective June 1, 1994, he was elected Vice
President-Human Resources.
60
<PAGE> 62
Anthony F. Earley, Jr., from 1989 to 1994, was President and Chief
Operating Officer of Long Island Lighting Company ("LILCO"), an electric
and gas utility company serving Long Island, New York. He previously
served in various executive capacities at LILCO from 1985 to 1989.
Effective March 1, 1994, he was elected President and Chief Operating
Officer and a member of the Board of Directors of Detroit Edison.
ITEM 3 - LEGAL PROCEEDINGS.
See the Company's "Item 3 - Legal Proceedings," which is incorporated
herein by this reference.
ITEM 4 -SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
PART II
ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
See the Company's "Item 5 - Market for Registrant's Common Equity and
Related Stockholder Matters," which is incorporated herein by this reference.
Detroit Edison's By-Laws contain this same provision with respect to the
Michigan Business Corporation Act. All of Detroit Edison's Common Stock is
held by the Company. The level of dividends paid by Detroit Edison to the
Company is periodically reviewed by Detroit Edison's Board of Directors.
<TABLE>
<CAPTION>
ITEM 6 - SELECTED FINANCIAL DATA.
Year Ended December 31
---------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
(Thousands)
Operating Revenues ........................................ $ 3,635,544 $ 3,519,341 $ 3,555,211 $ 3,558,143 $ 3,591,537
Net Income ................................................ $ 433,651 $ 419,909 $ 521,903 $ 588,047 $ 568,037
Net Income Available
for Common Stock......................................... $ 405,914 $ 390,269 $ 491,066 $ 557,549 $ 535,205
At year end:
Total Assets............................................... $11,130,591 $10,992,978 $11,134,879 $10,309,061 $10,463,624
Long-Term Debt
Obligations (including capital
leases) and Redeemable
Preferred and Preference
Stock Outstanding...................................... $ 4,004,247 $ 3,979,763 $ 4,007,622 $ 4,525,504 $ 4,900,020
</TABLE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
See the Company's and Detroit Edison's "Item 7 - Management's Discussion
and Analysis of Financial Condition and Results of Operations," which is
incorporated herein by this reference to Part II - Item 7 of the Company.
61
<PAGE> 63
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages 33 through 57.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
See the Company's "Item 9 - Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure," which is incorporated herein by this
reference.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding Detroit Edison's executive officers is incorporated
herein by reference to "Items 1 and 2 - Business and Properties, Executive
Officers." Detroit Edison's directors are the same as the Company's directors.
Information regarding directors is incorporated herein by reference to the
data under the heading "The Election of Directors" on pages 1-5 of the
Company's definitive proxy statement dated March 15, 1996, in connection with
its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 11 - EXECUTIVE COMPENSATION.
Information regarding "Executive Compensation" is incorporated herein by
reference to the data under the heading "Board Compensation Committee Report on
Executive Compensation" on pages 8-15 of the Company's definitive proxy
statement dated March 15, 1996, in connection with its Annual Meeting of
Shareholders to be held on April 22, 1996.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding ownership of equity securities is incorporated
herein by reference to the heading "Security Ownership of Management" on page 6
of the Company's definitive proxy statement dated March 15, 1996, in connection
with its Annual Meeting of Shareholders to be held on April 22, 1996.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information regarding certain relationships and related transactions is
incorporated herein by reference to the heading "Compensation Committee
Interlocks and Insider Participation" on page 15 of the Company's definitive
proxy statement dated March 15, 1996, in connection with its Annual Meeting of
Shareholders to be held on April 22, 1996.
62
<PAGE> 64
ANNUAL REPORTS ON FORM 10-K FOR DTE ENERGY COMPANY
AND THE DETROIT EDISON COMPANY
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as a part of this Annual
Report on Form 10-K.
(1) Consolidated financial statements. See "Item 8 -
Financial Statements and Supplementary Data" on page 33.
(2) Financial statement schedules. See "Item 8 - Financial
Statements and Supplementary Data" on page 33.
(3) Exhibits (*Denotes management contract or compensatory
plan or arrangement required to be filed as an exhibit to this
report pursuant to Item 14 (c) of this report).
(i) Exhibits filed herewith.
Exhibit
Number
-------
3-3 - Amended and Restated By-Laws, dated as of February 26,
1996, of DTE Energy Company.
3-4 - Amended and Restated By-Laws, dated as of February 26,
1996, of The Detroit Edison Company.
4-14 - Fifth Supplemental Note Indenture, dated as of
February 1, 1996.
4-15 - Supplemental Indenture, dated as of April 1, 1991,
establishing the 1991 Series AP Mortgage Bonds.
*10-1 - Detroit Edison 1996 Shareholder Value Improvement
Plan - A.
*10-2 - Detroit Edison Key Employee Deferred Compensation
Plan (January 1990).
*10-3 - Detroit Edison Long-Term Incentive Plan.
63
<PAGE> 65
Exhibit
Number
-------
11-2 - DTE Energy Company and Subsidiary Companies Primary and Fully
Diluted Earnings Per Share of Common Stock.
12-2 - The Detroit Edison Company and Subsidiary Companies Computation of
Ratio of Earnings to Fixed Charges.
12-3 - The Detroit Edison Company and Subsidiary Companies Computation of
Ratio of Earnings to Fixed Charges and Preferred and Preference
Stock Dividends.
16-1 - Letter regarding change in certifying accountant.
23-7 - Consent of Deloitte & Touche LLP.
23-8 - Consent of Price Waterhouse LLP.
27-1 - Financial Data Schedule for the period ended December 31, 1995 for
DTE Energy Company and Subsidiary Companies.
27-2 - Financial Data Schedule for the period ended December 31, 1995 for
The Detroit Edison Company and Subsidiary Companies.
99-1 - The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Savings Reparation Plan.
99-2 - The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Retirement Reparation Plan.
99-3 - The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Management Supplemental Benefit Plan.
99-4 - The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Benefit Equalization Plan.
99-5 - The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Plan for Deferring the Payment of
Directors' Fees.
64
<PAGE> 66
Exhibit
Number
-------
99-6 - The Detroit Edison Company Irrevocable Grantor Trust for The DTE
Energy Company Retirement Plan for Non-Employee Directors.
99-7 - DTE Energy Company Irrevocable Grantor Trust for The DTE Energy
Company Plan for Deferring the Payment of Directors' Fees.
99-8 - DTE Energy Company Irrevocable Grantor Trust for The DTE Energy
Company Retirement Plan for Non-Employee Directors.
(ii) Exhibits incorporated herein by reference.
3(a) - Restated Articles of Incorporation of Detroit Edison, as filed
December 10, 1991 with the State of Michigan, Department of
Commerce - Corporation and Securities Bureau (Exhibit 4-117 to
Form 10-Q for quarter ended March 31, 1993).
3(b) - Certificate containing resolution of the Detroit Edison Board of
Directors establishing the Cumulative Preferred Stock, 7.75%
Series as filed February 22, 1993 with the State of Michigan,
Department of Commerce - Corporation and Securities Bureau
(Exhibit 4-134 to Form 10-Q for quarter ended March 31, 1993).
3(c) - Certificate containing resolution of the Detroit Edison Board of
Directors establishing the Cumulative Preferred Stock, 7.74%
Series, as filed April 21, 1993 with the State of Michigan,
Department of Commerce - Corporation and Securities Bureau
(Exhibit 4-140 to Form 10-Q for quarter ended March 31, 1993).
3(d) - Amended and Restated Articles of Incorporation of DTE Energy
Company, dated December 13, 1995 (Exhibit 3A (3.1) to DTE Energy
Form 8-B filed January 2, 1996, File No. 1-11607).
3(e) - Agreement and Plan of Exchange (Exhibit 1(2) to DTE Energy Form
8-B filed January 2, 1996, File No. 1-11607).
65
<PAGE> 67
Exhibit
Number
-------
4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between
Detroit Edison (File No. 1-2198) and Bankers Trust Company as
Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures
supplemental thereto, dated as of dates indicated below, and filed
as exhibits to the filings as set forth below:
September 1, 1947 Exhibit B-20 to Registration No.
2-7136
October 1, 1968 Exhibit 2-B-33 to Registration
No. 2-30096
November 15, 1971 Exhibit 2-B-38 to Registration
No. 2-42160
January 15, 1973 Exhibit 2-B-39 to Registration
No. 2-46595
June 1, 1978 Exhibit 2-B-51 to Registration
No. 2-61643
June 30, 1982 Exhibit 4-30 to Registration No.
2-78941
August 15, 1982 Exhibit 4-32 to Registration No.
2-79674
October 15, 1985 Exhibit 4-170 to Form 10-K for
year ended December 31, 1994
November 30, 1987 Exhibit 4-139 to Form 10-K for
year ended December 31, 1992
July 15, 1989 Exhibit 4-171 to Form 10-K for
year ended December 31, 1994
December 1, 1989 Exhibit 4-172 to Form 10-K for
year ended December 31, 1994
February 15, 1990 Exhibit 4-173 to Form 10-K for
year ended December 31, 1994
November 1, 1990 Exhibit 4-110 to Form 10-K for
year ended December 31, 1990
May 1, 1991 Exhibit 4-112 to Form 10-Q for
quarter ended June 30, 1991
May 15, 1991 Exhibit 4-113 to Form 10-Q for
quarter ended June 30, 1991
September 1, 1991 Exhibit 4-116 to Form 10-Q for
quarter ended September 30, 1991
November 1, 1991 Exhibit 4-119 to Form 10-K for year
ended December 31, 1991
66
<PAGE> 68
Exhibit
Number
-------
January 15, 1992 Exhibit 4-120 to Form 10-K for
year ended December 31, 1991
February 29, 1992 Exhibit 4-121 to Form 10-Q for
quarter ended March 31, 1992
April 15, 1992 Exhibit 4-122 to Form 10-Q for
quarter ended June 30, 1992
July 15, 1992 Exhibit 4-123 to Form 10-Q for
quarter ended September 30, 1992
July 31, 1992 Exhibit 4-124 to Form 10-Q for
quarter ended September 30, 1992
November 30, 1992 Exhibit 4-130 to Registration
No. 33-56496
January 1, 1993 Exhibit 4-131 to Registration
No. 33-56496
March 1, 1993 Exhibit 4-141 to Form 10-Q for
quarter ended March 31, 1993
March 15, 1993 Exhibit 4-142 to Form 10-Q for
quarter ended March 31, 1993
April 1, 1993 Exhibit 4-143 to Form 10-Q for
quarter ended March 31, 1993
April 26, 1993 Exhibit 4-144 to Form 10-Q for
quarter ended March 31, 1993
May 31, 1993 Exhibit 4-148 to Registration
No. 33-64296
June 30, 1993 Exhibit 4-149 to Form 10-Q for
quarter ended June 30, 1993
(1993 Series AP)
June 30, 1993 Exhibit 4-150 to Form 10-Q for
quarter ended June 30, 1993
(1993 Series H)
September 15, 1993 Exhibit 4-158 to Form 10-Q for
quarter ended September 30, 1993.
March 1, 1994 Exhibit 4-163 to Registration No.
33-53207.
June 15, 1994 Exhibit 4-166 to Form 10-Q for
quarter ended June 30, 1994.
August 15, 1994 Exhibit 4-168 to Form 10-Q for
quarter ended September 30, 1994.
December 1, 1994 Exhibit 4-169 to Form 10-K for
year ended December 31, 1994.
August 1, 1995 Exhibit 4-174 to Form 10-Q for
quarter ended September 30, 1995.
67
<PAGE> 69
Exhibit
Number
-------
4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993
(Exhibit 4-152 to Registration No. 33-50325).
4(c) - First Supplemental Note Indenture, dated as of June 30, 1993
(Exhibit 4-153 to Registration No. 33-50325).
4(d) - Second Supplemental Note Indenture, dated as of September 15, 1993
(Exhibit 4-159 to Form 10-Q for quarter ended September 30, 1993).
4(e) - Third Supplemental Note Indenture, dated as of August 15, 1994
(Exhibit 4-169 to Form 10-Q for quarter ended September 30, 1994).
4(f) - First Amendment, dated as of December 12, 1995, to Third
Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit
4-12 to Registration No. 333-00023).
4(g) - Fourth Supplemental Note Indenture, dated as of August 15, 1995
(Exhibit 4-175 to Detroit Edison Form 10-Q for quarter ended
September 30, 1995).
4(h) - Fifth Supplemental Indenture, dated as of February 1, 1996
(Exhibit 4-1 to Detroit Edison Form 8-A dated March 11, 1996).
4(i) - Standby Note Purchase Credit Facility, dated as of August 17,
1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank
and Administrative Agent, Bank of America, The Bank of New York,
The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD,
Union Bank and Citicorp Securities, Inc. and First Chicago Capital
Markets, Inc. as Remarketing Agents (Exhibit 99-18 to Form 10-Q
for quarter ended September 30, 1994).
68
<PAGE> 70
Exhibit
Number
-------
*10(a) - Form of 1995 Indemnification Agreement between the Registrant and
(1) Terence E. Adderley, (2) Lillian Bauder, (3) David Bing, (4)
Anthony F. Earley, Jr., (5) Larry G. Garberding, (6) Allan D.
Gilmour, (7) Theodore S. Leipprandt, (8) John E. Lobbia, (9)
Patricia S. Longe, (10) Eugene A. Miller, (11) Dean E.
Richardson, (12) Alan E. Schwartz, (13) William Wegner, (14)
Christopher C. Arvani, (15) Susan M. Beale, (16) Elaine M.
Godfrey, (17) Ronald J. Giaier, (18) Ronald W. Gresens, (19)
Thomas A. Hughes, (20) Frederick S. Karwacki, (21) Leslie L.
Loomans, (22) Peter A. Marquardt, (23) Christopher C. Nern, and
(24) Albert J. Tack (Exhibit 3L (10-1) to DTE Energy Company Form
8-B dated January 2, 1996).
*10(b) - Form of Indemnification Agreement between The Detroit Edison
Company ("Detroit Edison") and (1) Frank E. Agosti, (2) Gerard M.
Anderson, (3) Robert J. Buckler, (4) Ronald W. Gresens, (5)
Leslie L. Loomans, (6) S. Martin Taylor, (7) Susan M. Beale, (8)
Frederick S. Karwacki, (9) Douglas R. Gipson, (10) Thomas A.
Hughes, (11) Christopher C. Nern, (12) Elaine M. Godfrey, (13)
Christopher C. Arvani, (14) Michael E. Champley, (15) Haven E.
Cockerham, (16) Ronald J. Giaier, (17) Peter A. Marquardt, and
(18) Albert J. Tack (Exhibit 10-41 to Detroit Edison's Form 10-Q
for quarter ended June 30, 1993).
*10(c) - The Detroit Edison Company Shareholder Value Improvement Plan -
A, as amended and restated effective January 1, 1996 (Exhibit 3L
(10-3) to DTE Energy Form 8-B dated January 2, 1996).
*10(d) - Certain arrangements pertaining to the employment of S. Martin
Taylor (Exhibit 10-38 to Detroit Edison's Form 10-K for year
ended December 31, 1992).
*10(e) - Certain arrangements pertaining to the employment of Anthony F.
Earley, Jr. (Exhibit 10-53 to Detroit Edison's Form 10-Q for
quarter ended March 31, 1994).
*10(f) - Third Restatement of The Detroit Edison Company Savings
Reparation Plan, effective as of January 1, 1996 (Exhibit 3L
(10-6) to DTE Energy Form 8-B dated January 2, 1996).
69
<PAGE> 71
Exhibit
Number
-------
*10(g) - Certain arrangements pertaining to the employment of Haven E.
Cockerham (Exhibit 10-55 to Detroit Edison's Form 10-Q for
quarter ended September 30, 1994).
*10(h) - Third Restatement of the Retirement Reparation Plan for Certain
Employees of Detroit Edison, effective as of January 1, 1996
(Exhibit 3L (10-9) to DTE Energy Form 8-B dated January 2, 1996).
*10(i) - Third Restatement of the Benefit Equalization Plan for Certain
Employees of Detroit Edison, effective as of January 1, 1996
(Exhibit 3L (10-10) to DTE Energy Form 8-B dated January 2,
1996).
*10(j) - Certain arrangements pertaining to the employment of Larry G.
Garberding (Exhibit 28-52 to Detroit Edison's Form 10-Q for
quarter ended June 30, 1990).
*10(k) - Form of Indemnification Agreement, between Detroit Edison and (1)
John E. Lobbia, (2) Larry G. Garberding and (3) Anthony F.
Earley, Jr. (Exhibit 19-7 to Detroit Edison's Form 10-Q for
quarter ended March 31, 1992).
*10(l) - Form of Indemnification Agreement between Detroit Edison and (1)
Terence E. Adderley, (2) Lillian Bauder, (3) David Bing, (4) Alan
E. Schwartz , (5) William Wegner, (6) Theodore S. Leipprandt, (7)
Patricia S. Longe, (8) Eugene A. Miller, (9) Dean E. Richardson,
and (10) Alan D. Gilmour (Exhibit 19-8 to Detroit Edison's Form
10-Q for quarter ended March 31, 1992).
*10(m) - Supplemental Long Term Disability Plan, dated November 5, 1991
(Exhibit 10-32 to Detroit Edison's Form 10-K for year ended
December 31, 1991).
*10(n) - Executive Vehicle Program, dated October 1, 1993 (Exhibit 10-47
to Detroit Edison's Form 10-Q for quarter ended September 30,
1993).
*10(o) - Amendment No. 1 to Executive Vehicle Plan, November 1993 (Exhibit
10-58 to Detroit Edison's Form 10-K for year ended December 31,
1993).
70
<PAGE> 72
Exhibit
Number
*10(p) - Certain arrangements pertaining to the employment of Gerard M.
Anderson (Exhibit 10-40 to Detroit Edison's Form 10-K for year
ended December 31, 1993).
*10(q) - Third Restatement of The Detroit Edison Company Management
Supplemental Benefit Plan, effective as of January 1, 1996
(Exhibit 3L (10-18) to DTE Energy Form 8-B dated January 2,
1996).
*10(r) - Third Restatement of The Detroit Edison Company Plan for
Deferring the Payment of Directors' Fees (January 1, 1996)
(Exhibit 3L (10-19) to DTE Energy Form 8-B dated January 2,
1996).
*10(s) - DTE Energy Company Retirement Plan for Non-Employee Directors
(January 1, 1996) (Exhibit 3L (10-20) to DTE Energy Form 8-B
dated January 2, 1996).
*10(t) - DTE Energy Company Plan for Deferring the Payment of Directors'
Fees (January 1, 1996) (Exhibit 3L (10-21) to DTE Energy Form 8-B
dated January 2, 1996).
21(a) - Subsidiaries of DTE Energy and Detroit Edison (Exhibit 3M (21) to
DTE Energy Form 8-B dated January 2, 1996).
99(a) - Belle River Participation Agreement between Detroit Edison and
Michigan Public Power Agency, dated as of December 1, 1982
(Exhibit 28-5 to Registration No. 2-81501).
99(b) - Belle River Transmission Ownership and Operating Agreement
between Detroit Edison and Michigan Public Power Agency, dated as
of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501.)
99(c) - 1988 Amended and Restated Loan Agreement, dated as of October 4,
1988, between Renaissance Energy Company (an unaffiliated
company) ("Renaissance") and Detroit Edison (Exhibit 99-6 to
Registration No. 33-50325).
71
<PAGE> 73
Exhibit
Number
-------
99(d) - First Amendment to 1988 Amended and Restated Loan Agreement, dated
as of February 1, 1990, between Detroit Edison and Renaissance
(Exhibit 99-7 to Registration No. 33-50325).
99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement,
dated as of September 1, 1993, between Detroit Edison and
Renaissance (Exhibit 99-8 to Registration No. 33-50325).
99(f) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and
Restated Nuclear Fuel Heat Purchase Contract, dated October 4,
1988, between The Detroit Edison Company and Renaissance Energy
Company (Exhibit 99-21 to Form 10-Q for quarter ended September
30, 1994).
99(g) - $200,000,000 364-Day Credit Agreement, dated as of September 1,
1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New
York Branch, as Agent (Exhibit 99-12 to Registration No.
33-50325).
99(h) - First Amendment, dated as of August 31, 1994, to $200,000,000
364-Day Credit Agreement, dated September 1, 1993, among The
Detroit Edison Company, Renaissance Energy Company, the Banks
party thereto and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994).
99(i) - $200,000,000 Three-Year Credit Agreement, dated September 1, 1993,
among Detroit Edison, Renaissance and Barclays Bank PLC, New York
Branch, as Agent (Exhibit 99-13 to Registration No. 33-50325).
99(j) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between Detroit Edison and Renaissance
(Exhibit 99-9 to Registration No. 33-50325).
72
<PAGE> 74
Exhibit
Number
-------
99(k) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat
Purchase Contract, dated as of February 1, 1990, between Detroit
Edison and Renaissance (Exhibit 99-10 to Registration No.
33-50325).
99(l) - Second Amendment, dated as of September 1, 1993, to 1988 Amended
and Restated Nuclear Fuel Heat Purchase Contract between Detroit
Edison and Renaissance (Exhibit 99-11 to Registration No.
33-50325).
99(m) - First Amendment, dated as of September 1, 1994, to $200,000,000
Three-Year Credit Agreement, dated as of September 1, 1993, among
The Detroit Edison Company, Renaissance Energy Company, the Banks
party thereto and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-20 to Form 10-Q for quarter ended September 30, 1994).
99(n) - Master Trust Agreement ("Master Trust"), dated as of June 30,
1994, between Detroit Edison and Fidelity Management Trust Company
relating to the Savings & Investment Plans (Exhibit 4-167 to Form
10-Q for quarter ended June 30, 1994).
99(o) - First Amendment, effective as of February 1, 1995, to Master
Trust.
99(p) - Second Amendment, effective as of February 1, 1995 to Master
Trust.
99(q) - Third Amendment, effective January 1, 1996, to Master Trust.
(b) Registrants did not file any reports on Form 8-K during the fourth
quarter of 1995.
(c) *Denotes management contract or compensatory plan or arrangement
required to be filed as an exhibit to this report.
73
<PAGE> 75
DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance ----------------------- Balance
at Beginning Charged to Charged to at End
of Costs and Other of
Description Period Expenses Accounts(a) Deductions(b) Period
- ------------------------- ------------ ---------- ----------- ------------- -------
<S> <C> <C> <C> <C> <C>
(Thousands)
YEAR 1995
Allowance for
uncollectible accounts
(shown as deduction
from accounts receivable
in balance sheet) ...... $30,000 $4,849 $3,253 $(16,102) $22,000
YEAR 1994
Allowance for
uncollectible accounts
(shown as deduction
from accounts receivable
in balance sheet) ...... $34,000 $11,585 $3,246 $(18,831) $30,000
YEAR 1993
Allowance for
uncollectible accounts
(shown as deduction
from accounts receivable
in balance sheet) ...... $32,000 $21,953 $2,752 $(22,705) $34,000
</TABLE>
- -------------------------------------------
(a) Collection of accounts previously written off.
(b) Uncollectible accounts written off.
74
<PAGE> 76
SIGNATURES
Pursuant to the requirements of Section 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.
<TABLE>
<S> <C>
DTE ENERGY COMPANY
------------------------------------
(Registrant)
By /s/ JOHN E. LOBBIA By /s/ LARRY G. GARBERDING
------------------------------------ ------------------------------------
John E. Lobbia Larry G. Garberding
Chairman of the Board, Executive Vice President,
Chief Executive Officer and Director Chief Financial Officer and Director
By /s/ ANTHONY F. EARLEY, JR. By /s/ RONALD W. GRESENS
------------------------------------ ------------------------------------
Anthony F. Earley, Jr. Ronald W. Gresens
President, Vice President and Controller
Chief Operating Officer and Director
By /s/ TERENCE E. ADDERLEY By /s/ PATRICIA S. LONGE
------------------------------------ ------------------------------------
Terence E. Adderley, Director Patricia S. Longe, Director
By /s/ LILLIAN BAUDER By /s/ EUGENE A. MILLER
------------------------------------ ------------------------------------
Lillian Bauder, Director Eugene A. Miller, Director
By /s/ DAVID BING By /s/ DEAN E. RICHARDSON
------------------------------------ ------------------------------------
David Bing, Director Dean E. Richardson, Director
By /s/ ALLAN D. GILMOUR By /s/ ALAN E. SCHWARTZ
------------------------------------ ------------------------------------
Allan D. Gilmour, Director Alan E. Schwartz, Director
By /s/ THEODORE S. LEIPPRANDT By /s/ WILLIAM WEGNER
------------------------------------ ------------------------------------
Theodore S. Leipprandt, Director William Wegner, Director
</TABLE>
Date: March 25, 1996
75
<PAGE> 77
SIGNATURES
Pursuant to the requirements of Section 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.
<TABLE>
<S> <C>
THE DETROIT EDISON COMPANY
-----------------------------
(Registrant)
By /s/ JOHN E. LOBBIA By /s/ LARRY G. GARBERDING
------------------------------------ -----------------------------
John E. Lobbia Larry G. Garberding
Chairman of the Board, Executive Vice President,
Chief Executive Officer and Director Chief Financial Officer and Director
By /s/ ANTHONY F. EARLEY, JR. By /s/ RONALD W. GRESENS
------------------------------------ -----------------------------
Anthony F. Earley, Jr. Ronald W. Gresens
President, Vice President and Controller
Chief Operating Officer and Director
By /s/ TERENCE E. ADDERLEY By /s/ PATRICIA S. LONGE
------------------------------------ -----------------------------
Terence E. Adderley, Director Patricia S. Longe, Director
By /s/ LILLIAN BAUDER By /s/ EUGENE A. MILLER
------------------------------------ -----------------------------
Lillian Bauder, Director Eugene A. Miller, Director
By /s/ DAVID BING By /s/ DEAN E. RICHARDSON
------------------------------------ -----------------------------
David Bing, Director Dean E. Richardson, Director
By /s/ ALLAN D. GILMOUR By /s/ ALAN E. SCHWARTZ
------------------------------------ -----------------------------
Allan D. Gilmour, Director Alan E. Schwartz, Director
By /s/ THEODORE S. LEIPPRANDT By /s/ WILLIAM WEGNER
------------------------------------ -----------------------------
Theodore S. Leipprandt, Director William Wegner, Director
</TABLE>
Date: March 25, 1996
76
<PAGE> 78
ANNUAL REPORTS ON FORM 10-K FOR DTE ENERGY COMPANY
AND THE DETROIT EDISON COMPANY
File Nos. 1-11607
1-2198
EXHIBIT INDEX
Exhibit Page
Number Number
------- ------
Exhibits filed herewith.
3-3 - Amended and Restated By-Laws, dated as of
February 26, 1996, of DTE Energy Company.
3-4 - Amended and Restated By-Laws, dated as of
February 26, 1996, of The Detroit Edison Company.
4-14 - Fifth Supplemental Note Indenture, dated as
of February 1, 1996.
4-15 - Supplemental Indenture, dated as of April 1, 1991,
establishing the 1991 Series AP Mortgage Bonds.
*10-1 - Detroit Edison 1996 Shareholder Value
Improvement Plan - A.
*10-2 - Detroit Edison Key Employee Deferred
Compensation Plan (January 1990).
*10-3 - Detroit Edison Long-Term Incentive Plan.
<PAGE> 79
Exhibit Page
Number Number
------- ------
11-2 - DTE Energy Company and Subsidiary Companies
Primary and Fully Diluted Earnings Per Share of
Common Stock.
12-2 - The Detroit Edison Company and Subsidiary
Companies Computation of Ratio of Earnings to
Fixed Charges.
12-3 - The Detroit Edison Company and Subsidiary
Companies Computation of Ratio of Earnings to
Fixed Charges and Preferred and Preference
Stock Dividends.
16-1 - Letter regarding change in certifying accountant.
23-7 - Consent of Deloitte & Touche LLP.
23-8 - Consent of Price Waterhouse LLP.
27-1 - Financial Data Schedule for the period ended
December 31, 1995 for DTE Energy Company and
Subsidiary Companies.
27-2 - Financial Data Schedule for the period ended
December 31, 1995 for The Detroit Edison Company
and Subsidiary Companies.
99-1 - The Detroit Edison Company Irrevocable Grantor
Trust for The Detroit Edison Company Savings
Reparation Plan.
99-2 - The Detroit Edison Company Irrevocable Grantor
Trust for The Detroit Edison Company Retirement
Reparation Plan.
99-3 - The Detroit Edison Company Irrevocable Grantor
Trust for The Detroit Edison Company Management
Supplemental Benefit Plan.
99-4 - The Detroit Edison Company Irrevocable Grantor
Trust for The Detroit Edison Company Benefit
Equalization Plan.
99-5 - The Detroit Edison Company Irrevocable Grantor
Trust for The Detroit Edison Company Plan for
Deferring the Payment of Directors' Fees.
<PAGE> 80
Exhibit Page
Number Number
------- ------
99-6 - The Detroit Edison Company Irrevocable Grantor
Trust for The DTE Energy Company Retirement
Plan for Non-Employee Directors.
99-7 - DTE Energy Company Irrevocable Grantor Trust
for The DTE Energy Company Plan for Deferring
the Payment of Directors' Fees.
99-8 - DTE Energy Company Irrevocable Grantor Trust for
The DTE Energy Company Retirement Plan for
Non-Employee Directors.
Exhibits incorporated herein by reference.
See Page Numbers
____ for location of
Exhibits Incorporated
By Reference
3(a) - Restated Articles of Incorporation of Detroit
Edison, as filed December 10, 1991 with the
State of Michigan, Department of Commerce -
Corporation and Securities Bureau
(Exhibit 4-117 to Form 10-Q for quarter ended
March 31, 1993).
3(b) - Certificate containing resolution of the Detroit
Edison Board of Directors establishing the
Cumulative Preferred Stock, 7.75% Series as filed
February 22, 1993 with the State of Michigan,
Department of Commerce - Corporation and
Securities Bureau (Exhibit 4-134 to Form 10-Q
for quarter ended March 31, 1993).
3(c) - Certificate containing resolution of the Detroit
Edison Board of Directors establishing the
Cumulative Preferred Stock, 7.74% Series, as
filed April 21, 1993 with the State of Michigan,
Department of Commerce - Corporation and Securities
Bureau (Exhibit 4-140 to Form 10-Q for quarter
ended March 31, 1993).
3(d) - Amended and Restated Articles of Incorporation
of DTE Energy Company, dated December 13, 1995
(Exhibit 3A (3.1) to DTE Energy Form 8-B filed
January 2, 1996, File No. 1-11607).
3(e) - Agreement and Plan of Exchange (Exhibit 1(2) to
DTE Energy Form 8-B filed January 2, 1996,
File No. 1-11607).
<PAGE> 81
Exhibit Page
Number Number
------- ------
4(a) - Mortgage and Deed of Trust, dated as of
October 1, 1924, between Detroit Edison
(File No. 1-2198) and Bankers Trust Company as
Trustee (Exhibit B-1 to Registration No. 2-1630)
and indentures supplemental thereto, dated as of
dates indicated below, and filed as exhibits to
the filings as set forth below:
September 1, 1947 Exhibit B-20 to Registration No.
2-7136
October 1, 1968 Exhibit 2-B-33 to Registration
No. 2-30096
November 15, 1971 Exhibit 2-B-38 to Registration
No. 2-42160
January 15, 1973 Exhibit 2-B-39 to Registration
No. 2-46595
June 1, 1978 Exhibit 2-B-51 to Registration
No. 2-61643
June 30, 1982 Exhibit 4-30 to Registration No.
2-78941
August 15, 1982 Exhibit 4-32 to Registration No.
2-79674
October 15, 1985 Exhibit 4-170 to Form 10-K for
year ended December 31, 1994
November 30, 1987 Exhibit 4-139 to Form 10-K for
year ended December 31, 1992
July 15, 1989 Exhibit 4-171 to Form 10-K for
year ended December 31, 1994
December 1, 1989 Exhibit 4-172 to Form 10-K for
year ended December 31, 1994
February 15, 1990 Exhibit 4-173 to Form 10-K for
year ended December 31, 1994
November 1, 1990 Exhibit 4-110 to Form 10-K for
year ended December 31, 1990
May 1, 1991 Exhibit 4-112 to Form 10-Q for
quarter ended June 30, 1991
May 15, 1991 Exhibit 4-113 to Form 10-Q for
quarter ended June 30, 1991
September 1, 1991 Exhibit 4-116 to Form 10-Q for
quarter ended September 30, 1991
November 1, 1991 Exhibit 4-119 to Form 10-K for year
ended December 31, 1991
<PAGE> 82
Exhibit Page
Number Number
------- ------
January 15, 1992 Exhibit 4-120 to Form 10-K for
year ended December 31, 1991
February 29, 1992 Exhibit 4-121 to Form 10-Q for
quarter ended March 31, 1992
April 15, 1992 Exhibit 4-122 to Form 10-Q for
quarter ended June 30, 1992
July 15, 1992 Exhibit 4-123 to Form 10-Q for
quarter ended September 30, 1992
July 31, 1992 Exhibit 4-124 to Form 10-Q for
quarter ended September 30, 1992
November 30, 1992 Exhibit 4-130 to Registration
No. 33-56496
January 1, 1993 Exhibit 4-131 to Registration
No. 33-56496
March 1, 1993 Exhibit 4-141 to Form 10-Q for
quarter ended March 31, 1993
March 15, 1993 Exhibit 4-142 to Form 10-Q for
quarter ended March 31, 1993
April 1, 1993 Exhibit 4-143 to Form 10-Q for
quarter ended March 31, 1993
April 26, 1993 Exhibit 4-144 to Form 10-Q for
quarter ended March 31, 1993
May 31, 1993 Exhibit 4-148 to Registration
No. 33-64296
June 30, 1993 Exhibit 4-149 to Form 10-Q for
quarter ended June 30, 1993
(1993 Series AP)
June 30, 1993 Exhibit 4-150 to Form 10-Q for
quarter ended June 30, 1993
(1993 Series H)
September 15, 1993 Exhibit 4-158 to Form 10-Q for
quarter ended September 30, 1993.
March 1, 1994 Exhibit 4-163 to Registration No.
33-53207.
June 15, 1994 Exhibit 4-166 to Form 10-Q for
quarter ended June 30, 1994.
August 15, 1994 Exhibit 4-168 to Form 10-Q for
quarter ended September 30, 1994.
December 1, 1994 Exhibit 4-169 to Form 10-K for
year ended December 31, 1994.
August 1, 1995 Exhibit 4-174 to Form 10-Q for
quarter ended September 30, 1995.
<PAGE> 83
Exhibit Page
Number Number
------- ------
4(b) - Collateral Trust Indenture (notes), dated as of
June 30, 1993 (Exhibit 4-152 to Registration
No. 33-50325).
4(c) - First Supplemental Note Indenture, dated as of
June 30, 1993 (Exhibit 4-153 to Registration
No. 33-50325).
4(d) - Second Supplemental Note Indenture, dated as of
September 15, 1993 (Exhibit 4-159 to Form 10-Q
for quarter ended September 30, 1993).
4(e) - Third Supplemental Note Indenture, dated as of
August 15, 1994 (Exhibit 4-169 to Form 10-Q for
quarter ended September 30, 1994).
4(f) - First Amendment, dated as of December 12, 1995,
to Third Supplemental Note Indenture, dated as
of August 15, 1994 (Exhibit 4-12 to Registration
No. 333-00023).
4(g) - Fourth Supplemental Note Indenture, dated as of
August 15, 1995 (Exhibit 4-175 to Detroit Edison
Form 10-Q for quarter ended September 30, 1995).
4(h) - Fifth Supplemental Indenture, dated as of
February 1, 1996 (Exhibit 4-1 to Detroit Edison
Form 8-A dated March 11, 1996).
4(i) - Standby Note Purchase Credit Facility, dated as
of August 17, 1994, among The Detroit Edison
Company, Barclays Bank PLC, as Bank and
Administrative Agent, Bank of America, The Bank of
New York, The Fuji Bank Limited, The Long-Term Credit
Bank of Japan, LTD, Union Bank and Citicorp
Securities, Inc. and First Chicago Capital Markets,
Inc. as Remarketing Agents (Exhibit 99-18 to Form
10-Q for quarter ended September 30, 1994).
<PAGE> 84
Exhibit Page
Number Number
------- ------
*10(a) - Form of 1995 Indemnification Agreement
between the Registrant and (1) Terence E.
Adderley, (2) Lillian Bauder, (3) David
Bing, (4) Anthony F. Earley, Jr., (5)
Larry G. Garberding, (6) Allan D.
Gilmour, (7) Theodore S. Leipprandt, (8)
John E. Lobbia, (9) Patricia S. Longe,
(10) Eugene A. Miller, (11) Dean E.
Richardson, (12) Alan E. Schwartz, (13)
William Wegner, (14) Christopher C. Arvani,
(15) Susan M. Beale, (16) Elaine M. Godfrey,
(17) Ronald J. Giaier, (18) Ronald W.
Gresens, (19) Thomas A. Hughes, (20)
Frederick S. Karwacki, (21) Leslie L.
Loomans, (22) Peter A. Marquardt, (23)
Christopher C. Nern, and (24) Albert J.
Tack (Exhibit 3L (10-1) to DTE Energy
Company Form 8-B dated January 2, 1996).
*10(b) - Form of Indemnification Agreement between The
Detroit Edison Company ("Detroit Edison")
and (1) Frank E. Agosti, (2) Gerard M.
Anderson, (3) Robert J. Buckler, (4) Ronald W.
Gresens, (5) Leslie L. Loomans, (6) S. Martin
Taylor, (7) Susan M. Beale, (8) Frederick S.
Karwacki, (9) Douglas R. Gipson, (10) Thomas A.
Hughes, (11) Christopher C. Nern, (12) Elaine
M. Godfrey, (13) Christopher C. Arvani,
(14) Michael E. Champley, (15) Haven E.
Cockerham, (16) Ronald J. Giaier, (17) Peter A.
Marquardt, and (18) Albert J. Tack (Exhibit 10-41
to Detroit Edison's Form 10-Q for quarter ended
June 30, 1993).
*10(c) - The Detroit Edison Company Shareholder Value
Improvement Plan - A, as amended and restated
effective January 1, 1996 (Exhibit 3L (10-3) to
DTE Energy Form 8-B dated January 2, 1996).
*10(d) - Certain arrangements pertaining to the employment
of S. Martin Taylor (Exhibit 10-38 to Detroit
Edison's Form 10-K for year ended December 31, 1992).
*10(e) - Certain arrangements pertaining to the employment
of Anthony F. Earley, Jr. (Exhibit 10-53 to Detroit
Edison's Form 10-Q for quarter ended March 31, 1994).
*10(f) - Third Restatement of The Detroit Edison Company
Savings Reparation Plan, effective as of January 1, 1996
(Exhibit 3L (10-6) to DTE Energy Form 8-B dated
January 2, 1996).
<PAGE> 85
Exhibit Page
Number Number
------- ------
*10(g) - Certain arrangements pertaining to the employment
of Haven E. Cockerham (Exhibit 10-55 to Detroit
Edison's Form 10-Q for quarter ended September
30, 1994).
*10(h) - Third Restatement of the Retirement Reparation Plan
for Certain Employees of Detroit Edison, effective as
of January 1, 1996 (Exhibit 3L (10-9) to DTE Energy
Form 8-B dated January 2, 1996).
*10(i) - Third Restatement of the Benefit Equalization Plan
for Certain Employees of Detroit Edison, effective
as of January 1, 1996 (Exhibit 3L (10-10) to DTE
Energy Form 8-B dated January 2, 1996).
*10(j) - Certain arrangements pertaining to the employment
of Larry G. Garberding (Exhibit 28-52 to Detroit
Edison's Form 10-Q for quarter ended June 30, 1990).
*10(k) - Form of Indemnification Agreement, between Detroit
Edison and (1) John E. Lobbia, (2) Larry G. Garberding
and (3) Anthony F. Earley, Jr. (Exhibit 19-7 to Detroit
Edison's Form 10-Q for quarter ended March 31, 1992).
*10(l) - Form of Indemnification Agreement between Detroit
Edison and (1) Terence E. Adderley, (2) Lillian Bauder,
(3) David Bing, (4) Alan E. Schwartz , (5) William Wegner,
(6) Theodore S. Leipprandt, (7) Patricia S. Longe, (8)
Eugene A. Miller, (9) Dean E. Richardson, and (10) Alan
D. Gilmour (Exhibit 19-8 to Detroit Edison's Form
10-Q for quarter ended March 31, 1992).
*10(m) - Supplemental Long Term Disability Plan, dated November
5, 1991 (Exhibit 10-32 to Detroit Edison's Form 10-K
for year ended December 31, 1991).
*10(n) - Executive Vehicle Program, dated October 1, 1993 (Exhibit
10-47 to Detroit Edison's Form 10-Q for quarter ended
September 30, 1993).
*10(o) - Amendment No. 1 to Executive Vehicle Plan, November 1993
(Exhibit 10-58 to Detroit Edison's Form 10-K for year
ended December 31, 1993).
<PAGE> 86
Exhibit Page
Number Number
------- ------
*10(p) - Certain arrangements pertaining to the employment
of Gerard M. Anderson (Exhibit 10-40 to Detroit
Edison's Form 10-K for year ended December 31,
1993).
*10(q) - Third Restatement of The Detroit Edison Company
Management Supplemental Benefit Plan, effective
as of January 1, 1996 (Exhibit 3L (10-18) to
DTE Energy Form 8-B dated January 2, 1996).
*10(r) - Third Restatement of The Detroit Edison Company
Plan for Deferring the Payment of Directors' Fees
(January 1, 1996) (Exhibit 3L (10-19) to DTE Energy
Form 8-B dated January 2, 1996).
*10(s) - DTE Energy Company Retirement Plan for Non-Employee
Directors (January 1, 1996) (Exhibit 3L (10-20) to
DTE Energy Form 8-B dated January 2, 1996).
*10(t) - DTE Energy Company Plan for Deferring the Payment of
Directors' Fees (January 1, 1996) (Exhibit 3L (10-21)
to DTE Energy Form 8-B dated January 2, 1996).
21(a) - Subsidiaries of DTE Energy and Detroit Edison (Exhibit
3M (21) to DTE Energy Form 8-B dated January 2, 1996).
99(a) - Belle River Participation Agreement between Detroit
Edison and Michigan Public Power Agency, dated as of
December 1, 1982 (Exhibit 28-5 to Registration No.
2-81501).
99(b) - Belle River Transmission Ownership and Operating
Agreement between Detroit Edison and Michigan Public
Power Agency, dated as of December 1, 1982 (Exhibit
28-6 to Registration No. 2-81501.)
99(c) - 1988 Amended and Restated Loan Agreement, dated as of
October 4, 1988, between Renaissance Energy Company
(an unaffiliated company) ("Renaissance") and Detroit
Edison (Exhibit 99-6 to Registration No. 33-50325).
<PAGE> 87
Exhibit Page
Number Number
------- ------
99(d) - First Amendment to 1988 Amended and Restated Loan
Agreement, dated as of February 1, 1990, between
Detroit Edison and Renaissance (Exhibit 99-7 to
Registration No. 33-50325).
99(e) - Second Amendment to 1988 Amended and Restated
Loan Agreement, dated as of September 1, 1993,
between Detroit Edison and Renaissance (Exhibit
99-8 to Registration No. 33-50325).
99(f) - Third Amendment, dated as of August 31, 1994, to
1988 Amended and Restated Nuclear Fuel Heat
Purchase Contract, dated October 4, 1988, between
The Detroit Edison Company and Renaissance Energy
Company (Exhibit 99-21 to Form 10-Q for quarter
ended September 30, 1994).
99(g) - $200,000,000 364-Day Credit Agreement, dated as of
September 1, 1993, among Detroit Edison, Renaissance
and Barclays Bank PLC, New York Branch, as Agent
(Exhibit 99-12 to Registration No. 33-50325).
99(h) - First Amendment, dated as of August 31, 1994, to
$200,000,000 364-Day Credit Agreement, dated
September 1, 1993, among The Detroit Edison Company,
Renaissance Energy Company, the Banks party thereto
and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-19 to Form 10-Q for quarter ended
September 30, 1994).
99(i) - $200,000,000 Three-Year Credit Agreement, dated
September 1, 1993, among Detroit Edison,
Renaissance and Barclays Bank PLC, New York
Branch, as Agent (Exhibit 99-13 to Registration
No. 33-50325).
99(j) - 1988 Amended and Restated Nuclear Fuel Heat
Purchase Contract, dated October 4, 1988,
between Detroit Edison and Renaissance
(Exhibit 99-9 to Registration No. 33-50325).
<PAGE> 88
Exhibit Page
Number Number
------- ------
99(k) - First Amendment to 1988 Amended and Restated Nuclear
Fuel Heat Purchase Contract, dated as of February 1,
1990, between Detroit Edison and Renaissance (Exhibit
99-10 to Registration No. 33-50325).
99(l) - Second Amendment, dated as of September 1, 1993, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance (Exhibit 99-11 to
Registration No. 33-50325).
99(m) - First Amendment, dated as of September 1, 1994, to
$200,000,000 Three-Year Credit Agreement, dated as of
September 1, 1993, among The Detroit Edison Company,
Renaissance Energy Company, the Banks party thereto and
Barclays Bank, PLC, New York Branch, as Agent (Exhibit
99-20 to Form 10-Q for quarter ended September 30, 1994).
99(n) - Master Trust Agreement ("Master Trust"), dated as of
June 30, 1994, between Detroit Edison and Fidelity
Management Trust Company relating to the Savings &
Investment Plans (Exhibit 4-167 to Form 10-Q for
quarter ended June 30, 1994).
99(o) - First Amendment, effective as of February 1, 1995,
to Master Trust.
99(p) - Second Amendment, effective as of February 1, 1995
to Master Trust.
99(q) - Third Amendment, effective January 1, 1996, to
Master Trust.
(b) Registrants did not file any reports on Form 8-K during
the fourth quarter of 1995.
* Denotes management contract or compensatory plan or
arrangement required to be filed as an exhibit to
this report.
<PAGE> 1
EXHIBIT 3-3
BYLAWS
of
DTE ENERGY COMPANY
_____________________
As amended through February 26, 1996
_____________________
<PAGE> 2
BYLAWS
of
DTE ENERGY COMPANY
_____________________
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
ARTICLE I
Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
SECTION 1. Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
SECTION 2. Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
SECTION 3. Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 1
SECTION 4. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 2
SECTION 5. Voting and Inspectors. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 2
SECTION 6. Record of Shareholders. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 2
SECTION 7. List of Shareholders. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 3
ARTICLE II
Board of Directors and Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 3
SECTION 1. Number, Time of Holding Office, and Limitation on
Age. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 3
SECTION 2. Vacancies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 4
SECTION 3. Meetings of the Board. . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 4
SECTION 4. Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 4
SECTION 5. Annual Meeting of Directors. . . . . . . . . . . . . . . . . . . . .. . . . . . 5
SECTION 6. Executive Committee. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
SECTION 7. Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
SECTION 8. Participation in Meetings . . . . . . . . . . . . . . . . . . . . . .. . . . . . 5
SECTION 9. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 6
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE III
Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 6
SECTION 1. Officers and Agents . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 6
SECTION 2. Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 6
SECTION 3. Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 6
SECTION 4. President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
SECTION 5. Other Officers . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
SECTION 6. Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
SECTION 7. Voting of Shares and Securities
of Other Corporations . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
ARTICLE IV
Capital Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
SECTION 1. Certificates of Shares . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 7
SECTION 2. Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
SECTION 3. Lost or Destroyed Stock Certificates . . . . . . . . . . . . . . . .. . . . . . 8
ARTICLE V
Checks, Notes, Bonds, Debentures, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
ARTICLE VI
Corporate Seal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
ARTICLE VII
Control Share Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 8
ARTICLE VIII
Amendment of Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . 9
</TABLE>
ii
<PAGE> 4
BYLAWS
OF
DTE ENERGY COMPANY
AS AMENDED THROUGH FEBRUARY 26, 1996
ARTICLE I
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the
shareholders of the Company shall be held on the fourth Monday of April in each
year (or if said day be a legal holiday, then on the next succeeding day not a
legal holiday), at such time and at such place as may be fixed by the Board of
Directors and stated in the notice of meeting, for the purpose of electing
directors and transacting such other business as may properly be brought before
the meeting.
SECTION 2. SPECIAL MEETINGS. Special meetings of the
shareholders may be held upon call of the Board of Directors or the Chairman of
the Board or the President or the holders of record of a majority of the
outstanding shares of stock of the Company entitled to vote at such meeting, at
such time as may be fixed by the Board of Directors or the Chairman of the
Board or the President or such shareholders and stated in the notice of
meeting. All such meetings shall be held at the office of the Company in the
City of Detroit unless some other place is specified in the notice.
SECTION 3. NOTICE OF MEETINGS. Written notice of the date,
time, place, and purpose or purposes of every meeting of the shareholders,
signed by the Secretary or an Assistant Secretary, shall be given either
personally or by mail, within the time prescribed by law, to each shareholder
of record entitled to vote at such meeting and to any shareholder who, by
reason of any action proposed to be taken at such meeting, might be entitled to
receive payment for such stock if such action were taken. If mailed, such
notice is given when deposited in the United States mail, with postage prepaid,
directed to the shareholder at the address as it appears on the record of
shareholders, or, if the shareholders shall have filed with the Secretary of
the Company a written request that notices intended for such shareholder be
mailed to some other address, then directed to the address designated in such
request. Further notice shall be given by mail, publication, or otherwise, if
and as required by law.
<PAGE> 5
Notice of meeting need not be given to any shareholder who submits a
signed waiver of notice, in person or by proxy, whether before or after the
meeting. The attendance of any shareholder at the meeting, in person or by
proxy, without protesting at the beginning of the meeting the lack of notice of
such meeting, shall constitute a waiver of notice by such shareholder.
Notice of a special meeting shall also indicate that it is being
issued by or at the direction of the person or persons calling the meeting.
SECTION 4. QUORUM. At every meeting of the shareholders, the
holders of record of a majority of the outstanding shares of stock of the
Company entitled to vote at such meeting, whether present in person or
represented by proxy, shall constitute a quorum. If at any meeting there shall
be no quorum, the holders of a majority of the outstanding shares of stock so
present or represented may adjourn the meeting from time to time, without
notice (unless otherwise required by statute) other than announcement at the
meeting, until a quorum shall have been obtained, when any business may be
transacted which might have been transacted at the meeting as first convened
had there been a quorum. When a quorum is once present to organize a meeting,
it is not broken by the subsequent withdrawal of any shareholder.
SECTION 5. VOTING AND INSPECTORS. Except as provided in the
Articles of Incorporation, each holder of record of outstanding shares of stock
of the Company entitled to vote at a meeting of shareholders shall be entitled
to one vote for each share of stock standing in the shareholder's name on the
record of shareholders, and may so vote either in person or by proxy appointed
by instrument in writing executed by such holder or by the shareholder's duly
authorized attorney-in-fact. No proxy shall be valid after the expiration of
three years from the date of its execution unless the shareholder executing it
shall have specified the length of time it is to continue in force which shall
be for some limited period. The authority of the holder of a proxy to act
shall not be revoked by the incompetence or death of the shareholder who
executed the proxy unless, before the authority is exercised, written notice of
an adjudication of such incompetence or of such death is received by the
Secretary or an Assistant Secretary.
In advance of any meeting of shareholders, the Board of Directors may
appoint one or more inspectors for the meeting. If inspectors are not so
appointed, the chairman of the meeting shall appoint such inspectors. Before
entering upon the discharge of their duties, the inspectors shall take and
subscribe an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of their ability, and shall
take charge of the polls and after balloting shall make a certificate of the
result of the vote taken. No officer or director of the Company or candidate
for office of director shall be appointed as an inspector. At all elections of
directors the voting shall be by ballot and a plurality of the votes cast shall
elect.
2
<PAGE> 6
SECTION 6. RECORD OF SHAREHOLDERS. For the purpose of
determining the shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or to express consent to or dissent
from any proposal without a meeting, or for the purpose of determining
shareholders entitled to receive payment of any dividend or the allotment of
any rights, or for the purpose of any other action, the Board of Directors may
fix, in advance, a date as the record date for any such determination of
shareholders. The record date shall not precede the date upon which is it
fixed and shall not be less than ten days nor more than the maximum number of
days permitted by law before the date of the meeting, or taking of any other
action.
SECTION 7. LIST OF SHAREHOLDERS. A list of shareholders of
record, arranged alphabetically within each class and series of stock, as of
the record date, certified by the Secretary or any Assistant Secretary or by a
transfer agent, shall be produced at any meeting of shareholders and may be
inspected by any shareholder at any time during the meeting. If the right to
vote at any meeting is challenged, the inspectors, or the chairman presiding at
the meeting, shall require such list of shareholders to be produced as evidence
of the right of the persons challenged to vote at such meeting, and all persons
who appear on such list to be shareholders entitled to vote thereat may vote at
such meeting.
ARTICLE II
BOARD OF DIRECTORS AND COMMITTEES
SECTION 1. NUMBER, TIME OF HOLDING OFFICE AND LIMITATION ON AGE.
The business and affairs of the Company shall be managed by or under the
direction of a Board of Directors. The number of directors constituting the
entire Board shall be determined from time to time by resolution of the Board
so long as the total number of directors is not less than twelve nor more than
eighteen; provided, however, that the minimum and maximum number of directors
may be increased or decreased from time to time by vote of a majority of the
entire Board; and, further provided that no change in the number of directors
shall serve to shorten the term of office of any incumbent director. The
directors shall be divided into three classes, as nearly equal in number as
possible, and the term of the office of the first class shall expire at the
1996 annual meeting of shareholders, the term of office of the second class
shall expire at the 1997 annual meeting of shareholders and the term of office
of the third class shall expire at the 1998 annual meeting of shareholders, or,
in each case, until their successors shall be duly elected and qualified. At
each annual meeting commencing in 1996, a number of directors equal to the
number of the class whose term expires at the time of the meeting shall be
elected to hold office until the third succeeding annual meeting of
shareholders. If at any time the holders of any series of the Company's
Preferred Stock are entitled to elect directors pursuant to the Articles of
Incorporation of the Company, then the provisions of such series of Preferred
Stock with respect to their rights shall apply and
3
<PAGE> 7
such directors shall be elected in a manner and for terms expiring consistent
with the Articles of Incorporation.
Except as hereinafter provided, each director shall be a holder of
common stock of the Company at the time of initial election to the Board or
shall become a holder within thirty days after such election (to the extent of
at least one share, owned beneficially). Any director who thereafter ceases to
be such a holder, shall thereupon cease to be a director. The Board shall have
the authority to waive the requirement to hold shares in individual situations
upon presentation of evidence that a nominee or director is unable to hold
shares for legal or religious reasons.
No person who shall have served as an employee of the Company or an
affiliate shall be elected a director after retiring from employment with the
Company or an affiliate; provided, however, that if such person was the chief
executive officer of the Company at the time of such retirement, such person
shall be eligible for election as a director until attaining age seventy. No
other person shall be elected a director after attaining age seventy; provided,
however, the Board shall have the authority to waive this provision for no more
than one three- year term upon a determination that circumstances exist which
make it prudent to continue the service of a director who possesses special and
unique expertise clearly beneficial to the Company.
SECTION 2. VACANCIES. Whenever any vacancy shall occur in the
Board of Directors by death, resignation, or any other cause, it shall be
filled without undue delay by a majority vote of the remaining members of the
Board of Directors (even if constituting less than a quorum), and the person
who is to fill any such vacancy shall hold office for the unexpired term of the
director to whom such person succeeds, or for the term fixed by the Board of
Directors acting in compliance with Section l of this Article II in case of a
vacancy created by an increase in the number of directors, and until a
successor shall be elected and shall have qualified; provided, however, that no
vacancy need be filled if, after such vacancy shall occur, the number of
directors remaining on the Board shall be not less than a majority of the
entire Board including any vacancies. During the existence of any vacancy or
vacancies, the surviving or remaining directors shall possess and may exercise
all the powers of the full Board of Directors, when action by a larger number
is not required by law.
SECTION 3. MEETINGS OF THE BOARD. Regular meetings of the Board
of Directors shall be held at such times and at such places as may from time to
time be fixed by the Board of Directors.
Special meetings of the Board of Directors may be called by the
Chairman of the Board, the President, or, in the event of the incapacity of the
Chairman of the Board and the President, the Executive Committee by giving
reasonable notice of the time and place of such meetings or by obtaining
written waivers of notice, before or after the meeting,
4
<PAGE> 8
from each absent director. All such meetings shall be held at the office of
the Company in the City of Detroit unless some other place is specified in the
notice.
A notice, or waiver of notice, need not specify the purpose of the
meeting.
SECTION 4. QUORUM. A majority of the directors in office at the
time of a meeting of the Board, shall constitute a quorum for the transaction
of business. If at any meeting of the Board of Directors there shall be less
than a quorum present, a majority of the directors present may adjourn the
meeting without notice other than announcement at the meeting, until a quorum
shall have been obtained, when any business may be transacted which might have
been transacted a the meeting as first convened had there been a quorum. The
acts of a majority of the directors present at any meeting at which there is a
quorum shall be the acts of the Board, unless otherwise provided by law, by the
Articles of Incorporation or by the Bylaws.
SECTION 5. ANNUAL MEETING OF DIRECTORS. A meeting of the Board
of Directors, known as the directors' annual meeting, shall be held without
notice each year after the adjournment of the annual shareholders' meeting and
on the same day. At such meeting the officers of the Company for the ensuing
year shall be elected. If a quorum of the directors is not present on the day
appointed for the directors' annual meeting, the meeting shall be adjourned to
some convenient day.
SECTION 6. EXECUTIVE COMMITTEE. The Board of Directors may, by
resolution or resolutions passed by a majority of the entire Board, designate
an Executive Committee to consist of the Chief Executive Officer and two or
more of the other directors, and alternates, and shall designate the Chairman
thereof. The Executive Committee shall have and may exercise, when the Board
is not in session, all of the powers of the Board in the management of the
business and affairs of the Company, and shall have power to authorize the seal
of the Company to be affixed to all papers which may require it. The Executive
Committee shall not have power to (a) amend these Bylaws, (b) change the number
of directors constituting the entire Board or fill vacancies in the Board, (c)
declare dividends, (d) establish, change the membership of, or fill vacancies
in, any committee, (e) fix the compensation of the directors or committee
members, (f) submit matters for action by shareholders, or (g) amend or repeal
a resolution of the Board which by its terms may not be changed by the
Executive Committee. The Board shall have the power at any time to fill
vacancies in, to change the membership of, or to dissolve, the Executive
Committee. The Executive Committee may make rules for the conduct of its
business and may appoint such subcommittees and assistants as it shall from
time to time deem necessary. A majority of the members of the Executive
Committee shall constitute a quorum. All action taken by the Executive
Committee shall be reported to the Board at its next meeting succeeding such
action. The Corporate Secretary or an Assistant Corporate Secretary shall
attend and act as the secretary of all meetings of the Committee and keep the
minutes thereof.
5
<PAGE> 9
Meetings of the Executive Committee may be called by the Chairman of
the Board, or, the President, or, in the event of the incapacity of the
Chairman of the Board and the President, by two or more members of the
Executive Committee by giving reasonable notice of the time and place of such
meetings. All such meetings shall be held at the office of the Company in the
City of Detroit unless some other place is specified in the notice.
SECTION 7. COMMITTEES. The Board of Directors may, by
resolution, create a committee or committees of one or more directors, and
alternates, to consider and report upon or to carry out such matters (not
excepted by Article II, Section 6) as may be entrusted to them by the Board of
Directors, and shall designate the Chairman of each such committee.
SECTION 8. PARTICIPATION IN MEETINGS. One or more members of
the Board of Directors or any committee may participate in any meeting of such
Board or such committee by means of a conference telephone or similar
communications equipment which enables all persons participating in such a
meeting to hear each other at the same time. Participation in the manner so
described shall constitute presence in person at such meetings.
SECTION 9. COMPENSATION. Each director of the Company who is
not a salaried officer or employee of the Company may receive reasonable
compensation for services as a director, including a reasonable fee for
attendance at meetings of the Board and committees thereof, and attendance at
the Company's request at other meetings or similar activities related to the
Company.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS AND AGENTS. The officers of the Company to
be elected by the Board of Directors, as soon as practicable after the election
of directors each year, shall be Chairman of the Board, the President, a
Secretary and a Treasurer. The Board of Directors may also from time to time
elect one or more Vice Presidents, a Controller, a General Auditor, a General
Counsel, and such other officers and agents as it may deem proper. The
Chairman of the Board and the President shall be chosen from among the
directors. The persons holding the offices of Chairman of the Board or
President may not also hold the office of General Auditor. The Board of
Directors may, in its discretion, leave vacant any office other than that of
Chairman of the Board, President, Secretary, or Treasurer.
6
<PAGE> 10
SECTION 2. TERM OF OFFICE. The term of office of all officers
shall be until the next directors' annual meeting or until their respective
successors are chosen and qualified. Any officer or agent elected by the Board
of Directors may be removed by the Board at any time, with or without cause.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board
shall be the Chief Executive Officer of the Company and, shall preside at all
meetings of the Board of Directors and shareholders, at which the Chairman is
present, and shall make the annual report to the shareholders. The Chairman
shall have general charge of the business and affairs of the Company subject to
the control of the Board of Directors, may create in the name of the Company
any authorized corporate obligation or other instrument and shall perform such
other functions as may be prescribed by the Board from time to time.
The Chairman of the Board shall manage or supervise the conduct of the
corporate finances and relations of the Company with its shareholders, with the
public, and with regulatory authorities, and in addition to the President, may
exercise all powers elsewhere in the Bylaws conferred upon the President. The
Chairman may delegate from time to time to the President or to other officers,
employees or positions of the Company, such powers as the Chairman may specify
in writing, with such terms and conditions, if any, as the Chairman may set
forth. A copy of each such delegation and of any revocation or change shall be
filed with the Secretary.
SECTION 4. PRESIDENT. The President shall be the chief
operating officer of the Company, subject to the control of the Board of
Directors and the Chairman of the Board, shall have power to authorize the
employment of such subordinate employees as may, in the President's judgment,
be advisable for the operations of the Company, may execute in the name of the
Company any authorized corporate obligation or other instrument, and shall
perform all other acts incident to the President's office or prescribed by the
Board of Directors or the Chairman of the Board, or authorized or required by
law. During the absence or disability of the Chairman of the Board, the
President shall assume the duties and authority of the Chairman of the Board
and shall be the Chief Executive Officer of the Company.
SECTION 5. OTHER OFFICERS. The other officers, agents, and
employees of the Company shall each have such powers and perform such duties in
the management of the property and affairs of the Company, subject to the
control of the Board of Directors, as generally pertain to their respective
offices, as well as such powers and duties as from time to time may be
prescribed by the Board of Directors, by the Chairman of the Board, or by the
President.
SECTION 6. COMPENSATION. The Board of Directors shall determine
the compensation to be paid to the Chairman of the Board, the President, and
each Vice President above the level of Assistant Vice President.
7
<PAGE> 11
SECTION 7. VOTING OF SHARES AND SECURITIES OF OTHER
CORPORATIONS. Unless the Board of Directors otherwise directs, the Company's
Chairman of the Board and President shall each be entitled to vote or designate
a proxy to vote all shares and other securities which the Company owns in any
other corporation or entity.
ARTICLE IV
CAPITAL STOCK
SECTION 1. CERTIFICATES OF SHARES. The interest of each
shareholder shall be evidenced by a certificate or certificates for shares of
stock of the Company in such form as the Board of Directors may from time to
time prescribe. The certificates of stock shall be signed by the Chairman of
the Board, the President or a Vice President and by the Treasurer, an Assistant
Treasurer, the Corporate Secretary, or an Assistant Corporate Secretary of the
Company, and shall be countersigned by a transfer agent for the stock and
registered by a registrar for such stock. The signatures of the officers and
the transfer agent and the registrar upon such certificates may be facsimiles,
engraved, or printed, subject to the provisions of applicable law. In case any
officer, transfer agent, or registrar shall cease to serve in that capacity
after their facsimile signature has been placed on a certificate, the
certificates may be issued with the same effect as if the officer, transfer
agent, or registrar were still in office.
SECTION 2. TRANSFER OF SHARES. Shares in the capital stock of
the Company shall be transferred on the books of the Company upon surrender and
cancellation of certificates for a like number of shares, with duly executed
power to transfer endorsed on or attached to the certificate.
SECTION 3. LOST OR DESTROYED STOCK CERTIFICATES. No certificate
for shares of stock of the Company shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed, except upon production of such
evidence of the loss, theft or destruction, and upon indemnification of the
Company and its agents to such extent and in such manner as the Board of
Directors may from time to time prescribe.
ARTICLE V
CHECKS, NOTES, BONDS, DEBENTURES, ETC.
All checks and drafts on the Company's bank accounts, all bills of
exchange and promissory notes, and all acceptances, obligations, and other
instruments for the payment of money, shall be signed by such officer or
officers or agent or agents, either manually or by facsimile signature or
signatures, as shall be thereunto authorized from time to time by the Board of
Directors either generally or in specific instances; provided that bonds,
8
<PAGE> 12
debentures, and other evidences of indebtedness of the Company bearing
facsimile signatures of officers of the Company shall be issued only when
authenticated by a manual signature on behalf of a trustee or an authenticating
agent appointed by the Board of Directors. In case any such officer of the
Company shall cease to be such after such officer's facsimile signature has
been placed thereon, such bonds, debentures or other evidences of indebtedness
may be issued with the same effect as if such person were still in office.
ARTICLE VI
CORPORATE SEAL
The Board of Directors shall provide a suitable seal, containing the
name of the Company.
ARTICLE VII
CONTROL SHARE ACQUISITIONS
The Stacey, Bennett, and Randall Shareholder Equity Act (Chapter 7B of
the Michigan Business Corporation Act) shall not apply to any control share
acquisitions (as defined in such Act) of shares of the Company.
This Article VII of the Bylaws may not be amended, altered, or
repealed with respect to any control share acquisition of shares of the Company
effected pursuant to a tender offer or other transaction commenced prior to the
date of such amendment, alteration, or repeal.
ARTICLE VIII
AMENDMENT OF BYLAWS
Those provisions of these Bylaws providing for a classified Board of
Directors (currently the third, fourth and fifth sentences of the first
paragraph of Section 1 of Article II) and the provisions of this sentence may
be amended or repealed only by the affirmative vote of the holders of a
majority of shares of Common Stock of the Company. Except as provided in the
immediately preceding sentence, Bylaws of the Company may be amended, repealed
or adopted by vote of the holders of a majority of shares at the time entitled
to vote in the election of any directors or by vote of a majority of the
directors in office.
9
<PAGE> 1
EXHIBIT 3-4
________________________________________________________________________________
BY-LAWS
of
THE DETROIT EDISON COMPANY
__________________
As amended through
February 26, 1996
__________________
________________________________________________________________________________
<PAGE> 2
BY-LAWS
OF
THE DETROIT EDISON COMPANY
--------------
INDEX
ARTICLE I
SHAREHOLDERS PAGE
Section 1. Annual Meeting ............................................. 1
Section 2. Special Meeting ............................................ 1
Section 3. Notice of Meetings ......................................... 1
Section 4. Quorum ..................................................... 1
Section 5. Voting and Inspectors ...................................... 2
Section 6. Record of Shareholders ..................................... 2
Section 7. List of Shareholders ....................................... 2
ARTICLE II
BOARD OF DIRECTORS AND COMMITTEES
Section 1. Number, Time of Holding Office and Limitation on Age ....... 2
Section 2. Vacancies .................................................. 3
Section 3. Meetings of the Board ...................................... 3
Section 4. Quorum ..................................................... 4
Section 5. Annual Meeting of Directors ................................ 4
Section 6. Executive Committee ........................................ 4
Section 7. Committees ................................................. 4
Section 8. Participation in Meetings .................................. 4
Section 9. Compensation ............................................... 5
ARTICLE III
OFFICERS
Section 1. Officers and Agents ........................................ 5
Section 2. Term of Office ............................................. 5
Section 3. Chairman of the Board ...................................... 5
Section 4. President .................................................. 5
Section 5. Other Officers ............................................. 6
Section 6. Compensation ............................................... 6
ARTICLE IV
CAPITAL STOCK
Section 1. Certificates of Shares ..................................... 6
Section 2. Transfer of Shares ......................................... 6
Section 3. Lost or Destroyed Stock Certificates ....................... 6
ARTICLE V
CHECKS, NOTES, BONDS, DEBENTURES, ETC. .................................... 6
ARTICLE VI
CORPORATE SEAL ............................................................ 7
ARTICLE VII
CONTROL SHARE ACQUISITIONS ................................................ 7
ARTICLE VIII
AMENDMENT OF BY-LAWS ...................................................... 7
<PAGE> 3
BY-LAWS
OF
THE DETROIT EDISON COMPANY
AS AMENDED THROUGH FEBRUARY 26, 1996
ARTICLE I
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of the shareholders of the
Company shall be held on the fourth Monday of April in each year (or if said
day be a legal holiday, then on the next succeeding day not a legal
holiday), at such time and at such place as may be fixed by the Board of
Directors and stated in the notice of meeting, for the purpose of electing
directors and transacting such other business as may properly be brought before
the meeting.
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders may
be held upon call of the Board of Directors or the Chairman of the Board or the
President or the holders of record of a majority of the outstanding shares of
stock of the Company, at such time as may be fixed by the Board of Directors or
the Chairman of the Board or the President or such shareholders and stated in
the notice of meeting. All such meetings shall be held at the office of the
Company in the City of Detroit unless some other place is specified in the
notice.
SECTION 3. NOTICE OF MEETINGS. Written notice of the time, place and
purpose or purposes of every meeting of the shareholders, signed by the
Secretary or an Assistant Secretary, shall be given either personally or by
mail, within the time prescribed by law, to each shareholder of record entitled
to vote at such meeting and to any shareholder who, by reason of any action
proposed at such meeting, might be entitled to receive payment for such stock
if such action were taken. If mailed, such notice is given when deposited in
the United States mail, with postage thereon prepaid, directed to the
shareholder at the address as it appears on the record of shareholders, or, if
the shareholder shall have filed with the Secretary of the Company a written
request that notices intended for such shareholder be mailed to some other
address, then directed to the address designated in such request. Further
notice shall be given by mail, publication or otherwise, if and as required by
law.
Notice of meeting need not be given to any shareholder who submits a signed
waiver of notice, in person or by proxy, whether before or after the meeting.
The attendance of any shareholder at the meeting, in person or by proxy,
without protesting at the beginning of the meeting the lack of notice of such
meeting, shall constitute a waiver of notice by such shareholder.
Notice of a special meeting shall also indicate that it is being issued by
or at the direction of the person or persons calling the meeting.
SECTION 4. QUORUM. At every meeting of the shareholders, the holders of
record of a majority of the outstanding shares of stock of the Company, entitled
to vote at such meeting, whether present in person or represented by proxy,
shall constitute a quorum. If at any meeting there shall be no quorum, the
holders of a majority of the outstanding shares of stock so present or
represented may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall have been
<PAGE> 4
2 ARTICLE I and II
obtained, when any business may be transacted which might have been transacted
at the meeting as first convened had there been a quorum. When a quorum is
once present to organize a meeting, it is not broken by the subsequent
withdrawal of any shareholder.
SECTION 5. VOTING AND INSPECTORS. Each holder of record of outstanding
shares of stock of the Company entitled to vote at a meeting of shareholders
shall be entitled to one vote for each share of stock standing in the
shareholder's name on the record of shareholders, and may so vote either in
person or by proxy appointed by instrument in writing executed by such holder
or by the shareholder's duly authorized attorney-in-fact. No proxy shall be
valid after the expiration of eleven months from the date of its execution
unless the shareholder executing it shall have specified therein the length of
time it is to continue in force which shall be for some limited period. The
authority of the holder of a proxy to act shall not be revoked by the
incompetence or death of the shareholder who executed the proxy unless, before
the authority is exercised, written notice of an adjudication of such
incompetence or of such death is received by the Secretary or an Assistant
Secretary.
In advance of any meeting of shareholders, the Board of Directors may
appoint one or more inspectors for the meeting. If inspectors are not so
appointed, the chairman of the meeting shall appoint such inspectors. Before
entering upon the discharge of their duties, the inspectors shall take and
subscribe an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of their ability, and shall
take charge of the polls and after balloting shall make a certificate of the
result of the vote taken. No officer or director of the Company or candidate
for office of director shall be appointed as an inspector. At all elections of
directors the voting shall be by ballot and a plurality of the votes cast
thereat shall elect.
SECTION 6. RECORD OF SHAREHOLDERS. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to or dissent from any proposal
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or the allotment of any rights, or for the
purpose of any other action, the Board of Directors may fix, in advance, a date
as the record date for any such determination of shareholders, which record
date shall not be less than ten days nor more than the maximum number of days
permitted by law before the date of the meeting, or the taking of any other
action.
SECTION 7. LIST OF SHAREHOLDERS. A list of shareholders as of the record
date, certified by the Secretary or any Assistant Secretary or by a transfer
agent, shall be produced at any meeting of shareholders upon the request
thereat or prior thereto of any shareholder. If the right to vote at any
meeting is challenged, the inspectors, or the person presiding at the meeting,
shall require such list of shareholders to be produced as evidence of the
right of the persons challenged to vote at such meeting, and all persons who
appear on such list to be shareholders entitled to vote thereat may vote at
such meeting.
ARTICLE II
BOARD OF DIRECTORS AND COMMITTEES
SECTION 1. NUMBER, TIME OF HOLDING OFFICE AND LIMITATION ON AGE. The
business and affairs of the Company shall be managed and controlled by a Board
of Directors. The number of directors constituting the entire Board shall be
determined from time to time by resolution of the Board so long as the total
number of directors is not less than twelve nor more than eighteen; provided,
however, that the minimum and maximum number of directors may be increased or
decreased from time to time by vote of a majority of the entire Board; and,
further provided that no change in the number of directors shall serve to
shorten the term of office of any incumbent director. Commencing with the
annual election of directors by the
<PAGE> 5
ARTICLE II 3
shareholders in 1991, the directors shall be divided into three classes, as
nearly equal in number as possible, and the term of office of the first class
shall expire at the 1992 annual meeting of shareholders, the term of office of
the second class shall expire at the 1993 annual meeting of shareholders and
the term of office of the third class shall expire at the 1994 annual meeting
of shareholders, or, in each case, until their successors shall be duly elected
and qualified. At each annual meeting commencing in 1992, a number of directors
equal to the number of the class whose term expires at the time of the meeting
shall be elected to hold office until the third succeeding annual meeting of
shareholders. In the event the holders of the Preferred Stock or the
Preference Stock are entitled to elect directors as provided in Article V,
Division I, subdivision (9) or Article V, Division II, subdivision (9) of the
Restated Articles of Incorporation of the Company, then the provisions of such
class of stock with respect to their rights shall apply and such directors
shall be elected for terms expiring at the next annual meeting of shareholders
and without regard to the classification of the remaining members of the Board
of Directors.
Except as hereinafter provided, each director shall be a holder of
common stock of the Company at the time of initial election to the Board or
shall become a holder within thirty days after such election (to the extent of
at least one share, owned beneficially) and any director who thereafter ceases
to be such a holder, shall thereupon cease to be a director. The Board shall
have the authority to waive the requirement to hold shares in individual
situations upon presentation of evidence that a nominee or director is unable
to hold shares for legal or religious reasons.
NO PERSON WHO SHALL HAVE SERVED AS AN EMPLOYEE OF THE COMPANY SHALL BE
ELECTED A DIRECTOR AFTER RETIRING FROM EMPLOYMENT WITH THE COMPANY; PROVIDED,
HOWEVER, THAT IF SUCH PERSON WAS THE CHIEF EXECUTIVE OFFICER OF THE COMPANY AT
THE TIME OF SUCH RETIREMENT, SUCH PERSON SHALL BE ELIGIBLE FOR ELECTION AS A
DIRECTOR UNTIL ATTAINING AGE SEVENTY. NO OTHER PERSON SHALL BE ELECTED A
DIRECTOR AFTER ATTAINING AGE SEVENTY; PROVIDED, HOWEVER, THE BOARD SHALL HAVE
THE AUTHORITY TO WAIVE THIS PROVISION FOR NO MORE THAN ONE THREE-YEAR TERM UPON
A DETERMINATION THAT CIRCUMSTANCES EXIST WHICH MAKE IT PRUDENT TO CONTINUE THE
SERVICE OF A DIRECTOR WHO POSSESSES SPECIAL AND UNIQUE EXPERTISE CLEARLY
BENEFICIAL TO THE COMPANY.
SECTION 2. VACANCIES. Whenever any vacancy shall occur in the Board of
Directors by death, resignation, or any other cause, it shall be filled without
undue delay by a majority vote of the remaining members of the Board of
Directors, and the person who is to fill any such vacancy shall hold office for
the unexpired term of the director to whom such person succeeds, or for the
term fixed by the Board of Directors acting in compliance with Section 1 of
this Article II in case of a vacancy created by an increase in the number of
directors, and until a successor shall be elected and shall have qualified;
provided, however, that no vacancy need be filled if, after such vacancy shall
occur, the number of directors remaining on the Board shall be not less than a
majority of the entire Board including any vacancies. During the existence of
any vacancy or vacancies, the surviving or remaining directors shall possess
and may exercise all the powers of the full Board of Directors, when action by
a larger number is not required by law.
SECTION 3. MEETINGS OF THE BOARD. Regular meetings of the Board of
Directors shall be held at such times and at such places as may from time to
time be fixed by the Board of Directors.
Special meetings of the Board of Directors may be called by the Chairman of
the Board or the President or, in the event of the incapacity of the Chairman
of the Board and the President, the Executive Committee by giving reasonable
notice of the time and place of such meetings or by obtaining written waivers
of notice, before or after the meeting, from each absent director. All such
meetings shall be held at the office of the Company in the City of Detroit
unless some other place is specified in the notice.
A notice, or waiver of notice, need not specify the purpose of the meeting.
Special meetings of the Board of Directors may be held without notice or
waiver, provided the action taken at such meetings shall be ratified in writing
by such of the directors as may not have been present.
<PAGE> 6
4
ARTICLE II
SECTION 4. QUORUM. A majority of the directors in office at the time
of a meeting of the Board, but not less than one-third of the Board including
any vacancies, shall constitute a quorum for the transaction of business, but
if at any meeting of the Board of Directors there shall be less than a quorum
present, a majority of the directors present may adjourn the meeting from time
to time without notice other than announcement at the meeting, until a quorum
shall have been obtained, when any business may be transacted which might have
been transacted at the meeting as first convened had there been a quorum. The
acts of a majority of the directors present at any meeting at which there is a
quorum shall be the acts of the Board, unless otherwise provided by law, by the
Restated Articles of Incorporation or by the By-Laws.
SECTION 5. ANNUAL MEETING OF DIRECTORS. A meeting of the Board of
Directors, to be known as the directors' annual meeting, shall be held without
notice each year after the adjournment of the annual shareholders' meeting and
on the same day, and at such meeting the officers of the Company for the
ensuing year shall be elected. If a quorum of the directors is not present on
the day appointed for the directors' annual meeting, the meeting shall be
adjourned to some convenient day.
SECTION 6. EXECUTIVE COMMITTEE. The Board of Directors may, by
resolution or resolutions passed by a majority of the entire Board, designate
an Executive Committee to consist of the Chief Executive Officer and two or
more of the other directors, and alternates, and shall designate the Chairman
thereof. The Executive Committee shall have and may exercise, when the Board
is not in session, all of the powers of the Board in the management of the
business and affairs of the Company, and shall have power to authorize the seal
of the Company to be affixed to all papers which may require it; but the
Executive Committee shall not have power to declare dividends, to change the
number of directors constituting the entire Board, to fill vacancies in the
Board, or to change the membership of, or to fill vacancies in, any committee,
or to fix the compensation of the directors or committee members, or to make or
amend By-Laws of the Company, or to submit matters for action by shareholders,
or to amend or repeal a resolution of the Board which by its terms may not be
changed by the Executive Committee. The Board shall have the power at any time
to fill vacancies in, to change the membership of, or to dissolve, the
Executive Committee. The Executive Committee may make rules for the conduct of
its business and may appoint such subcommittees and assistants as it shall from
time to time deem necessary. A majority of the members of the Executive
Committee shall constitute a quorum. All action taken by the Executive
Committee shall be reported to the Board at its meeting next succeeding such
action. The Secretary or an Assistant Secretary shall attend and act as
secretary of all meetings of the Executive Committee and keep the minutes
thereof.
Meetings of the Executive Committee may be called by the Chairman of
the Board or the President or, in the event of the incapacity of the Chairman of
the Board and the President, by two or more members of the Executive Committee
by giving reasonable notice of the time and place of such meetings. All such
meetings shall be held at the office of the Company in the City of Detroit
unless some other place is specified in the notice.
SECTION 7. COMMITTEES. The Board of Directors may, by resolution,
create a committee or committees of one or more directors, and alternates, to
consider and report upon or to carry out such matters (not excepted by the
foregoing section) as may be entrusted to them by the Board of Directors, and
shall designate the Chairman of each such committee.
SECTION 8. PARTICIPATION IN MEETINGS. One or more members of the Board
of Directors or any committee thereof may participate in any meeting of such
Board or such committee by means of a conference telephone or similar
communications equipment which enables all persons participating in such a
meeting to hear each other at the same time and participation in the manner so
described shall constitute presence in person at such meetings.
<PAGE> 7
5
ARTICLE II AND III
SECTION 9. COMPENSATION. Each director of the Company who is not a salaried
officer or employe of the Company may receive reasonable compensation for
services as a director, including a reasonable fee for attendance at meetings of
the Board and committees thereof, and attendance at the Company's request at
other meetings or similar activities related to the Company.
ARTICLE III
OFFICERS
SECTION 1. OFFICERS AND AGENTS. The officers of the Company to be elected
by the Board of Directors, as soon as practicable after the election of
directors each year, shall be Chairman of the Board, the President, a Secretary
and a Treasurer. The Board of Directors may also from time to time elect one or
more Vice Presidents, a Controller, a General Auditor, a General Counsel, and
such other officers and agents as it may deem proper. The Chairman of the
Board and the President shall be chosen from among the directors. The persons
holding the offices of Chairman of the Board or President may not also hold the
office of General Auditor. The Board of Directors may, in its discretion,
leave vacant any office other than that of Chairman of the Board, President,
Secretary or Treasurer.
SECTION 2. TERM OF OFFICE. The term of office of all officers shall be
until the next annual meeting of shareholders or until their respective
successors are chosen and qualified; but any officer or agent elected by the
Board of Directors may be removed by the Board at any time, with or without
cause.
SECTION 3. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be the
chief executive officer of the Company, shall preside at all meetings of the
Board of Directors and shareholders, at which the Chairman is present, and shall
make the annual report to the shareholders. The Chairman shall have general
charge of the business and affairs of the Company subject to the control of
the Board of Directors, may execute in the name of the Company any authorized
corporate obligation or other instrument and shall perform such other functions
as may be prescribed by the Board from time to time.
The Chairman of the Board shall manage or supervise the conduct of the
corporate finances and relations of the Company with its shareholders, with the
public and with regulatory authorities and in addition to the President, may
exercise all powers elsewhere in the By-Laws conferred upon the President. The
Chairman may delegate from time to time to the President or to other officers,
employes or positions of the Company, such powers as the Chairman may specify
in writing, with such terms and conditions, if any, as the Chairman may set
forth. A copy of each such delegation and of any revocation or change shall be
filed with the Secretary.
SECTION 4. PRESIDENT. The President shall be the chief operating officer of
the Company, subject to the control of the Board of Directors and the Chairman
of the Board, shall have power to authorize the employment of such subordinate
employes as may, in the President's judgment, be advisable for the operations
of the Company, may execute in the name of the Company any authorized corporate
obligation or other instrument and shall perform all other acts incident to the
President's office or prescribed by the Board of Directors or the Chairman of
the Board, or authorized or required by law. During the absence or disability
of the Chairman of the Board, the President shall assume the duties and
authority of the Chairman of the Board and shall be the chief executive officer
of the Company.
<PAGE> 8
6
ARTICLE III, IV AND V
SECTION 5. OTHER OFFICERS. The other officers, agents and employes of
the Company shall each have such powers and perform such duties in the
management of the property and affairs of the Company, subject to the control
of the Board of Directors, as generally pertain to their respective offices, as
well as such powers and duties as from time to time may be prescribed by the
Board of Directors, by the Chairman of the Board or by the President.
SECTION 6. COMPENSATION. The Board of Directors shall determine the
compensation to be paid to the Chairman of the Board, the President and each
Vice President above the level of Assistant Vice President.
ARTICLE IV
CAPITAL STOCK
SECTION 1. CERTIFICATES OF SHARES. The interest of each shareholder
shall be evidenced by a certificate or certificates for shares of stock of the
Company in such form as the Board of Directors may from time to time prescribe.
The certificates of stock shall be signed by the Chairman of the Board, the
President or a Vice President and by the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company, shall be sealed with the
seal of the Company or a facsimile thereof, and shall be countersigned by a
transfer agent for the stock and registered by a registrar for such stock. The
signatures of the officers and the transfer agent or the registrar upon such
certificates may be facsimiles, engraved or printed, subject to the provisions
of applicable law. In case any officer, transfer agent or registrar shall
cease to serve in that capacity after their facsimile signature has been placed
on a certificate, the certificates may be issued with the same effect as if the
officer, transfer agent or registrar were still in office.
SECTION 2. TRANSFER OF SHARES. Shares in the capital stock of the
Company shall be transferred on the books of the Company upon surrender and
cancellation of certificates for a like number of shares, with duly executed
power to transfer endorsed thereon or attached thereto.
SECTION 3. LOST OR DESTROYED STOCK CERTIFICATES. No certificate for
shares of stock of the Company shall be issued in place of any certificate
alleged to have been lost, stolen or destroyed, except upon production of such
evidence of the loss, theft or destruction, and upon indemnification of the
Company and its agents to such extent and in such manner as the Board of
Directors may from time to time prescribe.
ARTICLE V
CHECKS, NOTES, BONDS, DEBENTURES, ETC.
All checks and drafts on the Company's bank accounts and all bills of
exchange and promissory notes, and all acceptances, obligations and other
instruments for the payment of money, shall be signed by such
<PAGE> 9
7
ARTICLE V, VI AND VII
officer or officers or agent or agents, either manually or by facsimile
signature or signatures, as shall be thereunto authorized from time to time by
the Board of Directors either generally or in specific instances; provided that
bonds, debentures and other evidences of indebtedness of the Company bearing
facsimile signatures of officers of the Company shall be issued only when
authenticated by a manual signature on behalf of a trustee or an authenticating
agent appointed by Board of Directors and in case any such officer of the
Company shall cease to be such after such officer's facsimile signature has
been placed thereon, such bonds, debentures or other evidences of indebtedness
may be issued with the same effect as if such person were still in office.
ARTICLE VI
CORPORATE SEAL
The Board of Directors shall provide a suitable seal, containing the name of
the Company.
ARTICLE VII
CONTROL SHARE ACQUISITIONS
This Stacey, Bennett, and Randall Shareholder Equity Act (Chapter 7B of the
Michigan Business Corporation Act) shall not apply to any control share
acquisitions (as defined in such Act) of shares of the Company.
This Article VII of the By-Laws may not be amended, altered or repealed with
respect to any control share acquisition of shares of the Company effected
pursuant to a tender offer or other transaction commenced prior to the date of
such amendment, alteration or repeal.
ARTICLE VIII
AMENDMENT OF BY-LAWS
Those provisions of these By-Laws providing for a classified Board of
Directors (currently the third, fourth and fifth sentences of the first
paragraph of Section 1 of Article II) and the provisions of this sentence may
be amended or repealed only by vote of the holders of a majority of shares of
Common Stock of the Company. Except as provided in the immediately
preceding sentence, By-Laws of the Company may be amended, repealed or adopted
by vote of the holders of a majority of shares at the time entitled to vote in
the election of any directors or by vote of a majority of the directors in
office.
<PAGE> 1
EXHIBIT 4-14
- --------------------------------------------------------------------------------
THE DETROIT EDISON COMPANY
AND
BANKERS TRUST COMPANY
TRUSTEE
------------------------
FIFTH SUPPLEMENTAL INDENTURE
DATED AS OF FEBRUARY 1, 1996
------------------------
SUPPLEMENTING THE COLLATERAL TRUST INDENTURE
DATED AS OF JUNE 30, 1993
PROVIDING FOR
7 5/8% QUARTERLY INCOME DEBT SECURITIES
("QUIDS") (JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES, DUE 2026)
- --------------------------------------------------------------------------------
<PAGE> 2
FIFTH SUPPLEMENTAL INDENTURE, dated as of the 1st day of February 1996,
between THE DETROIT EDISON COMPANY, a corporation organized and existing under
the laws of the State of Michigan (the "Company"), and BANKERS TRUST COMPANY, a
New York banking corporation, having its principal office in The City of New
York, New York, as trustee (the "Trustee");
WHEREAS, the Company has heretofore executed and delivered to the Trustee a
Collateral Trust Indenture dated as of June 30, 1993 (the "Original Indenture"),
as supplemented by a First Supplemental Indenture dated as of June 30, 1993, a
Second Supplemental Indenture dated as of September 15, 1993, a Third
Supplemental Indenture dated as of August 15, 1994, as amended, and a Fourth
Supplemental Indenture dated as of August 15, 1995 (the "Prior Supplemental
Indentures") providing for the issuance by the Company from time to time of its
notes; and
WHEREAS, the Company now desires to provide for the issuance of an
additional series of its unsecured, subordinated debt securities pursuant to the
Original Indenture; and
WHEREAS, the Company intends hereby to designate a series of debt
securities which shall not have the benefit of the provisions of Article Four of
the Original Indenture and the other related provisions of the Original
Indenture relating to the grant of security and which shall have the terms and
variations from the provisions of the Original Indenture as set forth herein;
and
WHEREAS, the Company, in the exercise of the power and authority conferred
upon and reserved to it under the provisions of the Original Indenture,
including Section 1001 thereof, and pursuant to appropriate resolutions of the
Board of Directors, has duly determined to make, execute and deliver to the
Trustee this Fifth Supplemental Indenture to the Original Indenture as permitted
by Sections 201 and 301 of the Original Indenture in order to establish the form
or terms of, and to provide for the creation and issue of, a series of its debt
securities under the Original Indenture, which shall be known as the 7 5/8%
Quarterly Income Debt Securities (the "QUIDS") (Junior Subordinated Deferrable
Interest Debentures Due 2026); and
WHEREAS, all things necessary to make such debt securities, when executed
by the Company and authenticated and delivered by the Trustee or any
Authenticating Agent and issued upon the terms and subject to the conditions
hereinafter and in the Original Indenture set forth against payment therefor,
the valid, binding and legal obligations of the Company and to make this Fifth
Supplemental Indenture a valid, binding and legal agreement of the Company, have
been done;
NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL INDENTURE WITNESSETH that, in order
to establish the terms of a series of debt securities, and for and in
consideration of the premises and of the covenants contained in the Original
Indenture and in this Fifth Supplemental Indenture and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, it is mutually covenanted and agreed as follows:
ARTICLE ONE
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. Each capitalized term that is used herein and is
defined in the Original Indenture shall have the meaning specified in the
Original Indenture unless such term is otherwise defined herein.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions located in the State of
Michigan or in the state in which the principal corporate trust office of the
Trustee is located, are authorized or obligated by or pursuant to law or
executive order to close.
"Capital Stock" means any and all shares of the Company's Preferred Stock,
Preference Stock or Common Stock or any other equity securities of the Company.
<PAGE> 3
"Payment Obligation", when used with respect to Senior Indebtedness, means
an obligation stated in an agreement, instrument or lease to pay money (whether
for principal, premium, interest, sinking fund, periodic rent, stipulated value,
termination value, liquidated damages or otherwise), but excluding an obligation
to pay money in respect of fees of, or as payment or reimbursement for expenses
incurred by or on behalf of, or as indemnity for losses, damages, taxes or other
indemnity claims of any kind owed to, any holder of Senior Indebtedness or other
party to such agreement, instrument or lease.
"Senior Indebtedness" means each of the following, whether outstanding on
the date hereof or hereafter created, incurred or assumed:
(a) any Payment Obligation of the Company in respect of any
indebtedness, directly or indirectly, created, incurred or assumed (i) for
borrowed money or (ii) in connection with the acquisition of any business,
property or asset (including securities), other than any account payable or
other indebtedness created, incurred or assumed in the ordinary course of
business in connection with the obtaining of materials or services;
(b) any Payment Obligation of the Company in respect of any lease that
would, in accordance with generally accepted accounting principles, be
required to be classified and accounted for as a capital lease;
(c) any Payment Obligation of the Company in respect of any interest
rate exchange agreement, currency exchange agreement or similar agreement
that provides for payment (whether or not contingent) over a period or term
(including any renewals or extensions) longer than one year from the
execution thereof;
(d) any Payment Obligation of the Company in respect of any agreement
relating to the acquisition (including a sale and buyback) or lease
(including a sale and leaseback) of real or personal property that provides
for payment (whether or not contingent) over a period or term (including
any renewals or extensions) longer than one year from the execution
thereof;
(e) any Payment Obligation of any Subsidiary or of others of the kind
described in the preceding clauses (a) through (d) assumed or guaranteed by
the Company or for which the Company is otherwise responsible or liable;
and
(f) any amendment, renewal, extension or refunding of any Payment
Obligation described in the preceding subparagraphs (a) through (e);
unless in the agreement, instrument or lease in which any such Payment
Obligation is stated it is expressly provided that such Payment Obligation is
not senior in right of payment to the QUIDS.
SECTION 102. Section References. Each reference to a particular section set
forth in this Supplemental Indenture shall, unless the context otherwise
requires, refer to this Fifth Supplemental Indenture.
ARTICLE TWO
TITLE AND TERMS OF THE QUIDS
SECTION 201. Title of the QUIDS. This Fifth Supplemental Indenture hereby
establishes a series of QUIDS, which shall be known as the Company's 7 5/8%
Quarterly Income Debt Securities (Junior Subordinated Deferrable Interest
Debentures, Due 2026) (referred to herein as the "QUIDS"). For purposes of the
Original Indenture, the QUIDS shall constitute a single series of Securities.
The stated maturity of the QUIDS will be March 31, 2026.
SECTION 202. Variations from the Original Indenture. Notwithstanding the
provisions of the Original Indenture, the QUIDS shall be without benefit of any
security and shall be subordinated to Senior Indebtedness as and to the extent
provided in Article Four of this Supplemental Indenture. The QUIDS shall not
have the benefit of the provisions of Article Four of the Original Indenture and
shall not have the benefit of, or be subject to, the other related provisions of
the Original Indenture relating to the grant of security, including (for
avoidance of doubt and not for purposes of limitation) the Granting Clause, the
definitions of
2
<PAGE> 4
"Deliverable Mortgage Bonds," Deliverable Securities," "Designated Mortgage
Bonds," "Grant," "Mortgage," "Mortgage Bonds," "Mortgage Trustee," "Previously
Delivered Mortgage Bonds," and "Trust Estate," Section 301(20), Sections
301(a)(v), (ix), (x) and (xi), Sections 301(b)(ii) and (iii), Section 301(d),
and Sections 601(4) and (8).
SECTION 203. Amount and Denominations; DTC. The aggregate principal amount
of QUIDS that may be issued under this Fifth Supplemental Indenture is limited
to $185,000,000. The QUIDS shall be issuable only in fully registered form and,
as permitted by Sections 301 and 302 of the Original Indenture, in denominations
of $25 and integral multiples thereof. The QUIDS will initially be issued under
a book-entry system, registered in the name of The Depository Trust Company, as
depository ("DTC"), or its nominee, who is hereby designated as "U.S.
Depository" under the Original Indenture.
SECTION 204. Interest Rate and Interest Payment Dates. (a) The QUIDS will
bear interest at the rate of 7 5/8% per annum from the date of original issuance
until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same rate per
annum during such overdue period. Interest on the QUIDS will be payable
quarterly (subject to deferral as set forth herein) in arrears on March 31, June
30, September 30 and December 31 of each year (each an "Interest Payment Date"),
commencing March 31, 1996 to the persons in whose names the QUIDS are registered
at the close of business on the relevant record date for such interest
installment, which will be one Business Day prior to the relevant Interest
Payment Date or, in the case of a Deferral Period (as described herein), one
Business Day prior to the Interest Payment Date for such Deferral Period (each a
"Record Date"); provided, however, that, in the event that any Interest Payment
Date shall not be a Business Day, then interest shall be payable on the next day
that is a Business Day (but without interest or other payment in respect of such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day
without reduction in amount due to such early payment (and in which case the
relevant Record Date shall be on the Business Day immediately preceding such
Interest Payment Date), in each case with the same force and effect as if made
on such Interest Payment Date, subject to certain rights of deferral described
in Section 204(b) hereof.
The amount of interest payable in any period will be computed on the basis
of twelve 30-day months and a 360-day year and, for any period shorter than a
full quarterly interest period, will be computed on the basis of the actual
number of days elapsed in such period.
(b) The provisions of Section 204(a) notwithstanding, the Company shall
have the right at any time, on one or more occasions so long as an Event of
Default with respect to the QUIDS has not occurred and is not continuing, to
extend any interest payment period on the QUIDS for a period (a "Deferral
Period") not to exceed 20 consecutive quarterly interest payment periods;
provided that the date on which such Deferral Period ends must be an Interest
Payment Date and must be no later than March 31, 2026 or any date on which any
QUIDS are fixed for redemption. On the Interest Payment Date at the end of the
Deferral Period, the Company shall pay all interest then accrued and unpaid,
which shall be compounded quarterly at the rate of interest on the QUIDS (except
to the extent prohibited by law) to the date of payment, to the persons in whose
names the QUIDS are registered on the Record Date for such Deferral Period. The
Company shall give the Holders of the QUIDS notice of its election to defer
interest payments or to extend the Deferral Period ten Business Days prior to
the earlier of (1) the next scheduled quarterly payment date and (2) the date
the Company is required to give notice of the record date of such related
interest payment to the New York Stock Exchange or other applicable
self-regulatory organization or to the Holders of the QUIDS, but in any event
not less than two Business Days prior to such record date. During the Deferral
Period the Company shall not declare or pay any dividend on or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its Capital Stock
or make any guaranty payment with respect to the foregoing, other than
redemptions of any series of Capital Stock of the Company pursuant to the terms
of any sinking fund provisions with respect thereto. During any Deferral Period,
the Company may not (i) make any distributions, loans or guarantees for the
benefit of, (ii) purchase, defease, redeem or otherwise acquire or retire for
value any securities of or (iii) make any other investment in, any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company, for the purpose of, or to enable the payment
of,
3
<PAGE> 5
directly or indirectly, dividends on any equity securities of DTE Holdings, Inc.
and its successors or assigns. During any Deferral Period, the Company may
continue to extend the interest payment period by extending the Deferral Period,
on one or more occasions, by notice given as aforesaid in this paragraph (b),
provided that such Deferral Period, as extended, must end on an Interest Payment
Date and in no event shall the aggregate Deferral Period, as extended, exceed 20
consecutive quarterly interest payment periods or extend beyond March 31, 2026
or any date on which QUIDS are fixed for redemption. No interest shall be due
and payable during a Deferral Period except at the end thereof.
SECTION 205. Redemption of QUIDS. The QUIDS shall not be redeemable prior
to March 31, 2001. Thereafter, upon notice given by mailing the same, postage
prepaid, at least 30 days and not more than 60 days prior to the date fixed for
redemption, any or all of the QUIDS may be redeemed by the Company, at its
option, at any time and from time to time, at a Redemption Price equal to 100%
of the principal amount of the QUIDS to be redeemed plus accrued and unpaid
interest thereon to the date fixed for redemption.
SECTION 206. Form of QUIDS. Attached hereto as Exhibit A is a form of the
definitive QUIDS.
ARTICLE THREE
ADDITIONAL EVENTS OF DEFAULT AND COVENANTS
SECTION 301. Inapplicability of Certain Events of Default. The Events of
Default set forth in Sections 601(4) and 601(8) of the Original Indenture shall
not apply to the QUIDS. The omission by the Company to pay interest on the QUIDS
during a Deferral Period as permitted by Section 204 shall not constitute an
Event of Default under Section 601(1) of the Original Indenture.
ARTICLE FOUR
SUBORDINATION OF QUIDS
SECTION 401. QUIDS Subordinate to Senior Indebtedness. The Company for
itself, its successors and assigns, covenants and agrees, and each Holder of
QUIDS issued, whether upon original issue or upon transfer or assignment
thereof, by its acceptance thereof likewise covenants and agrees, that the
payment of principal of and interest on each and all of the QUIDS is hereby
expressly subordinated, to the extent and in the manner hereinafter in this
Article set forth, in right of payment to the prior payment in full of all
existing and future Senior Indebtedness of the Company.
SECTION 402. Payments to Securityholders. (a) Upon (i) any acceleration of
the principal amount due on the QUIDS or (ii) any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest, if any, due upon all Senior Indebtedness shall
first be paid in full, or payment thereof provided for in money or money's worth
in accordance with its terms, before any payment is made on account of the
principal of or interest on the indebtedness evidenced by the QUIDS, and upon
any such dissolution or winding-up or liquidation or reorganization any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the QUIDS under the terms
of this Supplemental Indenture would be entitled, except for the provisions
hereof, shall (subject to the power of a court of competent jurisdiction to make
other equitable provision reflecting the rights conferred by the provisions
hereof upon the Senior Indebtedness and the holders thereof with respect to the
QUIDS and the Holders thereof by a lawful plan of reorganization under
applicable bankruptcy law), be paid by the Company or any receiver, trustee in
bankruptcy, liquidating trustee, agent or other person making such payment or
distribution, or by the Holders of the QUIDS if received by them, directly to
the holders of Senior Indebtedness (pro rata to each such holder on the basis of
the respective amounts of Senior Indebtedness held by such holder) or their
representatives, to the extent necessary to pay all Senior Indebtedness
(including interest thereon) in full, in money or money's worth, in accordance
with its terms, after giving effect to any concurrent payment or distribution to
or for the holders of
4
<PAGE> 6
Senior Indebtedness, before any payment or distribution is made to the Holders
of the indebtedness evidenced by the QUIDS. The consolidation of the Company
with, or a merger of the Company into, another Person or the liquidation or
dissolution of the Company following the conveyance or transfer of its property
as an entirety, or substantially as an entirety, to another Person upon the
terms and conditions provided in Section 901 of the Original Indenture shall not
be deemed a dissolution, winding-up, liquidation or reorganization for the
purposes of this Section 402(a).
(b) In the event that any payment or distribution of assets of the Company
of any kind or character not permitted by Section 402(a), whether in cash,
property or securities, shall be received by the Trustee or the Holders of QUIDS
before all Senior Indebtedness is paid in full, or provision made for such
payment, in accordance with its terms, upon written notice to the Trustee or, as
the case may be, such Holder, such payment or distribution shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
such Senior Indebtedness or their representative or representatives, or to the
Trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all such Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.
Nothing in this Article shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 706 of the Original Indenture. In addition, nothing
in this Article shall prevent the Company from making or the Trustee from
receiving or applying any payment in connection with the redemption of the QUIDS
if the first publication of notice of such redemption (whether by mail or
otherwise in accordance with this Supplemental Indenture) has been made, and the
Trustee has received such payment from the Company, prior to the occurrence of
any of the contingencies specified in this Section 402.
(c) No payment on account of principal of or interest on the QUIDS shall be
made unless full payment of amounts then due for principal, premium, if any,
sinking funds and interest on any Senior Indebtedness has been made or duly
provided for in money or money's worth in accordance with the terms of such
Senior Indebtedness. No payment on account of principal or interest on the QUIDS
shall be made if, at the time of such payment or immediately after giving effect
thereto, (i) there shall exist a default in the payment of principal, premium,
if any, sinking fund or interest with respect to any Senior Indebtedness, or
(ii) there shall have occurred an event of default (other than a default in the
payment of principal, premium, if any, sinking funds or interest) with respect
to any Senior Indebtedness, as defined therein or in the instrument under which
the same is outstanding, permitting the holders thereof to accelerate the
maturity thereof and upon written notice thereof given to the Trustee, with a
copy to the Company (the delivery of which shall not affect the validity of the
notice to the Trustee), and such event of default shall not have been cured or
waived or shall not have ceased to exist, provided, however, that if the holders
of the Senior Indebtedness to which the default relates have not declared such
Senior Indebtedness to be immediately due and payable within 180 days after the
occurrence of such default (or have declared such Senior Indebtedness to be
immediately due and payable and within such period have rescinded such
declaration of acceleration), then the Company shall resume making any and all
required payments in respect of the QUIDS (including any missed payments). Only
one payment blockage period under the immediately preceding sentence may be
commenced within any consecutive 365-day period with respect to the QUIDS of any
series. No event of default which existed or was continuing on the date of the
commencement of any 180-day payment blockage period with respect to the Senior
Indebtedness initiating such payment blockage period shall be, or be made, the
basis for the commencement of a second payment blockage period by a Holder or
representative of such Senior Indebtedness whether or not within a period of 365
consecutive days unless such event of default shall have been cured or waived
for a period of not less than 90 consecutive days (and, in the case of any such
waiver, no payment shall be made by the Company to the holders of Senior
Indebtedness in connection with such waiver other than amounts due pursuant to
the terms of the Senior Indebtedness as in effect at the time of such default).
SECTION 403. Subrogation to Rights of Holders of Senior Indebtedness. From
and after the payment in full of all Senior Indebtedness, the Holders of the
QUIDS (together with the holders of any other indebtedness of the Company which
is subordinate in right of payment to the payment in full of all Senior
5
<PAGE> 7
Indebtedness, which is not subordinate in right of payment to the QUIDS and
which by its terms grants such right of subrogation to the holder thereof) shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets or securities of the Company applicable to
the Senior Indebtedness until the QUIDS shall be paid in full, and, for the
purposes of such subrogation, no such payments or distributions to the holders
of Senior Indebtedness of assets or securities, which otherwise would have been
payable or distributable to Holders of the QUIDS, shall, as between the Company,
its creditors other than the holders of Senior Indebtedness, and the Holders of
the QUIDS, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness, it being understood that the provisions of this Article are
and are intended solely for the purpose of defining the relative rights of the
Holders of the QUIDS, on the one hand, and the holders of the Senior
Indebtedness, on the other hand, and nothing contained herein is intended to or
shall impair as between the Company, its creditors other than the holders of
Senior Indebtedness, and the Holders of the QUIDS, the obligation of the
Company, which is unconditional and absolute, to pay to the Holders of the QUIDS
the principal of, premium, if any, and interest, if any, on the QUIDS as and
when the same shall become due and payable in accordance with their terms, or to
affect the relative rights of the Holders of the QUIDS and creditors of the
Company other than the holders of the Senior Indebtedness, nor shall anything
herein or therein prevent the Trustee or the Holder of QUIDS from exercising all
remedies otherwise permitted by applicable law upon default hereunder with
respect to the QUIDS subject to the rights of the holders of Senior
Indebtedness, under Section 402, to receive cash, property or securities of the
Company otherwise payable or deliverable to the Trustee or the Holders of the
QUIDS or to a representative of such Holders, on their behalf.
Upon any distribution or payment in connection with any proceedings or sale
referred to in Section 402(a), the Trustee and each Holder of the QUIDS then
Outstanding, shall be entitled to rely upon a certificate of the liquidating
trustee or agent or other Person making any distribution or payment to the
Trustee or such Holder for the purpose of ascertaining the holders of Senior
Indebtedness entitled to participate in such payment or distribution, the amount
of such Senior Indebtedness or the amount payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article.
SECTION 404. No Impairment of Subordination. Nothing contained in this
Article or elsewhere in this Supplemental Indenture or the QUIDS shall prevent
at any time the Company from making payments at any time of principal of or
interest on the QUIDS, except under the conditions described in Section 402 or
during the pendency of any proceedings or sale therein referred to.
SECTION 405. Trustee to Effectuate Subordination. Each Holder of a
Subordinated Security by his acceptance thereof, whether upon original issue or
upon transfer or assignment, authorizes and directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provisions in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.
No rights of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Trustee
or any Holder of the QUIDS then Outstanding, or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by any such holder, with
the terms, provisions and covenants of this Supplemental Indenture, regardless
of any knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Holders of the QUIDS, without incurring
responsibility to the Holders of the QUIDS and without impairing or releasing
the subordination provided in this Article or the obligations of the Holders of
the QUIDS to the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness of any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
6
<PAGE> 8
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection of Senior Indebtedness; and (iv) exercise or refrain from exercising
any rights against the Company and any other Person.
SECTION 406. Notice to Trustee. The Company shall give prompt written
notice to the Trustee in the form of an Officers' Certificate of any fact known
to the Company which would prohibit the making of any payment of money to or by
the Trustee in respect of the QUIDS pursuant to the provisions of this Article.
Notwithstanding the provisions of this Article or any other provisions of this
Supplemental Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the QUIDS pursuant to the provisions of this Article,
unless and until the Trustee shall have received at its Corporate Trust Office
written notice thereof from the Company or a holder or holders of Senior
Indebtedness or from any trustee therefor at least two Business Days prior to
such payment date; and, prior to the receipt of any such written notice, the
Trustee, shall be entitled in all respects to assume that no such facts exist.
The Trustee shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Senior Indebtedness
(or a trustee on behalf of such holder) to establish that such notice has been
given by a holder of Senior Indebtedness or a trustee on behalf of any such
holder. In the event that the Trustee determines in good faith that further
evidence is required with respect to the right of any Person as a holder of
Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under the Article, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 407. Reliance on Certificate of Liquidating Agent. Upon any payment
or distribution referred to in this Article, the Trustee, and the Holders of the
QUIDS shall be entitled to rely upon any order or decree entered by any court of
competent jurisdiction in which a dissolution, winding up or total or partial
liquidation or reorganization of the Company is pending, or a certificate of the
trustee in bankruptcy, liquidating trustee, custodian, receiver, assignee for
the benefit of creditors, agent or other Person making such payment or
distribution, delivered to the Trustee or to the Holders of the QUIDS, for the
purpose of ascertaining the Persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 408. Trustee Not Fiduciary for Holders of Senior Indebtedness. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior
Indebtedness and shall not be liable to any such holders if it shall in good
faith mistakenly pay over or distribute to Holders of the QUIDS of any series or
to the Company or to any other Person cash, property or securities to which any
holders of Senior Indebtedness shall be entitled by virtue of this Article or
otherwise.
SECTION 409. Rights of Trustee as Holder of Senior Indebtedness. The
Trustee in its individual capacity shall be entitled to all the rights set forth
in this Article with respect to any Senior Indebtedness which may at any time be
held by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Supplemental Indenture shall deprive the Trustee of any of its
rights as such holder.
SECTION 410. Article Applicable to Paying Agent. In case at any time any
Paying Agent other than the Trustee shall have been appointed by the Company and
be then acting hereunder, the term "Trustee" as used in this Article shall in
such case (unless the context shall otherwise require) be construed as extending
to and including such Paying Agent within its meaning as fully for all intents
and purposes as if such Paying Agent were named in this Article in addition to
or in place of the Trustee; provided, however, that this Section shall not apply
to the Company or any Affiliate of the Company if it or such Affiliate acts as
Paying Agent.
7
<PAGE> 9
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
The Trustee makes no undertaking or representations in respect of, and
shall not be responsible in any manner whatsoever for and in respect of, the
validity or sufficiency of this Fifth Supplemental Indenture or the proper
authorization or the due execution hereof by the Company or for or in respect of
the recitals and statements contained herein, all of which recitals and
statements are made solely by the Company.
Except as expressly amended hereby, the Original Indenture shall continue
in full force and effect in accordance with the provisions thereof and the
Original Indenture is in all respects hereby ratified and confirmed. This Fifth
Supplemental Indenture and all its provisions shall be deemed a part of the
Original Indenture in the manner and to the extent herein and therein provided.
This Fifth Supplemental Indenture shall be governed by, and construed in
accordance with, the laws of the State of New York.
This Fifth 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.
8
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Fifth 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 above written.
THE DETROIT EDISON COMPANY
By:
--------------------------------------
Name:
Title:
ATTEST:
By:
- --------------------------------------
Elaine M. Godfrey
Assistant Corporate Secretary
[Corporate Seal]
STATE OF MICHIGAN )
) :
COUNTY OF WAYNE )
On the day of February 1996, before me personally came , to
me known, who, being by me duly sworn, did depose and say that he is
of THE DETROIT EDISON COMPANY, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and he signed his name thereto by like authority.
--------------------------------------
, Notary Public
My Commission Expires
[Notarial Seal]
9
<PAGE> 11
BANKERS TRUST COMPANY,
as Trustee
By:
-----------------------------------
Name: Scott Thiel
Title: Assistant Vice President
ATTEST:
By:
----------------------------------------
Shafiq Jadavji
Assistant Treasurer
[Corporate Seal]
STATE OF NEW YORK )
) :
COUNTY OF NEW YORK )
On the 8th day of February 1996, before me personally came Scott Thiel, to
me known, who, being by me duly sworn, did depose and say that he is Assistant
Vice President of BANKERS TRUST COMPANY, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and she signed her name thereto by like authority.
--------------------------------------
Carol Allen
Notary Public, State of New York
No. 24-4920187
Qualified in Kings County
Commission Expires 2-16-96
[Notarial Seal]
10
<PAGE> 12
EXHIBIT A
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A
DEPOSITORY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN
CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO A NOMINEE OF DTC OR
BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO., 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 A PERSON IS WRONGFUL, INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT ("OID") FOR U.S.
FEDERAL INCOME TAX PURPOSES. THE FOLLOWING INFORMATION IS PROVIDED SOLELY FOR
PURPOSES OF APPLYING THE FEDERAL INCOME TAX OID RULES TO THIS NOTE:
NO. R-1 $185,000,000
THE DETROIT EDISON COMPANY
7 5/8% JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURE
DUE 2026
<TABLE>
<CAPTION>
ISSUE PRICE ISSUE DATE CUSIP NO.
- ----------- ----------------- ---------
<S> <C> <C>
$ 25.00 February 13, 1996 250847712
</TABLE>
THE DETROIT EDISON COMPANY, a corporation duly organized and existing under
the laws of the State of Michigan (herein referred to as the "Company", which
term includes any successor corporation 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 eighty-five million Dollars
($185,000,000) on March 31, 2026 and to pay interest at the rate of 7 5/8% per
annum on said principal sum from the date of issuance until the principal of
this Debenture ("Note") hereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same rate per
annum during such overdue period. Interest on this Note will be payable
quarterly (subject to deferral as set forth herein) in arrears on March 31, June
30, September 30 and December 31 of each year (each such date, an "Interest
Payment Date"), commencing March 31, 1996.
The amount of interest payable for any period shall be computed on the
basis of twelve 30-day months and a 360-day year and, for any period shorter
than a full quarterly interest period, will be computed on the basis of the
actual number of days elapsed in such period. In the event that any date on
which interest is payable on this Note is not a Business Day, then payment of
the amount payable on such date will be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day
without reduction in the amount due to such early payment (and in which case the
relevant Record Date shall be on the Business Day immediately preceding such
11
<PAGE> 13
Interest Payment Date), in each case with the same force and effect as if made
on such date, subject to certain rights of deferral described below. A "Business
Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions located in the State of Michigan or in
the state in which the principal corporate trust office of the Trustee is
located are authorized or obligated by or pursuant to law or executive order to
close. The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date (other than interest payable on redemption or
maturity) will, as provided in the Indenture (as defined herein), be paid to the
person in whose name this Note (or one or more Predecessor Notes, as defined in
said Indenture) is registered at the close of business on the relevant record
date for such interest installment, which shall be one Business Day prior to the
relevant Interest Payment Date or, in the case of a Deferral Period (as defined
in the Indenture), one Business Day prior to Interest Payment Date for such
Deferral Period (each a "Record Date"). Interest payable on redemption or
maturity shall be payable to the person to whom the principal is paid. Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such Record Date, and may be
paid to the person in whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on a special record date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof shall be
given to the registered holders of this series of Notes not less than 10 days
prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. The principal of and
the interest on this Note shall be payable at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New
York, in any coin or currency of the United States of America which at the time
of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the registered holder at the close of business on the Record
Date at such address as shall appear in the Security Register.
Payment of the principal of and interest on this Note is, to the extent
provided in the Indenture, subordinated and subject in right of payment to the
prior payment in full of all existing and future Senior Indebtedness, as defined
in the Indenture, of the Company and this Note is issued subject to the
provisions of the Indenture with respect thereto. Each registered holder of this
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee as his or her
attorney-in-fact for any and all such purposes. Each registered holder hereof,
by his or her acceptance hereof, hereby waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each
holder of Senior Indebtedness, whether now outstanding or hereafter incurred,
and waives reliance by each such holder upon said provisions.
This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
Unless the Certificate of Authentication hereon has been executed by the
Trustee or a duly appointed Authentication Agent referred to herein, this Note
shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Note is one of a duly authorized series of Notes of the Company
(herein sometimes referred to as the "Notes"), specified in the Indenture, all
issued or to be issued in one or more series under and pursuant to a Collateral
Trust Indenture dated as of June 30, 1993 (the "Original Indenture") duly
executed and delivered between the Company and Bankers Trust Company, a national
banking association organized and existing under the laws of the United States,
as Trustee (herein referred to as the "Trustee"), as supplemented by the First
Supplemental Indenture dated as of June 30, 1993, a Second Supplemental
Indenture dated as of September 15, 1993, a Third Supplemental Indenture dated
as of August 15, 1994, as amended, a Fourth Supplemental Indenture dated as of
August 15, 1995 and a Fifth Supplemental Indenture dated as of February 1, 1996
(together with the Original Indenture, the "Indenture") between the Company and
the Trustee, to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the respective rights, limitations
of rights, obligations, duties and immunities thereunder of the
12
<PAGE> 14
Trustee, the Company and the registered holders of the Notes and of the terms
upon which the Notes are, and are to be, authenticated and delivered. By the
terms of the Indenture, the Notes are issuable in series which may vary as to
amount, date of maturity, rate of interest and in other respects as in the
Indenture provided. This series of Notes is limited in aggregate principal
amount as specified in said Fifth Supplemental Indenture.
Notwithstanding the provisions of the Original Indenture, this Note shall
be without benefit of any security and shall be subordinated to Senior
Indebtedness (as defined in the Indenture) as and to the extent provided in
Article Four of said Fifth Supplemental Indenture. This Note shall not have the
benefit of the provisions of Article Four of the Original Indenture and shall
not have the benefit of, or be subject to, the other related provisions of the
Original Indenture relating to the grant of security, including (for avoidance
of doubt and not for purposes of limitation) the Granting Clause, the
definitions of "Deliverable Mortgage Bonds," "Deliverable Securities,"
"Designated Mortgage Bonds," "Grant," "Mortgage," "Mortgage Bonds," "Mortgage
Trustee," "Previously Delivered Mortgage Bonds," and "Trust Estate," Section
301(20), Section 301(a)(v), (ix), (x) and (xi), Sections 301(b)(ii) and (iii),
and Section 301(d). In addition, the Events of Default set forth in Sections
601(4) and 601(8) of the Original Indenture shall not apply to this Note. The
omission by the Company to pay interest on this Note during a Deferral Period as
permitted by Section 204 of said Fifth Supplemental Indenture shall not
constitute an Event of Default under Section 601(1) of the Original Indenture.
The Company shall have the right to redeem this Note at the option of the
Company, without premium or penalty, in whole or in part, at any time on or
after March 31, 2001 and prior to maturity at a redemption price equal to 100%
of the principal amount redeemed plus the accrued and unpaid interest thereon to
the date fixed for redemption. Any redemption pursuant to this paragraph will be
made upon not less than 30 nor more than 60 days notice. If the Notes are only
partially redeemed by the Company, the Notes will be redeemed pro rata or by lot
or by any other method utilized by the Trustee; provided that if at the time of
redemption, the Notes are registered as a Global Note, the Depositary shall
determine by lot the principal amount of such Notes held by each Note holder to
be redeemed.
In the event of redemption of this Note in part only, a new Note or Notes
of this series for the unredeemed portion hereof will be issued in the name of
the registered holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Note upon compliance by the Company with certain conditions
set forth therein.
The Indenture contains provisions permitting the Company and the Trustee,
with the consent of the registered holders of not less than a majority in
aggregate principal amount of the outstanding Notes of each series affected at
the time, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the registered holders of the Notes;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Notes of any series, or reduce the principal amount
thereof, or reduce the rate of or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, without the
consent of the registered holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the registered holders of which are required to
consent to any such supplemental indenture, without the consent of the
registered holders of each Note then outstanding and affected thereby. The
Indenture also contains provisions permitting (i) the registered holders of at
least 66 2/3% in aggregate principal amount of the Notes of all series at the
time outstanding affected thereby, on behalf of the registered holders of the
Notes of such series, to waive compliance by the Company with certain provisions
of the Indenture and (ii) the registered holders of a majority in aggregate
principal amount of the Notes of all series at the time outstanding affected
thereby, on
13
<PAGE> 15
behalf of the registered holders of the Notes of such series, to waive certain
past defaults under the Indenture and their consequences. Any such consent or
waiver by the registered holder of this Note (unless revoked as provided in the
Indenture) shall be conclusive and binding upon such registered holder and upon
all future registered holders and owners of this Note and of any Note issued in
exchange hereof or in place hereof (whether by registration of transfer or
otherwise), irrespective of whether or not any notation of such consent or
waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or of
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the time and place and at the rate and in the coin or currency herein
prescribed.
The Company shall have the right at any time, on one or more occasions, so
long as an Event of Default has not occurred and is not continuing under the
Indenture with respect to the Notes, to extend any interest payment period on
this Note to a period not to exceed 20 consecutive quarterly interest payment
periods and, as a consequence, the quarterly interest payment on the Notes would
be deferred (but would continue to accrue with interest thereon compounded
quarterly at the rate of interest on the Notes, except as provided by law)
during any such Deferral Period (as defined in the Indenture). At the end of
each Deferral Period, the Company shall pay all interest then accrued and unpaid
(compounded quarterly, at the rate of interest on the Notes, except to the
extent provided by law) to the persons in whose name the QUIDS are registered on
the Record Date for such Deferral Period. In the event the Company exercises
this right, the Company shall not declare or pay any dividends on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
Capital Stock (as defined in the Indenture) or make any guarantee payments with
respect to the foregoing during such Deferral Period, other than redemptions of
any series of Capital Stock of the Company pursuant to the terms of any sinking
fund provisions with respect thereto. In addition, during any Deferral Period,
the Company may not (i) make any distributions, loans or guarantees for the
benefit of, (ii) purchase, defease, redeem or otherwise acquire or retire for
value any securities of or (iii) make any other investment in any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company, for the purpose of, or to enable the payment
of, directly or indirectly, dividends on any equity security of DTE Energy
Company and its successors or assigns. During any Deferral Period, the Company
may continue to extend the interest payment period by extending the Deferral
Period; provided that the aggregate Deferral Period, as extended, must end on an
Interest Payment Date and in no event shall the aggregate Deferral Period exceed
20 consecutive quarterly interest payment periods or extend beyond the maturity
of the Notes or any date on which any of the Notes are fixed for redemption. No
interest shall be due and payable on the Notes during a Deferral Period except
at the end thereof. The Company shall give the registered holders of Notes
notice of its election to defer interest payments or to extend the Deferral
Period ten Business Days prior to the earlier of (i) the next scheduled
quarterly payment date or (ii) the date the Company is required to give notice
of the record date of such related interest payment to the New York Stock
Exchange or other applicable self-regulatory organization or to the holders of
the Notes, but in any event not less than two Business Days prior to such record
date.
As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Note is registrable in the Security Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company in any place where the principal of and any interest on
this Note are payable or at such other offices or agencies as the Company may
designate, duly endorsed by or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Security
Registrar or any transfer agent duly executed by the registered holder hereof or
his or her attorney duly authorized in writing, and thereupon one or more new
Notes of this series and of like tenor, of authorized denominations and for the
same aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and any Note Registrar may deem and treat
the registered holder hereof as the absolute owner hereof (whether or not this
Note shall be overdue and notwithstanding any notice of ownership or writing
hereon made by anyone other than the Note Registrar) for the purpose of
receiving payment of or on account of the
14
<PAGE> 16
principal hereof and interest due hereon and for all other purposes, and neither
the Company nor the Trustee nor any paying agent nor any Note Registrar shall be
affected by any notice to the contrary.
The Notes of this series are issuable only in fully registered form without
coupons in denominations of $25 and any integral multiple thereof. This Global
Note is exchangeable for Notes in definitive form only under certain limited
circumstances set forth in the Indenture. Notes of this series so issued are
issuable only in registered form without coupons in denominations of $25 and any
integral multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Notes of this series are exchangeable for a like
aggregate principal amount of Notes of this series of a different authorized
denomination, as requested by the registered holder surrendering the same.
As set forth in, and subject to the provisions of, the Indenture, no
registered owner of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless (i) such
registered owner shall have previously given to the Trustee written notice of a
continuing Event of Default with respect to the Notes of this series, (ii) the
registered owners of not less than 25% in principal amount of the outstanding
Notes of this series shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, (iii) the
Trustee shall have failed to institute such proceeding within 60 days and (iv)
the Trustee shall not have received from the registered owners of a majority in
principal amount of the outstanding Notes of this series a direction
inconsistent with such request within such 60-day period; provided, however,
that such limitations do not apply to a suit instituted by the registered owner
hereof for the enforcement of payment of the principal of or any interest on
this Note on or after the respective due dates expressed herein, subject to
deferral as set forth herein.
All terms used in this Note which are defined in the Indenture shall have
the meanings assigned to them in the Indenture.
15
<PAGE> 17
IN WITNESS WHEREOF, the Company has caused this Instrument to be executed.
THE DETROIT EDISON COMPANY
By
--------------------------------------
L. L. Loomans
Vice President and Treasurer
Attest:
By
- ----------------------------------------------------
Susan M. Beale
Vice President and Corporate Secretary
[Corporate Seal]
CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series of Notes described in the
withinmentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By
--------------------------------------
Authorized Signatory
Date:
16
<PAGE> 18
FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
(Please insert Social Security or Other Identifying Number of Assignee)
- --------------------------------------------------------------------------------
(please print or type name and address, including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorneys to transfer the within Note on the books of the
Issuer, with full power of substitution in the premises.
Dated:
- -----------------------------------------------
NOTICE: The signature of this assignment must correspond with the name as
written upon the face of the within Note in every particular, without alteration
or enlargement or any change whatever and NOTICE: Signature(s) must be
guaranteed by a financial institution that is a member of the Securities
Transfer Agents Medallion Program ("STAMP"), the Stock Exchange, Inc. Medallion
Signature Program ("MSP"). When assignment is made by a guardian, trustee,
executor or administrator, an officer of a corporation, or anyone in a
representative capacity, proof of his or her authority to act must accompany
this Note.
17
<PAGE> 1
EXHIBIT 4-15
CONFORMED COPY
THE DETROIT EDISON COMPANY
(2000 Second Avenue,
Detroit, Michigan 48226)
TO
BANKERS TRUST COMPANY
(Four Albany Street,
New York, New York 10015)
AS TRUSTEE
------------------------
INDENTURE
Dated as of April 1, 1991
------------------------
SUPPLEMENTAL TO MORTGAGE AND DEED OF TRUST
DATED AS OF OCTOBER 1, 1924
PROVIDING FOR
(A) GENERAL AND REFUNDING MORTGAGE BONDS, 1991 SERIES AP, DUE JULY 15, 2008
AND
(B) RECORDING AND FILING DATA
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TABLE OF CONTENTS*
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PAGE
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PARTIES.............................................................. 1
RECITALS
Original Indenture and Supplementals............................... 1
Issue of Bonds under Indenture..................................... 1
Bonds heretofore issued............................................ 1
Reason for creation of new series.................................. 5
Bonds to be 1991 Series AP......................................... 5
Further Assurance.................................................. 5
Authorization of Supplemental Indenture............................ 5
Consideration for Supplemental Indenture........................... 6
PART I.
CREATION OF TWO HUNDRED EIGHTY-EIGHTH
SERIES OF BONDS
GENERAL AND REFUNDING MORTGAGE BONDS,
1991 SERIES AP
Sec. 1. Terms of Bonds of 1991 Series AP............................. 6
Sec. 2. Redemption of Bonds of 1991 Series AP........................ 8
Sec. 3. Redemption in Event of Acceleration.......................... 8
Sec. 4. Consent...................................................... 9
Sec. 5. Form of Bonds of 1991 Series AP.............................. 9
Form of Trustee's Certificate................................ 14
PART II.
RECORDING AND FILING DATA
Recording and filing of Original Indenture........................... 14
Recording and filing of Supplemental Indentures...................... 14
Recording of Certificates of Provision for Payment................... 18
PART III.
THE TRUSTEE
Terms and conditions of acceptance of trust by Trustee............... 18
PART IV.
MISCELLANEOUS
Execution in Counterparts............................................ 18
Testimonium.......................................................... 19
Execution............................................................ 19
Acknowledgements..................................................... 20
Affidavit as to consideration and good faith......................... 21
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* This Table of Contents shall not have any bearing upon the interpretation of
any of the terms or provisions of this Indenture.
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PARTIES. SUPPLEMENTAL INDENTURE, dated as of the first day of April, in the year
one thousand nine hundred and ninety-one, between THE DETROIT EDISON
COMPANY, a corporation organized and existing under the laws of the State
of Michigan and a transmitting utility (hereinafter called the "Company"),
party of the first part, and BANKERS TRUST COMPANY, a corporation
organized and existing under the laws of the State of New York, having its
corporate trust office at Four Albany Street, in the Borough of Manhattan,
The City and State of New York, as Trustee under the Mortgage and Deed of
Trust hereinafter mentioned (hereinafter called the "Trustee"), party of
the second part.
ORIGINAL WHEREAS, the Company has heretofore executed and delivered its Mortgage
INDENTURE AND and Deed of Trust (hereinafter referred to as the "Original Indenture"),
SUPPLEMENTALS. dated as of October 1, 1924, to the Trustee, for the security of all bonds
of the Company outstanding thereunder, and pursuant to the terms and
provisions of the Original Indenture, indentures dated as of,
respectively, June 1, 1925, August 1, 1927, February 1, 1931, June 1,
1931, October 1, 1932, September 25, 1935, September 1, 1936, November 1,
1936, February 1, 1940, December 1, 1940, September 1, 1947, March 1,
1950, November 15, 1951, January 15, 1953, May 1, 1953, March 15, 1954,
May 15, 1955, August 15, 1957, June 1, 1959, December 1, 1966, October 1,
1968, December 1, 1969, July 1, 1970, December 15, 1970, June 15, 1971,
November 15, 1971, January 15, 1973, May 1, 1974, October 1, 1974, January
15, 1975, November 1, 1975, December 15, 1975, February 1, 1976, June 15,
1976, July 15, 1976, February 15, 1977, March 1, 1977, June 15, 1977, July
1, 1977, October 1, 1977, June 1, 1978, October 15, 1978, March 15, 1979,
July 1, 1979, September 1, 1979, September 15, 1979, January 1, 1980,
April 1, 1980, August 15, 1980, August 1, 1981, November 1, 1981, June 30,
1982, August 15, 1982, June 1, 1983, October 1, 1984, May 1, 1985, May 15,
1985, October 15, 1985, April 1, 1986, August 15, 1986, November 30, 1986,
January 31, 1987, April 1, 1987, August 15, 1987, November 30, 1987, June
15, 1989, July 15, 1989, December 1, 1989, February 15, 1990 and November
1, 1990 supplemental to the Original Indenture, have heretofore been
entered into between the Company and the Trustee (the Original Indenture
and all indentures supplemental thereto together being hereinafter
sometimes referred to as the "Indenture"); and
ISSUE OF WHEREAS, the Indenture provides that said bonds shall be issuable in one
BONDS UNDER or more series, and makes provision that the rates of interest and dates
INDENTURE. for the payment thereof, the date of maturity or dates of maturity, if of
serial maturity, the terms and rates of optional redemption (if
redeemable), the forms of registered bonds without coupons of any series
and any other provisions and agreements in respect thereof, in the
Indenture provided and permitted, as the Board of Directors may determine,
may be expressed in a supplemental indenture to be made by the Company to
the Trustee thereunder; and
BONDS HERETOFORE WHEREAS, bonds in the principal amount of Five billion six hundred
ISSUED. thirty-two million two hundred eighty-two thousand dollars
($5,632,282,000) have heretofore been issued under the Indenture as
follows, viz:
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(1) Bonds of Series A -- Principal Amount $26,016,000,
(2) Bonds of Series B -- Principal Amount $23,000,000,
(3) Bonds of Series C -- Principal Amount $20,000,000,
(4) Bonds of Series D -- Principal Amount $50,000,000,
(5) Bonds of Series E -- Principal Amount $15,000,000,
(6) Bonds of Series F -- Principal Amount $49,000,000,
(7) Bonds of Series G -- Principal Amount $35,000,000,
(8) Bonds of Series H -- Principal Amount $50,000,000,
(9) Bonds of Series I -- Principal Amount $60,000,000,
(10) Bonds of Series J -- Principal Amount $35,000,000,
(11) Bonds of Series K -- Principal Amount $40,000,000,
(12) Bonds of Series L -- Principal Amount $24,000,000,
(13) Bonds of Series M -- Principal Amount $40,000,000,
(14) Bonds of Series N -- Principal Amount $40,000,000,
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(15) Bonds of Series O -- Principal Amount $60,000,000,
(16) Bonds of Series P -- Principal Amount $70,000,000,
(17) Bonds of Series Q -- Principal Amount $40,000,000,
(18) Bonds of Series W -- Principal Amount $50,000,000,
(19) Bonds of Series BB -- Principal Amount $50,000,000,
(20) Bonds of Series CC -- Principal Amount $50,000,000,
(21) Bonds of Series UU -- Principal Amount $100,000,000,
(22-29) Bonds of Series DDP Nos. 1-8 -- Principal Amount $6,400,000,
(30-41) Bonds of Series FFR Nos. 1-12 -- Principal Amount $8,000,000,
(42-56) Bonds of Series GGP Nos. 1-6 and
8-16 -- Principal Amount $8,355,000,
(57-70) Bonds of Series IIP Nos. 1-6 and
8-15 -- Principal Amount $490,000,
(71-76) Bonds of Series JJP Nos. 1-6 -- Principal Amount $690,000,
(77-82) Bonds of Series KKP Nos. 1-6 -- Principal Amount $1,590,000,
(83-97) Bonds of Series LLP Nos. 1-7 and
8-15 -- Principal Amount $8,850,000,
(98-110) Bonds of Series NNP Nos. 1-6 and
8-14 -- Principal Amount $8,450,000,
(111-119) Bonds of Series OOP Nos. 1-9 -- Principal Amount $3,015,000,
(120-133) Bonds of Series QQP Nos. 1-8 and
10-15 -- Principal Amount $9,710,000,
(134-140) Bonds of Series TTP Nos. 1-7 -- Principal Amount $385,000,
(141) Bonds of 1980 Series A -- Principal Amount $50,000,000,
(142-158) Bonds of 1980 Series CP Nos.
1-12 and 13-17 -- Principal Amount $26,000,000,
(159-169) Bonds of 1980 Series DP Nos.
1-11 -- Principal Amount $10,750,000,
(170-174) Bonds of 1981 Series AP Nos. 1-5 -- Principal Amount $4,000,000,
</TABLE>
all of which have either been retired and cancelled, or no
longer represent obligations of the Company, having been called
for redemption and funds necessary to effect the payment,
redemption and retirement thereof having been deposited with
the Trustee as a special trust fund to be applied for such
purpose;
(175) Bonds of Series R in the principal amount of One hundred
million dollars ($100,000,000), all of which are outstanding at
the date hereof;
(176) Bonds of Series S in the principal amount of One hundred
fifty million dollars ($150,000,000), all of which are
outstanding at the date hereof;
(177) Bonds of Series T in the principal amount of Seventy-five
million dollars ($75,000,000), all of which are outstanding at
the date hereof;
(178) Bonds of Series U in the principal amount of Seventy-five
million dollars ($75,000,000), all of which are outstanding at
the date hereof;
(179) Bonds of Series V in the principal amount of One hundred
million dollars ($100,000,000), all of which are outstanding at
the date hereof;
(180) Bonds of Series X in the principal amount of One hundred
million dollars ($100,000,000), all of which are outstanding at
the date hereof;
(181) Bonds of Series Y in the principal amount of Sixty
million dollars ($60,000,000), all of which are outstanding at
the date hereof;
(182) Bonds of Series Z in the principal amount of One hundred
million dollars ($100,000,000), all of which are outstanding at
the date hereof;
(183) Bonds of Series AA in the principal amount of One hundred
million dollars ($100,000,000), all of which are outstanding at
the date hereof;
(184) Bonds of Series DDP No. 9 in the principal amount of
Seven million nine hundred five thousand dollars ($7,905,000),
of which Two million four hundred
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thousand dollars ($2,400,000) principal amount have heretofore
been retired and Five million five hundred five thousand
dollars ($5,505,000) principal amount are outstanding at the
date hereof;
(185) Bonds of Series EE in the principal amount of Fifty
million dollars ($50,000,000), of which Thirty-five million
dollars ($35,000,000) principal amount have heretofore been
retired and Fifteen million dollars ($15,000,000) principal
amount are outstanding at the date hereof;
(186-187) Bonds of Series FFR Nos. 13-14 in the principal
amount of Thirty-seven million six hundred thousand dollars
($37,600,000), all of which are outstanding at the date hereof;
(188-194) Bonds of Series GGP Nos. 7 and 17-22 in the principal
amount of Thirty-three million nine hundred forty-five thousand
dollars ($33,945,000), of which Three million two hundred
thousand dollars ($3,200,000) principal amount have heretofore
been retired and Thirty million seven hundred forty-five
thousand dollars ($30,745,000) principal amount are outstanding
at the date hereof;
(195) Bonds of Series HH in the principal amount of Fifty
million dollars ($50,000,000), all of which are outstanding at
the date hereof;
(196-197) Bonds of Series MMP and MMP No. 2 in the principal
amount of Five million four hundred thirty thousand dollars
($5,430,000), of which One million three hundred eighty
thousand dollars ($1,380,000) principal amount have heretofore
been retired and Four million fifty thousand dollars
($4,050,000) principal amount are outstanding at the date
hereof;
(198-205) Bonds of Series IIP Nos. 7 and 16-22 in the principal
amount of Three million two hundred sixty thousand dollars
($3,260,000), of which Two hundred twenty thousand dollars
($220,000) principal amount have heretofore been retired and
Three million forty thousand dollars ($3,040,000) principal
amount are outstanding at the date hereof;
(206-207) Bonds of Series JJP Nos. 7-8 in the principal amount
of Six million one hundred sixty thousand dollars ($6,160,000),
of which Six hundred twenty thousand dollars ($620,000)
principal amount have heretofore been retired and Five million
five hundred forty thousand dollars ($5,540,000) are
outstanding at the date hereof;
(208-213) Bonds of Series KKP Nos. 7-12 in the principal amount
of One hundred twenty-three million seven hundred ninety
thousand dollars ($123,790,000), of which One million three
hundred thousand dollars ($1,300,000) principal amount have
heretofore been retired and One hundred twenty-two million four
hundred ninety thousand dollars ($122,490,000) are outstanding
at the date hereof;
(214-221) Bonds of Series NNP Nos. 7 and 15-21 in the principal
amount of Thirty-nine million five hundred thousand
($39,500,000), of which Two million four hundred seventy-five
thousand dollars ($2,475,000) principal amount have heretofore
been retired and Thirty-seven million twenty-five thousand
dollars ($37,025,000) principal amount are outstanding at the
date hereof;
(222-230) Bonds of Series OOP Nos. 10-18 in the principal
amount of Fifteen million eight hundred sixty-five thousand
dollars ($15,865,000), of which Two hundred eighty thousand
dollars ($280,000) principal amount have heretofore been
retired and Fifteen million five hundred eighty-five thousand
dollars ($15,585,000) are outstanding at the date hereof;
(231) Bonds of Series PP in the principal amount of Seventy
million dollars ($70,000,000), all of which are outstanding at
the date hereof;
(232-236) Bonds of Series QQP Nos. 9 and 16-19 in the principal
amount of Three million nine hundred forty thousand dollars
($3,940,000), all of which are outstanding at the date hereof;
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(237) Bonds of Series RR in the principal amount of Seventy
million dollars ($70,000,000), all of which are outstanding at
the date hereof;
(238) Bonds of Series SS in the principal amount of One hundred
fifty million dollars ($150,000,000), of which Ninety million
dollars ($90,000,000) principal amount have heretofore been
retired and Sixty million dollars ($60,000,000) principal
amount are outstanding at the date hereof;
(239-246) Bonds of Series TTP Nos. 8-15 in the principal amount
of Three million four hundred fifteen thousand dollars
($3,415,000), all of which are outstanding at the date hereof;
(247) Bonds of 1980 Series B in the principal amount of One
hundred million dollars ($100,000,000), of which Fifty-nine
million eight hundred fifty thousand dollars ($59,850,000)
principal amount have heretofore been retired and Forty million
one hundred fifty thousand dollars ($40,150,000) principal
amount are outstanding at the date hereof;
(248-255) Bonds of 1980 Series CP Nos. 18-25 in the principal
amount of Nine million dollars ($9,000,000), all of which are
outstanding at the date hereof;
(256-266) Bonds of 1981 Series AP Nos. 6-16 in the principal
amount of One hundred twenty million dollars ($120,000,000),
all of which are outstanding at the date hereof;
(267) Bonds of 1984 Series AP in the principal amount of Two
million four hundred thousand dollars ($2,400,000), all of
which are outstanding at the date hereof;
(268) Bonds of 1984 Series BP in the principal amount of Seven
million seven hundred fifty thousand dollars ($7,750,000), all
of which are outstanding at the date hereof;
(269) Bonds of 1985 Series A in the principal amount of
Thirty-five million dollars ($35,000,000), all of which are
outstanding at the date hereof;
(270) Bonds of 1985 Series B in the principal amount of Fifty
million dollars ($50,000,000), all of which are outstanding at
the date hereof;
(271) Bonds of 1986 Series A in the principal amount of Two
hundred million dollars ($200,000,000), all of which are
outstanding at the date hereof;
(272) Bonds of 1986 Series B in the principal amount of One
hundred million dollars ($100,000,000), all of which are
outstanding at the date hereof;
(273) Bonds of 1986 Series C in the principal amount of Two
hundred million dollars ($200,000,000), all of which are
outstanding at the date hereof;
(274) Bonds of 1987 Series A in the principal amount of Three
hundred million dollars ($300,000,000), all of which are
outstanding at the date hereof;
(275) Bonds of 1987 Series B in the principal amount of One
hundred seventy-five million dollars ($175,000,000), all of
which are outstanding at the date hereof;
(276) Bonds of 1987 Series C in the principal amount of Two
hundred twenty-five million dollars ($225,000,000), all of
which are outstanding at the date hereof;
(277) Bonds of 1987 Series D in the principal amount of Two
hundred fifty million dollars ($250,000,000), all of which are
outstanding at the date hereof;
(278) Bonds of 1987 Series E in the principal amount of One
hundred fifty million dollars ($150,000,000), all of which are
outstanding at the date hereof;
(279) Bonds of 1987 Series F in the principal amount of Two
hundred million dollars ($200,000,000), all of which are
outstanding at the date hereof;
(280) Bonds of 1989 Series A in the principal amount of Three
hundred million dollars ($300,000,000), all of which are
outstanding at the date hereof;
(281) Bonds of 1989 Series BP in the principal amount of
Sixty-six million five hundred sixty-five thousand
($66,565,000), all of which are outstanding at the date hereof;
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(282) Bonds of 1990 Series A in the principal amount of One
hundred ninety-four million six hundred forty-nine thousand
($194,649,000) of which Six million two hundred seventy-nine
thousand ($6,279,000) principal amount have heretofore been
retired and One hundred eighty-eight million three hundred
seventy thousand ($188,370,000) principal amount are
outstanding at the date hereof;
(283) Bonds of 1990 Series B in the principal amount of Two
hundred fifty-six million nine hundred thirty-two thousand
($256,932,000) of which Nine million five hundred sixteen
thousand ($9,516,000) principal amount have heretofore been
retired and Two hundred forty-seven million four hundred
sixteen thousand ($247,416,000) principal amount are
outstanding at the date hereof; and
(284) Bonds of 1990 Series C in the principal amount of
Eighty-five million four hundred seventy-five thousand
($85,475,000) of which Three million four hundred nineteen
thousand ($3,419,000) principal amount have heretofore been
retired and Eighty-two million fifty-six thousand ($82,056,000)
principal amount are outstanding at the date hereof;
and, accordingly, of the bonds so issued, Four billion three
hundred forty-two million six hundred forty-two thousand
dollars ($4,342,642,000) principal amount are outstanding at
the date hereof; and
REASON FOR WHEREAS, the Michigan Strategic Fund has issued $32,375,000 principal
CREATION OF amount of its Limited Obligation Refunding Revenue Bonds (The Detroit
NEW SERIES. Edison Company Pollution Control Bonds Project), Series 1990BB so as to
provide funds for the refunding of certain pollution control previously
issued to finance pollution control projects of the Company; and
WHEREAS, the Company has entered into a Loan Agreement, dated as of July
15, 1990 and amended as of April 1, 1991, with the Michigan Strategic Fund
in order to refund certain pollution control bonds, and pursuant to such
Loan Agreement the Company has agreed to issue its General and Refunding
Mortgage Bonds under the Indenture in order further to secure its
obligations under such Loan Agreement; and
WHEREAS, for such purposes the Company desires to issue a new series of
bonds to be issued under the Indenture and to be authenticated and
delivered pursuant to Section 8 of Article III of the Indenture; and
BONDS TO BE WHEREAS, the Company desires by this Supplemental Indenture to create
1991 SERIES AP such new series of bonds, to be designated "General and Refunding Mortgage
Bonds, 1991 Series AP"; and
FURTHER WHEREAS, the Original Indenture, by its terms, includes in the property
ASSURANCE. subject to the lien thereof all of the estates and properties, real,
personal and mixed, rights, privileges and franchises of every nature and
kind and wheresoever situate, then or thereafter owned or possessed by or
belonging to the Company or to which it was then or at any time thereafter
might be entitled in law or in equity (saving and excepting, however, the
property therein specifically excepted or released from the lien thereof),
and the Company therein covenanted that it would, upon reasonable request,
execute and deliver such further instruments as may be necessary or proper
for the better assuring and confirming unto the Trustee all or any part of
the trust estate, whether then or thereafter owned or acquired by the
Company (saving and excepting, however, property specifically excepted or
released from the lien thereof); and
AUTHORIZATION WHEREAS, the Company in the exercise of the powers and authority
OF SUPPLEMENTAL conferred upon and reserved to it under and by virtue of the provisions of
INDENTURE. the Indenture, and pursuant to resolutions of its Board of Directors has
duly resolved and determined to make, execute and deliver to the Trustee a
supplemental indenture in the form hereof for the purposes herein
provided; and
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WHEREAS, all conditions and requirements necessary to make this
Supplemental Indenture a valid and legally binding instrument in
accordance with its terms have been done, performed and fulfilled, and the
execution and delivery hereof have been in all respects duly authorized;
CONSIDERATION NOW, THEREFORE, THIS INDENTURE WITNESSETH: That The Detroit Edison
FOR SUPPLEMENTAL Company, in consideration of the premises and of the covenants contained
INDENTURE. in the Indenture and of the sum of One Dollar ($1.00) and other good and
valuable consideration to it duly paid by the Trustee at or before the
ensealing and delivery of these presents, the receipt whereof is hereby
acknowledged, hereby covenants and agrees to and with the Trustee and its
successors in the trusts under the Original Indenture and in said
indentures supplemental thereto as follows:
PART I.
CREATION OF TWO HUNDRED EIGHTY-EIGHTH
SERIES OF BONDS.
GENERAL AND REFUNDING MORTGAGE BONDS,
1991 SERIES AP
CERTAIN TERMS SECTION 1. The Company hereby creates the Two hundred Eighty-eighth
OF BONDS OF series of bonds to be issued under and secured by the Original Indenture
1991 SERIES AP as amended to date and as further amended by this Supplemental Indenture,
to be designated, and to be distinguished from the bonds of all other
series, by the title "General and Refunding Mortgage Bonds, 1991 Series
AP" (elsewhere herein referred to as the "bonds of 1991 Series AP"). The
aggregate principal amount of bonds of 1991 Series AP shall be limited to
Thirty-two million three hundred and seventy-five thousand dollars
($32,375,000), except as provided in Sections 7 and 13 of Article II of
the Original Indenture with respect to exchanges and replacements of
bonds.
Each bond of 1991 Series AP is to be irrevocably assigned to, and
registered in the name of, NBD Bank, N.A., as trustee, or a successor
trustee (said trustee or any successor trustee being hereinafter referred
to as the "Strategic Fund Trust Indenture Trustee"), under the Trust
Indenture, dated as of July 15, 1990, as amended April 1, 1991
(hereinafter called the "Strategic Fund Trust Indenture"), between the
Michigan Strategic Fund (hereinafter called "Strategic Fund"), and the
Strategic Fund Trust Indenture Trustee, to secure payment of the Michigan
Strategic Fund Limited Obligation Refunding Revenue Bonds (The Detroit
Edison Company Pollution Control Bonds Project), Collateralized Series
1990BB (hereinafter called the "Strategic Fund Revenue Bonds"), issued by
the Strategic Fund under the Strategic Fund Trust Indenture, the proceeds
of which have been provided for the refunding of certain pollution control
bonds which the Company refunded pursuant to the provisions of the Loan
Agreement, dated as of July 15, 1990, as amended April 1, 1991
(hereinafter called the "Strategic Fund Agreement"), between the Company
and the Strategic Fund.
The bonds of 1991 Series AP shall be issued as registered bonds without
coupons in denominations of a multiple of $5,000. The bonds of 1991 Series
AP shall be issued in the aggregate principal amount of $32,375,000, shall
mature on July 15, 2008 and shall bear interest, payable semi-annually on
January 15 and July 15 of each year (commencing July 15, 1991), at the
rate of 7.0%, until the principal thereof shall have become due and
payable and thereafter until the Company's obligation with respect to the
payment of said principal shall have been discharged as provided in the
Indenture.
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The bonds of 1991 Series AP shall be payable as to principal, premium,
if any, and interest as provided in the Indenture, but only to the extent
and in the manner herein provided. The bonds of 1991 Series AP shall be
payable, both as to principal and interest, at the office or agency of the
Company in the Borough of Manhattan, The City and State of New York, in
any coin or currency of the United States of America which at the time of
payment is legal tender for public and private debts.
Except as provided herein, each bond of 1991 Series AP shall be dated
the date of its authentication and interest shall be payable on the
principal represented thereby from the January 15 or July 15 next
preceding the date thereof to which interest has been paid on bonds of
1991 Series AP, unless the bond is authenticated on a date to which
interest has been paid, in which case interest shall be payable from the
date of authentication, or unless the date of authentication is prior to
January 15, 1992, in which case interest shall be payable from July 15,
1991.
The bonds of 1991 Series AP in definitive form shall be, at the election
of the Company, fully engraved or shall be lithographed or printed in
authorized denominations as aforesaid and numbered 1 and upwards (with
such further designation as may be appropriate and desirable to indicate
by such designation the form, series and denominations of bonds of 1991
Series AP). Until bonds of 1991 Series AP in definitive form are ready for
delivery, the Company may execute, and upon its request in writing the
Trustee shall authenticate and deliver in lieu thereof, bonds of 1991
Series AP in temporary form, as provided in Section 10 of Article II of
the Indenture. Temporary bonds of 1991 Series AP, if any, may be printed
and may be issued in authorized denominations in substantially the form of
definitive bonds of 1991 Series AP, but with such omissions, insertions
and variations as may be appropriate for temporary bonds, all as may be
determined by the Company.
Bonds of 1991 Series AP shall not be assignable or transferable except
as may be required to effect a transfer to any successor trustee under the
Strategic Fund Trust Indenture, or, subject to compliance with applicable
law, as may be involved in the course of the exercise of rights and
remedies consequent upon an Event of Default under the Strategic Fund
Trust Indenture. Any such transfer shall be made upon surrender thereof
for cancellation at the office or agency of the Company in the Borough of
Manhattan, The City and State of New York, together with a written
instrument of transfer (if so required by the Company or by the Trustee)
in form approved by the Company duly executed by the holder or by its duly
authorized attorney. Bonds of 1991 Series AP shall in the same manner be
exchangeable for a like aggregate principal amount of bonds of 1991 Series
AP upon the terms and conditions specified herein and in Section 7 of
Article II of the Indenture. The Company waives its rights under Section 7
of Article II of the Indenture not to make exchanges or transfers of bonds
of 1991 Series AP, during any period of ten days next preceding any
redemption date for such bonds.
Bonds of 1991 Series AP, in definitive and temporary form, may bear such
legends as may be necessary to comply with any law or with any rules or
regulations made pursuant thereto or as may be specified in the Strategic
Fund Agreement.
Upon payment of the principal or premium, if any, or interest on the
Strategic Fund Revenue Bonds, whether at maturity or prior to maturity by
redemption or otherwise, or upon provision for the payment thereof having
been made in accordance with Article IV of the Strategic Fund Trust
Indenture, bonds of 1991 Series AP in a principal amount equal to the
principal amount of such Strategic Fund Revenue Bonds, shall, to the
extent of such payment of principal, premium or interest, be deemed fully
paid and the obligation of the Company thereunder to make such payment
shall forthwith cease and be discharged, and, in the case of the payment
of principal and premium, if any, such bonds shall be surrendered for
cancellation or presented for appropriate notation to the Trustee.
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REDEMPTION SECTION 2. Bonds of 1991 Series AP shall be redeemed on the respective
OF BONDS OF dates and in the respective principal amounts which correspond to the
1991 SERIES AP redemption dates for, and the principal amounts to be redeemed of, the
Strategic Fund Revenue Bonds.
In the event the Company elects to redeem any Strategic Fund Revenue Bonds
prior to maturity in accordance with the provisions of the Strategic Fund
Trust Indenture, the Company shall on the same date redeem bonds of 1991
Series AP in principal amounts and at redemption prices corresponding to
the Strategic Fund Revenue Bonds so redeemed. The Company agrees to give
the Trustee notice of any such redemption of bonds of 1991 Series AP on
the same date as it gives notice of redemption of Strategic Fund Revenue
Bonds to the Strategic Fund Trust Indenture Trustee.
REDEMPTION SECTION 3. In the event of an Event of Default under the Strategic Fund
OF BONDS OF 1991 Trust Indenture and the acceleration of all Strategic Fund Revenue Bonds,
SERIES AP IN EVENT the bonds of 1991 Series AP shall be redeemable in whole upon receipt by
OF ACCELERATION the Trustee of a written demand (hereinafter called a "Redemption Demand")
OF STRATEGIC FUND from the Strategic Fund Trust Indenture Trustee stating that there has
REVENUE BONDS. occurred under the Strategic Fund Trust Indenture both an Event of Default
and a declaration of acceleration of payment of principal, accrued
interest and premium, if any, on the Strategic Fund Revenue Bonds,
specifying the last date to which interest on the Strategic Fund Revenue
Bonds has been paid (such date being hereinafter referred to as the
"Initial Interest Accrual Date") and demanding redemption of the bonds of
said series. The Trustee shall, within five days after receiving such
Redemption Demand, mail a copy thereof to the Company marked to indicate
the date of its receipt by the Trustee. Promptly upon receipt by the
Company of such copy of a Redemption Demand, the Company shall fix a date
on which it will redeem the bonds of said series so demanded to be
redeemed (hereinafter called the "Demand Redemption Date"). Notice of the
date fixed as the Demand Redemption Date shall be mailed by the Company to
the Trustee at least ten days prior to such Demand Redemption Date. The
date to be fixed by the Company as and for the Demand Redemption Date may
be any date up to and including the earlier of (x) the 60th day after
receipt by the Trustee of the Redemption Demand or (y) the maturity date
of such bonds first occurring following the 20th day after the receipt by
the Trustee of the Redemption Demand; provided, however, that if the
Trustee shall not have received such notice fixing the Demand Redemption
Date on or before the 10th day preceding the earlier of such dates, the
Demand Redemption Date shall be deemed to be the earlier of such dates.
The Trustee shall mail notice of the Demand Redemption Date (such notice
being hereinafter called the "Demand Redemption Notice") to the Strategic
Fund Trust Indenture Trustee not more than ten nor less than five days
prior to the Demand Redemption Date.
Each bond of 1991 Series AP shall be redeemed by the Company on the
Demand Redemption Date therefore upon surrender thereof by the Strategic
Fund Trust Indenture Trustee to the Trustee at a redemption price equal to
the principal amount thereof plus accrued interest thereon at the rate
specified for such bond from the Initial Interest Accrual Date to the
Demand Redemption Date plus an amount equal to the aggregate premium, if
any, due and payable on such Demand Redemption Date on all Strategic Fund
Revenue Bonds; provided, however, that in the event of a receipt by the
Trustee of a notice that, pursuant to Section 606 of the Strategic Fund
Trust Indenture, the Strategic Fund Trust Indenture Trustee has terminated
proceedings to enforce any right under the Strategic Fund Trust Indenture,
then any Redemption Demand shall thereby be rescinded by the Strategic
Fund Trust Indenture Trustee, and no Demand Redemption Notice shall be
given, or, if already given, shall be automatically annulled; but no such
rescission or annulment shall extend to or affect any subsequent default
or impair any right consequent thereon.
</TABLE>
<PAGE> 11
9
<TABLE>
<CAPTION>
<S> <C>
Anything herein contained to the contrary notwithstanding, the Trustee
is not authorized to take any action pursuant to a Redemption Demand and
such Redemption Demand shall be of no force or effect, unless it is
executed in the name of the Strategic Fund Trust Indenture Trustee by its
President or one of its Vice Presidents.
CONSENT. SECTION 4. The holders of the bonds of 1991 Series AP, by their
acceptance of and holding thereof, consent and agree that bonds of any
series may be issued which mature on a date or dates later than October 1,
2024 and also consent to the deletion from the first paragraph of Section
5 of Article II of the Indenture of the phrase "but in no event later than
October 1, 2024". Such holders further agree that (a) such consent shall,
for all purposes of Article XV of the Indenture and without further action
on the part of such holders, be deemed the affirmative vote of such
holders at any meeting called pursuant to said Article XV for the purpose
of approving such deletion, and (b) such deletion shall become effective
at such time as not less than eighty-five per cent (85%) in principal
amount of bonds outstanding under the Indenture shall have consented
thereto substantially in the manner set forth in this Section 4, or in
writing, or by affirmative vote cast at a meeting called pursuant to said
Article XV, or by any combination thereof.
FORM OF BONDS SECTION 5. The bonds of 1991 Series AP and the form of Trustee's
OF 1991 SERIES AP Certificate to be endorsed on such bonds shall be substantially in the
following forms, respectively:
</TABLE>
<PAGE> 12
10
<TABLE>
[FORM OF FACE OF BOND]
THE DETROIT EDISON COMPANY
GENERAL AND REFUNDING MORTGAGE BOND
1991 SERIES AP, 7.0% DUE JULY 15, 2008
<S><C>
Notwithstanding any provisions hereof or in the Indenture, this bond is
not assignable or transferable except as may be required to effect a
transfer to any successor trustee under the Trust Indenture, dated as of
July 15, 1990 and amended as of April 1, 1991 between the Michigan
Strategic Fund and NBD Bank, N.A., as trustee, or, subject to compliance
with applicable law, as may be involved in the course of the exercise of
rights and remedies consequent upon an Event of Default under said Trust
Indenture.
$......... No..........
THE DETROIT EDISON COMPANY (hereinafter called the "Company"), a
corporation of the State of Michigan, for value received, hereby promises
to pay to the Michigan Strategic Fund, or registered assigns, at the
Company's office or agency in the Borough of Manhattan, The City and State
of New York, the principal sum of dollars ($ ) in
lawful money of the United States of America on the date specified in the
title hereof and interest thereon at the rate specified in the title
hereof, in like lawful money, from May 1, 1991, and after the first
payment of interest on bonds of this Series has been made or otherwise
provided for, from the most recent date to which interest has been paid or
otherwise provided for, semi-annually on January 15 and July 15 of each
year (commencing July 15, 1991), until the Company's obligation with
respect to payment of said principal shall have been discharged, all as
provided, to the extent and in the manner specified in the Indenture
hereinafter mentioned on the reverse hereof and in the supplemental
indenture pursuant to which this bond has been issued.
Under a Trust Indenture, dated as of July 15, 1990 and amended as of
April 1, 1991 (hereinafter called the "Strategic Fund Trust Indenture"),
between the Michigan Strategic Fund (hereinafter called "Strategic Fund"),
and NBD Bank, N.A., as trustee (hereinafter called the "Strategic Fund
Trust Indenture Trustee"), the Strategic Fund has issued Limited
Obligation Refunding Revenue Bonds (The Detroit Edison Company Pollution
Control Bonds Project), Collateralized Series 1990BB (hereinafter called
the "Strategic Fund Revenue Bonds"). This bond was originally issued to
the Strategic Fund and simultaneously irrevocably assigned to the
Strategic Fund Trust Indenture Trustee so as to secure the payment of the
Strategic Fund Revenue Bonds. Payments of principal of, or premium, if
any, or interest on, Strategic Fund Revenue Bonds shall constitute like
payments on this bond as further provided herein and in the supplemental
indenture pursuant to which this bond has been issued.
Reference is hereby made to such further provisions of this bond set
forth on the reverse hereof and such further provisions shall for all
purposes have the same effect as though set forth at this place.
This bond shall not be valid or become obligatory for any purpose until
Bankers Trust Company, the Trustee under the Indenture hereinafter
mentioned on the reverse hereof, or its successor thereunder, shall have
signed the form of certificate endorsed hereon.
</TABLE>
<PAGE> 13
11
IN WITNESS WHEREOF, THE DETROIT EDISON COMPANY has caused this
instrument to be executed by its Chairman of the Board and its Executive
Vice President and Chief Financial Officer or a Vice President, with
their manual or facsimile signatures, and its corporate seal, or a
facsimile thereof, to be impressed or imprinted hereon and the same to
be attested by its Secretary or an Assistant Secretary with his or her
manual or facsimile signature.
Dated: THE DETROIT EDISON COMPANY
By ............................
Chairman of the Board
............................
Executive Vice President
Attest: and Chief Financial Officer
............................
Secretary
<PAGE> 14
12
<TABLE>
[FORM OF REVERSE OF BOND]
<S><C>
This bond is one of an authorized issue of bonds of the Company,
unlimited as to amount except as provided in the Indenture hereinafter
mentioned or any indentures supplemental thereto, and is one of a series
of General and Refunding Mortgage Bonds known as 1991 Series AP, limited
to an aggregate principal amount of $32,375,000, except as otherwise
provided in the Indenture hereinafter mentioned. This bond and all other
bonds of said series are issued and to be issued under, and are all
equally and ratably secured (except insofar as any sinking, amortization,
improvement or analogous fund, established in accordance with the
provisions of the Indenture hereinafter mentioned, may afford additional
security for the bonds of any particular series and except as provided in
Section 3 of Article VI of said Indenture) by an Indenture, dated as of
October 1, 1924, duly executed by the Company to Bankers Trust Company, a
corporation of the State of New York, as Trustee, to which Indenture and
all indentures supplemental thereto (including the Supplemental Indenture
dated as of April 1, 1991) reference is hereby made for a description of
the properties and franchises mortgaged and conveyed, the nature and
extent of the security, the terms and conditions upon which the bonds are
issued and under which additional bonds may be issued, and the rights of
the holders of the bonds and of the Trustee in respect of such security
(which Indenture and all indentures supplemental thereto, including the
Supplemental Indenture dated as of April 1, 1991, are hereinafter
collectively called the "Indenture"). As provided in the Indenture, said
bonds may be for various principal sums and are issuable in series, which
may mature at different times, may bear interest at different rates and
may otherwise vary as in said Indenture provided. With the consent of the
Company and to the extent permitted by and as provided in the Indenture,
the rights and obligations of the Company and of the holders of the bonds
and the terms and provisions of the Indenture, or of any indenture
supplemental thereto, may be modified or altered in certain respects by
affirmative vote of at least eighty-five percent (85%) in amount of the
bonds then outstanding, and, if the rights of one or more, but less than
all, series of bonds then outstanding are to be affected by the action
proposed to be taken, then also by affirmative vote of at least
eighty-five percent (85%) in amount of the series of bonds so to be
affected (excluding in every instance bonds disqualified from voting by
reason of the Company's interest therein as specified in the Indenture);
provided, however, that, without the consent of the holder hereof, no such
modification or alteration shall, among other things, affect the terms of
payment of the principal of or the interest on this bond, which in those
respects is unconditional.
The holders of the bonds of 1991 Series AP, by their acceptance of and
holding thereof, consent and agree that bonds of any series may be issued
which mature on a date or dates later than October 1, 2024 and also
consent to the deletion from the first paragraph of Section 5 of Article
II of the Indenture of the phrase "but in no event later than October 1,
2024,". Such holders further agree that (a) such consent shall, for all
purposes of Article XV of the Indenture and without further action on the
part of such holders, be deemed the affirmative vote of such holders at
any meeting called pursuant to said Article XV for the purpose of
approving such deletion, and (b) such deletion shall become effective at
such time as not less than eighty-five per cent (85%) in principal amount
of bonds outstanding under the Indenture shall have consented thereto
substantially in the manner set forth in Section 4 of Part I of the
Supplemental Indenture dated as of April 1, 1991, or in writing, or by
affirmative vote cast at a meeting called pursuant to said Article XV, or
by any combination thereof.
This bond is redeemable upon the terms and conditions set forth in the
Indenture, including provision for redemption upon demand of the Strategic
Fund Trust Indenture Trustee following the occurrence of an Event of
Default under the Strategic Fund Trust Indenture and the acceleration of
the principal of the Strategic Fund Revenue Bonds.
</TABLE>
<PAGE> 15
13
<TABLE>
<S><C>
Under the Indenture, funds may be deposited with the Trustee (which
shall have become available for payment), in advance of the redemption
date of any of the bonds of 1991 Series AP (or portions thereof), in trust
for the redemption of such bonds (or portions thereof) and the interest
due or to become due thereon, and thereupon all obligations of the Company
in respect of such bonds (or portions thereof) so to be redeemed and such
interest shall cease and be discharged, and the holders thereof shall
thereafter be restricted exclusively to such funds for any and all claims
of whatsoever nature on their part under the Indenture or with respect to
such bonds (or portions thereof) and interest.
In case an event of default, as defined in the Indenture, shall occur,
the principal of all the bonds issued thereunder may become or be declared
due and payable, in the manner, with the effect and subject to the
conditions provided in the Indenture.
Upon payment of the principal of, or premium, if any, or interest on,
the Strategic Fund Revenue Bonds, whether at maturity or prior to maturity
by redemption or otherwise or upon provision for the payment thereof
having been made in accordance with Article IV of the Strategic Fund Trust
Indenture, bonds of 1991 Series AP in a principal amount equal to the
principal amount of such Strategic Fund Revenue Bonds and having both a
corresponding maturity date and interest rate shall, to the extent of such
payment of principal, premium or interest, be deemed fully paid and the
obligation of the Company thereunder to make such payment shall forthwith
cease and be discharged, and, in the case of the payment of principal and
premium, if any, such bonds of said series shall be surrendered for
cancellation or presented for appropriate notation to the Trustee.
This bond is not assignable or transferable except as may be required to
effect a transfer to any successor trustee under the Strategic Fund Trust
Indenture, or, subject to compliance with applicable law, as may be
involved in the course of the exercise of rights and remedies consequent
upon an Event of Default under the Strategic Fund Trust Indenture. Any
such transfer shall be made by the registered holder hereof, in person or
by his attorney duly authorized in writing, on the books of the Company
kept at its office or agency in the Borough of Manhattan, The City and
State of New York, upon surrender and cancellation of this bond, and
thereupon, a new registered bond of the same series of authorized
denominations for a like aggregate principal amount will be issued to the
transferee in exchange therefor, and this bond with others in like form
may in like manner be exchanged for one or more new bonds of the same
series of other authorized denominations, but of the same aggregate
principal amount, all as provided and upon the terms and conditions set
forth in the Indenture, and upon payment, in any event, of the charges
prescribed in the Indenture.
No recourse shall be had for the payment of the principal of or the
interest on this bond, or for any claim based hereon or otherwise in
respect hereof or of the Indenture, or of any indenture supplemental
thereto, against any incorporator, or against any past, present or future
stockholder, director or officer, as such, of the Company, or of any
predecessor or successor corporation, either directly or through the
Company or any such predecessor or successor corporation, whether for
amounts unpaid on stock subscriptions or by virtue of any constitution,
statute or rule of law, or by the enforcement of any assessment or penalty
or otherwise howsoever; all such liability being, by the acceptance hereof
and as part of the consideration for the issue hereof, expressly waived
and released by every holder or owner hereof, as more fully provided in
the Indenture.
</TABLE>
<PAGE> 16
14
[FORM OF TRUSTEE'S CERTIFICATE]
FORM OF This bond is one of the bonds, of the series designated
TRUSTEE'S therein, described in the within-mentioned Indenture.
CERTIFICATE.
BANKERS TRUST COMPANY,
as Trustee
By ...........................
Authorized Officer
<TABLE>
<CAPTION>
PART II.
RECORDING AND FILING DATA
<S> <C>
RECORDING AND The Original Indenture and indentures supplemental thereto have been
FILING OF ORIGINAL recorded and/or filed and Certificates of Provision for Payment have been
INDENTURE. recorded as hereinafter set forth.
The Original Indenture has been recorded as a real estate mortgage and
filed as a chattel mortgage in the offices of the respective Registers of
Deeds of certain counties in the State of Michigan as set forth in the
Supplemental Indenture dated as of September 1, 1947, has been recorded as
a real estate mortgage in the office of the Register of Deeds of Genesee
County, Michigan as set forth in the Supplemental Indenture dated as of
May 1, 1974, has been filed in the Office of the Secretary of State of
Michigan on November 16, 1951 and has been filed and recorded in the
office of the Interstate Commerce Commission on December 8, 1969.
RECORDING AND Pursuant to the terms and provisions of the Original Indenture,
FILING OF indentures supplemental thereto heretofore entered into have been recorded
SUPPLEMENTAL as a real estate mortgage and/or filed as a chattel mortgage or as a
INDENTURES. financing statement in the offices of the respective Registers of Deeds of
certain counties in the State of Michigan, the Office of the Secretary of
State of Michigan and the Office of the Interstate Commerce Commission, as
set forth in supplemental indentures as follows:
</TABLE>
<TABLE>
<CAPTION>
RECORDED AND/OR
FILED AS SET FORTH
IN
SUPPLEMENTAL PURPOSE OF SUPPLEMENTAL
INDENTURE SUPPLEMENTAL INDENTURE
DATED AS OF INDENTURE DATED AS OF:
---------------------------------- ------------------------ ------------------
<S> <C> <C>
June 1, 1925(a)(b)................ Series B Bonds February 1, 1940
August 1, 1927(a)(b).............. Series C Bonds February 1, 1940
February 1, 1931(a)(b)............ Series D Bonds February 1, 1940
June 1, 1931(a)(b)................ Subject Properties February 1, 1940
October 1, 1932(a)(b)............. Series E Bonds February 1, 1940
September 25, 1935(a)(b).......... Series F Bonds February 1, 1940
September 1, 1936(a)(b)........... Series G Bonds February 1, 1940
November 1, 1936(a)(b)............ Subject Properties February 1, 1940
February 1, 1940(a)(b)............ Subject Properties September 1, 1947
December 1, 1940(a)(b)............ Series H Bonds and Ad- September 1, 1947
ditional Provisions
September 1, 1947(a)(b)(c)........ Series I Bonds, November 15, 1951
Subject Properties and
Additional Provisions
March 1, 1950(a)(b)(c)............ Series J Bonds November 15, 1951
and Additional Provi-
sions
November 15, 1951(a)(b)(c)........ Series K Bonds January 15, 1953
Additional Provisions
and Subject Properties
January 15, 1953(a)(b)............ Series L Bonds May 1, 1953
May 1, 1953(a).................... Series M Bonds March 15, 1954
and Subject Properties
March 15, 1954(a)(c).............. Series N Bonds May 15, 1955
and Subject Properties
</TABLE>
<PAGE> 17
15
<TABLE>
<CAPTION>
RECORDED AND/OR
FILED AS SET FORTH
IN
SUPPLEMENTAL PURPOSE OF SUPPLEMENTAL
INDENTURE SUPPLEMENTAL INDENTURE
DATED AS OF INDENTURE DATED AS OF:
---------------------------------- ------------------------ ------------------
<S> <C> <C>
May 15, 1955(a)(c)................ Series O Bonds August 15, 1957
and Subject Properties
August 15, 1957(a)(c)............. Series P Bonds June 1, 1959
Additional Provisions
and Subject Properties
June 1, 1959(a)(c)................ Series Q Bonds December 1, 1966
and Subject Properties
December 1, 1966(a)(c)............ Series R Bonds October 1, 1968
Additional Provisions
and Subject Properties
October 1, 1968(a)(c)............. Series S Bonds December 1, 1969
and Subject Properties
December 1, 1969(a)(c)............ Series T Bonds July 1, 1970
and Subject Properties
July 1, 1970(c)................... Series U Bonds December 15, 1970
and Subject Properties
December 15, 1970(c).............. Series V and June 15, 1971
Series W Bonds
June 15, 1971(c).................. Series X Bonds November 15, 1971
and Subject Properties
November 15, 1971(c).............. Series Y Bonds January 15, 1973
and Subject Properties
January 15, 1973(c)............... Series Z Bonds May 1, 1974
and Subject Properties
May 1, 1974....................... Series AA Bonds October 1, 1974
and Subject Properties
October 1, 1974................... Series BB Bonds January 15, 1975
and Subject Properties
January 15, 1975.................. Series CC Bonds November 1, 1975
and Subject Properties
November 1, 1975.................. Series DDP Nos. 1-9 December 15, 1975
Bonds and Subject
Properties
December 15, 1975................. Series EE Bonds February 1, 1976
and Subject Properties
February 1, 1976.................. Series FFR Nos. 1-13 June 15, 1976
Bonds
June 15, 1976..................... Series GGP Nos. 1-7 July 15, 1976
Bonds and Subject
Properties
July 15, 1976..................... Series HH Bonds February 15, 1977
and Subject Properties
February 15, 1977................. Series MMP Bonds and March 1, 1977
Subject Properties
March 1, 1977..................... Series IIP Nos. 1-7 June 15, 1977
Bonds, Series JJP Nos.
1-7 Bonds, Series KKP
Nos. 1-7 Bonds and
Series LLP Nos. 1-7
Bonds
June 15, 1977..................... Series FFR No. 14 Bonds July 1, 1977
and Subject Properties
July 1, 1977...................... Series NNP Nos. 1-7 October 1, 1977
Bonds and Subject
Properties
</TABLE>
<PAGE> 18
16
<TABLE>
<CAPTION>
RECORDED AND/OR
FILED AS SET FORTH
IN
SUPPLEMENTAL PURPOSE OF SUPPLEMENTAL
INDENTURE SUPPLEMENTAL INDENTURE
DATED AS OF INDENTURE DATED AS OF:
---------------------------------- ------------------------ ------------------
<S> <C> <C>
October 1, 1977................... Series GGP Nos. 8-22 June 1, 1978
Bonds and Series OOP
Nos. 1-17 Bonds and
Subject Properties
June 1, 1978...................... Series PP Bonds, October 15, 1978
Series QQP Nos. 1-9
Bonds and Subject
Properties
October 15, 1978.................. Series RR Bonds March 15, 1979
and Subject Properties
March 15, 1979.................... Series SS Bonds July 1, 1979
and Subject Properties
July 1, 1979...................... Series IIP Nos. 8-22 September 1, 1979
Bonds, Series NNP Nos.
8-21 Bonds and Series
TTP Nos. 1-15 Bonds
and Subject Properties
September 1, 1979................. Series JJP No. 8 Bonds, September 15, 1979
Series KKP No. 8
Bonds, Series LLP Nos.
8-15 Bonds, Series MMP
No. 2 Bonds and Series
OOP No. 18 Bonds and
Subject Properties
September 15, 1979................ Series UU Bonds January 1, 1980
January 1, 1980................... 1980 Series A Bonds and April 1, 1980
Subject Properties
April 1, 1980..................... 1980 Series B Bonds August 15, 1980
August 15, 1980................... Series QQP Nos. 10-19 August 1, 1981
Bonds, 1980 Series CP
Nos. 1-12 Bonds and
1980 Series DP No.
1-11 Bonds and Subject
Properties
August 1, 1981.................... 1980 Series CP Nos. November 1, 1981
13-25 Bonds and
Subject Properties
November 1, 1981.................. 1981 Series AP Nos. 1-12 June 30, 1982
Bonds
June 30, 1982..................... Article XIV August 15, 1982
Reconfirmation
August 15, 1982................... 1981 Series AP Nos. June 1, 1983
13-14 and Subject
Properties
June 1, 1983...................... 1981 Series AP Nos. October 1, 1984
15-16 and Subject
Properties
October 1, 1984................... 1984 Series AP and 1984 May 1, 1985
Series BP Bonds and
Subject Properties
May 1, 1985....................... 1985 Series A Bonds May 15, 1985
May 15, 1985...................... 1985 Series B Bonds and October 15, 1985
Subject Properties
October 15, 1985.................. Series KKP No. 9 Bonds April 1, 1986
and Subject Properties
</TABLE>
<PAGE> 19
17
<TABLE>
<CAPTION>
RECORDED AND/OR
FILED AS SET FORTH
IN
SUPPLEMENTAL PURPOSE OF SUPPLEMENTAL
INDENTURE SUPPLEMENTAL INDENTURE
DATED AS OF INDENTURE DATED AS OF:
---------------------------------- ------------------------ ------------------
<S> <C> <C>
April 1, 1986..................... 1986 Series A and August 15, 1986
Subject Properties
August 15, 1986................... 1986 Series B and November 30, 1986
Subject Properties
November 30, 1986................. 1986 Series C January 31, 1987
January 31, 1987.................. 1987 Series A April 1, 1987
April 1, 1987..................... 1987 Series B and 1987 August 15, 1987
Series C
August 15, 1987................... 1987 Series D and 1987 November 30, 1987
Series E and Subject
Properties
November 30, 1987................. 1987 Series F June 15, 1989
June 15, 1989..................... 1989 Series A July 15, 1989
July 15, 1989..................... Series KKP No. 10 December 1, 1989
December 1, 1989.................. Series KKP No. 11 and February 15, 1990
1989 Series BP
February 15, 1990................. 1990 Series A, 1990 November 1, 1990
Series B, 1990 Series
C, 1990 Series D, 1990
Series E and 1990
Series F
</TABLE>
---------------
(a) See Supplemental Indenture dated as of July 1, 1970 for
Interstate Commerce Commission filing and recordation
information.
(b) See Supplemental Indenture dated as of May 1, 1953 for
Secretary of State of Michigan filing information.
(c) See Supplemental Indenture dated as of May 1, 1974 for
County of Genesee, Michigan recording and filing
information.
<TABLE>
<S><C>
Further, pursuant to the terms and provisions of the Original
Indenture, a Supplemental Indenture dated as of November 1, 1990 providing
for the terms of bonds to be issued thereunder of Series KKP No. 12 has
heretofore been entered into between the Company and the Trustee and has
been filed in the Office of the Secretary of State of Michigan as a
financing statement on November 9, 1990 (Filing No. 07211B), has been
filed and recorded in the Office of the Interstate Commerce Commission
(Recordation No. 5485-QQQ), and has been recorded as a real estate
mortgage in the offices of the respective Register of Deeds of certain
counties in the State of Michigan, as follows:
</TABLE>
<TABLE>
<CAPTION>
LIBER
OF
MORTGAGES
OR
COUNTY
COUNTY RECORDED RECORDS PAGE
---------------------------- ---------------- ------ ----------
<S> <C> <C> <C>
Genesee..................... November 9, 1990 2611 288-310
Huron....................... November 9, 1990 548 684-706
Ingham...................... November 9, 1990 1849 330-352
Lapeer...................... November 9, 1990 702 519-541
Lenawee..................... November 9, 1990 1140 314-336
Livingston.................. November 9, 1990 1441 608-630
Macomb...................... November 9, 1990 4991 681-703
Mason....................... November 9, 1990 398 324-346
Monroe...................... November 9, 1990 1142 474-496
Oakland..................... November 9, 1990 11629 295-317
Sanilac..................... November 9, 1990 414 235-257
St. Clair................... November 9, 1990 974 519-541
Tuscola..................... November 9, 1990 607 815-837
Washtenaw................... November 9, 1990 2451 933-955
Wayne....................... November 9, 1990 24896 308-330
</TABLE>
<PAGE> 20
18
<TABLE>
<CAPTION>
<S> <C>
RECORDING OF All the bonds of Series A which were issued under the Original
CERTIFICATES Indenture dated as of October 1, 1924, and of Series B, C, D, E, F, G, H,
OF PROVISION I, J, K, L, M, N, O, P, Q, W, BB, CC, DDP Nos. 1-8, FFR Nos. 1-12, GGP
FOR PAYMENT. Nos. 1-6 and 8-16, IIP Nos. 1-6 and 8-15, JJP Nos. 1-6, KKP Nos. 1-6, LLP
Nos. 1-7 and 8-15, NNP Nos. 1-6 and 8-14, OOP Nos. 1-9, QQP Nos. 1-8 and
10-15 and TTP Nos. 1-7, UU 1980 Series A, 1980 Series CP Nos. 1-12 and
13-17, 1980 Series DP Nos. 1-11 and 1981 Series AP Nos. 1-5 which were
issued under Supplemental Indentures dated as of, respectively, June 1,
1925, August 1, 1927, February 1, 1931, October 1, 1932, September 25,
1935, September 1, 1936, December 1, 1940, September 1, 1947, November 15,
1951, January 15, 1953, May 1, 1953, March 15, 1954, May 15, 1955, August
15, 1957, December 15, 1970, October 1, 1974, January 15, 1975, November
1, 1975, February 1, 1976, June 15, 1976, October 1, 1977, March 1, 1977,
July 1, 1979, March 1, 1977, March 1, 1977, March 1, 1977, September 1,
1979, July 1, 1977, July 1, 1979, September 15, 1979, October 1, 1977,
June 1, 1978, October 1, 1977, July 1, 1979, January 1, 1980, August 15,
1980 and November 1, 1981 have matured or have been called for redemption
and funds sufficient for such payment or redemption have been irrevocably
deposited with the Trustee for that purpose; and Certificates of Provi-
sion for Payment have been recorded in the offices of the respective
Registers of Deeds of certain counties in the State of Michigan, with
respect to all bonds of Series A, B, C, D, E, F, G, H, K, L, M, O, W, BB,
CC, DDP Nos. 1 and 2, FFR Nos. 1-3, GGP Nos. 1 and 2, IIP No. 1, JJP No.
1, KKP No. 1, LLP No. 1 and GGP No. 8.
PART III.
THE TRUSTEE.
TERMS AND The Trustee hereby accepts the trust hereby declared and provided, and
CONDITIONS OF agrees to perform the same upon the terms and conditions in the Original
ACCEPTANCE OF Indenture, as amended to date and as supplemented by this Supplemental
TRUST BY TRUSTEE. Indenture, and in this Supplemental Indenture set forth, and upon the
following terms and conditions:
The Trustee shall not be responsible in any manner whatsoever for and
in respect of the validity or sufficiency of this Supplemental Indenture
or the due execution hereof by the Company or for or in respect of the
recitals contained herein, all of which recitals are made by the Company
solely.
PART IV.
MISCELLANEOUS.
Except to the extent specifically provided therein, no provision of
this supplemental indenture or any future supplemental indenture is
intended to modify, and the parties do hereby adopt and confirm, the
provisions of Section 318(c) of the Trust Indenture Act which amend and
supercede provisions of the Indenture in effect prior to November 15,
1990.
EXECUTION IN THIS SUPPLEMENTAL INDENTURE MAY BE SIMULTANEOUSLY EXECUTED IN ANY NUM-
COUNTERPARTS. BER OF COUNTERPARTS, EACH OF WHICH WHEN SO EXECUTED SHALL BE DEEMED TO BE
AN ORIGINAL; BUT SUCH COUNTERPARTS SHALL TOGETHER CONSTITUTE BUT ONE AND
THE SAME INSTRUMENT.
</TABLE>
<PAGE> 21
19
<TABLE>
<CAPTION>
<S> <C>
TESTIMONIUM. IN WITNESS WHEREOF, THE DETROIT EDISON COMPANY AND BANKERS TRUST
COMPANY HAVE CAUSED THESE PRESENTS TO BE SIGNED IN THEIR RESPECTIVE
CORPORATE NAMES BY THEIR RESPECTIVE CHAIRMEN OF THE BOARD, PRESIDENTS,
VICE PRESIDENTS, ASSISTANT VICE PRESIDENTS, TREASURERS OR ASSISTANT
TREASURERS AND IMPRESSED WITH THEIR RESPECTIVE CORPORATE SEALS, ATTESTED
BY THEIR RESPECTIVE SECRETARIES OR ASSISTANT SECRETARIES, ALL AS OF THE
DAY AND YEAR FIRST ABOVE WRITTEN.
</TABLE>
THE DETROIT EDISON COMPANY,
(Corporate Seal) By /s/ C. C. ARVANI
-------------------------
C. C. Arvani
Assistant Treasurer
EXECUTION. Attest:
/s/ SUSAN M. BEALE
-------------------------
Susan M. Beale
Secretary
Signed, sealed and delivere
DETROIT EDISON COMPANY, in
presence of
/s/ JANE E. LENART
-------------------------
Jane E. Lenart
/s/ JANET A. SCULLEN
-------------------------
Janet A. Scullen
(Corporate Seal)
BANKERS TRUST COMPANY,
By /s/ BARBARA A. JOINER
-------------------------
Barbara A. Joiner
Vice President
Attest:
/s/ SANDRA SHIRLEY
-------------------------
Sandra Shirley
Assistant Vice President
Signed, sealed and delivere
BANKERS TRUST COMPANY, in the
presence of
/s/ ERIC M. HAWNER
-------------------------
Eric M. Hawner
/s/ MARGARET BEREZA
-------------------------
Margaret Bereza
<PAGE> 22
20
<TABLE>
<CAPTION>
STATE OF MICHIGAN
COUNTY OF WAYNE SS.:
<S> <C>
ACKNOWLEDGMENT On this 25th day of April, 1991, before me, the subscriber, a Notary
OF EXECUTION Public within and for the County of Wayne, in the State of Michigan,
BY COMPANY. personally appeared C. C. Arvani, to me personally known, who, being by me
duly sworn, did say that he does business at 2000 Second Avenue, Detroit,
Michigan 48226 and is the Assistant Treasurer of THE DETROIT EDISON
COMPANY, one of the corporations described in and which executed the
foregoing instrument; that he knows the corporate seal of the said
corporation and that the seal affixed to said instrument is the corporate
seal of said corporation; and that said instrument was signed and sealed
in behalf of said corporation by authority of its Board of Directors and
that he subscribed his name thereto by like authority; and said C. C.
Arvani, acknowledged said instrument to be the free act and deed of said
corporation.
</TABLE>
/s/ PEARL E. KOTTER
-------------------------------------
(Notarial Seal) Pearl E. Kotter, Notary Public
Macomb County, MI
(Acting in Wayne County)
My Commission Expires August 23, 1993
<TABLE>
<CAPTION>
STATE OF NEW YORK
COUNTY OF NEW YORK SS.:
<S> <C>
ACKNOWLEDGMENT On this 23rd day of April, 1991, before me, the subscriber, a Notary
OF EXECUTION Public within and for the County of New York, in the State of New York,
BY TRUSTEE. personally appeared Barbara A. Joiner, to me personally known, who, being
by me duly sworn, did say that she does business at Four Albany Street,
New York, New York 10015, and is Vice President of BANKERS TRUST COMPANY,
one of the corporations described in and which executed the foregoing
instrument; that she knows the corporate seal of the said corporation and
that the seal affixed to said instrument is the corporate seal of said
corporation; and that said instrument was signed and sealed in behalf of
said corporation by authority of its Board of Directors and that she
subscribed her name thereto by like authority; and said Barbara A. Joiner
acknowledged said instrument to be the free act and deed of said
corporation.
</TABLE>
(Notarial Seal)
/s/ JEAN O'KEEFE
-------------------------------------
Jean O'Keefe
Notary Public, State of New York
No. 31-4905426
Qualified in New York County
Certificate filed in New York County
Commission Expires September 14, 1991
<PAGE> 23
21
<TABLE>
<CAPTION>
STATE OF MICHIGAN
COUNTY OF WAYNE SS.:
<S> <C>
AFFIDAVIT AS TO C. C. Arvani, being duly sworn, says: that he is the Assistant Treasurer
CONSIDERATION of THE DETROIT EDISON COMPANY, the Mortgagor named in the foregoing
AND GOOD FAITH. instrument, and that he has knowledge of the facts in regard to the making
of said instrument and of the consideration therefor; that the
consideration for said instrument was and is actual and adequate, and that
the same was given in good faith for the purposes in such instrument set
forth.
/s/ C. C. ARVANI
------------------------------
C. C. Arvani
</TABLE>
Sworn to before me this 25th day of
April, 1991
/s/ PEARL E. KOTTER
--------------------------------------
Pearl E. Kotter, Notary Public
Macomb County, MI
(Acting in Wayne County)
My Commission Expires August 23, 1993
(Notarial Seal)
This instrument was drafted by Frances B. Rohlman, Esq.,
2000 Second Avenue, Detroit, Michigan 48226
<PAGE> 1
EXHIBIT 10-1
1996 Shareholder Value Improvement Plan - A
<TABLE>
<CAPTION>
TARGET LEVELS
MEASURE WEIGHT 1 2 3
- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Positive & Positive &
Top 10% Within Top Below
TOTAL SHAREHOLDER RETURN (TSR)* 40% of 48 10%-50% Median but
DJEU Prorated at least 10%
CUSTOMER VALUE MEASURES**
CUSTOMER SATISFACTION 20% 91% 89% 88%
SAFETY
LWDC 5% 7 8 10
RECORDABLES*** 5% 210 230 250
O&M AND CAPITAL 10% -4% -2% 0
PRODUCTION COST 20% $20.23 $20.75 $21.26
- --------------------------------------------------------------------------------
PERFORMANCE FUND 20% 15% 10%
- --------------------------------------------------------------------------------
</TABLE>
Conditions for Awards:
*There is no award if the total return is negative
**TSR must be positive or above the median of DJEU.
***LWDC must be at least Level 3
Approved:
- ----------------------------------------------
Terrence E. Adderley, Chairman Date
Organization and Compensation Committee
<PAGE> 1
EXHIBIT 10-2
Key Employe Deferred Compensation Plan
Policy and Benefits Development
Organization Planning and Development
Human Resources
January, 1990
The Key Employe Deferred Compensation Plan ("Plan"), initiated in 1964, is
designed to supplement pension benefits available to certain management
employees under the Employes' Retirement Plan. Basic Awards may be made to
eligible individuals effective each December 31.
ADMINISTRATION
The Organization and Compensation Committee ("Committee") of the Board of
Directors administers the Plan and is responsible for all future awards
hereunder without further action by the Board of Directors. The Committee has
the authority to interpret the Plan's provisions and prescribe any regulations
relating to its administration.
ELIGIBILITY
Participation (subject to award eligibility requirements) in the Plan is
restricted to the following employes:
Frank E. Agosti
Stanley G. Catola
Malcolm G. Dade, Jr.
Ronald W. Gresens
Willard R. Holland
Wesley D. Kappler
Sheldon M. Lutz
Robert V. Nicolson
William S. Orser
Frederick L. Petersen
J. James Roosen
Mahmud U. Syed
B. Ralph Sylvia
S. Martin Taylor
James H. Tuttle
Maurice L. Vermeulen
Richard C. Viinikainen
Saul J. Waldman
Morley A. Wassermann
<PAGE> 2
Participants must be age 50 or older to be eligible to receive basic awards.
CALCULATION OF BASIC AWARD AMOUNTS
For Plan years beginning 1989, participants will receive basic awards of one
percent (1%) of the total base salary paid or accrued during full months for
which the eligibility criteria have been met; provided, however, that in the
event the Committee certifies to the Paymaster a different award (or no award)
by December 31, then such certified amount shall prevail.
For example, assume an individual earns $10,000 per month and reaches age 50 on
July 1. The award amount would be calculated for such year as follows:
.01 X $10,000 X 6 = $600.00
CALCULATION OF SUPPLEMENTAL AWARD AMOUNTS
In addition to the Basic Awards, Supplemental Awards are calculated and paid
monthly at the same time as Basic Awards are paid. The amount of each
Supplemental Award is the sum of: (A) 1/12 of the balance of total unpaid Basic
Awards granted prior to 1981 times the average prime interest rate of the
National Bank of Detroit for the preceding month less 1%, PLUS (B) 1/12 of the
balance of total unpaid Basic Awards granted after 1980 times the lesser of (i)
the average prime interest rate of the National Bank of Detroit for the
preceding month less 1%, or (ii) 10%.
For example, assume an individual terminates employment on January 1, 1993 and
has received Basic Awards as follows:
<TABLE>
<S> <C>
1978 $500
1979 600
1980 700
1981 800
1982 900
1983 1,000
1984 1,100
1985 1,200
1986 1,300
1987 1,400
1988 1,500
1989 1,600
1990 1,700
1991 1,800
1992 1,900
</TABLE>
<PAGE> 3
Total annual Basic Awards are $18,000 per year and total unpaid Basic Awards
are $18,000 x 15 = $270,000.
Assume that the average prime interest rate for December 1992 is 13%. The
Basic Award for January 1993 would be $18,000 / 12 = $1,500 and the Supplemental
Award for January 1993 would be $27,000 x 12% / 12 = $270 plus $243,000 x 10% /
12 = $2,025, for a total Supplemental Award of $2,295. The total award for the
first month would therefore be $1,500 + $2,295 = $3,795.
Assume that the average prime interest rate for January 1993 was 10%. The
Basic Award for February 1993 would be $1,500 and the Supplemental Award would
be ($27,000 - $150) x 9% / 12 = $201.38 plus ($243,000 - $1,350) x 9% / 12 =
$1,812.38, for a total Supplemental Award of $2,013.76. The total award would
therefore be $1,500 + $2,013.76 = $3,513.76.
AWARDS
Awards under this Plan are not considered earnings for purposes of the Employe
Savings Plan, the Employes' Retirement Plan, insurance or other employe benefit
programs including, but not limited to, the Executive Incentive Plan.
Note, however, that under certain circumstances awards granted after January 1,
1984 may be subject to the Federal Insurance Contributions Act ("F.I.C.A.")
tax.
The amount of Basic Award grants is prorated for individuals who have met the
eligibility criteria during a given year but whose employment is terminated for
any reason during such year.
PAYMENT OF AWARDS
Basic Awards are paid to participants in monthly installments for a period of
15 years after termination of employment, commencing in the first full month
after termination. In other words, if an individual's 1984 Deferred
Compensation Plan award were $1,000 then that individual would be entitled to
receive $83.33 per month ($1,000 per year) for a period of 15 years following
termination of employment. Supplemental Awards are calculated, added to and
paid at the same time as Basic Awards.
If a participant should die prior to receipt of the full amount of all awards,
the remaining balance of unpaid Basic Awards plus Supplemental Awards are paid
to the participant's designated beneficiary or estate on the same monthly basis
as if paid to the participant. At the election of the participant, payments to
a designated beneficiary may be made monthly over a shorter period or in a lump
sum.
AMENDMENT OR TERMINATION
<PAGE> 4
The Company reserves the right to amend, modify, supplement or terminate the
Plan at any time, provided, however, that no such amendment, modification,
supplement or termination shall affect the right of any participant (or such
participant's beneficiary) to receive benefits theretofore accrued. The
foregoing does not preclude voluntary waiver of benefits by a participant or
beneficiary.
<PAGE> 1
EXHIBIT 10.3
THE DETROIT EDISON COMPANY
LONG-TERM INCENTIVE PLAN
SECTION 1. PURPOSE.
The purpose of this Long-Term Incentive Plan is to more closely align the
interests of key employes of The Detroit Edison Company, its Subsidiaries and
any successor corporation with those of shareholders by rewarding long term
growth and profitability. In the emerging competitive environment, placing more
pay at risk will foster the desired results by providing key employes additional
incentives to devote their best efforts to pursue and sustain the Company's
financial success through the achievement of corporate goals. In addition,
ownership of stock assists in the attraction and retention of qualified employes
and Directors. Accordingly, certain key employes may be granted Stock Options,
Stock Appreciation Rights, Restricted Stock, Performance Shares and Performance
Units. Nonemploye Directors will also receive Awards of Common Stock.
SECTION 2. DEFINITIONS.
A. "Agreement" shall mean a written Agreement, in a form approved by the
Committee, which sets forth the terms and conditions of an Award. Agreements
shall be subject to the express terms and conditions set forth herein, and to
such other terms and conditions not inconsistent with the Plan as the Committee
shall deem appropriate.
B. "Award" shall mean an Option (which may be designated as a Nonqualified
Stock Option or an Incentive Stock Option), a Stock Appreciation Right (which
may be designated as a Freestanding SAR or a Tandem SAR), Restricted Stock,
Performance Shares or Performance Units, in each case granted under this Plan.
Each such Award shall be evidenced by an Agreement. The term shall also include
non-discretionary awards of Common Stock to Nonemploye Directors pursuant to
Section 10 of the Plan.
C. "Board" shall mean the Board of Directors of the Company.
D. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
E. "Committee" shall mean the Organization and Compensation Committee of
the Board, or such other Board Committee as may be designated from time to time
by the Board. All Directors serving on the Committee at any given time shall be
"disinterested persons" as that term is used in Rule 16b-3, and the number of
Directors serving on the Committee at any given time shall be no less than the
number then required by Rule 16b-3.
F. "Common Stock" shall mean shares of common stock of the Company, subject
to adjustment as provided in Section 13.
G. "Company" shall mean The Detroit Edison Company, a Michigan corporation,
and any successor corporation.
H. "Date of Grant" means the date specified by the Committee pursuant to
Section 4 hereof on which a grant of Options, SAR's, Restricted Stock,
Performance Shares or Performance Units shall become effective, which shall not
be earlier than the date on which the Committee takes action with respect
thereto.
I. "Employe" shall mean (i) an employe of the Company or a Subsidiary,
whether or not an officer thereof, and shall include any such employe who is
also a Director of the Company or a Subsidiary, and (ii) a director of a
Subsidiary who is not a Nonemploye Director.
J. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
K. "Exercise Price" shall mean, with respect to each share of Common Stock
subject to an Option, the price fixed by the Committee at which such share may
be purchased pursuant to the exercise of such Option.
L. "Fair Market Value" shall mean the fair market value of the Common Stock
determined by the Committee by whatever method or means the members, in the good
faith exercise of their discretion, at that time shall deem appropriate.
1
<PAGE> 2
M. "Freestanding SAR" shall mean a right, granted pursuant to this Plan
without reference or relationship to any Option, of an Employe to receive cash,
shares of Common Stock, or a combination thereof, as the case may be, having an
aggregate value equal to the excess of the Fair Market Value of one share of
Common Stock on the date of exercise of such SAR over the Fair Market Value of
one such share on the Date of Grant of such SAR.
N. "Incentive Stock Option" or "ISO" shall mean an Option that meets the
requirements of Section 422 of the Code, or any successor provision, and that is
intended by the Committee to constitute an ISO. Any ISO granted hereunder must
be granted within ten years from the date of adoption of the Plan by the Board.
If for any reason an Option (or any portion thereof) intended by the Committee
to be an ISO nevertheless does not so qualify as an ISO under the Code, either
at the time of grant or subsequently, such failure to qualify shall not
invalidate the Option (or any portion thereof) and instead the nonqualified
portion (or, if necessary, the entire Option) shall be deemed to have been
granted as a Nonqualified Stock Option irrespective of the manner in which it is
designated in the Option Agreement.
O. "Nonemploye Director" shall mean a Director of the Company who is not an
employe of the Company or any Subsidiary.
P. "Nonqualified Stock Option" or "NQSO" shall mean an Option that is not
an ISO.
Q. "Option" shall mean the right, granted pursuant to this Plan, of a
holder to purchase shares of Common Stock at an Exercise Price and upon terms to
be specified by the Committee. The term shall include a Nonqualified Stock
Option or an Incentive Stock Option.
R. "Optionee" means the person so designated in an Agreement evidencing an
outstanding Option.
S. "Performance Measures" shall mean (1) in the case of Performance Shares
or Performance Units, those criteria and objectives determined by the Committee
the attainment of which during the applicable Performance Period would be a
pre-condition to settlement of such Award, and (2) in the case of Restricted
Stock, those Committee-determined criteria and objectives (if any) which, if not
met during the applicable Restriction Period, would cause a forfeiture of such
Award and/or which, if met during the otherwise applicable Restriction Period,
would cause an early termination of the Restriction Period. The Performance
Measures applicable to any Award to an Employe who is, or is determined by the
Committee to be likely to become, a "covered employe" within the meaning of
Section 162(m) of the Code (or any successor provision) shall be limited to
criteria and objectives related to: (i) shareholder value growth based on stock
price and dividends, (ii) customer price, (iii) customer satisfaction and (iv)
growth based on increasing sales or profitability of one or more business units;
provided, however, that the Committee may impose any other subjective or
objective criteria it may approve from time to time for the purpose of reducing
the amount otherwise payable upon settlement of Performance Shares or
Performance Units or for the purpose of increasing the number of shares of
Restricted Stock that would otherwise be forfeited during the applicable
Restriction Period. Except in the case of such a covered employe, if the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company or a Subsidiary, or the manner in
which it conducts its business, or other events or circumstances render the
Performance Measures to be unsuitable, the Committee may modify such Performance
Measures, in whole or in part, as the Committee deems appropriate and equitable.
T. "Performance Period" shall mean the period designated by the Committee
during which the Performance Measures applicable to Performance Shares or
Performance Units shall be measured. The Performance Period shall be established
on the Date of Grant of such Performance Shares or Performance Units, and shall
not be less than one year in duration. The duration of Performance Periods may
vary.
U. "Performance Shares" shall mean the right, contingent upon attainment of
Performance Measures within a Performance Period, to receive a specified number
of shares of Common Stock, which may be Restricted Stock, or, in lieu of all or
any portion of such shares, their Fair Market Value in cash.
V. "Performance Units" shall mean the right, contingent upon attainment of
Performance Measures within a Performance Period, to receive a specified dollar
amount or, in lieu of all or any portion of such amount, shares of Common Stock
having the same Fair Market Value or the same number of shares of Restricted
Stock. Each Performance Unit shall have a face amount of $1.00.
2
<PAGE> 3
W. "Plan" shall mean the Long-Term Incentive Plan set forth in this
instrument, as amended from time to time.
X. "Reorganization" shall mean the corporate reorganization of The Detroit
Edison Company pursuant to resolutions adopted by the Board of Directors of The
Detroit Edison Company on December 5, 1994 and January 23, 1995 (as such
resolutions may be amended or supplemented from time to time) whereby it is
proposed that a corporation ("Holding Company") will become the parent holding
company of The Detroit Edison Company.
Y. "Restriction Period" shall mean the period designated by the Committee
during which Restricted Stock shall be subject to a substantial risk of
forfeiture and may not be sold, exchanged, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of, except as otherwise
provided in the Plan.
Z. "Restricted Stock" shall mean any shares of Common Stock issued pursuant
to the Plan subject to a substantial risk of forfeiture pursuant to Section 83
of the Code and to the restriction that they may not be sold, exchanged,
assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed
of, except as otherwise provided in the Plan, prior to termination of a
Restriction Period. Restricted Stock shall constitute issued and outstanding
shares of Common Stock for all corporate purposes.
AA. "Rule 16b-3" means Rule 16b-3 as promulgated and amended from time to
time by the Securities and Exchange Commission under the Exchange Act (or any
successor rule) as in effect with respect to the Company at a given time.
BB. "Stock Appreciation Right" or "SAR" shall mean any Freestanding SAR or
Tandem SAR.
CC. "Subsidiary" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest; provided, however, for purposes of
determining whether any person may receive a grant of ISO's, "Subsidiary" means
any corporation in which the Company owns or controls directly or indirectly
more than 50 percent of the total combined voting power represented by all
classes of stock issued by such corporation at the time of the grant.
DD. "Tandem SAR" shall mean a right, granted under this Plan, pursuant to
which a holder may elect to surrender an Option, or any portion thereof, which
is then exercisable, and receive in exchange therefor shares of Common Stock,
cash, or a combination thereof, as the case may be, with an aggregate value
equal to the excess of the Fair Market Value of one share of Common Stock at the
time of exercise over the per share Exercise Price specified in such Option,
multiplied by the number of shares of Common Stock covered by such Option, or
portion thereof, which is so surrendered.
EE. "Tax Withholding Date" shall mean the date the withholding tax
obligation first arises with respect to an Award.
SECTION 3. LIMITS ON AVAILABLE SHARES AND FREESTANDING SAR'S
A. Shares of Common Stock used for an Award under the Plan may be either
authorized but unissued shares or authorized, issued and outstanding shares
acquired by or on behalf of the Company in the name of an Award recipient (or
permissible successor thereof) for purposes of granting or settling such Award,
or may be a combination of the foregoing. Subject to adjustment as provided in
Section 13 of the Plan, the aggregate maximum number of shares which may be (i)
issued or transferred upon the exercise of Options or SAR's, (ii) awarded as
Restricted Stock and released from substantial risk of forfeiture thereof or
(iii) issued or transferred in payment of Performance Shares or Performance
Units which have been earned is 7,200,000.
B. Upon the full or partial payment of any Exercise Price by the transfer
to the Company of Common Stock or upon satisfaction of tax withholding
obligations in connection with any such exercise or any other payment made or
benefit realized under the Plan by the transfer or relinquishment of Common
Stock, there shall be deemed to have been issued or transferred under the Plan
only the net number of shares of Common Stock actually issued or transferred by
the Company less the number of shares of Common Stock so transferred or
relinquished; provided, however, that the number of shares of Common Stock
actually issued or transferred by the Company upon the exercise of Incentive
Stock Options shall not exceed the number of shares of Common Stock first
specified above in Section 3(A), subject to adjustment as therein provided.
3
<PAGE> 4
C. Upon payment in cash of the benefit provided by any Award granted under
the Plan, any shares of Common Stock that were covered by that Award shall again
be available for issuance or transfer hereunder.
D. The number of Performance Units (which each have a face amount of $1.00)
that may be granted under this Plan shall not in the aggregate exceed
25,000,000. Performance Units that are granted under this Plan and are paid in
shares of Common Stock or are not earned by the Employe at the end of the
Performance Period shall be available for future grants of Performance Units
hereunder.
E. Notwithstanding any other provision of the Plan to the contrary, no
Employe shall be granted Options for more than 300,000 shares of Common Stock or
Stock Appreciation Rights for more than 300,000 shares of Common Stock during
any period of five consecutive calendar years, subject to adjustment as provided
in Section 13 of this Plan.
F. Notwithstanding any other provision of the Plan to the contrary, in no
event shall any Employe receive awards of Restricted Stock, Performance Shares
and Performance Units having an aggregate value as of their respective Dates of
Grant in excess of $750,000 in any calendar year or in excess of $3,500,000 in
any period of five consecutive calendar years.
SECTION 4. ADMINISTRATION.
The Plan shall be administered by the Committee. In addition to any implied
powers and duties that may be needed to carry out the provisions of the Plan,
the Committee shall have all the powers vested in it by the terms of the Plan,
including exclusive authority to grant Awards to Employes under the Plan, to
select the Employes to receive such Awards, to determine the type, size and
terms of the Awards to be made to each Employe selected (which Awards need not
be uniform), to determine the time when Awards to Employes will be granted, and
to prescribe the form of the Agreements embodying Awards made under the Plan.
Any Award made to an Employe may provide for acceleration of the period of
exercisability, lapse or alteration of the Restriction Period, or modification
of any Performance Measure in the event of a change in control of the Company or
any Subsidiary or other similar transaction or event. The Committee shall be
authorized to interpret the Plan and the Awards granted under the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, to
make any other determinations which it believes necessary or advisable for the
administration of the Plan, and to correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Award in the manner and to the
extent the Committee deems desirable to carry it into effect.
All Committee determinations shall be final, conclusive and binding on the
Company, any Subsidiary, any Employe, any Nonemploye Director, beneficiary,
legal representative, and any other interested parties. The Committee may
authorize any one or more of their number, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. No member of the
Committee shall be liable for any such action taken or determination made in
good faith.
SECTION 5. ELIGIBILITY.
All key Employes are eligible for selection by the Committee to receive an
Award, except Employes covered by a collective bargaining Agreement with the
Company or a Subsidiary which does not provide for coverage under this Plan.
Nonemploye Directors shall be eligible only for non-discretionary Awards under
Section 10 of the Plan.
SECTION 6. STOCK OPTIONS.
A. Terms and Conditions.
1. Type of Option. The Committee may make Awards of ISO's and NQSO's.
Each Option Award shall specify whether the pertinent Option is intended as
a Nonqualified Stock Option or an Incentive Stock Option.
2. Number of Shares Covered. Each Option Award shall specify the
number of shares of Common Stock subject to the pertinent Option.
3. Exercise Period. Each Option Award shall specify the period (or
periods) not in excess of 10 years during which the pertinent Option (or
portions thereof) may be exercised, and the Option
4
<PAGE> 5
Agreement shall provide that the Option (or such portion) shall expire at
the end of such period (or periods), and may be subject to earlier
termination in the event of a change in control of the Company or any
Subsidiary or other similar transaction or event, as provided in the Option
Agreement.
4. Exercise Price. The Exercise Price shall be determined by the
Committee at the time any Option is granted, and shall be set forth in the
Option Agreement. In no event shall the Exercise Price per share of any
Option be less than 100% of the Fair Market Value per share on the Date of
Grant.
5. Manner of Exercise. The specified number of shares with respect to
which an Option is exercised shall, subject to applicable tax withholding,
be issued following receipt by the Company of (i) written notice of such
exercise from the Optionee (in such form as the Committee shall have
specified in the Option Agreement or otherwise) of an Option delivered to
the Corporate Secretary or the Vice President and Treasurer of the Company,
and (ii) payment, as provided herein, of the Exercise Price.
6. Payment for Shares. (a) The Exercise Price shall be payable, in
whole or in part, in (i) cash in the form of currency or check or other
cash equivalent acceptable to the Company, (ii) nonforfeitable,
unrestricted shares of Common Stock which are already owned by the Optionee
and have a value at the time of exercise that is equal to the Option Price,
(iii) any other legal consideration that the Committee may deem
appropriate, including without limitation any form of consideration
authorized under Section 6(A)(6)(b) below, on such basis as the Committee
may determine in accordance with the Plan and (iv) any combination of the
foregoing.
(b) Any grant of a Nonqualified Stock Option may provide that payment
of the Exercise Price may also be made in whole or in part in the form of
shares of Restricted Stock or other Common Stock that are subject to risk
of forfeiture or restrictions on transfer. Unless otherwise determined by
the Committee on or after the Date of Grant, whenever any Exercise Price is
paid in whole or in part by means of any of the forms of consideration
specified in this paragraph, the Common Stock received by the Optionee upon
the exercise of the Nonqualified Option shall be subject to the same risks
of forfeiture or restrictions on transfer as those that applied to the
consideration surrendered by the Optionee; provided, however, that such
risks of forfeiture and restrictions on transfer shall apply only to the
same number of shares of Common Stock received by the Optionee as applied
to the forfeitable or restricted Common Stock surrendered by the Optionee.
(c) Any grant may provide for deferred payment of the Exercise Price
from the proceeds of sale through a broker of some or all of the shares of
Common Stock to which the exercise relates.
B. Effect of Exercise of Option on Tandem SAR.
Upon the exercise of an Option with respect to which a Tandem SAR has been
granted, the number of shares of Common Stock with respect to which the SAR
shall be exercisable shall be reduced by the number of shares with respect to
which the Option has been exercised.
SECTION 7. STOCK APPRECIATION RIGHTS.
A. Terms and Conditions.
1. Type of SAR. Each SAR Award shall specify whether it relates to a
Tandem SAR or to Freestanding SAR's.
2. Number of Optioned Shares or Freestanding SAR's. In the case of
any Tandem SAR, the SAR Award shall specify the Option and the number of
shares of Common Stock subject thereto to which the SAR relates. Any SAR
Award relating to Freestanding SAR's shall specify the number of such SAR's
to which it relates.
3. Exercise Period. Each SAR Award shall specify the period during
which the pertinent SAR(s) may be exercised and the SAR Agreement shall
provide that the SAR(s) shall expire at the end of each period (or periods)
and may be subject to earlier termination in the event of a change in
control of the Company or any Subsidiary or other similar transaction or
event, as provided in the SAR Agreement. For a Freestanding SAR, such
expiration date shall be no later than ten years from the Date of Grant
thereof.
5
<PAGE> 6
For Tandem SAR's, such expiration date(s) shall be no later than the
date(s) of expiration of the related Option, and a Tandem SAR shall be
exercisable during its term only when and to the extent the related Option
is exercisable. A Freestanding SAR shall be exercisable only during the
period of the grantee's employment with the Company or a Subsidiary and for
such post-termination exercise period as would apply under the Option
Agreement had the Freestanding SAR Award to the grantee instead been an
Award of NQSO's.
4. Manner of Exercise. A SAR granted under the Plan shall be
exercised by the holder by delivery to the Corporate Secretary or the Vice
President and Treasurer of the Company of written notice of exercise in
such form as shall have been specified in the SAR Agreement or otherwise.
5. Payment to Holder. If the form of consideration to be received
upon exercise of the SAR is not specified in the SAR Agreement, upon the
exercise thereof, the holder may request the form of consideration he or
she wishes to receive in satisfaction of such SAR, which may be in shares
of Common Stock (valued at Fair Market Value on the date of exercise of the
SAR), or in cash, or partly in cash and partly in shares of Common Stock,
as the holder shall request; provided, however, that the Committee, in its
sole discretion, may consent to or disapprove any request of the Employe to
receive cash in full or partial settlement of such SAR. Payment shall be
subject to applicable tax withholding.
B. Effect of Exercise of Tandem SAR on Related Option.
Upon the exercise of a Tandem SAR, the number of shares covered by the
related Option shall be reduced by the number of shares of Common Stock with
respect to which such SAR is exercised.
SECTION 8. RESTRICTED STOCK.
A. Terms and Conditions.
The Committee may make Awards of Restricted Stock to Employes without
additional consideration or may offer to sell Restricted Stock to Employes at a
price that is equal to or less than its Fair Market Value. The terms and
conditions of any such Restricted Stock Award shall be as determined by the
Committee and shall be set forth in the Restricted Stock Agreement. The
Restricted Stock Agreement shall specify the number of shares of Common Stock
subject to the Award and the applicable Restriction Period or Periods. Any such
Agreement may provide for forfeiture of shares covered thereby if specified
Performance Measures are not attained during a Restriction Period and/or for
termination of any Restriction Period upon attainment of Performance Measures,
but in no event may any such Agreement permit termination of any Restriction
Period earlier than three years after the Date of Grant of the pertinent Award
except in the case of Awards that are subject to Performance Measures (in which
case the Restriction Period shall be at least one year) or in the case of death,
disability, retirement or in the event of a change in control of the Company or
any Subsidiary or other similar circumstance in accordance with the provisions
of the Restricted Stock Agreement.
B. Certificates Evidencing Ownership of Restricted Stock.
During the Restriction Period, a certificate representing the Restricted
Stock shall be registered in the recipient's name and bear a restrictive legend
to the effect that ownership of such Restricted Stock, and the enjoyment of all
rights appurtenant thereto, are subject to the restrictions, terms, and
conditions provided in the Plan and the applicable Agreement.
Certificates representing Restricted Stock together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock evidenced
by such certificate in the event it is forfeited, shall be deposited by the
recipient with the Company. Upon the termination of an applicable Restriction
Period, and subject to remittance of applicable withholding tax, a certificate
or certificates evidencing ownership of the number of shares of Common Stock
theretofore evidenced by the certificate representing Restricted Stock, free of
restrictive legend (other than any relating to a right of first refusal of the
Company or required by any applicable securities laws), shall be issued to the
Employe, his or her beneficiary(ies), or legal representative, promptly after
the expiration of the Restriction Period.
6
<PAGE> 7
C. Rights With Respect to Shares During Restriction Period.
Subject to the terms and conditions of the Restricted Stock Agreement, the
Employe, as the owner of the Common Stock issued as Restricted Stock, shall have
all rights of a shareholder including, but not limited to, voting rights, the
right to receive cash or stock dividends thereon, and the right to participate
in any capital adjustment of the Company. Any distributions with respect to
shares of Restricted Stock other than in the form of cash shall be held by the
Company, and shall be subject to the same restrictions as the shares with
respect to which such distributions were made. Any grant or sale may require
that any or all dividends or other distributions paid on the shares of
Restricted Stock during the Restriction Period shall be automatically
sequestered and may be reinvested on an immediate or deferred basis in
additional shares of Common Stock, which may be subject to the same restrictions
as the underlying Award or such other restrictions as the Committee may
determine.
SECTION 9. PERFORMANCE SHARES AND PERFORMANCE UNITS.
A. Terms and Conditions.
The Committee may make Awards of Performance Shares and Performance Units.
The terms and conditions of any Performance Share Award or a Performance Unit
Award shall be set forth in the applicable Agreement. Such Agreement shall
specify the number of Performance Shares or Performance Units subject to the
Award, the Performance Period(s), which may be subject to earlier termination in
the event of a change in control of the Company or any Subsidiary or other
similar transaction or event, and the Performance Measures applicable to the
Award.
B. Payment.
Following the end of a Performance Period applicable to a granted Award,
the Committee shall determine the extent (if any) to which Performance Measures
established for the Award were attained and, accordingly, the number, if any, of
shares of Common Stock or the amount of cash that shall then become payable to
the holder of the Award. If the Performance Shares or Performance Units are to
be paid to the Employe in the form of shares of Restricted Stock, the recipient
must execute a Restricted Stock Agreement as a condition of the issuance of such
shares in his or her name.
SECTION 10. NON-DISCRETIONARY AWARDS TO NONEMPLOYE DIRECTORS.
On the date of the 1995 annual meeting of Common Stock shareholders of the
Company and on the date of each annual meeting of Common Stock shareholders of
the Company thereafter, each Nonemploye Director shall receive automatically an
Award of 300 shares of Common Stock if he or she is elected at such meeting or
continuing to serve immediately after such meeting as a Nonemploye Director. The
shares of Common Stock awarded pursuant to this Section 10 shall not be subject
to any restriction under the Plan (other than any that may be required pursuant
to Section 16(N)).
SECTION 11. WITHHOLDING TAXES.
The Company shall, if required by applicable law, withhold or cause to be
withheld, Federal, state and/or local taxes in connection with the exercise,
vesting or settlement of an Award. Unless otherwise provided in the applicable
Agreement, each Employe may satisfy any such tax withholding obligation by any
of the following means, or by a combination of such means: (i) a cash payment,
(ii) subject to Committee approval, by delivery to the Company of a number of
shares of Common Stock having a Fair Market Value, as of the Tax Withholding
Date, sufficient to satisfy the amount of the withholding tax obligation arising
from an exercise, vesting or settlement of an Award, (iii) subject to Committee
approval, by authorizing the Company to withhold from the shares of Common Stock
otherwise issuable to the Employe pursuant to the exercise or vesting of an
Award, a number of shares having a Fair Market Value, as of the Tax Withholding
Date, which will satisfy the amount of the withholding tax obligation, or (iv)
by a combination of such methods of payment. If the amount requested is not
paid, the Company may refuse to satisfy the Award. The Company and the Employe
may also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
7
<PAGE> 8
SECTION 12. TRANSFERABILITY.
A. No Option or other derivative security (as that term is defined in Rule
16b-3) granted under the Plan may be transferred by an Employe except by will or
the laws of descent and distribution. Options and Stock Appreciation Rights
granted under the Plan may not be exercised during an Employe's lifetime except
by the Employe or, in the event of the Employe's legal incapacity, by the
employe's guardian or legal representative acting in a fiduciary capacity on
behalf of the Employe under state law and court supervision. Notwithstanding the
foregoing, the Committee, in its sole discretion, may provide for the
transferability of particular Awards under the Plan so long as such provisions
will not disqualify the exemption for other Awards under Rule 16b-3.
B. Any grant made under the Plan may provide that all or any part of the
shares of Common Stock that are to be issued or transferred by the Company upon
the exercise of Options or Stock Appreciation Rights or in payment of
Performance Shares or Performance Units, or that are no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 8 of this Plan, shall be subject to further restrictions upon transfer.
SECTION 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
In the event of any change in the outstanding Common Stock by reason of any
stock split, stock dividend, recapitalization, merger, consolidation,
reorganization, combination, or exchange of shares, split-up, split-off,
spin-off, spin-away, liquidation or other similar change in capitalization, or
any distribution to common stock shareholders of the Company other than normal
cash dividends, the number or kind of shares that may be issued, transferred or
awarded under the Plan pursuant to Section 3, and the number or kind of shares
subject to any outstanding Award, shall be automatically adjusted, and the
Committee shall be authorized to make such other equitable adjustment of any
Award or shares issuable pursuant thereto, or in any Performance Measures
related to any Award, so that the proportionate interest of the Employe shall be
maintained as before the occurrence of such event. In the event of any such
transaction or event, the Committee may provide in substitution for any or all
outstanding Awards under the Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all Awards so replaced. The Committee
shall also make or provide for such adjustments in the maximum numbers of shares
of Common Stock which may be issued or transferred upon the exercise of Options
or SARs or awarded as Restricted Stock or issued or transferred in payment of
Performance shares or Performance Units, as specified in Section 3(A) of the
Plan, the maximum numbers of shares of Common Stock specified in Section 3(E) of
the Plan and the number of shares to be awarded automatically pursuant to
Section 10 of the Plan as the Committee may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section 13. Any such adjustment shall be conclusive and binding for all purposes
of the Plan. If the Reorganization is consummated, (i) the "Common Stock" shall
mean thereafter the common stock of Holding Company for which The Detroit Edison
Company common stock is exchanged in the Reorganization, subject to adjustment
pursuant to this Section 13; (ii) "Company" shall thereafter refer to Holding
Company and any successor corporation, and (iii) "Board" and "Committee" shall
thereafter refer to the board of directors and applicable committee of Holding
Company.
SECTION 14. AMENDMENT AND TERMINATION.
The Committee may at any time terminate, modify or amend the Plan in such
respects as it shall deem advisable. However, under no circumstances, without
approval of the Common Stock shareholders, may the Plan be amended or modified
to permit the exercise of an Option at an Exercise Price of less than the Fair
Market Value of a share of Common Stock on the Date of Grant, to increase the
number of shares of stock which may be the subject of Awards under the Plan
under Section 3 (except pursuant to adjustments under
Section 13), or otherwise cause any Award under the Plan to cease to qualify
under Rule 16b-3 or for the performance based exception to Section 162(m) of the
Code. The termination or any modification or amendment of the Plan shall not,
without the consent of the Employe, adversely affect his or her rights under an
Award granted prior thereto.
SECTION 15. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE.
Notwithstanding any other provision of the Plan to the contrary, in the
event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the
8
<PAGE> 9
Company, termination of employment to enter public service with the consent of
the Company or leave of absence approved by the Company, or in the event of
hardship or other special circumstances, of an Employe who holds an Option or
Stock Appreciation Right that is not immediately and fully exercisable, any
shares of Restricted Stock as to which the substantial risk of forfeiture or the
prohibition or restriction on transfer has not lapsed, any Performance Shares or
Performance Units that have not been fully earned, or any Common Shares that are
subject to any transfer restriction pursuant to Section 8 of this Plan, the
Committee may take any action that it deems to be equitable under the
circumstances or in the best interests of the Company or any Subsidiary,
including without limitation waiving or modifying any limitation or requirement
with respect to any Award under this Plan.
SECTION 16. MISCELLANEOUS PROVISIONS.
A. Except as provided in Section 10, no Employe or other person shall have
any claim or right to be granted an Award under the Plan.
B. Grant of any Option, SAR or Performance Shares or Performance Units
shall not confer upon the grantee any rights of a shareholder with respect to
any shares subject to such Award.
C. The Plan, the grant, exercise, vesting and/or settlement of Awards
thereunder, and the obligations of the Company to satisfy Awards shall be
subject to all applicable Federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required, and
the Committee may impose any additional restrictions with respect to Awards in
order to comply with any legal requirements applicable to Awards or to qualify
for any exemption it may deem appropriate.
D. Any expenses of the Plan shall be borne by the Company.
E. By accepting an Award under the Plan, each Employe and his or her legal
representative or beneficiary shall be conclusively deemed to have indicated his
or her acceptance and ratification of, and consent to, any action taken under
the Plan by the Company, the Board or the Committee.
F. Nothing in the Plan, or in any Agreement entered into pursuant to the
Plan, shall confer on an Employe any right to continue in the employ of the
Company or any Subsidiary, or in any way affect the right of the Company or any
Subsidiary to terminate the Employe's employment without prior notice at any
time for any reason or for no reason.
G. Participation in the Plan shall not affect an Employe's eligibility to
participate in any other benefit or incentive plan of the Company or any
Subsidiary. Awards under the Plan shall not be considered earnings for purposes
of the Employe Savings Plan, any Company-sponsored or Subsidiary-sponsored
Retirement Plan, insurance or other employee benefit programs.
H. With respect to shares acquired upon the exercise of Options or Stock
Appreciation Rights and with respect to shares acquired by an individual under a
Restricted Stock Award, Performance Share or Performance Unit Award, or
otherwise under the Plan, the Company may reserve a "right of first refusal" to
purchase from the holder thereof any such shares at Fair Market Value. If such
right is reserved, the holder, prior to any disposition of such shares of Common
Stock, shall be required to first notify the Corporate Secretary or Vice
President and Treasurer of the Company or such other officer as may be
designated by the Committee, in writing in such form as the Committee may
prescribe, of his or her intention to dispose of any such shares, and the
Company will advise the holder within five days whether it intends to purchase
or cause to be purchased such shares, for this purpose. Fair Market Value shall
be determined as of the date next preceding the date that the Company notifies
the holder of its intention to purchase or cause to be purchased such shares.
The Committee will designate an officer to decide whether to accept or reject
such right of first refusal. If the Company does not exercise its right to
purchase or cause to be purchased the shares within such period, the holder may
freely dispose of the shares following expiration of such period.
I. A breach by the Employe, his or her beneficiary(ies), or legal
representative, of any restrictions, terms or conditions provided in the Plan,
the Agreement, or otherwise established by the Committee with respect to any
Award will, unless waived in whole or in part by the Committee, cause a
forfeiture of such Award.
J. The Committee shall not, without the further approval of the Common
Stock shareholders of the Company, authorize the amendment of any outstanding
Option to reduce the Exercise Price or authorize the
9
<PAGE> 10
amendment of any outstanding Stock Appreciation Right to reduce the base price.
Furthermore, no Option or Stock Appreciation Right shall be cancelled and
replaced with Awards having a lower Exercise Price or base price without the
further approval of the Common Stock shareholders of the Company.
K. The Plan shall be submitted to the Common Stock shareholders of the
Company for their approval on April 24, 1995, or on such other date as may be
fixed for the next annual meeting of Common Stock shareholders, and shall become
effective only upon such approval and thereafter continue until its termination
by the Compensation Committee. No Restricted Stock Awards or Awards to
Nonemploye Directors shall be granted prior to the date the Plan becomes
effective, and any other Awards that may be granted before the Plan becomes
effective shall be granted subject to and shall become effective only upon the
effectiveness of the Plan.
L. The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of Michigan.
M. It is the intention that the Plan at all times fully satisfy the
provisions and conditions of Rule 16b-3 applicable to a Plan of this type.
Accordingly, anything herein to the contrary notwithstanding, to the extent that
Rule 16b-3 at any given time would require that decisions concerning the
selection of Employes who are or become subject to reporting requirements of
Section 16 of the Exchange Act ("Section 16 Reporting Persons") to be granted
Awards hereunder, the timing, amounts, and other terms of such Awards, and the
form of settlement of any such Awards be made only by the Committee, all such
decisions by the Committee shall be final and conclusive and not subject to
reversal or modification by the Board. Moreover, irrespective of any rights or
discretionary power which a Section 16 Reporting Person holding a pertinent
Award otherwise would possess hereunder or under the Agreement evidencing such
Award concerning the timing of exercise of a SAR, the manner of paying the
Exercise Price for an exercised Option, a request or election concerning the
form of settlement of a SAR, or the manner of satisfying tax withholding
obligations arising with respect to any Award, the Section 16 Reporting Person
shall be entitled to exercise such rights and discretion only at such times and
manner and under such other conditions as at the time are contemplated by the
applicable provisions of Rule 16b-3 and any attempt otherwise to exercise such
rights or discretion shall be void and of no effect. The Plan is intended to
comply with and be subject to Rule 16b-3 as in effect prior to May 1, 1991. The
Committee may at any time elect that this Plan shall be subject to Rule 16b-3 as
in effect on and after May 1, 1991.
N. Restrictions on Common Stock. The Company may impose restrictions on
any shares of Common Stock granted pursuant to the Plan as it may deem advisable
including, without limitation, restrictions intended to achieve compliance with
the Securities Act of 1933, as amended, with the requirements of any stock
exchange upon which such shares or shares of the same class are then listed, and
with any blue sky or securities laws applicable to such shares.
O. The Committee may require or permit Employes to elect to defer the
issuance of Common Stock or the settlement of Awards in cash under such rules
and procedures as it may establish under the Plan. It also may provide that
deferred settlements include the payment or crediting of interest on the
deferral amounts, or the payment or crediting of dividend equivalents where the
deferral amounts are denominated in shares.
P. The Committee may condition the grant of any Award or combination of
Awards authorized under this Plan (other than non-discretionary Awards pursuant
to Section 10) on the surrender or deferral by an Employe of his or her right to
receive a cash bonus or other compensation otherwise payable by the Company or a
Subsidiary to the Employe.
Q. If another corporation is merged into the Company or the Company
otherwise acquires another corporation, the Committee may elect to assume under
this Plan any or all outstanding stock options or other awards granted by such
corporation under any stock option or other plan adopted by it prior to such
acquisition. Such assumptions shall be on such terms and conditions as the
Committee may determine; provided, however, that the awards as so assumed do not
contain any terms, conditions or rights that are inconsistent with the terms of
this Plan. Unless otherwise determined by the Committee, such awards shall not
be taken into account for purposes of determining the limitations contained in
Section 3 of this Plan.
10
<PAGE> 1
EXHIBIT 11-2
DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES
PRIMARY AND FULLY DILUTED EARNINGS PER SHARE
OF COMMON STOCK
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------
1995 1994 1993
----------------- ---------------- ----------------
<S> <C> <C> <C>
(Thousands, except per share amounts)
PRIMARY:
Net Income ................................. $405,914 $390,269 $491,066
Weighted average number of common
shares outstanding (a) .................... 144,940 146,152 147,031
Earnings per share of Common Stock
based on weighted average number
of shares outstanding ..................... $2.80 $2.67 $3.34
FULLY DILUTED:
Net Income ................................. $405,914 $390,269 $491,066
Convertible Preferred Stock dividends ...... 205 314 340
-------- -------- --------
$406,119 $390,583 $491,406
======== ======== ========
Weighted average number of common
shares outstanding (a) .................... 144,940 146,152 147,031
Conversion of convertible Preferred Stock .. 237 324 351
-------- -------- --------
145,177 146,476 147,382
======== ======== ========
Earnings per share of Common Stock
assuming conversion of outstanding
convertible Preferred Stock ............... $2.80 $2.67 $3.33
</TABLE>
- ------------------------------------
(a) Based on a daily average.
<PAGE> 1
EXHIBIT 12-2
THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------
1995 1994 1993
---------- ---------- ----------
(Thousands, except for ratio)
<S> <C> <C> <C>
Net income ................................ $ 433,651 $ 419,909 $ 521,903
---------- ---------- ----------
Taxes based on income:
Current income taxes ..................... 220,730 169,381 217,363
Deferred taxes - net ..................... 78,817 110,243 99,801
Investment tax credit adjustments - net .. (16,294) (12,826) (14,227)
Municipal and state ...................... 2,627 2,566 3,373
---------- ---------- ----------
Total taxes based on income ............ 285,880 269,364 306,310
---------- ---------- ----------
Fixed charges:
Interest on long-term debt ............... 275,599 273,763 325,194
Amortization of debt discount, premium
and expense ............................ 11,312 10,832 9,114
Other interest ........................... 9,666 11,170 4,928
Interest factor of rents ................. 29,000 28,000 29,200
---------- ---------- ----------
Total fixed charges .................... 325,577 323,765 368,436
---------- ---------- ----------
Earnings before taxes based on income
and fixed charges ........................ $1,045,108 $1,013,038 $1,196,649
========== ========== ==========
Ratio of earnings to fixed charges ........ 3.21 3.13 3.25
</TABLE>
<PAGE> 1
EXHIBIT 12-3
THE DETROIT EDISON COMPANY AND SUBSIDARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED AND PREFERENCE STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------
1995 1994 1993
-------------- -------------- --------------
(Thousands, except for ratio and percent)
<S> <C> <C> <C>
Net income .................................. $ 433,651 $ 419,909 $ 521,903
---------- ---------- -----------
Taxes based on income:
Current income taxes ....................... 220,730 169,381 217,363
Deferred taxes - net ....................... 78,817 110,243 99,801
Investment tax credit adjustments - net .... (16,294) (12,826) (14,227)
Municipal and state ........................ 2,627 2,566 3,373
---------- ---------- -----------
Total taxes based on income ............ 285,880 269,364 306,310
---------- ---------- -----------
Fixed charges:
Interest on long-term debt ................. 275,599 273,763 325,194
Amortization of debt discount, premium
and expense .............................. 11,312 10,832 9,114
Other interest ............................. 9,666 11,170 4,928
Interest factor of rents ................... 29,000 28,000 29,200
---------- ---------- -----------
Total fixed charges .................... 325,577 323,765 368,436
---------- ---------- -----------
Earnings before taxes based on income
and fixed charges .......................... $1,045,108 $1,013,038 $1,196,649
========== ========== ==========
Preferred and preference stock
dividends .................................. $ 27,737 $ 29,640 $ 30,837
Dividends meeting requirement of
IRC Section 247 ............................ 3,870 3,870 4,383
Percent deductible for income tax purposes .. 40.00% 40.00% 40.00%
Amount deductible ........................... 1,548 1,548 1,753
Amount not deductible ....................... 26,189 28,092 29,084
Ratio of pretax income to net income ........ 1.66 1.64 1.58
Dividend factor for amount not deductible ... 43,474 46,071 45,953
Amount deductible ........................... 1,548 1,548 1,753
---------- ---------- -----------
Total preferred and preference stock
dividend factor ....................... 45,022 47,619 47,706
Total fixed charges .................... 325,577 323,765 368,436
---------- ---------- -----------
Total fixed charges and preferred
and preference stock dividends ........ $ 370,599 $ 371,384 $ 416,142
========== ========== ==========
Ratio of earnings to fixed charges and
preferred and preference stock
dividends .................................. 2.82 2.73 2.88
</TABLE>
<PAGE> 1
EXHIBIT 16-1
March 25, 1996
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
Ladies and Gentlemen:
We have read Item 9 of DTE Energy Company's Form 10-K dated March 25, 1996 and
are in agreement with the statements contained therein.
Your very truly,
Price Waterhouse LLP
<PAGE> 1
EXHIBIT 23-7
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated January 22,
1996 appearing in the Annual Report on Form 10-K of DTE Energy Company and The
Detroit Edison Company for the year ended December 31, 1995 in the following
registration statements:
FORM REGISTRATION NUMBER
DTE Energy Company
Form S-3 33-57545
Form S-8 333-00023
The Detroit Edison Company
Form S-3 33-53207
Form S-3 33-64296
Deloitte & Touche LLP
March 25, 1996
<PAGE> 1
EXHIBIT 23-8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Registration Nos.
33-53207 and 33-64296) of The Detroit Edison Company and Form S-8 (Registration
No. 333-00023) of DTE Energy Company and in the Prospectus and Proxy Statement
constituting a part of the Registration Statement on Form S-3 (Registration No.
33-57545) of DTE Energy Company of our report dated January 23, 1995 except for
Note 1, paragraph one and three, which is as of January 1, 1996 appearing on
page 35 of this Form 10-K.
Price Waterhouse LLP
Detroit, Michigan
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
The DTE Energy Company and Subsidiary Companies Schedule contains summary
financial information extracted from the Consolidated Statement of Income,
Balance Sheet, Statement of Cash Flows, Statement of Common Shareholders' Equity
and Primary and Fully Diluted Earnings per Share of Common Stock and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000936340
<NAME> DTE ENERGY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8,518,402
<OTHER-PROPERTY-AND-INVEST> 453,146
<TOTAL-CURRENT-ASSETS> 835,503
<TOTAL-DEFERRED-CHARGES> 1,323,540
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 11,130,591
<COMMON> 1,951,437
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,484,871
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,436,308
0
326,604
<LONG-TERM-DEBT-NET> 3,756,094
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 36,990
<LONG-TERM-DEBT-CURRENT-PORT> 119,214
0
<CAPITAL-LEASE-OBLIGATIONS> 128,362
<LEASES-CURRENT> 154,307
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,172,712
<TOT-CAPITALIZATION-AND-LIAB> 11,130,591
<GROSS-OPERATING-REVENUE> 3,635,544
<INCOME-TAX-EXPENSE> 289,687
<OTHER-OPERATING-EXPENSES> 2,606,535
<TOTAL-OPERATING-EXPENSES> 2,896,222
<OPERATING-INCOME-LOSS> 739,322
<OTHER-INCOME-NET> (11,363)
<INCOME-BEFORE-INTEREST-EXPEN> 727,959
<TOTAL-INTEREST-EXPENSE> 294,308
<NET-INCOME> 405,914
27,737
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 298,635
<TOTAL-INTEREST-ON-BONDS> 275,599
<CASH-FLOW-OPERATIONS> 912,943
<EPS-PRIMARY> 2.80
<EPS-DILUTED> 2.80
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
The Detroit Edison Company and Subsidiary Companies Schedule contains summary
financial information extracted from the Consolidated Statement of Income,
Balance Sheet, Statement of Cash Flows and Statement of Common Shareholders'
Equity and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<CIK> 0000028385
<NAME> THE DETROIT EDISON COMPANY
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8,518,402
<OTHER-PROPERTY-AND-INVEST> 453,146
<TOTAL-CURRENT-ASSETS> 835,503
<TOTAL-DEFERRED-CHARGES> 1,323,540
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 11,130,591
<COMMON> 1,451,199
<CAPITAL-SURPLUS-PAID-IN> 500,238
<RETAINED-EARNINGS> 1,484,871
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,436,308
0
326,604
<LONG-TERM-DEBT-NET> 3,756,094
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 36,990
<LONG-TERM-DEBT-CURRENT-PORT> 119,214
0
<CAPITAL-LEASE-OBLIGATIONS> 128,362
<LEASES-CURRENT> 154,307
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,172,712
<TOT-CAPITALIZATION-AND-LIAB> 11,130,591
<GROSS-OPERATING-REVENUE> 3,635,544
<INCOME-TAX-EXPENSE> 289,687
<OTHER-OPERATING-EXPENSES> 2,606,535
<TOTAL-OPERATING-EXPENSES> 2,896,222
<OPERATING-INCOME-LOSS> 739,322
<OTHER-INCOME-NET> (11,363)
<INCOME-BEFORE-INTEREST-EXPEN> 727,959
<TOTAL-INTEREST-EXPENSE> 294,308
<NET-INCOME> 433,651
27,737
<EARNINGS-AVAILABLE-FOR-COMM> 405,914
<COMMON-STOCK-DIVIDENDS> 298,635
<TOTAL-INTEREST-ON-BONDS> 275,599
<CASH-FLOW-OPERATIONS> 940,680
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99-1
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
SAVINGS REPARATION PLAN
AS RESTATED AS OF JANUARY 1, 1996
<PAGE> 2
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
SAVINGS REPARATION PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS . . . . . . . . . . . . . . . . . . 2
-----------
1.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Board of Directors . . . . . . . . . . . . . . . . . . . . . 2
1.3 Change of Control . . . . . . . . . . . . . . . . . . . . . 2
1.4 Company . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Effective Date . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Reserved . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Excess Assets . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Funding Amount . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 General Creditors . . . . . . . . . . . . . . . . . . . . . 4
1.10 Reserved . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Insolvent . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Investment Manager . . . . . . . . . . . . . . . . . . . . . 5
1.13 IRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.14 Participant . . . . . . . . . . . . . . . . . . . . . . . . 5
1.15 Reserved . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 Plan Administrator . . . . . . . . . . . . . . . . . . . . . 5
1.17 Potential Change of Control . . . . . . . . . . . . . . . . 5
1.18 Potential Change of Control Period . . . . . . . . . . . . . 6
1.19 Reserved . . . . . . . . . . . . . . . . . . . . . . . 7
1.20 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.21 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.22 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
1.23 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . 7
II. ESTABLISHMENT OF THE TRUST . . . . . . . . . . 7
--------------------------
2.1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Description of Trust . . . . . . . . . . . . . . . . . . . . 7
2.3 Irrevocability . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Acceptance by the Trustee . . . . . . . . . . . . . . . . . 9
III. CONTRIBUTIONS . . . . . . . . . . . . . . . . . 9
-------------
3.1 Calculations of Funding Amount . . . . . . . . . . . . . . . 9
3.2 Contributions as of Each Valuation Date . . . . . . . . . . 10
3.3 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 No Dilution of Trust . . . . . . . . . . . . . . . . . . . . 10
3.5 Collection . . . . . . . . . . . . . . . . . . . . . . . . . 10
IV. ACCOUNTING AND ADMINISTRATION . . . . . . . . . 11
-----------------------------
4.1 Trustee Recordkeeping . . . . . . . . . . . . . . . . . . . 11
4.2 Company Recordkeeping . . . . . . . . . . . . . . . . . . . 11
4.3 Periodic Accounting . . . . . . . . . . . . . . . . . . . . 12
4.4 Administrative Powers of Trustee . . . . . . . . . . . . . . 13
V. INVESTMENTS . . . . . . . . . . . . . . . . . . 15
-----------
5.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Investment Powers of Trustee . . . . . . . . . . . . . . . . 15
5.3 Investment Managers . . . . . . . . . . . . . . . . . . . . 19
5.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5 Single Fund . . . . . . . . . . . . . . . . . . . . . . . . 20
VI. PAYMENTS FROM THE TRUST . . . . . . . . . . . . 20
-----------------------
6.1 Obligation of Trustee to Make Payments
to Participants . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Obligation of the Company to Make Payments to Participants . 21
6.3 Distributions to Participants . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Insufficient Trust Fund Assets . . . . . . . . . . . . . . . 21
6.6 Payment of Excess Assets to Company . . . . . . . . . . . . 22
6.7 Company to Pay Withholding and Employment Taxes . . . . . . 22
6.8 Payment in Reversion to Company . . . . . . . . . . . . . . 23
6.9 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . 23
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY . . . . . 23
-------------------------------------
7.1 No Security Interest . . . . . . . . . . . . . . . . . . . 23
7.2 Determination of Insolvency . . . . . . . . . . . . . . . 23
7.3 Payments When Company Is Insolvent . . . . . . . . . . . . 24
7.4 Resumption of Duties after Insolvency . . . . . . . . . . 25
7.5 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . 25
VIII. RESIGNATION OR REMOVAL OF TRUSTEE . . . . . . . 26
---------------------------------
8.1 Resignation or Removal of Trustee . . . . . . . . . . . . 26
8.2 Successor Trustee . . . . . . . . . . . . . . . . . . . . 26
8.3 Duties of Retiring and Successor Trustees . . . . . . . . 27
8.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . 27
IX. AMENDMENT AND TERMINATION OF TRUST . . . . . . 27
----------------------------------
9.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . 28
X. GENERAL PROVISIONS . . . . . . . . . . . . . . 28
------------------
10.1 Coordination with Plan . . . . . . . . . . . . . . . . . . 28
10.2 Litigation . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Trustee's Action Conclusive . . . . . . . . . . . . . . . 29
10.4 No Guarantee or Responsibility . . . . . . . . . . . . . . 29
10.5 Liabilities Mutually Exclusive . . . . . . . . . . . . . . 29
10.6 Indemnification . . . . . . . . . . . . . . . . . . . . . 29
10.7 Expenses and Compensation . . . . . . . . . . . . . . . . 30
10.8 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
10.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.10 Antiassignment Clause . . . . . . . . . . . . . . . . . . 31
10.11 True and Correct Document . . . . . . . . . . . . . . . . 31
10.12 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . 31
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . 31
10.14 Gender and Number . . . . . . . . . . . . . . . . . . . . 31
10.15 Successors . . . . . . . . . . . . . . . . . . . . . . . . 31
10.16 Severability . . . . . . . . . . . . . . . . . . . . . . . 31
10.17 Applicable Law . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
EXHIBIT A THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
SAVINGS REPARATION PLAN
EXHIBIT B THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
SAVINGS REPARATION PLAN
PARTICIPANTS (as defined in the Trust)
<PAGE> 6
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
SAVINGS REPARATION PLAN
THIS TRUST AGREEMENT is made this 24th day of July, 1995, as restated
in its entirety effective January 1, 1996, by and between The Detroit Edison
Company, a Michigan corporation, and The Northern Trust Company, an Illinois
corporation, of Chicago, Illinois ("Trustee"), and any successor provided for
in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has established and maintains the Savings
Reparation Plan ("Plan"), an unfunded benefit plan, a copy of which is attached
hereto as Exhibit A, for the benefit of certain Company Executives listed on
Exhibit B hereto, which Exhibits may be amended from time to time by the
Company prior to a potential Change of Control and/or Change of Control, and
without the Trustee's consent; and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred
to the Trust and the earnings thereon shall be used by the Trustee, subject to
the claims of the Company's creditors in the event the Company becomes
Insolvent, to satisfy the liabilities of the Company in accordance with the
provisions hereof; and, upon satisfaction of all liabilities of the Company
with respect to all Participants (and their Beneficiaries, if applicable), the
assets, if any, remaining in the Trust shall revert to the Company; and
- 1 -
<PAGE> 7
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose of providing deferred compensation for a select group of
management and/or highly-compensated employees, and shall not be construed to
provide income for federal income tax purposes to a Participant (or his or her
Beneficiary) prior to the actual payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS Unless the context requires otherwise, definitions as
used herein shall have the same meaning as in the Plan when applied to said
Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in
the Plan as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors,
as constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the
following events:
(a) a change of control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
under the Securities Act of 1934, as amended (the "Exchange Act"), or
any successor provisions, whether or not the Company is then subject
to such reporting requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit
plan maintained by the Company, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of the Board of
Directors (the "Base Capital Stock"); provided, however, that any
change in the relative beneficial ownership of securities of any
person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any
- 2 -
<PAGE> 8
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of
the Company; or
(c) a change in the composition of the Company's Board of
Directors, as a result of which fewer than two-thirds of the incumbent
directors are directors who either
(1) had been directors of the Company 24 months prior to
such change, or
(2) were elected, or nominated for election, to the
Company's Board of Directors with the affirmative
votes of at least a majority of the directors who had
been directors of the Company 24 months prior to such
change and who were still in office at the time of
the election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in which
the Company is not the continuing or surviving
corporation or pursuant to which shares of the
Company's common stock would be converted into cash,
securities, or other property, other than a merger of
the Company in which the holders of the Company's
common stock immediately prior to the merger have the
same proportionate ownership of common stock of the
surviving corporation immediately after the merger,
or
(2) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Company, or
(3) the stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of the
Company.
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may
- 3 -
<PAGE> 9
be amended or supplemented from time to time), whereby it is proposed that a
corporation will become the parent holding company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means The Detroit Edison Company, a Michigan
corporation, its successors and assigns.
1.5 "Effective Date" means July 24, 1995.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of one
hundred and twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during
any Potential Change of Control Period, "Funding Amount" means one hundred and
twenty per cent (120%) of the actual benefit obligation on the books of the
Company as of the most recent Valuation Date, as certified by the Company to
the Trustee, which shall be the amount necessary to ensure that the assets of
the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each respective
Participant under the Plan shall be limited to benefits attributable to service
rendered by the Participant to the Company.
1.9 "General Creditors" means the unsecured general creditors of
the Company, including the Participants.
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
(a) is unable to pay its debts as they become due; or
- 4 -
<PAGE> 10
(b) is subject to a pending proceeding as a debtor under
the Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed
by the Company in the manner provided in Section 5.3 to direct the investment
of any part or all of the assets of the Trust Fund in accordance with Article
V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" means an individual listed on Exhibit B attached
hereto who
(a) is a Participant in the Plan because of services rendered to the
Company; or
(b) would be a Participant in the Plan because of services rendered
to the Company but is not due to age, years of service or active employment.
The Company agrees to list all Participants on Exhibit B attached hereto.
Except after a Change of Control as provided in Section 3.4, the Company may
add or delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan
as responsible for the management, operation, and administration of the Plan.
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change of
Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than the Company or an employee
benefit plan maintained by the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 9.5% or more of
the combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of the Board of
- 5 -
<PAGE> 11
Directors (the "Base Capital Stock"); provided, however, that any
change in the relative beneficial ownership of securities of any
person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter
in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such
person's beneficial ownership of any securities of the Company; or
(c) the public announcement by any individual or entity,
other than the Company, that such individual or entity intends to take
or to consider taking actions which, if consummated, would constitute
a Change of Control of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company
is not the continuing or surviving corporation, or pursuant to which
shares of the Company's common stock would be converted into cash,
securities, or other property, other than a transaction in which the
holders of the Company's common stock immediately prior to the merger,
acquisition, consolidation, or reorganization have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, acquisition, consolidation, or
reorganization, including, but not limited to, the creation of a
parent entity to oversee the Company; or
(e) the public announcement of the sale or other transfer
of substantially all of the assets of the Company to any third party;
or
(f) the Board of Directors of the Company adopts a
resolution to the effect that a Potential Change of Control of the
Company has occurred for purposes of this Trust.
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year
period immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the Potential Change of Control Period shall end one (1) year
following the date of the most recent Potential Change of Control.
- 6 -
<PAGE> 12
The Company shall promptly notify the Trustee of a Potential
Change of Control and the Trustee may conclusively rely upon such notice and
shall have no duty to independently determine whether a Potential Change of
Control has occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to
this Trust Agreement and all of the terms and conditions of this Trust
Agreement, which is intended to constitute a grantor trust under IRC Section
Section 671 et seq.
1.21 "Trust Fund" means all moneys, securities, and other property
held by the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any
successor trustee appointed pursuant to Article VIII.
1.23 "Valuation Date" means the day in each calendar year which is
the last day of the Company's fiscal year in each year, and such other times as
the Company may determine. Each of (a) any date of a Potential Change of
Control, (b) the date of a Change of Control, (c) the effective date of a
Trustee's resignation or removal, and (d) the date of termination of the Trust
shall also be a Valuation Date if any such date occurs other than on the last
business day of the Company's fiscal Year. The first Valuation Date shall be
December 31, 1994.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the
Trustee, which Trust shall consist of such sums of money and other property
acceptable to the Trustee as from time to time have been and shall be paid or
delivered by the Company to the Trustee as provided herein. All such money and
other property, all investments and reinvestments made therewith, or the
proceeds thereof, and all investment earnings and profits thereon, less all
payments and charges as authorized herein, shall constitute the Trust Fund. The
Trust Fund shall be held in trust by the Trustee, and shall be dealt with in
accordance with the provisions of this Trust.
2.2 Description of Trust. The Company represents and agrees that:
- 7 -
<PAGE> 13
(a) the Trust is intended to be a grantor trust under IRC
Section Section 671-678, and shall be construed accordingly. The
Company intends and agrees that it is the "owner" or grantor of the
Trust in its entirety, as that term is defined in subpart E, part I,
subchapter J, chapter 1, subtitle A of the IRC and that, for income
tax purposes, all income, deductions, and credits of the Trust Fund
belong to it as owner, and will be included on its income tax or other
required tax returns, and any income tax determined to be payable as a
result thereof will be the sole obligation of, and will be paid by,
the Company;
(b) a true and correct copy of the Plan, as in effect on
the Effective Date hereof, is attached hereto as Exhibit A. The
Company shall file with the Trustee, promptly upon its adoption, a
true and correct copy of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal
obligations of the Company to Participants under the Plan as provided
herein, subject to the claims of General Creditors in the event of
Insolvency, and the balance of the Trust Fund, if any, remaining after
payment of the Company's obligation to Participants under the Plan
will revert to the Company in accordance with the Trust;
(d) contributions by the Company to the Trust which are
made coincident with and subsequent to the Effective Date shall be in
amounts determined under Article III hereof. The Company agrees to
fund the Trust as provided therein;
(e) the principal of the Trust, and any earnings thereon
shall be held by the Trustee separate and apart from other funds of
Company, and shall be used exclusively for the uses and purposes as
herein set forth;
(f) the Trust established under this agreement does not
fund and is not intended to fund the Plan, or any other employee
benefit plan or program of the Company. Neither the establishment of
the Trust, nor the payment or delivery of assets to the Trustee shall
vest any Participant in any right, title, or interest in or to any
assets of the Trust Fund;
(g) participants shall have no preferred claim on, or any
beneficial ownership interest in, assets of the Trust. To the extent
that any Participant acquires the right to receive payment(s) under
the Plan, any such right shall be
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mere unsecured contractual rights of Participants against the Company,
and such Participants (or their Beneficiary(ies)) shall have only the
unsecured promise of the Company that such payment(s) will be made.
Any assets held by the Trust will be subject to the claims of General
Creditors under federal and state law in the event of Insolvency, as
defined herein, with no preference whatsoever given to claims of
employees over claims of other unsecured creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan
is a plan for a select group of management or highly compensated
employees, and as such are exempt from the application of ERISA except
for the disclosure requirements applicable to such plan, for which the
Company bears full responsibility as to compliance. The Company
further represents that the Plan is not qualified under IRC Section
401 and therefore, is not subject to any IRC requirements applicable
to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this
Section 2.3, the Trust shall be irrevocable from the effective date, and the
assets of the Trust Fund shall be held in accordance with the provisions hereof
for the exclusive purpose of providing for the payment of the Company's
obligations to pay benefits to Participants under the Plan and to satisfy the
claims of General Creditors in the event of Insolvency, and defraying the
expenses of the Trust. Except as provided in Section 6.6 and Section 6.8 and
in the event of Insolvency, no part of the income or corpus of the Trust Fund
shall be recoverable by or for the benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust
established under this Trust Agreement on the terms and subject to the
provisions set forth herein, and agrees to discharge and perform fully and
faithfully all of the duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1995, the
Company shall contribute to the Trust the Funding Amount as determined on the
first Valuation Date. As of each Valuation Date, and until the entire Trust
Fund has been distributed, the Company (or, after a Change of Control, the
Company's independent public accountants) shall recalculate the Funding
Amounts.
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3.2 Contributions as of Each Valuation Date. During the life of
the Trust but no later than September 30 of each year, commencing no later than
September 30, 1996, the Company shall contribute to the Trust such amount as is
necessary to make trust assets equal the Funding Amount as of the previous
Valuation Date. The Plan Administrator or its delegate (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written notice of the amount of the necessary contribution on or
before the date such contribution is due to the Trust. Any such payments to the
Trustee do not discharge or release the Company of its obligation under the
Plan or Section 6.2 to pay benefits to Participants under the Plan, and shall
at all times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit
B in effect on the date of a Change of Control shall not be amended to include
a Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of the Delivery Date of the
proposed amended Exhibit B of the Funding Amount calculated based on the
Participants named in the Exhibit B in effect on the Date of the Change of
Control and any new or additional Participants named in the proposed amended
Exhibit B (the "New Funding Amount") and (b), assets in an amount necessary to
make the trust assets equal the New Funding Amount. If the Trustee determines
that assets of the Trust Fund, including such assets as are delivered by the
Company on the Delivery Date, equal or exceed the New Funding Amount, the
Trustee shall accept the amended Exhibit B. Any amended Exhibit B so accepted
shall be deemed incorporated with the same effect as if otherwise included
herein. Unless an Exhibit B amended after a Change of Control is accepted by
the Trustee as provided in this Section, the Trustee shall have no liability,
responsibility, or obligation with respect to a Participant named in any
amended Exhibit B unless such Participant is named in the Exhibit B then in
effect on the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the
Trustee within one hundred and twenty (120) days of notice and demand from the
Trustee (or, upon the occurrence of a Potential Change of Control or a Change
of Control, within seven (7) days of notice and demand from the Trustee), any
amount determined to be payable by the Company to the Trustee under Sections
3.2, 6.5 or 7.4(a) of the Trust, the Trustee may commence legal action, (which
is expressly deemed to include without
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limitation an alternate dispute resolution proceeding), to compel the Company
to pay to the Trustee any amount determined to be payable to it under the
Trust. The Trustee may bring such action against the Company in any court of
competent jurisdiction, and shall be entitled to recover for the benefit of the
Trust from the Company such amount, plus interest for each day at the rate of
interest per annum of five (5) percentage points in excess of the prime lending
rate as announced by NBD Bank, from the due date specified in the Trustee's
notice and demand (or the date(s) from which pro rata payments were made, if
such action is brought by the Trustee pursuant to Section 6.5 hereof) to the
date of payment, plus all costs of collection, including reasonable attorneys
fees and costs of litigation. The Trustee is authorized to bring action to
compel payment by the Company, and, in connection with reasonable claims for
delinquent contributions by the Company, to retain, at the expense of the
Company, counsel and other appropriate experts, including actuaries and
accountants, to aid it in pursuing litigation for collection against the
Company. The Trustee's anticipated reasonable costs and expenses incurred
pursuant to this Section 3.5 are payable by the Company in advance; and should
the Company not make timely payment, the Trustee may charge the Trust Fund for
such reasonably anticipated costs and expenses. The Trustee shall in no event
be required to advance or expend its own funds in order to comply with the
provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be
kept accurate and detailed records of any investments, receipts, disbursements,
and all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
4.2 Company Recordkeeping. The Company shall keep full, accurate,
and detailed books and records with respect to the Participants and benefits
paid and payable under the Plan, which records shall be made available to the
Trustee at its request.
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<PAGE> 17
4.3 Periodic Accounting. Within sixty (60) days following a
Valuation Date, the Trustee shall deliver to Company a written accounting,
dated as of the Valuation Date, of its administration of the Trust Fund during
such year or during the period from the most recent Valuation Date to the date
of such current Valuation Date, which accounting shall be in accordance with
the following provisions:
(a) Such accounting shall set forth all investments,
receipts, disbursements, and other transactions effected the by Trust
Fund during the preceding year, or during the period from the most
recent Valuation Date to the date of such current Valuation Date,
including a description of all securities and investments purchased
and sold, with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and
showing all cash, securities or other property held in the Trust Fund,
less liabilities known to the Trustee (other than liabilities to
Participants entitled to benefits under the Plans) at the end of such
year or other period, as the case may be. In making a valuation, all
cash, securities or other property held in the Trust Fund shall be
valued at their then fair market value, and shall be in a format as
may be established by the Company. A copy of each accounting so
delivered to the Company shall be open to inspection at the office of
the Trustee during normal business hours.
(b) If within ninety (90) days after the filing of such
written accounting, the Company has not delivered to the Trustee
notice of any objection to any act or transaction of the Trustee, the
initial accounting shall become an account stated as between the
Trustee and the Company. If any objection has been delivered to the
Trustee by the Company, and if the Company is satisfied that it should
be withdrawn, the Company shall signify its approval of the accounting
in writing filed with the Trustee, and the accounting shall become an
account stated as between the Trustee and the Company. If the
accounting is adjusted following an objection thereto, the Trustee
shall file and deliver the adjusted accounting to the Company. If
within fifteen (15) days after such filing of an adjusted accounting,
the Company has not delivered to the Trustee notice of any objection
to the transactions as so adjusted, the adjusted accounting shall
become an account stated as between the Trustee and the Company.
(c) Unless an accounting is fraudulent, when it becomes
an account stated, it shall be finally settled, and the Trustee shall,
to the extent permitted by applicable law, be forever released and
discharged from all liability and
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<PAGE> 18
accountability with respect to the propriety of its acts and
transactions shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that
authority with respect to the administration of the Trust has been allocated to
others in accordance with this Trust, and subject to Article V, the Trustee
shall have exclusive authority and discretion to manage and administer the
Trust. The Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of
like character and with like aims, provided, however, that Trustee shall incur
no liability to any person for any action taken pursuant to a direction,
request or approval given by Company which is contemplated by, and in
conformity with, the terms of the Trustee's responsibilities under this Trust,
and is given in writing by Company. The responsibility for maintenance of
individual benefit records shall be retained by the Company, and may be
delegated to such person or entity as the Company may employ from time to time.
Except as otherwise provided herein, the Trustee shall have, without exclusion,
all powers conferred on trustees by law and, without limiting the foregoing,
shall have the following administrative powers, rights, and duties in addition
to those provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all
assets held by the Trustee on such terms and conditions as the Trustee
shall decide; provided however, that if the Company delivers written
instructions to the Trustee, the Trustee shall follow such
instructions;
(b) when directed by the Company or requested by a
Participant pursuant to Article VI, to make payments from the Trust
Fund to Participants and, when required by Article VII, to make
payments from the Trust Fund to General Creditors entitled to payments
thereunder;
(c) except as provided in Article VI and Article VII, to
waive, modify, reduce, compromise, release, contest, submit to
arbitration, or settle or extend the time of payment of any claims,
debts, damages, or demands of any nature in favor of or against the
Trustee or all or any part of the Trust Fund;
(d) to retain any disputed property until an appropriate
final adjudication or release is obtained, and to represent the Trust
in, or commence or defend, any litigation the Trustee considers in its
discretion necessary in connection with the Trust Fund;
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<PAGE> 19
(e) to withhold, if the Company so directs, all or any
part of any payment required to be made hereunder as may be necessary
and proper to protect the Trustee or the Trust Fund against any
liability or claim on account of any estate, inheritance, income or
other tax or assessment attributable to any amount payable hereunder,
and to discharge any such liability with any part or all of such
payment so withheld in accordance with Section 6.7;
(f) to maintain records reflecting all receipts and
payments under this Trust and such other records as the Company may
specify and to which the Trustee agrees, which records may be audited
from time to time by the Company or anyone named by the Company; and
to furnish a written accounting to the Company as of each Valuation
Date, as provided in Section 4.3;
(g) if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from
conversion of the policy from a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy. Notwithstanding the preceding sentence,
the Trustee may loan to the Company the proceeds of any borrowing
against an insurance policy held as an asset of the Trust;
(h) to furnish the Company with such information for tax
or other purposes which the Company may reasonably request and which
the Trustee may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal
counsel (who, except following a Change of Control, may be legal
counsel to the Company and who are not in the Company's reasonable
judgment deemed to have a conflict of interest), consultants,
custodians, depositories, experts and other providers of services, to
consult with them with respect to the implementation and construction
of this Trust, the duties of the Trustee hereunder, the transactions
contemplated by this Trust, or any act which the Trustee proposes to
take or omit, and to rely upon the advice of and services performed by
such persons; to delegate discretionary powers to such persons and to
reasonably rely upon information and advice furnished by such persons;
provided that each such delegation and the acceptance thereof by each
such person shall be in writing; and provided further that the Trustee
may not delegate its responsibilities as to the management or control
of the assets of the Trust Fund;
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<PAGE> 20
(j) to determine whether the Company is Insolvent, and to
hold assets of the Trust Fund for the benefit of General Creditors in
the event of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a
Change of Control, as provided in Article VI hereof;
(l) to perform all other acts which in the Trustee's
judgment are appropriate for the proper protection, management,
investment, and distribution of the Trust Fund, and to carry out the
purposes of the Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has
investment responsibility, the Trustee shall invest and reinvest the principal
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income, in accordance with the written
investment guidelines established by the Company and provided to the Trustee by
the Company. If no such written investment guidelines are received by the
Trustee, the assets of the Trust Fund shall be invested in such investments as
determined by the Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that
authority with respect to the management of all or a portion of the Trust Fund
has been allocated to others in accordance with this Trust, the Trustee shall
have exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
(a) to invest and reinvest in any property wherever
situated, whether real, personal, mixed, foreign or domestic,
including common and preferred stocks, bonds, notes, and debentures
(including convertible stocks and securities, but not including any
stock, securities, or debt instruments of the Company
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<PAGE> 21
[unless held in a collective or commingled fund and such Company
securities comprise 5% or less of the assets of such fund]),
leaseholds, mortgages (including, without limitation, any collective
or part interest in any bond and mortgage or note and mortgage),
certificates of deposit, life insurance contracts, guaranteed
investment contracts, and guaranteed annuity contract, all regardless
of diversification and without being limited to investments authorized
by law for the investment of trust funds;
(b) to invest and reinvest, without distinction between
principal and income, in contracts for future delivery of United
States Treasury Bills, other financial instruments, or indices based
on any group of securities, and in options to buy or sell indices
based on any group of securities or any kind of evidences of ownership
or indebtedness, including financial instruments or futures contracts
relating thereto;
(c) to invest and reinvest part or all of the Trust Fund
in any deposit accounts, deposit administration fund maintained by a
legal reserve life insurance company in accordance with an agreement
between the Trustee and such insurance company, a group annuity
contract or life insurance policies issued by such insurance company
to the Trustee as contract holder, any interest bearing deposits held
by any financial institution having total capital and surplus of at
least Fifty Million Dollars ($50,000,000), investments in any stocks,
bonds, debentures, mutual fund shares, notes, commercial paper,
treasury bills, and any mutual, common, commingled or collective trust
funds or pooled investment funds, and to diversify such investments so
as to minimize the risk of losses;
(d) to commingle assets of the Trust Fund, for investment
purposes only, with assets of any common, collective, or commingled
trust fund which has been or may hereafter be established and
maintained by the Trustee, or by any other financial institution;
provided that to the extent that any part or all of the assets of the
Trust Fund for which the Trustee has investment responsibility are
invested in any such common, collective or commingled trust fund or
pooled investment fund which is maintained by a bank or trust company
(including a bank or trust company acting as Trustee), the provisions
of the documents under which such common, collective or commingled
trust fund or pooled investment fund are maintained shall govern any
investment therein and provided further that prior to investing any
portion of the Trust Fund for the first time in any such common,
collective, or commingled trust fund, the Trustee shall advise the
Company of its intent to make such an investment, and furnish to the
Company
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<PAGE> 22
any information it may reasonably request with respect to such common,
collective, or commingled trust fund (other than a trust fund
established by the Company), and provided further that the Trustee
shall maintain separate records with respect to each other trust of
the Trust Fund;
(e) to vote stock and other voting securities personally
or by proxy (and to delegate the Trustee's powers and discretion with
respect to such stock or other voting securities to such proxy), to
exercise subscription, conversion and other rights and options (and
make payments from the Trust Fund in connection therewith), to take
any action and to abstain from taking any action with respect to any
reorganization, consolidation, merger, dissolution, recapitalization,
refinancing and any other plan or change affecting any property
constituting a part of the Trust Fund (and in connection therewith to
delegate the Trustee's discretionary powers and pay assessments,
subscriptions and other charges from the Trust Fund), to hold or
register any property from time to time in the Trustee's name or in
the name of a nominee or to hold it unregistered or in such form that
title shall pass by delivery; and to borrow from anyone, including
itself (to the extent permitted by law), such amounts from time to
time as the Trustee considers desirable to carry out this Trust (and
to mortgage or pledge all or part of the Trust Fund as security); to
participate in any plan or reorganization, consolidation, merger,
combination, liquidation, or other similar plan relating to any such
property, and to consent to or oppose any such plan or any action
thereunder, or any contract, lease, mortgage, purchase, sale, or other
action by any corporation or other entity any of the securities of
which may at any time be held in the Trust Fund, and to do any act
with reference thereto;
(f) to retain in cash such amounts as the Trustee
considers advisable and as are permitted by applicable law, and to
deposit any cash so retained in any depository (including any bank
acting as Trustee) which the Trustee may select, provided such
depository must have total capital and surplus of at least Fifty
Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section
4.4(g), to apply for, pay premiums on, and maintain in force
individual, ordinary or universal life insurance policies on the lives
of Participants, which policies may contain provisions which the
Company may approve or direct; to receive or acquire such policy or
policies from the Company, but the Trustee may purchase a life
insurance policy from a person other than the insurer which issues a
policy only if the Trustee pays, transfers, or otherwise exchanges an
amount no more
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<PAGE> 23
than the cash surrender value of the policy or policies, and the
policy or policies is (are) not subject to a mortgage or similar lien
which the Trustee would be required to assume; to have with respect to
such policy or policies any rights, powers, options, privileges, and
benefits usually comprised in the term "incidents of ownership", and
normally vested in an owner of such policy or policies to be exercised
only pursuant to Company direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to
dispose of, and to grant options for the purchase or exchange with
respect to it, any property at any time held by it, by public or
private sale, for cash or on credit, or partly for cash and partly for
credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power
to any such committee; and to pay part of the expenses and
compensation of any such committee and any assessments levied with
respect to any property so deposited;
(k) to exercise any conversion privilege or subscription
right available in connection with any such property, and to do any
act with reference thereto, including the exercise of options, the
making of agreements or subscription, and the payment of expenses,
assessment or subscription, which may be deemed necessary or advisable
in connection therewith, and to hold and retain any securities or
other property which it may so acquire;
(l) to extend the time of payment of any obligation held
in the Trust Fund;
(m) to enter into standby agreements for future
investment, either with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the
renewal or extension of any mortgage, and to agree to a reduction in
the rate of interest on any indebtedness or mortgage or to any other
modification or change in the terms of any indebtedness or mortgage,
or of any guarantee pertaining thereto, in any manner and to any
extent that may be deemed advisable for the protection of the Trust
Fund or the preservation of any covenant or condition of any
indebtedness or mortgage or in the performance of any guarantee, or to
enforce any default in
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<PAGE> 24
such manner and to such extent as may be deemed advisable; and to
exercise and enforce any and all rights of foreclosure, to bid on any
property in foreclosure, to take a deed in lieu of foreclosure with or
without paying a consideration therefor, and in connection therewith
to release the obligation on the bond secured by such mortgage; and to
exercise and enforce in any action, suit or proceeding at law or in
equity any rights or remedies in respect of any such indebtedness or
mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and
all deeds, leases, notes, bonds, guarantees, mortgage, conveyance,
contracts, waivers, releases, or other instruments in writing
necessary or proper for the accomplishment of any of the foregoing
powers;
(p) to organize under the laws of any state one or more
corporations, partnerships, or trusts for the purpose of acquiring and
holding title to any property that it is authorized to acquire under
this Trust, and to exercise with respect thereto any or all of the
powers set forth in this Trust;
(q) notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the Trustee
shall not have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within the
meaning of Section 301.7701-2 of the Procedure and Administrative
Regulations promulgated under the IRC; and
(r) generally to do all acts, whether or not expressly
authorized, that the Trustee deems necessary or desirable for the
protection of the Trust Fund, and to carry out the purposes of the
Trust.
5.3 Investment Managers. The Company may appoint one or more
Investment Managers to direct the investment of any part or all of the assets
of the Trust Fund by the Trustee. Appointment of an Investment Manager shall be
made by written notice to the Investment Manager(s) and to the Trustee, which
notice shall specify those powers, rights, and duties of the Trustee under this
Trust that are allocated to the Investment Manager(s) and the portion of the
assets of the Trust Fund subject to the Investment Manager(s). After it
receives written notice of such appointment, the Trustee shall have no
obligation or responsibility for those investment duties which are allocated to
an Investment Manager. An Investment Manager so appointed pursuant to this
paragraph shall be either a registered investment adviser under the Investment
Advisers Act of 1940, a bank, as defined in said Act, or an insurance company
qualified to
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<PAGE> 25
manage, acquire and dispose of the assets of the Plans under the laws of more
than one state of the United States. Any such Investment Manager shall
acknowledge to the Company in writing that is accepts such appointment. The
Trustee shall not be liable for any loss or diminution of any assets managed by
an Investment Manager, including without limitation, any loss or diminution
caused by any action or inaction taken or omitted by it at the direction of an
Investment Manager. In addition, the Trustee shall not be liable for the
diversification of any assets managed by Investment Managers of the Company,
each of which shall be solely the responsibility of the Company. An Investment
Manager may resign at any time upon written notice to the Trustee and the
Company. The Company may remove an Investment Manager at any time by written
notice to the Investment Manager and the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each
investment fund, and the income thereon, shall be held and invested as a single
fund, and the Trustee shall not make any separate investment of the Trust Fund,
or make any separate investment fund, for the account of any Participant or
other General Creditors prior to receipt of directions to make payments to such
Participant or other General Creditors in accordance with Article VI or Article
VII. All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The
Trustee's obligation to distribute to any Participant out of the assets of the
Trust Fund shall be limited to payment at such times and in such amounts as are
properly in conformance with the provisions of Section 6.3. Payments to
Participants pursuant to this Article VI shall be made by the Trustee to the
extent that funds in the Trust Fund are sufficient for such purpose, and shall
at all times be subject to the provisions of Article VII. In the event the
Company determines that it will pay benefits directly to Participants as they
become due under the terms of the Plan, the Company shall notify Trustee of its
decision prior to the time amounts are payable to Participants.
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<PAGE> 26
6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be
made from the Trust Fund to pay benefits in accordance with the Plan shall be
initiated by:
(a) written direction to the Trustee from the Plan
Administrator, which direction shall certify that such distribution(s)
is(are) in accordance with the Plan, and specify the timing, form,
payee, and amount of such benefit payments, including any federal,
state, or local income taxes to be withheld, and the Trustee shall
make or commence the directed distributions after receipt of such
written direction; or
(b) by the submission to the Trustee by a Participant of
a certified copy of the non-appealable order of an appropriate forum
with jurisdiction to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee
determines or is advised that the Trust Fund does not have sufficient assets to
permit the Trustee to make a payment property directed pursuant to this Trust,
including a payment provided for under Section 10.7 of this Trust, the Trustee
shall pay any benefits due (if otherwise payable hereunder) to Participants on
a pro rata basis as directed by the Plan Administrator, and the Company shall
make the balance of such payments as they become due. If the Plan Administrator
determines that the Trust Fund does not have sufficient funds to provide for
the payment of all amounts otherwise payable to Participants (or their
Beneficiary(ies)) from the Trust under the Plans, it shall notify the Company
and the Trustee of the amount of the deficiency, and, within forty-five (45)
days of such notice, the Company deposit in trust with the Trustee the
additional amounts needed to make such payments. Upon receipt of such amount
by the Trustee from the Company, proceeds shall first be used by the Trustee to
pay any benefits
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<PAGE> 27
previously due remaining unpaid, in the order in which they were due, pursuant
to Plan Administrator instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII,
and except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount
paid to a Participant by the Trustee in accordance with this Article VI shall
be reduced by the amount of taxes required to be withheld pursuant to Plan
Administrator instructions, and the Trustee shall inform the Company of all
amounts so withheld. The Company shall direct that the Trustee shall either
(a) pay to the Company a sum equal to the amount of such
taxes as are required to be withheld, whereupon the Company shall have
full responsibility for the payment of all withholding taxes to the
appropriate taxing authorities, or
(b) pay such taxes directly to the appropriate taxing
authorities for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall
- 22 -
<PAGE> 28
furnish each Participant with the appropriate tax information form evidencing
payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon
receipt of written certification from the Company that all obligations of the
Company to Participants with respect to the Plan have been satisfied, and if
the Trust Fund shall have any assets remaining, the Trustee shall distribute
such remaining assets of the Trust Fund to the Company, after converting such
assets to cash if requested by the Company, subject to the Trustee's right to
retain such reasonable amount for compensation and expenses as provided in
Section 10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on
or beneficial ownership interest in the Trust Fund before such assets are paid
to the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any other General Creditor. At all times during the continuance
of this Trust, as provided in this Article VII hereof, the principal and income
of the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with no
preference whatsoever given claims of employees over claims of other unsecured
creditors of the Company.
7.2 Determination of Insolvency. Notwithstanding any other
provisions of this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive
Officer of the Company shall have the fiduciary duty and
responsibility on behalf of General Creditors to notify the Trustee
promptly in writing in the event the Company is Insolvent, and the
Trustee shall have the right to rely thereon to the exclusion of all
directions or claims for payment made thereafter by Participants.
- 23 -
<PAGE> 29
(b) If the Trustee has actual knowledge that the Company
is Insolvent, the Trustee shall act in accordance with Section 7.3
hereof.
(c) Unless the Trustee receives written notice from the
Board of Directors or the Chief Executive Officer of the Company that
the Company is Insolvent, or from a person claiming to be a General
Creditor and claiming that the Company is Insolvent, the Trustee shall
have no duty to inquire whether the Company is Insolvent. If the
Trustee receives a written allegation from a person claiming to be a
General Creditor that the Company is Insolvent, the Trustee's only
duty of inquiry shall be to request that the Company's independent
public accountants determine whether the Company is Insolvent, and
shall suspend benefit payments pending such determination. If the
Company's independent public accountants advise the Trustee that the
Company is not Insolvent, it shall resume payments in accordance with
this Trust. If the Trustee receives notice of the Company's Insolvency
pursuant to this Section 7.2(c), it shall act in accordance with this
Section and Section 7.3 hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall
suspend payments to Participants and shall notify Participants of the
suspension, and shall hold the Trust Fund for the benefit of the
General Creditors, and shall pay and deliver the entire amount of the
Trust Fund only as a court competent jurisdiction, or duly appointed
receiver or other person authorized to act by such court, may order
or direct to make the Trust Fund available to satisfy the claims of
the General Creditors (payments to Participants in accordance with the
terms of the Plan may be resumed only pursuant to Section 7.4 hereof);
or
(b) by reason of Section 1.11(a), the Trustee shall
suspend payments to Participants and shall notify Participants of the
suspension, and shall (i) hold the Trust Fund for the benefit of
General Creditors or (ii) pay over all or a portion of the Trust Fund
to General Creditors if directed by the Company or an appropriate
judicial forum.
- 24 -
<PAGE> 30
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of notice of a
Court order to the contrary, the Trustee shall resume all of its duties and
responsibilities under the Trust, including payments to Participants if
otherwise provided for herein, within thirty (30) days of the Trustee's receipt
of a determination from the Company's independent public accounting firm that
the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event
that amounts are paid from the Trust Fund to General Creditors of the
Company, then as soon as practicable after the Company is no longer
Insolvent, the Company shall deposit into the Trust Fund a sum to
equal to the Funding Amount, determined as of the date the Company is
no longer Insolvent, which date shall be a Valuation Date. The
Company (or, after a Change of Control, the Company's independent
public accountants) shall provide the Trustee with written
certification of such Funding Amount. If the Funding Amount is not
paid by the Company within ninety (90) days of the Trustee's receipt
of such notice, the Trustee shall demand payment and the provisions of
Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of
Payments. Provided that there are sufficient assets of the Trust Fund,
if Trustee discontinues the payment of benefits from the Trust
pursuant to Section 7.3 and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Participants under the terms
of the Plan for the period of such discontinuance, as determined by
the Plan Administrator, less the aggregate amount of any payments made
to Participants by the Company in lieu of the payments provided for
hereunder during any such period of discontinuance. If the Trustee
suspends a payment to a Participant under this Section, and
subsequently makes such payment, the payment shall include interest at
the rate of interest per annum equal to the prime rate as published by
NBD Bank for each day from the date of suspension to the date of
payment, as calculated by the Plan Administrator.
7.5 Reserved.
- 25 -
<PAGE> 31
VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for
any reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal
of a Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor
Trustee shall be appointed by the Company. If a Trustee should resign
or be removed, and the Company does not notify the Trustee of the
appointment of a successor Trustee within forty-five (45) days of its
notice of its resignation or removal, then the Company shall be deemed
to have failed to have appointed a successor Trustee, and the Trustee
shall apply to a court of competent jurisdiction for appointment of a
successor Trustee.
(b) After the occurrence of a Change of Control, the
Trustee who is the Trustee on the date of the Change of Control may be
removed by the Company for three (3) years from the date of the Change
of Control. If a Trustee resigns or is removed at any time after the
date of a Change of Control, the Trustee shall apply to a court of
competent jurisdiction for appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
- 26 -
<PAGE> 32
8.3 Duties of Retiring and Successor Trustees. In the event of
the resignation or removal of a Trustee, the retiring Trustee shall within
thirty (30) days after the effective date of resignation or removal furnish to
the successor Trustee and the Company a final accounting of its administration
of the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this
Trust, the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which amendment shall include the effective date of such amendment.
Any amendment of the Trust may be made:
(a) prior to a Change of Control, without limitation and
in any manner and effective as of any date, including a retroactive
effective date, if accompanied by the written certification that no
Change of Control has occurred;
(b) after a Change of Control, only if a period of three
(3) years has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific
written consent to the amendment by Participants whose
actuarial interests under the Plan, computed by the Company's
independent public accountants as of the effective date of
such amendment, represent at least 51% of the total of all
actuarial interests under the Plan; or
- 27 -
<PAGE> 33
(2) such amendment is accompanied by the opinion
of legal counsel satisfactory to the Trustee that the
amendment is necessary for the purpose of conforming the Trust
to any present or future federal or state law (including
revenue laws) relating to trusts of this or similar nature, as
such laws may be amended from time to time, and a
certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
9.2 Termination. After all assets of the Trust Fund have been
distributed by the Trustee to the Participants or their Beneficiaries in
accordance with Article VI, the Trustee shall render an accounting, which shall
be the final accounting, in the manner provided for in Section 4.3. Upon
acceptance of the accounting by the Company, any assets remaining in the Trust
Fund, after deduction of such reasonable amount for compensation and expenses
as provided for in Section 10.7, shall be returned to the Company in the manner
provided in Section 6.8, and the Trust shall terminate thereupon. The Trust and
all the rights, titles, powers, duties, discretions and immunities imposed on
or reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee
shall be governed solely by the terms of this Trust Agreement.
- 28 -
<PAGE> 34
10.2 Litigation. In any action or proceeding regarding the Trust,
the Company, any assets of the Trust Fund, or the administration of the Trust,
any creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or
non-exercise of its powers and discretion in good faith shall be conclusive on
all persons. No one other than the Company shall be obliged to see to the
application of any money paid or property delivered to the Trustee. The
certificate of the Trustee that it is acting according to this Trust will fully
protect all persons dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other
provision of this Trust to the contrary, the Trustee does not guarantee payment
of any amount which may become due and payable to a Participant. The Trustee
shall have no responsibility for the disclosure to Participants regarding the
terms of the Plan or of this Trust, or for the validity thereof. The Trustee
shall not be responsible for administrative functions under the Plan and shall
have only such responsibilities under this Trust Agreement as specifically set
forth herein. The Trustee will be under no liability or obligation to anyone
with respect to any failure on the part of the Company, the Plan Administrator,
the Company's independent public accounting firm, an Investment Manager, or a
Participant to perform any of their respective obligations under the Plan or
this Trust. The Trustee shall be fully protected in relying upon any notice or
direction provided to it from any party in connection with the Trustee's duties
hereunder which the Trustee in good faith believes to be genuine, and executed
and delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the amounts
held in the Trust Fund at the time of such payment or otherwise to risk or
expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the
Company shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the
extent permitted by law the Trustee and hold it harmless against Trustee's
costs, expenses and
- 29 -
<PAGE> 35
liabilities (including, without limitation, attorneys' fees and expenses)
arising out of or in connection with the performance of the Trustee's duties
arising hereunder (but excluding costs arising as a result of the Trustee's bad
faith or gross negligence in the performance of its responsibilities
hereunder), and to be primarily liable for such payments. If the Company does
not pay such costs, expenses and liabilities in a reasonably timely manner,
Trustee may obtain payment from the Trust. This Section shall survive the
termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid
compensation by the Company in an amount agreed to by the Company and the
Trustee. The Trustee shall be reimbursed by the Company for reasonable expenses
incurred by it in the management and administration of this Trust Agreement,
including the reasonable compensation of the Trustee's counsel and other
agents; and if the Trustee is not timely reimbursed with respect to amounts due
pursuant to this Section 10.7 (or in the case of expenses to be incurred
pursuant to Section 3.5 hereof), the Trustee may charge such amounts against
the Trust Fund. Any compensation or expenses so agreed upon or otherwise
payable not paid by the Company on a timely basis may be charged to the Trust
Fund no more frequently than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required
or permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
The Detroit Edison Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
- 30 -
<PAGE> 36
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants
and their Beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
10.11 True and Correct Document. Any persons dealing with the
Trustee may rely upon a copy of this Trust and any amendments thereto certified
to be true and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may
be waived by the person entitled to such notice.
10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender
shall include the feminine and neuter genders and the singular shall include
the plural and the plural shall include the singular wherever required by the
context.
10.15 Successors. This Trust shall be binding on all persons
entitled to payments hereunder and their respective heirs and legal
representatives, and on the Company, the Trustee, and their respective
successors.
10.16 Severability. If any provision of this Trust is held to be
illegal or invalid, such illegality or invalidity shall not affect the
remaining provisions of this Trust, which shall be construed and enforced as if
such illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and
construed in accordance with the laws of the State of Michigan with respect to
the Company's obligations and in accordance with the laws of the State of
Illinois with respect to the Trustee's obligations and Trust Administration.
- 31 -
<PAGE> 37
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
THE DETROIT EDISON COMPANY
By L.L. Loomans
------------------------
Its
-----------------------
THE NORTHERN TRUST COMPANY
as Trustee
By
------------------------
Its
-----------------------
- 32 -
<PAGE> 38
EXHIBIT A
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
SAVINGS REPARATION PLAN
The Company has established an Irrevocable Grantor Trust to pay benefits under
the Savings Reparation Plan. A copy of such Plan, including any amendment(s),
is attached hereto.
<PAGE> 39
EXHIBIT B
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
SAVINGS REPARATION PLAN
PARTICIPANTS (as defined in the Trust)
as of December 31, 1995
Name [Date of Birth]
------------ ---------------
<PAGE> 1
EXHIBIT 99-2
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
RETIREMENT REPARATION PLAN
AS RESTATED AS OF JANUARY 1, 1996
<PAGE> 2
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
RETIREMENT REPARATION PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
1.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Excess Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 General Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Insolvent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.13 IRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.14 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.15 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.17 Potential Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 Potential Change of Control Period . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.20 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.21 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.22 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
1.23 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
II. ESTABLISHMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . 7
--------------------------
2.1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Description of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Irrevocability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Acceptance by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
III. CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------------
3.1 Calculations of Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Contributions as of Each Valuation Date . . . . . . . . . . . . . . . . . . . . . . . 10
3.3 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 No Dilution of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
IV. ACCOUNTING AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . 11
-----------------------------
4.1 Trustee Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Company Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Periodic Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Administrative Powers of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
V. INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------
5.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Investment Powers of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Investment Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5 Single Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
VI. PAYMENTS FROM THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------
6.1 Obligation of Trustee to Make Payments
to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
6.2 Obligation of the Company to Make Payments to Participants . . . . . . . . . . . . . . 21
6.3 Distributions to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Insufficient Trust Fund Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Payment of Excess Assets to Company . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Company to Pay Withholding and Employment Taxes . . . . . . . . . . . . . . . . . . . 22
6.8 Payment in Reversion to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY . . . . . . . . . . . . . . . . . . 23
-------------------------------------
7.1 No Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Determination of Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Payments When Company Is Insolvent . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Resumption of Duties after Insolvency . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
VIII. RESIGNATION OR REMOVAL OF TRUSTEE . . . . . . . . . . . . . . . . . . . . 26
---------------------------------
8.1 Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.3 Duties of Retiring and Successor Trustees . . . . . . . . . . . . . . . . . . . . . 27
8.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
IX. AMENDMENT AND TERMINATION OF TRUST . . . . . . . . . . . . . . . . . . . 27
----------------------------------
9.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
X. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------
10.1 Coordination with Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.2 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Trustee's Action Conclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4 No Guarantee or Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.5 Liabilities Mutually Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.7 Expenses and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
10.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.10 Antiassignment Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11 True and Correct Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.14 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.15 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.17 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
EXHIBIT A THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
RETIREMENT REPARATION PLAN
EXHIBIT B THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
RETIREMENT REPARATION PLAN
PARTICIPANTS (as defined in the Trust)
<PAGE> 6
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
RETIREMENT REPARATION PLAN
THIS TRUST AGREEMENT is made this 24th day of July, 1995, as restated
in its entirety effective January 1, 1996, by and between The Detroit Edison
Company, a Michigan corporation, and The Northern Trust Company, an Illinois
corporation, of Chicago, Illinois ("Trustee"), and any successor provided for
in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has established and maintains the Retirement
Reparation Plan ("Plan"), an unfunded benefit plan, a copy of which is attached
hereto as Exhibit A, for the benefit of certain Company Executives listed on
Exhibit B hereto, which Exhibits may be amended from time to time by the
Company prior to a potential Change of Control and/or Change of Control, and
without the Trustee's consent; and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred
to the Trust and the earnings thereon shall be used by the Trustee, subject to
the claims of the Company's creditors in the event the Company becomes
Insolvent, to satisfy the liabilities of the Company in accordance with the
provisions hereof; and, upon satisfaction of all liabilities of the Company
with respect to all Participants (and their Beneficiaries, if applicable), the
assets, if any, remaining in the Trust shall revert to the Company; and
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<PAGE> 7
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose of providing deferred compensation for a select group of
management and/or highly-compensated employees, and shall not be construed to
provide income for federal income tax purposes to a Participant (or his or her
Beneficiary) prior to the actual payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS Unless the context requires otherwise, definitions as
used herein shall have the same meaning as in the Plan when applied to said
Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in
the Plan as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors,
as constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the
following events:
(a) a change of control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
under the Securities Act of 1934, as amended (the "Exchange Act"), or
any successor provisions, whether or not the Company is then subject
to such reporting requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit
plan maintained by the Company, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of
the combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of the Board of
Directors (the "Base Capital Stock"); provided, however, that any
change in the relative beneficial ownership of securities of any
person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any
- 2 -
<PAGE> 8
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of
the Company; or
(c) a change in the composition of the Company's Board of
Directors, as a result of which fewer than two-thirds of the
incumbent directors are directors who either
(1) had been directors of the Company 24 months prior to
such change, or
(2) were elected, or nominated for election, to the
Company's Board of Directors with the affirmative
votes of at least a majority of the directors who had
been directors of the Company 24 months prior to such
change and who were still in office at the time of
the election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in which
the Company is not the continuing or surviving
corporation or pursuant to which shares of the
Company's common stock would be converted into cash,
securities, or other property, other than a merger of
the Company in which the holders of the Company's
common stock immediately prior to the merger have the
same proportionate ownership of common stock of the
surviving corporation immediately after the merger,
or
(2) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Company, or
(3) the stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of the
Company.
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may
- 3 -
<PAGE> 9
be amended or supplemented from time to time), whereby it is proposed that a
corporation will become the parent holding company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means The Detroit Edison Company, a Michigan
corporation, its successors and assigns.
1.5 "Effective Date" means July 24, 1995.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of one
hundred and twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during
any potential Change of Control Period, "Funding Amount" means one hundred and
twenty per cent (120%) of the actual benefit obligation on the books of the
Company as of the most recent Valuation Date, as certified by the Company to
the Trustee, which shall be the amount necessary to ensure that the assets of
the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each respective
Participant under the Plan shall_be limited to benefits attributable to service
rendered by the Participant to the Company.
1.9 "General Creditors" means the unsecured general creditors of
the Company, including the Participants.
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
(a) is unable to pay its debts as they become due; or
- 4 -
<PAGE> 10
(b) is subject to a pending proceeding as a debtor under
the Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed
by the Company in the manner provided in Section 5.3 to direct the investment
of any part or all of the assets of the Trust Fund in accordance with Article
V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" means an individual listed on Exhibit B attached
hereto who
(a) is a Participant in the Plan because of services rendered to the
Company; or
(b) would be a Participant in the Plan because of services rendered
to the Company but is not due to age, years of service or active employment.
The Company agrees to list all Participants on Exhibit B attached hereto.
Except after a Change of Control as provided in Section 3.4, the Company may
add or delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan
as responsible for the management, operation, and administration of the Plan.
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change of
Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than the Company or an employee
benefit plan maintained by the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 9.5% or more of
the combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of the Board of
- 5 -
<PAGE> 11
Directors (the "Base Capital Stock"); provided, however, that any
change in the relative beneficial ownership of securities of any
person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter
in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such
person's beneficial ownership of any securities of the Company; or
(c) the public announcement by any individual or entity,
other than the Company, that such individual or entity intends to take
or to consider taking actions which, if consummated, would constitute
a Change of Control of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company
is not the continuing or surviving corporation, or pursuant to which
shares of the Company's common stock would be converted into cash,
securities, or other property, other than a transaction in which the
holders of the Company's common stock immediately prior to the merger,
acquisition, consolidation, or reorganization have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, acquisition, consolidation, or
reorganization, including, but not limited to, the creation of a
parent entity to oversee the Company; or
(e) the public announcement of the sale or other transfer
of substantially all of the assets of the Company to any third party;
or
(f) the Board of Directors of the Company adopts a
resolution to the effect that a Potential Change of Control of the
Company has occurred for purposes of this Trust.
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year
period immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the Potential Change of Control Period shall end one (1) year
following the date of the most recent Potential Change of Control.
- 6 -
<PAGE> 12
The Company shall promptly notify the Trustee of a Potential
Change of Control and the Trustee may conclusively rely upon such notice and
shall have no duty to independently determine whether a Potential Change of
Control has occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to
this Trust Agreement and all of the terms and conditions of this Trust
Agreement, which is intended to constitute a grantor trust under IRC Section
Section 671 et seq.
1.21 "Trust Fund" means all moneys, securities, and other property
held by the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any
successor trustee appointed pursuant to Article VIII.
1.23 "Valuation Date" means the day in each calendar year which is
the last day of the Company's fiscal year in each year, and such other times as
the Company may determine. Each of (a) any date of a Potential Change of
Control, (b) the date of a Change of Control, (c) the effective date of a
Trustee's resignation or removal, and (d) the date of termination of the Trust
shall also be a Valuation Date if any such date occurs other than on the last
business day of the Company's fiscal Year. The first Valuation Date shall be
December 31, 1994.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the
Trustee, which Trust shall consist of such sums of money and other property
acceptable to the Trustee as from time to time have been and shall be paid or
delivered by the Company to the Trustee as provided herein. All such money and
other property, all investments and reinvestments made therewith, or the
proceeds thereof, and all investment earnings and profits thereon, less all
payments and charges as authorized herein, shall constitute the Trust Fund. The
Trust Fund shall be held in trust by the Trustee, and shall be dealt with in
accordance with the provisions of this Trust.
2.2 Description of Trust. The Company represents and agrees that:
- 7 -
<PAGE> 13
(a) the Trust is intended to be a grantor trust under IRC
Section Section 671-678, and shall be construed accordingly. The
Company intends and agrees that it is the "owner" or grantor of the
Trust in its entirety, as that term is defined in subpart E, part I,
subchapter J, chapter 1, subtitle A of the IRC and that, for income
tax purposes, all income, deductions, and credits of the Trust Fund
belong to it as owner, and will be included on its income tax or other
required tax returns, and any income tax determined to be payable as a
result thereof will be the sole obligation of, and will be paid by,
the Company;
(b) a true and correct copy of the Plan, as in effect on
the Effective Date hereof, is attached hereto as Exhibit A. The
Company shall file with the Trustee, promptly upon its adoption, a
true and correct copy of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal
obligations of the Company to Participants under the Plan as provided
herein, subject to the claims of General Creditors in the event of
Insolvency, and the balance of the Trust Fund, if any, remaining after
payment of the Company's obligation to Participants under the Plan
will revert to the Company in accordance with the Trust;
(d) contributions by the Company to the Trust which are
made coincident with and subsequent to the Effective Date shall be in
amounts determined under Article III hereof. The Company agrees to
fund the Trust as provided therein;
(e) the principal of the Trust, and any earnings thereon
shall be held by the Trustee separate and apart from other funds of
Company, and shall be used exclusively for the uses and purposes as
herein set forth;
(f) the Trust established under this agreement does not
fund and is not intended to fund the Plan, or any other employee
benefit plan or program of the Company. Neither the establishment of
the Trust, nor the payment or delivery of assets to the Trustee shall
vest any Participant in any right, title, or interest in or to any
assets of the Trust Fund;
(g) participants shall have no preferred claim on, or any
beneficial ownership interest in, assets of the Trust. To the extent
that any Participant acquires the right to receive payment(s) under
the Plan, any such right shall be
- 8 -
<PAGE> 14
mere unsecured contractual rights of Participants against the Company,
and such Participants (or their Beneficiary(ies)) shall have only the
unsecured promise of the Company that such payment(s) will be made.
Any assets held by the Trust will be subject to the claims of General
Creditors under federal and state law in the event of Insolvency, as
defined herein, with no preference whatsoever given to claims of
employees over claims of other unsecured creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan
is a plan for a select group of management or highly compensated
employees, and as such are exempt from the application of ERISA except
for the disclosure requirements applicable to such plan, for which the
Company bears full responsibility as to compliance. The Company
further represents that the Plan is not qualified under IRC Section
401 and therefore, is not subject to any IRC requirements applicable
to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this
Section 2.3, the Trust shall be irrevocable from the effective date, and the
assets of the Trust Fund shall be held in accordance with the provisions hereof
for the exclusive purpose of providing for the payment of the Company's
obligations to pay benefits to Participants under the Plan and to satisfy the
claims of General Creditors in the event of Insolvency, and defraying the
expenses of the Trust. Except as provided in Section 6.6 and Section 6.8 and
in the event of Insolvency, no part of the income or corpus of the Trust Fund
shall be recoverable by or for the benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust
established under this Trust Agreement on the terms and subject to the
provisions set forth herein, and agrees to discharge and perform fully and
faithfully all of the duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1995, the
Company shall contribute to the Trust the Funding Amount as determined on the
first Valuation Date. As of each Valuation Date, and until the entire Trust
Fund has been distributed, the Company (or, after a Change of Control, the
Company's independent public accountants) shall recalculate the Funding
Amounts.
- 9 -
<PAGE> 15
3.2 Contributions as of Each Valuation Date. During the life of
the Trust but no later than September 30 of each year, commencing no later than
September 30, 1996, the Company shall contribute to the Trust such amount as is
necessary to make trust assets equal the Funding Amount as of the previous
Valuation Date. The Plan Administrator or its delegate (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written notice of the amount of the necessary contribution on or
before the date such contribution is due to the Trust. Any such payments to the
Trustee do not discharge or release the Company of its obligation under the
Plan or Section 6.2 to pay benefits to Participants under the Plan, and shall
at all times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit
B in effect on the date of a Change of Control shall not be amended to include
a Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of the Delivery Date of the
proposed amended Exhibit B of the Funding Amount calculated based on the
Participants named in the Exhibit B in effect on the Date of the Change of
Control and any new or additional Participants named in the proposed amended
Exhibit B (the "New Funding Amount") and (b), assets in an amount necessary to
make the trust assets equal the New Funding Amount. If the Trustee determines
that assets of the Trust Fund, including such assets as are delivered by the
Company on the Delivery Date, equal or exceed the New Funding Amount, the
Trustee shall accept the amended Exhibit B. Any amended Exhibit B so accepted
shall be deemed incorporated with the same effect as if otherwise included
herein. Unless an Exhibit B amended after a Change of Control is accepted by
the Trustee as provided in this Section, the Trustee shall have no liability,
responsibility, or obligation with respect to a Participant named in any
amended Exhibit B unless such Participant is named in the Exhibit B then in
effect on the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the
Trustee within one hundred and twenty (120) days of notice and demand from the
Trustee (or, upon the occurrence of a Potential Change of Control or a Change
of Control, within seven (7) days of notice and demand from the Trustee), any
amount determined to be payable by the Company to the Trustee under Sections
3.2, 6.5 or 7.4(a) of the Trust, the Trustee may commence legal action, (which
is expressly deemed to include without
- 10 -
<PAGE> 16
limitation an alternate dispute resolution proceeding), to compel the Company
to pay to the Trustee any amount determined to be payable to it under the
Trust. The Trustee may bring such action against the Company in any court of
competent jurisdiction, and shall be entitled to recover for the benefit of the
Trust from the Company such amount, plus interest for each day at the rate of
interest per annum of five (5) percentage points in excess of the prime lending
rate as announced by NBD Bank, from the due date specified in the Trustee's
notice and demand (or the date(s) from which pro rata payments were made, if
such action is brought by the Trustee pursuant to Section 6.5 hereof) to the
date of payment, plus all costs of collection, including reasonable attorneys
fees and costs of litigation. The Trustee is authorized to bring action to
compel payment by the Company, and, in connection with reasonable claims for
delinquent contributions by the Company, to retain, at the expense of the
Company, counsel and other appropriate experts, including actuaries and
accountants, to aid it in pursuing litigation for collection against the
Company. The Trustee's anticipated reasonable costs and expenses incurred
pursuant to this Section 3.5 are payable by the Company in advance; and should
the Company not make timely payment, the Trustee may charge the Trust Fund for
such reasonably anticipated costs and expenses. The Trustee shall in no event
be required to advance or expend its own funds in order to comply with the
provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be
kept accurate and detailed records of any investments, receipts, disbursements,
and all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
4.2 Company Recordkeeping. The Company shall keep full, accurate,
and detailed books and records with respect to the Participants and benefits
paid and payable under the Plan, which records shall be made available to the
Trustee at its request.
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<PAGE> 17
4.3 Periodic Accounting. Within sixty (60) days following a
Valuation Date, the Trustee shall deliver to Company a written accounting,
dated as of the Valuation Date, of its administration of the Trust Fund during
such year or during the period from the most recent Valuation Date to the date
of such current Valuation Date, which accounting shall be in accordance with
the following provisions:
(a) Such accounting shall set forth all investments,
receipts, disbursements, and other transactions effected the by Trust
Fund during the preceding year, or during the period from the most
recent Valuation Date to the date of such current Valuation Date,
including a description of all securities and investments purchased
and sold, with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and
showing all cash, securities or other property held in the Trust Fund,
less liabilities known to the Trustee (other than liabilities to
Participants entitled to benefits under the Plans) at the end of such
year or other period, as the case may be. In making a valuation, all
cash, securities or other property held in the Trust Fund shall be
valued at their then fair market value, and shall be in a format as
may be established by the Company. A copy of each accounting so
delivered to the Company shall be open to inspection at the office of
the Trustee during normal business hours.
(b) If within ninety (90) days after the filing of such
written accounting, the Company has not delivered to the Trustee
notice of any objection to any act or transaction of the Trustee, the
initial accounting shall become an account stated as between the
Trustee and the Company. If any objection has been delivered to the
Trustee by the Company, and if the Company is satisfied that it should
be withdrawn, the Company shall signify its approval of the accounting
in writing filed with the Trustee, and the accounting shall become an
account stated as between the Trustee and the Company. If the
accounting is adjusted following an objection thereto, the Trustee
shall file and deliver the adjusted accounting to the Company. If
within fifteen (15) days after such filing of an adjusted accounting,
the Company has not delivered to the Trustee notice of any objection
to the transactions as so adjusted, the adjusted accounting shall
become an account stated as between the Trustee and the Company.
(c) Unless an accounting is fraudulent, when it becomes
an account stated, it shall be finally settled, and the Trustee shall,
to the extent permitted by applicable law, be forever released and
discharged from all liability and
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accountability with respect to the propriety of its acts and
transactions shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that
authority with respect to the administration of the Trust has been allocated to
others in accordance with this Trust, and subject to Article V, the Trustee
shall have exclusive authority and discretion to manage and administer the
Trust. The Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of
like character and with like aims, provided, however, that Trustee shall incur
no liability to any person for any action taken pursuant to a direction,
request or approval given by Company which is contemplated by, and in
conformity with, the terms of the Trustee's responsibilities under this Trust,
and is given in writing by Company. The responsibility for maintenance of
individual benefit records shall be retained by the Company, and may be
delegated to such person or entity as the Company may employ from time to time.
Except as otherwise provided herein, the Trustee shall have, without exclusion,
all powers conferred on trustees by law and, without limiting the foregoing,
shall have the following administrative powers, rights, and duties in addition
to those provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all
assets held by the Trustee on such terms and conditions as the Trustee
shall decide; provided however, that if the Company delivers written
instructions to the Trustee, the Trustee shall follow such
instructions;
(b) when directed by the Company or requested by a
Participant pursuant to Article VI, to make payments from the Trust
Fund to Participants and, when required by Article VII, to make
payments from the Trust Fund to General Creditors entitled to payments
thereunder;
(c) except as provided in Article VI and Article VII, to
waive, modify, reduce, compromise, release, contest, submit to
arbitration, or settle or extend the time of payment of any claims,
debts, damages, or demands of any nature in favor of or against the
Trustee or all or any part of the Trust Fund;
(d) to retain any disputed property until an appropriate
final adjudication or release is obtained, and to represent the Trust
in, or commence or defend, any litigation the Trustee considers in its
discretion necessary in connection with the Trust Fund;
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<PAGE> 19
(e) to withhold, if the Company so directs, all or any
part of any payment required to be made hereunder as may be necessary
and proper to protect the Trustee or the Trust Fund against any
liability or claim on account of any estate, inheritance, income or
other tax or assessment attributable to any amount payable hereunder,
and to discharge any such liability with any part or all of such
payment so withheld in accordance with Section 6.7;
(f) to maintain records reflecting all receipts and
payments under this Trust and such other records as the Company may
specify and to which the Trustee agrees, which records may be audited
from time to time by the Company or anyone named by the Company; and
to furnish a written accounting to the Company as of each Valuation
Date, as provided in Section 4.3;
(g) if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from
conversion of the policy from a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy. Notwithstanding the preceding sentence,
the Trustee may loan to the Company the proceeds of any borrowing
against an insurance policy held as an asset of the Trust;
(h) to furnish the Company with such information for tax
or other purposes which the Company may reasonably request and which
the Trustee may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal
counsel (who, except following a Change of Control, may be legal
counsel to the Company and who are not in the Company's reasonable
judgment deemed to have a conflict of interest), consultants,
custodians, depositories, experts and other providers of services, to
consult with them with respect to the implementation and construction
of this Trust, the duties of the Trustee hereunder, the transactions
contemplated by this Trust, or any act which the Trustee proposes to
take or omit, and to rely upon the advice of and services performed by
such persons; to delegate discretionary powers to such persons and to
reasonably rely upon information and advice furnished by such persons;
provided that each such delegation and the acceptance thereof by each
such person shall be in writing; and provided further that the Trustee
may not delegate its responsibilities as to the management or control
of the assets of the Trust Fund;
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(j) to determine whether the Company is Insolvent, and to
hold assets of the Trust Fund for the benefit of General Creditors in
the event of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a
Change of Control, as provided in Article VI hereof;
(l) to perform all other acts which in the Trustee's
judgment are appropriate for the proper protection, management,
investment, and distribution of the Trust Fund, and to carry out the
purposes of the Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has
investment responsibility, the Trustee shall invest and reinvest the principal
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income, in accordance with the written
investment guidelines established by the Company and provided to the Trustee by
the Company. If no such written investment guidelines are received by the
Trustee, the assets of the Trust Fund shall be invested in such investments as
determined by the Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that
authority with respect to the management of all or a portion of the Trust Fund
has been allocated to others in accordance with this Trust, the Trustee shall
have exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
(a) to invest and reinvest in any property wherever
situated, whether real, personal, mixed, foreign or domestic,
including common and preferred stocks, bonds, notes, and debentures
(including convertible stocks and securities, but not including any
stock, securities, or debt instruments of the Company
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<PAGE> 21
[unless held in a collective or commingled fund and such Company
securities comprise 5% or less of the assets of such fund]),
leaseholds, mortgages (including, without limitation, any collective
or part interest in any bond and mortgage or note and mortgage),
certificates of deposit, life insurance contracts, guaranteed
investment contracts, and guaranteed annuity contract, all regardless
of diversification and without being limited to investments authorized
by law for the investment of trust funds;
(b) to invest and reinvest, without distinction between
principal and income, in contracts for future delivery of United
States Treasury Bills, other financial instruments, or indices based
on any group of securities, and in options to buy or sell indices
based on any group of securities or any kind of evidences of ownership
or indebtedness, including financial instruments or futures contracts
relating thereto;
(c) to invest and reinvest part or all of the Trust Fund
in any deposit accounts, deposit administration fund maintained by a
legal reserve life insurance company in accordance with an agreement
between the Trustee and such insurance company, a group annuity
contract or life insurance policies issued by such insurance company
to the Trustee as contract holder, any interest bearing deposits held
by any financial institution having total capital and surplus of at
least Fifty Million Dollars ($50,000,000), investments in any stocks,
bonds, debentures, mutual fund shares, notes, commercial paper,
treasury bills, and any mutual, common, commingled or collective trust
funds or pooled investment funds, and to diversify such investments so
as to minimize the risk of losses;
(d) to commingle assets of the Trust Fund, for investment
purposes only, with assets of any common, collective, or commingled
trust fund which has been or may hereafter be established and
maintained by the Trustee, or by any other financial institution;
provided that to the extent that any part or all of the assets of the
Trust Fund for which the Trustee has investment responsibility are
invested in any such common, collective or commingled trust fund or
pooled investment fund which is maintained by a bank or trust company
(including a bank or trust company acting as Trustee), the provisions
of the documents under which such common, collective or commingled
trust fund or pooled investment fund are maintained shall govern any
investment therein and provided further that prior to investing any
portion of the Trust Fund for the first time in any such common,
collective, or commingled trust fund, the Trustee shall advise the
Company of its intent to make such an investment, and furnish to the
Company
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<PAGE> 22
any information it may reasonably request with respect to such common,
collective, or commingled trust fund (other than a trust fund
established by the Company), and provided further that the Trustee
shall maintain separate records with respect to each other trust of
the Trust Fund;
(e) to vote stock and other voting securities personally
or by proxy (and to delegate the Trustee's powers and discretion with
respect to such stock or other voting securities to such proxy), to
exercise subscription, conversion and other rights and options (and
make payments from the Trust Fund in connection therewith), to take
any action and to abstain from taking any action with respect to any
reorganization, consolidation, merger, dissolution, recapitalization,
refinancing and any other plan or change affecting any property
constituting a part of the Trust Fund (and in connection therewith to
delegate the Trustee's discretionary powers and pay assessments,
subscriptions and other charges from the Trust Fund), to hold or
register any property from time to time in the Trustee's name or in
the name of a nominee or to hold it unregistered or in such form that
title shall pass by delivery; and to borrow from anyone, including
itself (to the extent permitted by law), such amounts from time to
time as the Trustee considers desirable to carry out this Trust (and
to mortgage or pledge all or part of the Trust Fund as security); to
participate in any plan or reorganization, consolidation, merger,
combination, liquidation, or other similar plan relating to any such
property, and to consent to or oppose any such plan or any action
thereunder, or any contract, lease, mortgage, purchase, sale, or other
action by any corporation or other entity any of the securities of
which may at any time be held in the Trust Fund, and to do any act
with reference thereto;
(f) to retain in cash such amounts as the Trustee
considers advisable and as are permitted by applicable law, and to
deposit any cash so retained in any depository (including any bank
acting as Trustee) which the Trustee may select, provided such
depository must have total capital and surplus of at least Fifty
Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section
4.4(g), to apply for, pay premiums on, and maintain in force
individual, ordinary or universal life insurance policies on the lives
of Participants, which policies may contain provisions which the
Company may approve or direct; to receive or acquire such policy or
policies from the Company, but the Trustee may purchase a life
insurance policy from a person other than the insurer which issues a
policy only if the Trustee pays, transfers, or otherwise exchanges an
amount no more
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<PAGE> 23
than the cash surrender value of the policy or policies, and the
policy or policies is (are) not subject to a mortgage or similar lien
which the Trustee would be required to assume; to have with respect to
such policy or policies any rights, powers, options, privileges, and
benefits usually comprised in the term "incidents of ownership", and
normally vested in an owner of such policy or policies to be exercised
only pursuant to Company direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to
dispose of, and to grant options for the purchase or exchange with
respect to it, any property at any time held by it, by public or
private sale, for cash or on credit, or partly for cash and partly for
credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power
to any such committee; and to pay part of the expenses and
compensation of any such committee and any assessments levied with
respect to any property so deposited;
(k) to exercise any conversion privilege or subscription
right available in connection with any such property, and to do any
act with reference thereto, including the exercise of options, the
making of agreements or subscription, and the payment of expenses,
assessment or subscription, which may be deemed necessary or advisable
in connection therewith, and to hold and retain any securities or
other property which it may so acquire;
(l) to extend the time of payment of any obligation held
in the Trust Fund;
(m) to enter into standby agreements for future
investment, either with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the
renewal or extension of any mortgage, and to agree to a reduction in
the rate of interest on any indebtedness or mortgage or to any other
modification or change in the terms of any indebtedness or mortgage,
or of any guarantee pertaining thereto, in any manner and to any
extent that may be deemed advisable for the protection of the Trust
Fund or the preservation of any covenant or condition of any
indebtedness or mortgage or in the performance of any guarantee, or to
enforce any default in
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<PAGE> 24
such manner and to such extent as may be deemed advisable; and to
exercise and enforce any and all rights of foreclosure, to bid on any
property in foreclosure, to take a deed in lieu of foreclosure with or
without paying a consideration therefor, and in connection therewith
to release the obligation on the bond secured by such mortgage; and to
exercise and enforce in any action, suit or proceeding at law or in
equity any rights or remedies in respect of any such indebtedness or
mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and
all deeds, leases, notes, bonds, guarantees, mortgage, conveyance,
contracts, waivers, releases, or other instruments in writing
necessary or proper for the accomplishment of any of the foregoing
powers;
(p) to organize under the laws of any state one or more
corporations, partnerships, or trusts for the purpose of acquiring and
holding title to any property that it is authorized to acquire under
this Trust, and to exercise with respect thereto any or all of the
powers set forth in this Trust;
(q) notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the Trustee
shall not have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within the
meaning of Section 301.7701-2 of the Procedure and Administrative
Regulations promulgated under the IRC; and
(r) generally to do all acts, whether or not expressly
authorized, that the Trustee deems necessary or desirable for the
protection of the Trust Fund, and to carry out the purposes of the
Trust.
5.3 Investment Managers. The Company may appoint one or more
Investment Managers to direct the investment of any part or all of the assets
of the Trust Fund by the Trustee. Appointment of an Investment Manager shall be
made by written notice to the Investment Manager(s) and to the Trustee, which
notice shall specify those powers, rights, and duties of the Trustee under this
Trust that are allocated to the Investment Manager(s) and the portion of the
assets of the Trust Fund subject to the Investment Manager(s). After it
receives written notice of such appointment, the Trustee shall have no
obligation or responsibility for those investment duties which are allocated to
an Investment Manager. An Investment Manager so appointed pursuant to this
paragraph shall be either a registered investment adviser under the Investment
Advisers Act of 1940, a bank, as defined in said Act, or an insurance company
qualified to
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<PAGE> 25
manage, acquire and dispose of the assets of the Plans under the laws of more
than one state of the United States. Any such Investment Manager shall
acknowledge to the Company in writing that is accepts such appointment. The
Trustee shall not be liable for any loss or diminution of any assets managed by
an Investment Manager, including without limitation, any loss or diminution
caused by any action or inaction taken or omitted by it at the direction of an
Investment Manager. In addition, the Trustee shall not be liable for the
diversification of any assets managed by Investment Managers of the Company,
each of which shall be solely the responsibility of the Company. An Investment
Manager may resign at any time upon written notice to the Trustee and the
Company. The Company may remove an Investment Manager at any time by written
notice to the Investment Manager and the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each
investment fund, and the income thereon, shall be held and invested as a single
fund, and the Trustee shall not make any separate investment of the Trust Fund,
or make any separate investment fund, for the account of any Participant or
other General Creditors prior to receipt of directions to make payments to such
Participant or other General Creditors in accordance with Article VI or Article
VII. All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The
Trustee's obligation to distribute to any Participant out of the assets of the
Trust Fund shall be limited to payment at such times and in such amounts as are
properly in conformance with the provisions of Section 6.3. Payments to
Participants pursuant to this Article VI shall be made by the Trustee to the
extent that funds in the Trust Fund are sufficient for such purpose, and shall
at all times be subject to the provisions of Article VII. In the event the
Company determines that it will pay benefits directly to Participants as they
become due under the terms of the Plan, the Company shall notify Trustee of its
decision prior to the time amounts are payable to Participants.
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<PAGE> 26
6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be
made from the Trust Fund to pay benefits in accordance with the Plan shall be
initiated by:
(a) written direction to the Trustee from the Plan
Administrator, which direction shall certify that such distribution(s)
is(are) in accordance with the Plan, and specify the timing, form,
payee, and amount of such benefit payments, including any federal,
state, or local income taxes to be withheld, and the Trustee shall
make or commence the directed distributions after receipt of such
written direction; or
(b) by the submission to the Trustee by a Participant of
a certified copy of the non-appealable order of an appropriate forum
with jurisdiction to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee
determines or is advised that the Trust Fund does not have sufficient assets to
permit the Trustee to make a payment property directed pursuant to this Trust,
including a payment provided for under Section 10.7 of this Trust, the Trustee
shall pay any benefits due (if otherwise payable hereunder) to Participants on
a pro rata basis as directed by the Plan Administrator, and the Company shall
make the balance of such payments as they become due. If the Plan Administrator
determines that the Trust Fund does not have sufficient funds to provide for
the payment of all amounts otherwise payable to Participants (or their
Beneficiary(ies)) from the Trust under the Plans, it shall notify the Company
and the Trustee of the amount of the deficiency, and, within forty-five (45)
days of such notice, the Company deposit in trust with the Trustee the
additional amounts needed to make such payments. Upon receipt of such amount
by the Trustee from the Company, proceeds shall first be used by the Trustee to
pay any benefits
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<PAGE> 27
previously due remaining unpaid, in the order in which they were due, pursuant
to Plan Administrator instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII,
and except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount
paid to a Participant by the Trustee in accordance with this Article VI shall
be reduced by the amount of taxes required to be withheld pursuant to Plan
Administrator instructions, and the Trustee shall inform the Company of all
amounts so withheld. The Company shall direct that the Trustee shall either
(a) pay to the Company a sum equal to the amount of such
taxes as are required to be withheld, whereupon the Company shall have
full responsibility for the payment of all withholding taxes to the
appropriate taxing authorities, or
(b) pay such taxes directly to the appropriate taxing
authorities for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall
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<PAGE> 28
furnish each Participant with the appropriate tax information form evidencing
payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon
receipt of written certification from the Company that all obligations of the
Company to Participants with respect to the Plan have been satisfied, and if
the Trust Fund shall have any assets remaining, the Trustee shall distribute
such remaining assets of the Trust Fund to the Company, after converting such
assets to cash if requested by the Company, subject to the Trustee's right to
retain such reasonable amount for compensation and expenses as provided in
Section 10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on
or beneficial ownership interest in the Trust Fund before such assets are paid
to the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any other General Creditor. At all times during the continuance
of this Trust, as provided in this Article VII hereof, the principal and income
of the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with no
preference whatsoever given claims of employees over claims of other unsecured
creditors of the Company.
7.2 Determination of Insolvency. Notwithstanding any other
provisions of this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive
Officer of the Company shall have the fiduciary duty and
responsibility on behalf of General Creditors to notify the Trustee
promptly in writing in the event the Company is Insolvent, and the
Trustee shall have the right to rely thereon to the exclusion of all
directions or claims for payment made thereafter by Participants.
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<PAGE> 29
(b) If the Trustee has actual knowledge that the Company
is Insolvent, the Trustee shall act in accordance with Section 7.3
hereof.
(c) Unless the Trustee receives written notice from the
Board of Directors or the Chief Executive Officer of the Company that
the Company is Insolvent, or from a person claiming to be a General
Creditor and claiming that the Company is Insolvent, the Trustee shall
have no duty to inquire whether the Company is Insolvent. If the
Trustee receives a written allegation from a person claiming to be a
General Creditor that the Company is Insolvent, the Trustee's only
duty of inquiry shall be to request that the Company's independent
public accountants determine whether the Company is Insolvent, and
shall suspend benefit payments pending such determination. If the
Company's independent public accountants advise the Trustee that the
Company is not Insolvent, it shall resume payments in accordance with
this Trust. If the Trustee receives notice of the Company's Insolvency
pursuant to this Section 7.2(c), it shall act in accordance with this
Section and Section 7.3 hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall
suspend payments to Participants and shall notify Participants of the
suspension, and shall hold the Trust Fund for the benefit of the
General Creditors, and shall pay and deliver the entire amount of the
Trust Fund only as a court competent jurisdiction, or duly appointed
receiver or other person authorized to act by such court, may order
or direct to make the Trust Fund available to satisfy the claims of
the General Creditors (payments to Participants in accordance with the
terms of the Plan may be resumed only pursuant to Section 7.4 hereof);
or
(b) by reason of Section 1.11(a), the Trustee shall
suspend payments to Participants and shall notify Participants of the
suspension, and shall (i) hold the Trust Fund for the benefit of
General Creditors or (ii)_pay over all or a portion of the Trust Fund
to General Creditors if directed by the Company or an appropriate
judicial forum.
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<PAGE> 30
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of notice of a
Court order to the contrary, the Trustee shall resume all of its duties and
responsibilities under the Trust, including payments to Participants if
otherwise provided for herein, within thirty (30) days of the Trustee's receipt
of a determination from the Company's independent public accounting firm that
the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event
that amounts are paid from the Trust Fund to General Creditors of the
Company, then as soon as practicable after the Company is no longer
Insolvent, the Company shall deposit into the Trust Fund a sum to
equal to the Funding Amount, determined as of the date the Company is
no longer Insolvent, which date shall be a Valuation Date. The
Company (or, after a Change of Control, the Company's independent
public accountants) shall provide the Trustee with written
certification of such Funding Amount. If the Funding Amount is not
paid by the Company within ninety (90) days of the Trustee's receipt
of such notice, the Trustee shall demand payment and the provisions of
Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of
Payments. Provided that there are sufficient assets of the Trust Fund,
if Trustee discontinues the payment of benefits from the Trust
pursuant to Section 7.3 and subsequently resumes such payments, the
first payment following such discontinuance shall include the
aggregate amount of all payments due to Participants under the terms
of the Plan for the period of such discontinuance, as determined by
the Plan Administrator, less the aggregate amount of any payments made
to Participants by the Company in lieu of the payments provided for
hereunder during any such period of discontinuance. If the Trustee
suspends a payment to a Participant under this Section, and
subsequently makes such payment, the payment shall include interest at
the rate of interest per annum equal to the prime rate as published by
NBD Bank for each day from the date of suspension to the date of
payment, as calculated by the Plan Administrator.
7.5 Reserved.
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<PAGE> 31
VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for
any reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal
of a Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor
Trustee shall be appointed by the Company. If a Trustee should resign
or be removed, and the Company does not notify the Trustee of the
appointment of a successor Trustee within forty-five (45) days of its
notice of its resignation or removal, then the Company shall be deemed
to have failed to have appointed a successor Trustee, and the Trustee
shall apply to a court of competent jurisdiction for appointment of a
successor Trustee.
(b) After the occurrence of a Change of Control, the
Trustee who is the Trustee on the date of the Change of Control may be
removed by the Company for three (3) years from the date of the Change
of Control. If a Trustee resigns or is removed at any time after the
date of a Change of Control, the Trustee shall apply to a court of
competent jurisdiction for appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
- 26 -
<PAGE> 32
8.3 Duties of Retiring and Successor Trustees. In the event of
the resignation or removal of a Trustee, the retiring Trustee shall within
thirty (30) days after the effective date of resignation or removal furnish to
the successor Trustee and the Company a final accounting of its administration
of the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this
Trust, the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which amendment shall include the effective date of such amendment.
Any amendment of the Trust may be made:
(a) prior to a Change of Control, without limitation and
in any manner and effective as of any date, including a retroactive
effective date, if accompanied by the written certification that no
Change of Control has occurred;
(b) after a Change of Control, only if a period of three
(3) years has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific
written consent to the amendment by Participants whose
actuarial interests under the Plan, computed by the Company's
independent public accountants as of the effective date of
such amendment, represent at least 51% of the total of all
actuarial interests under the Plan; or
- 27 -
<PAGE> 33
(2) such amendment is accompanied by the opinion
of legal counsel satisfactory to the Trustee that the
amendment is necessary for the purpose of conforming the Trust
to any present or future federal or state law (including
revenue laws) relating to trusts of this or similar nature, as
such laws may be amended from time to time, and a
certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
9.2 Termination. After all assets of the Trust Fund have been
distributed by the Trustee to the Participants or their Beneficiaries in
accordance with Article VI, the Trustee shall render an accounting, which shall
be the final accounting, in the manner provided for in Section 4.3. Upon
acceptance of the accounting by the Company, any assets remaining in the Trust
Fund, after deduction of such reasonable amount for compensation and expenses
as provided for in Section 10.7, shall be returned to the Company in the manner
provided in Section 6.8, and the Trust shall terminate thereupon. The Trust and
all the rights, titles, powers, duties, discretions and immunities imposed on
or reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee
shall be governed solely by the terms of this Trust Agreement.
- 28 -
<PAGE> 34
10.2 Litigation. In any action or proceeding regarding the Trust,
the Company, any assets of the Trust Fund, or the administration of the Trust,
any creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or
non-exercise of its powers and discretion in good faith shall be conclusive on
all persons. No one other than the Company shall be obliged to see to the
application of any money paid or property delivered to the Trustee. The
certificate of the Trustee that it is acting according to this Trust will fully
protect all persons dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other
provision of this Trust to the contrary, the Trustee does not guarantee payment
of any amount which may become due and payable to a Participant. The Trustee
shall have no responsibility for the disclosure to Participants regarding the
terms of the Plan or of this Trust, or for the validity thereof. The Trustee
shall not be responsible for administrative functions under the Plan and shall
have only such responsibilities under this Trust Agreement as specifically set
forth herein. The Trustee will be under no liability or obligation to anyone
with respect to any failure on the part of the Company, the Plan Administrator,
the Company's independent public accounting firm, an Investment Manager, or a
Participant to perform any of their respective obligations under the Plan or
this Trust. The Trustee shall be fully protected in relying upon any notice or
direction provided to it from any party in connection with the Trustee's duties
hereunder which the Trustee in good faith believes to be genuine, and executed
and delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the amounts
held in the Trust Fund at the time of such payment or otherwise to risk or
expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the
Company shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the
extent permitted by law the Trustee and hold it harmless against Trustee's
costs, expenses and
- 29 -
<PAGE> 35
liabilities (including, without limitation, attorneys' fees and expenses)
arising out of or in connection with the performance of the Trustee's duties
arising hereunder (but excluding costs arising as a result of the Trustee's bad
faith or gross negligence in the performance of its responsibilities
hereunder), and to be primarily liable for such payments. If the Company does
not pay such costs, expenses and liabilities in a reasonably timely manner,
Trustee may obtain payment from the Trust. This Section shall survive the
termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid
compensation by the Company in an amount agreed to by the Company and the
Trustee. The Trustee shall be reimbursed by the Company for reasonable expenses
incurred by it in the management and administration of this Trust Agreement,
including the reasonable compensation of the Trustee's counsel and other
agents; and if the Trustee is not timely reimbursed with respect to amounts due
pursuant to this Section 10.7 (or in the case of expenses to be incurred
pursuant to Section 3.5 hereof), the Trustee may charge such amounts against
the Trust Fund. Any compensation or expenses so agreed upon or otherwise
payable not paid by the Company on a timely basis may be charged to the Trust
Fund no more frequently than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required
or permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
The Detroit Edison Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
- 30 -
<PAGE> 36
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants
and their Beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
10.11 True and Correct Document. Any persons dealing with the
Trustee may rely upon a copy of this Trust and any amendments thereto certified
to be true and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may
be waived by the person entitled to such notice.
10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender
shall include the feminine and neuter genders and the singular shall include
the plural and the plural shall include the singular wherever required by the
context.
10.15 Successors. This Trust shall be binding on all persons
entitled to payments hereunder and their respective heirs and legal
representatives, and on the Company, the Trustee, and their respective
successors.
10.16 Severability. If any provision of this Trust is held to be
illegal or invalid, such illegality or invalidity shall not affect the
remaining provisions of this Trust, which shall be construed and enforced as if
such illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and
construed in accordance with the laws of the State of Michigan with respect to
the Company's obligations and in accordance with the laws of the State of
Illinois with respect to the Trustee's obligations and Trust Administration.
- 31 -
<PAGE> 37
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
THE DETROIT EDISON COMPANY
By L.L. Loomans
----------------------------
Its
----------------------------
THE NORTHERN TRUST COMPANY
as Trustee
By
----------------------------
Its
----------------------------
- 32 -
<PAGE> 38
EXHIBIT A
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
RETIREMENT REPARATION PLAN
The Company has established an Irrevocable Grantor Trust to pay benefits under
the Retirement Reparation Plan. A copy of such Plan, including any
amendment(s), is attached hereto.
<PAGE> 39
EXHIBIT B
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
RETIREMENT REPARATION PLAN
PARTICIPANTS (as defined in the Trust)
as of December 31, 1995
Name [Date of Birth]
----------- ---------------
<PAGE> 1
EXHIBIT 99-3
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
AS RESTATED AS OF JANUARY 1, 1996
<PAGE> 2
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-----------
1.1 Beneficiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3 Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.5 Effective Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.6 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.7 Excess Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.8 Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.9 General Creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.10 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.11 Insolvent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.12 Investment Manager . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.13 IRC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.14 Participant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.15 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.16 Plan Administrator . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.17 Potential Change of Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
1.18 Potential Change of Control Period . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.19 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.20 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
1.21 Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.22 Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.23 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
II. ESTABLISHMENT OF THE TRUST . . . . . . . . . . . . . . . . . . . . . . . 7
--------------------------
2.1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Description of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.3 Irrevocability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.4 Acceptance by the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
III. CONTRIBUTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
-------------
3.1 Calculations of Funding Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.2 Contributions as of Each Valuation Date . . . . . . . . . . . . . . . . . . . . . . . 9
3.3 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 No Dilution of Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.5 Collection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
IV. ACCOUNTING AND ADMINISTRATION . . . . . . . . . . . . . . . . . . . . . . 11
-----------------------------
4.1 Trustee Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.2 Company Recordkeeping . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.3 Periodic Accounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.4 Administrative Powers of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
V. INVESTMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
-----------
5.1 Generally . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.2 Investment Powers of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.3 Investment Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.5 Single Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
VI. PAYMENTS FROM THE TRUST . . . . . . . . . . . . . . . . . . . . . . . . . 20
-----------------------
6.1 Obligation of Trustee to Make Payments
to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.2 Obligation of the Company to Make Payments to Participants . . . . . . . . . . . . . . 21
6.3 Distributions to Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.5 Insufficient Trust Fund Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.6 Payment of Excess Assets to Company . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.7 Company to Pay Withholding and Employment Taxes . . . . . . . . . . . . . . . . . . . 22
6.8 Payment in Reversion to Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
6.9 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY . . . . . . . . . . . . . . . . . . 23
-------------------------------------
7.1 No Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.2 Determination of Insolvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
7.3 Payments When Company Is Insolvent . . . . . . . . . . . . . . . . . . . . . . . . . 24
7.4 Resumption of Duties after Insolvency . . . . . . . . . . . . . . . . . . . . . . . 25
7.5 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
VIII. RESIGNATION OR REMOVAL OF TRUSTEE . . . . . . . . . . . . . . . . . . . . 26
---------------------------------
8.1 Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.2 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
8.3 Duties of Retiring and Successor Trustees . . . . . . . . . . . . . . . . . . . . . 27
8.4 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
IX. AMENDMENT AND TERMINATION OF TRUST . . . . . . . . . . . . . . . . . . . 27
----------------------------------
9.1 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.3 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
X. GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
------------------
10.1 Coordination with Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
10.2 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.3 Trustee's Action Conclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.4 No Guarantee or Responsibility . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.5 Liabilities Mutually Exclusive . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
10.7 Expenses and Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.8 Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.9 Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
10.10 Antiassignment Clause . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.11 True and Correct Document . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.12 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.13 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.14 Gender and Number . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.15 Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.16 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10.17 Applicable Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
EXHIBIT A THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST FOR THE DETROIT
EDISON COMPANY MANAGEMENT SUPPLEMENTAL
BENEFIT PLAN
EXHIBIT B THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST FOR THE DETROIT
EDISON COMPANY MANAGEMENT SUPPLEMENTAL
BENEFIT PLAN
PARTICIPANTS (as defined in the Trust)
<PAGE> 6
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
THIS TRUST AGREEMENT is made this 17th day of July, 1995, as restated in
its entirety effective January 1, 1996, by and between The Detroit Edison
Company, a Michigan corporation, and The Northern Trust Company, an Illinois
corporation, of Chicago, Illinois ("Trustee"), and any successor provided for
in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has established and maintains the Management
Supplemental Benefit Plan ("Plan"), an unfunded benefit plan, a copy of which
is attached hereto as Exhibit A, for the benefit of certain Company Executives
listed on Exhibit B hereto, which Exhibits may be amended from time to time by
the Company prior to a potential Change of Control and/or Change of Control,
and without the Trustee's consent; and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred to
the Trust and the earnings thereon shall be used by the Trustee, subject to the
claims of the Company's creditors in the event the Company becomes Insolvent,
to satisfy the liabilities of the Company in accordance with the provisions
hereof; and, upon satisfaction of all liabilities of the Company with respect
to all Participants (and their Beneficiaries, if applicable), the assets, if
any, remaining in the Trust shall revert to the Company; and
- 1 -
<PAGE> 7
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose of providing deferred compensation for a select group of
management and/or highly-compensated employees, and shall not be construed to
provide income for federal income tax purposes to a Participant (or his or her
Beneficiary) prior to the actual payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS Unless the context requires otherwise, definitions as used
herein shall have the same meaning as in the Plan when applied to said Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in the
Plan as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors, as
constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the following
events:
(a) a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Act of 1934, as amended (the "Exchange Act"), or any successor
provisions, whether or not the Company is then subject to such reporting
requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to vote
at elections of the Board of Directors (the "Base Capital Stock");
provided, however, that any change in the relative beneficial ownership of
securities of any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any
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<PAGE> 8
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company; or
(c) a change in the composition of the Company's Board of Directors, as a
result of which fewer than two-thirds of the incumbent directors are
directors who either
(1) had been directors of the Company 24 months prior to such
change, or
(2) were elected, or nominated for election, to the Company's Board
of Directors with the affirmative votes of at least a majority
of the directors who had been directors of the Company 24 months
prior to such change and who were still in office at the time of
the election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to
which shares of the Company's common stock would be converted
into cash, securities, or other property, other than a merger of
the Company in which the holders of the Company's common stock
immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, or
(2) any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all, or substantially
all, of the assets of the Company, or
(3) the stockholders of the Company approve a plan or proposal for
the liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may
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<PAGE> 9
be amended or supplemented from time to time), whereby it is proposed that a
corporation will become the parent holding company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means The Detroit Edison Company, a Michigan corporation,
its successors and assigns.
1.5 "Effective Date" means July 17, 1995.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of one hundred
and twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the books of
the Company as of the most recent Valuation Date, certified by the Company to
the Trustee, which shall be the amount necessary to ensure that the assets of
the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during
any Potential Change of Control Period, "Funding Amount" means one hundred and
twenty per cent (120%) of the actual benefit obligation on the books of the
Company as of the most recent Valuation Date, as certified by the Company to
the Trustee, which shall be the amount necessary to ensure that the assets of
the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each respective
Participant under the Plan shall be limited to benefits attributable to service
rendered by the Participant to the Company.
1.9 "General Creditors" means the unsecured general creditors of the
Company, including the Participants.
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
(a) is unable to pay its debts as they become due; or
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(b) is subject to a pending proceeding as a debtor under the
Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed
by the Company in the manner provided in Section 5.3 to direct the investment
of any part or all of the assets of the Trust Fund in accordance with Article
V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" means an individual listed on Exhibit B attached
hereto who
(a) is a Participant in the Plan because of services rendered to the
Company; or
(b) would be a Participant in the Plan because of services rendered to
the Company but is not due to age, years of service or active employment.
The Company agrees to list all Participants on Exhibit B attached hereto.
Except after a Change of Control as provided in Section 3.4, the Company may
add or delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan
as responsible for the management, operation, and administration of the Plan.
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 9.5% or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to vote
at elections of the Board of
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<PAGE> 11
Directors (the "Base Capital Stock"); provided, however, that any change
in the relative beneficial ownership of securities of any person resulting
solely from a reduction in the aggregate number of outstanding shares of
Base Capital Stock, and any decrease thereafter in such person's ownership
of securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of any
securities of the Company; or
(c) the public announcement by any individual or entity, other than
the Company, that such individual or entity intends to take or to consider
taking actions which, if consummated, would constitute a Change of Control
of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company is
not the continuing or surviving corporation, or pursuant to which shares
of the Company's common stock would be converted into cash, securities, or
other property, other than a transaction in which the holders of the
Company's common stock immediately prior to the merger, acquisition,
consolidation, or reorganization have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger,
acquisition, consolidation, or reorganization, including, but not limited
to, the creation of a parent entity to oversee the Company; or
(e) the public announcement of the sale or other transfer of
substantially all of the assets of the Company to any third party; or
(f) the Board of Directors of the Company adopts a resolution to the
effect that a Potential Change of Control of the Company has occurred for
purposes of this Trust.
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year
period immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the Potential Change of Control Period shall end one (1) year
following the date of the most recent Potential Change of Control.
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The Company shall promptly notify the Trustee of a Potential Change
of Control and the Trustee may conclusively rely upon such notice and shall
have no duty to independently determine whether a Potential Change of Control
has occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to this
Trust Agreement and all of the terms and conditions of this Trust Agreement,
which is intended to constitute a grantor trust under IRC Section Section 671
et seq.
1.21 "Trust Fund" means all moneys, securities, and other property
held by the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any successor
trustee appointed pursuant to Article VIII.
1.23 "Valuation Date" means the day in each calendar year which is
the last day of the Company's fiscal year in each year, and such other times as
the Company may determine. Each of (a) any date of a Potential Change of
Control, (b) the date of a Change of Control, (c) the effective date of a
Trustee's resignation or removal, and (d) the date of termination of the Trust
shall also be a Valuation Date if any such date occurs other than on the last
business day of the Company's fiscal Year. The first Valuation Date shall be
December 31, 1994.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the Trustee,
which Trust shall consist of such sums of money and other property acceptable
to the Trustee as from time to time have been and shall be paid or delivered by
the Company to the Trustee as provided herein. All such money and other
property, all investments and reinvestments made therewith, or the proceeds
thereof, and all investment earnings and profits thereon, less all payments and
charges as authorized herein, shall constitute the Trust Fund. The Trust Fund
shall be held in trust by the Trustee, and shall be dealt with in accordance
with the provisions of this Trust.
2.2 Description of Trust. The Company represents and agrees that:
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<PAGE> 13
(a) the Trust is intended to be a grantor trust under IRC Section
Section 671-678, and shall be construed accordingly. The Company intends
and agrees that it is the "owner" or grantor of the Trust in its entirety,
as that term is defined in subpart E, part I, subchapter J, chapter 1,
subtitle A of the IRC and that, for income tax purposes, all income,
deductions, and credits of the Trust Fund belong to it as owner, and will
be included on its income tax or other required tax returns, and any
income tax determined to be payable as a result thereof will be the sole
obligation of, and will be paid by, the Company;
(b) a true and correct copy of the Plan, as in effect on the
Effective Date hereof, is attached hereto as Exhibit A. The Company shall
file with the Trustee, promptly upon its adoption, a true and correct copy
of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal obligations of
the Company to Participants under the Plan as provided herein, subject to
the claims of General Creditors in the event of Insolvency, and the
balance of the Trust Fund, if any, remaining after payment of the
Company's obligation to Participants under the Plan will revert to the
Company in accordance with the Trust;
(d) contributions by the Company to the Trust which are made
coincident with and subsequent to the Effective Date shall be in amounts
determined under Article III hereof. The Company agrees to fund the Trust
as provided therein;
(e) the principal of the Trust, and any earnings thereon shall be
held by the Trustee separate and apart from other funds of Company, and
shall be used exclusively for the uses and purposes as herein set forth;
(f) the Trust established under this agreement does not fund and is
not intended to fund the Plan, or any other employee benefit plan or
program of the Company. Neither the establishment of the Trust, nor the
payment or delivery of assets to the Trustee shall vest any Participant in
any right, title, or interest in or to any assets of the Trust Fund;
(g) participants shall have no preferred claim on, or any beneficial
ownership interest in, assets of the Trust. To the extent that any
Participant acquires the right to receive payment(s) under the Plan, any
such right shall be
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<PAGE> 14
mere unsecured contractual rights of Participants against the Company, and
such Participants (or their Beneficiary(ies)) shall have only the
unsecured promise of the Company that such payment(s) will be made. Any
assets held by the Trust will be subject to the claims of General
Creditors under federal and state law in the event of Insolvency, as
defined herein, with no preference whatsoever given to claims of employees
over claims of other unsecured creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan is a plan
for a select group of management or highly compensated employees, and as
such are exempt from the application of ERISA except for the disclosure
requirements applicable to such plan, for which the Company bears full
responsibility as to compliance. The Company further represents that the
Plan is not qualified under IRC Section 401 and therefore, is not
subject to any IRC requirements applicable to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this Section 2.3,
the Trust shall be irrevocable from the effective date, and the assets of the
Trust Fund shall be held in accordance with the provisions hereof for the
exclusive purpose of providing for the payment of the Company's obligations to
pay benefits to Participants under the Plan and to satisfy the claims of
General Creditors in the event of Insolvency, and defraying the expenses of the
Trust. Except as provided in Section 6.6 and Section 6.8 and in the event of
Insolvency, no part of the income or corpus of the Trust Fund shall be
recoverable by or for the benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust established
under this Trust Agreement on the terms and subject to the provisions set forth
herein, and agrees to discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1995, the Company
shall contribute to the Trust the Funding Amount as determined on the first
Valuation Date. As of each Valuation Date, and until the entire Trust Fund has
been distributed, the Company (or, after a Change of Control, the Company's
independent public accountants) shall recalculate the Funding Amounts.
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<PAGE> 15
3.2 Contributions as of Each Valuation Date. During the life of the
Trust but no later than September 30 of each year, commencing no later than
September 30, 1996, the Company shall contribute to the Trust such amount as is
necessary to make trust assets equal the Funding Amount as of the previous
Valuation Date. The Plan Administrator or its delegate (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written notice of the amount of the necessary contribution on or
before the date such contribution is due to the Trust. Any such payments to the
Trustee do not discharge or release the Company of its obligation under the
Plan or Section 6.2 to pay benefits to Participants under the Plan, and shall
at all times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit B in
effect on the date of a Change of Control shall not be amended to include a
Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of the Delivery Date of the
proposed amended Exhibit B of the Funding Amount calculated based on the
Participants named in the Exhibit B in effect on the Date of the Change of
Control and any new or additional Participants named in the proposed amended
Exhibit B (the "New Funding Amount") and (b), assets in an amount necessary to
make the trust assets equal the New Funding Amount. If the Trustee determines
that assets of the Trust Fund, including such assets as are delivered by the
Company on the Delivery Date, equal or exceed the New Funding Amount, the
Trustee shall accept the amended Exhibit B. Any amended Exhibit B so accepted
shall be deemed incorporated with the same effect as if otherwise included
herein. Unless an Exhibit B amended after a Change of Control is accepted by
the Trustee as provided in this Section, the Trustee shall have no liability,
responsibility, or obligation with respect to a Participant named in any
amended Exhibit B unless such Participant is named in the Exhibit B then in
effect on the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the
Trustee within one hundred and twenty (120) days of notice and demand from the
Trustee (or, upon the occurrence of a Potential Change of Control or a Change
of Control, within seven (7) days of notice and demand from the Trustee), any
amount determined to be payable by the Company to the Trustee under Sections
3.2, 6.5 or 7.4(a) of the Trust, the Trustee may commence legal action, (which
is expressly deemed to include without
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<PAGE> 16
limitation an alternate dispute resolution proceeding), to compel the Company
to pay to the Trustee any amount determined to be payable to it under the
Trust. The Trustee may bring such action against the Company in any court of
competent jurisdiction, and shall be entitled to recover for the benefit of the
Trust from the Company such amount, plus interest for each day at the rate of
interest per annum of five (5) percentage points in excess of the prime lending
rate as announced by NBD Bank, from the due date specified in the Trustee's
notice and demand (or the date(s) from which pro rata payments were made, if
such action is brought by the Trustee pursuant to Section 6.5 hereof) to the
date of payment, plus all costs of collection, including reasonable attorneys
fees and costs of litigation. The Trustee is authorized to bring action to
compel payment by the Company, and, in connection with reasonable claims for
delinquent contributions by the Company, to retain, at the expense of the
Company, counsel and other appropriate experts, including actuaries and
accountants, to aid it in pursuing litigation for collection against the
Company. The Trustee's anticipated reasonable costs and expenses incurred
pursuant to this Section 3.5 are payable by the Company in advance; and should
the Company not make timely payment, the Trustee may charge the Trust Fund for
such reasonably anticipated costs and expenses. The Trustee shall in no event
be required to advance or expend its own funds in order to comply with the
provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be kept
accurate and detailed records of any investments, receipts, disbursements, and
all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
4.2 Company Recordkeeping. The Company shall keep full, accurate, and
detailed books and records with respect to the Participants and benefits paid
and payable under the Plan, which records shall be made available to the
Trustee at its request.
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<PAGE> 17
4.3 Periodic Accounting. Within sixty (60) days following a Valuation
Date, the Trustee shall deliver to Company a written accounting, dated as of
the Valuation Date, of its administration of the Trust Fund during such year or
during the period from the most recent Valuation Date to the date of such
current Valuation Date, which accounting shall be in accordance with the
following provisions:
(a) Such accounting shall set forth all investments, receipts,
disbursements, and other transactions effected the by Trust Fund during
the preceding year, or during the period from the most recent Valuation
Date to the date of such current Valuation Date, including a description
of all securities and investments purchased and sold, with the cost or net
proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities or other
property held in the Trust Fund, less liabilities known to the Trustee
(other than liabilities to Participants entitled to benefits under the
Plans) at the end of such year or other period, as the case may be. In
making a valuation, all cash, securities or other property held in the
Trust Fund shall be valued at their then fair market value, and shall be
in a format as may be established by the Company. A copy of each
accounting so delivered to the Company shall be open to inspection at the
office of the Trustee during normal business hours.
(b) If within ninety (90) days after the filing of such written
accounting, the Company has not delivered to the Trustee notice of any
objection to any act or transaction of the Trustee, the initial accounting
shall become an account stated as between the Trustee and the Company. If
any objection has been delivered to the Trustee by the Company, and if the
Company is satisfied that it should be withdrawn, the Company shall
signify its approval of the accounting in writing filed with the Trustee,
and the accounting shall become an account stated as between the Trustee
and the Company. If the accounting is adjusted following an objection
thereto, the Trustee shall file and deliver the adjusted accounting to the
Company. If within fifteen (15) days after such filing of an adjusted
accounting, the Company has not delivered to the Trustee notice of any
objection to the transactions as so adjusted, the adjusted accounting
shall become an account stated as between the Trustee and the Company.
(c) Unless an accounting is fraudulent, when it becomes an account
stated, it shall be finally settled, and the Trustee shall, to the extent
permitted by applicable law, be forever released and discharged from all
liability and
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<PAGE> 18
accountability with respect to the propriety of its acts and transactions
shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that
authority with respect to the administration of the Trust has been allocated to
others in accordance with this Trust, and subject to Article V, the Trustee
shall have exclusive authority and discretion to manage and administer the
Trust. The Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of
like character and with like aims, provided, however, that Trustee shall incur
no liability to any person for any action taken pursuant to a direction,
request or approval given by Company which is contemplated by, and in
conformity with, the terms of the Trustee's responsibilities under this Trust,
and is given in writing by Company. The responsibility for maintenance of
individual benefit records shall be retained by the Company, and may be
delegated to such person or entity as the Company may employ from time to time.
Except as otherwise provided herein, the Trustee shall have, without exclusion,
all powers conferred on trustees by law and, without limiting the foregoing,
shall have the following administrative powers, rights, and duties in addition
to those provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all assets held
by the Trustee on such terms and conditions as the Trustee shall decide;
provided however, that if the Company delivers written instructions to the
Trustee, the Trustee shall follow such instructions;
(b) when directed by the Company or requested by a Participant
pursuant to Article VI, to make payments from the Trust Fund to
Participants and, when required by Article VII, to make payments from the
Trust Fund to General Creditors entitled to payments thereunder;
(c) except as provided in Article VI and Article VII, to waive,
modify, reduce, compromise, release, contest, submit to arbitration, or
settle or extend the time of payment of any claims, debts, damages, or
demands of any nature in favor of or against the Trustee or all or any
part of the Trust Fund;
(d) to retain any disputed property until an appropriate final
adjudication or release is obtained, and to represent the Trust in, or
commence or defend, any litigation the Trustee considers in its discretion
necessary in connection with the Trust Fund;
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<PAGE> 19
(e) to withhold, if the Company so directs, all or any part of any
payment required to be made hereunder as may be necessary and proper to
protect the Trustee or the Trust Fund against any liability or claim on
account of any estate, inheritance, income or other tax or assessment
attributable to any amount payable hereunder, and to discharge any such
liability with any part or all of such payment so withheld in accordance
with Section 6.7;
(f) to maintain records reflecting all receipts and payments under
this Trust and such other records as the Company may specify and to which
the Trustee agrees, which records may be audited from time to time by the
Company or anyone named by the Company; and to furnish a written
accounting to the Company as of each Valuation Date, as provided in
Section 4.3;
(g) if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy
from a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
Notwithstanding the preceding sentence, the Trustee may loan to the
Company the proceeds of any borrowing against an insurance policy held as
an asset of the Trust;
(h) to furnish the Company with such information for tax or other
purposes which the Company may reasonably request and which the Trustee
may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal counsel (who,
except following a Change of Control, may be legal counsel to the Company
and who are not in the Company's reasonable judgment deemed to have a
conflict of interest), consultants, custodians, depositories, experts and
other providers of services, to consult with them with respect to the
implementation and construction of this Trust, the duties of the Trustee
hereunder, the transactions contemplated by this Trust, or any act which
the Trustee proposes to take or omit, and to rely upon the advice of and
services performed by such persons; to delegate discretionary powers to
such persons and to reasonably rely upon information and advice furnished
by such persons; provided that each such delegation and the acceptance
thereof by each such person shall be in writing; and provided further that
the Trustee may not delegate its responsibilities as to the management or
control of the assets of the Trust Fund;
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<PAGE> 20
(j) to determine whether the Company is Insolvent, and to hold
assets of the Trust Fund for the benefit of General Creditors in the event
of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a Change of
Control, as provided in Article VI hereof;
(l) to perform all other acts which in the Trustee's judgment are
appropriate for the proper protection, management, investment, and
distribution of the Trust Fund, and to carry out the purposes of the
Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has
investment responsibility, the Trustee shall invest and reinvest the principal
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income, in accordance with the written
investment guidelines established by the Company and provided to the Trustee by
the Company. If no such written investment guidelines are received by the
Trustee, the assets of the Trust Fund shall be invested in such investments as
determined by the Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that authority
with respect to the management of all or a portion of the Trust Fund has been
allocated to others in accordance with this Trust, the Trustee shall have
exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
(a) to invest and reinvest in any property wherever situated,
whether real, personal, mixed, foreign or domestic, including common and
preferred stocks, bonds, notes, and debentures (including convertible
stocks and securities, but not including any stock, securities, or debt
instruments of the Company
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<PAGE> 21
[unless held in a collective or commingled fund and such Company
securities comprise 5% or less of the assets of such fund]), leaseholds,
mortgages (including, without limitation, any collective or part interest
in any bond and mortgage or note and mortgage), certificates of deposit,
life insurance contracts, guaranteed investment contracts, and guaranteed
annuity contract, all regardless of diversification and without being
limited to investments authorized by law for the investment of trust
funds;
(b) to invest and reinvest, without distinction between principal
and income, in contracts for future delivery of United States Treasury
Bills, other financial instruments, or indices based on any group of
securities, and in options to buy or sell indices based on any group of
securities or any kind of evidences of ownership or indebtedness,
including financial instruments or futures contracts relating thereto;
(c) to invest and reinvest part or all of the Trust Fund in any
deposit accounts, deposit administration fund maintained by a legal
reserve life insurance company in accordance with an agreement between the
Trustee and such insurance company, a group annuity contract or life
insurance policies issued by such insurance company to the Trustee as
contract holder, any interest bearing deposits held by any financial
institution having total capital and surplus of at least Fifty Million
Dollars ($50,000,000), investments in any stocks, bonds, debentures,
mutual fund shares, notes, commercial paper, treasury bills, and any
mutual, common, commingled or collective trust funds or pooled investment
funds, and to diversify such investments so as to minimize the risk of
losses;
(d) to commingle assets of the Trust Fund, for investment purposes
only, with assets of any common, collective, or commingled trust fund
which has been or may hereafter be established and maintained by the
Trustee, or by any other financial institution; provided that to the
extent that any part or all of the assets of the Trust Fund for which the
Trustee has investment responsibility are invested in any such common,
collective or commingled trust fund or pooled investment fund which is
maintained by a bank or trust company (including a bank or trust company
acting as Trustee), the provisions of the documents under which such
common, collective or commingled trust fund or pooled investment fund are
maintained shall govern any investment therein and provided further that
prior to investing any portion of the Trust Fund for the first time in any
such common, collective, or commingled trust fund, the Trustee shall
advise the Company of its intent to make such an investment, and furnish
to the Company
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<PAGE> 22
any information it may reasonably request with respect to such common,
collective, or commingled trust fund (other than a trust fund established
by the Company), and provided further that the Trustee shall maintain
separate records with respect to each other trust of the Trust Fund;
(e) to vote stock and other voting securities personally or by proxy
(and to delegate the Trustee's powers and discretion with respect to such
stock or other voting securities to such proxy), to exercise subscription,
conversion and other rights and options (and make payments from the Trust
Fund in connection therewith), to take any action and to abstain from
taking any action with respect to any reorganization, consolidation,
merger, dissolution, recapitalization, refinancing and any other plan or
change affecting any property constituting a part of the Trust Fund (and
in connection therewith to delegate the Trustee's discretionary powers and
pay assessments, subscriptions and other charges from the Trust Fund), to
hold or register any property from time to time in the Trustee's name or
in the name of a nominee or to hold it unregistered or in such form that
title shall pass by delivery; and to borrow from anyone, including itself
(to the extent permitted by law), such amounts from time to time as the
Trustee considers desirable to carry out this Trust (and to mortgage or
pledge all or part of the Trust Fund as security); to participate in any
plan or reorganization, consolidation, merger, combination, liquidation,
or other similar plan relating to any such property, and to consent to or
oppose any such plan or any action thereunder, or any contract, lease,
mortgage, purchase, sale, or other action by any corporation or other
entity any of the securities of which may at any time be held in the Trust
Fund, and to do any act with reference thereto;
(f) to retain in cash such amounts as the Trustee considers
advisable and as are permitted by applicable law, and to deposit any cash
so retained in any depository (including any bank acting as Trustee) which
the Trustee may select, provided such depository must have total capital
and surplus of at least Fifty Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section 4.4(g), to
apply for, pay premiums on, and maintain in force individual, ordinary or
universal life insurance policies on the lives of Participants, which
policies may contain provisions which the Company may approve or direct;
to receive or acquire such policy or policies from the Company, but the
Trustee may purchase a life insurance policy from a person other than the
insurer which issues a policy only if the Trustee pays, transfers, or
otherwise exchanges an amount no more
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than the cash surrender value of the policy or policies, and the policy or
policies is (are) not subject to a mortgage or similar lien which the
Trustee would be required to assume; to have with respect to such policy
or policies any rights, powers, options, privileges, and benefits usually
comprised in the term "incidents of ownership", and normally vested in an
owner of such policy or policies to be exercised only pursuant to Company
direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to dispose of,
and to grant options for the purchase or exchange with respect to it, any
property at any time held by it, by public or private sale, for cash or on
credit, or partly for cash and partly for credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any property
so deposited;
(k) to exercise any conversion privilege or subscription right
available in connection with any such property, and to do any act with
reference thereto, including the exercise of options, the making of
agreements or subscription, and the payment of expenses, assessment or
subscription, which may be deemed necessary or advisable in connection
therewith, and to hold and retain any securities or other property which
it may so acquire;
(l) to extend the time of payment of any obligation held in the
Trust Fund;
(m) to enter into standby agreements for future investment, either
with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the renewal or
extension of any mortgage, and to agree to a reduction in the rate of
interest on any indebtedness or mortgage or to any other modification or
change in the terms of any indebtedness or mortgage, or of any guarantee
pertaining thereto, in any manner and to any extent that may be deemed
advisable for the protection of the Trust Fund or the preservation of any
covenant or condition of any indebtedness or mortgage or in the
performance of any guarantee, or to enforce any default in
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<PAGE> 24
such manner and to such extent as may be deemed advisable; and to exercise
and enforce any and all rights of foreclosure, to bid on any property in
foreclosure, to take a deed in lieu of foreclosure with or without paying
a consideration therefor, and in connection therewith to release the
obligation on the bond secured by such mortgage; and to exercise and
enforce in any action, suit or proceeding at law or in equity any rights
or remedies in respect of any such indebtedness or mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgage, conveyance, contracts,
waivers, releases, or other instruments in writing necessary or proper for
the accomplishment of any of the foregoing powers;
(p) to organize under the laws of any state one or more
corporations, partnerships, or trusts for the purpose of acquiring and
holding title to any property that it is authorized to acquire under this
Trust, and to exercise with respect thereto any or all of the powers set
forth in this Trust;
(q) notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a business
and dividing the gains therefrom, within the meaning of Section 301.7701-2
of the Procedure and Administrative Regulations promulgated under the IRC;
and
(r) generally to do all acts, whether or not expressly authorized,
that the Trustee deems necessary or desirable for the protection of the
Trust Fund, and to carry out the purposes of the Trust.
5.3 Investment Managers. The Company may appoint one or more Investment
Managers to direct the investment of any part or all of the assets of the Trust
Fund by the Trustee. Appointment of an Investment Manager shall be made by
written notice to the Investment Manager(s) and to the Trustee, which notice
shall specify those powers, rights, and duties of the Trustee under this Trust
that are allocated to the Investment Manager(s) and the portion of the assets
of the Trust Fund subject to the Investment Manager(s). After it receives
written notice of such appointment, the Trustee shall have no obligation or
responsibility for those investment duties which are allocated to an Investment
Manager. An Investment Manager so appointed pursuant to this paragraph shall be
either a registered investment adviser under the Investment Advisers Act of
1940, a bank, as defined in said Act, or an insurance company qualified to
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<PAGE> 25
manage, acquire and dispose of the assets of the Plans under the laws of more
than one state of the United States. Any such Investment Manager shall
acknowledge to the Company in writing that is accepts such appointment. The
Trustee shall not be liable for any loss or diminution of any assets managed by
an Investment Manager, including without limitation, any loss or diminution
caused by any action or inaction taken or omitted by it at the direction of an
Investment Manager. In addition, the Trustee shall not be liable for the
diversification of any assets managed by Investment Managers of the Company,
each of which shall be solely the responsibility of the Company. An Investment
Manager may resign at any time upon written notice to the Trustee and the
Company. The Company may remove an Investment Manager at any time by written
notice to the Investment Manager and the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each investment
fund, and the income thereon, shall be held and invested as a single fund, and
the Trustee shall not make any separate investment of the Trust Fund, or make
any separate investment fund, for the account of any Participant or other
General Creditors prior to receipt of directions to make payments to such
Participant or other General Creditors in accordance with Article VI or Article
VII. All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The
Trustee's obligation to distribute to any Participant out of the assets of the
Trust Fund shall be limited to payment at such times and in such amounts as are
properly in conformance with the provisions of Section 6.3. Payments to
Participants pursuant to this Article VI shall be made by the Trustee to the
extent that funds in the Trust Fund are sufficient for such purpose, and shall
at all times be subject to the provisions of Article VII. In the event the
Company determines that it will pay benefits directly to Participants as they
become due under the terms of the Plan, the Company shall notify Trustee of its
decision prior to the time amounts are payable to Participants.
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<PAGE> 26
6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be made
from the Trust Fund to pay benefits in accordance with the Plan shall be
initiated by:
(a) written direction to the Trustee from the Plan Administrator,
which direction shall certify that such distribution(s) is(are) in
accordance with the Plan, and specify the timing, form, payee, and amount
of such benefit payments, including any federal, state, or local income
taxes to be withheld, and the Trustee shall make or commence the directed
distributions after receipt of such written direction; or
(b) by the submission to the Trustee by a Participant of a certified
copy of the non-appealable order of an appropriate forum with jurisdiction
to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee
determines or is advised that the Trust Fund does not have sufficient assets to
permit the Trustee to make a payment property directed pursuant to this Trust,
including a payment provided for under Section 10.7 of this Trust, the Trustee
shall pay any benefits due (if otherwise payable hereunder) to Participants on
a pro rata basis as directed by the Plan Administrator, and the Company shall
make the balance of such payments as they become due. If the Plan Administrator
determines that the Trust Fund does not have sufficient funds to provide for
the payment of all amounts otherwise payable to Participants (or their
Beneficiary(ies)) from the Trust under the Plans, it shall notify the Company
and the Trustee of the amount of the deficiency, and, within forty-five (45)
days of such notice, the Company deposit in trust with the Trustee the
additional amounts needed to make such payments. Upon receipt of such amount by
the Trustee from the Company, proceeds shall first be used by the Trustee to
pay any benefits
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<PAGE> 27
previously due remaining unpaid, in the order in which they were due, pursuant
to Plan Administrator instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII, and
except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount paid to
a Participant by the Trustee in accordance with this Article VI shall be
reduced by the amount of taxes required to be withheld pursuant to Plan
Administrator instructions, and the Trustee shall inform the Company of all
amounts so withheld. The Company shall direct that the Trustee shall either
(a) pay to the Company a sum equal to the amount of such taxes as
are required to be withheld, whereupon the Company shall have full
responsibility for the payment of all withholding taxes to the appropriate
taxing authorities, or
(b) pay such taxes directly to the appropriate taxing authorities
for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall
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<PAGE> 28
furnish each Participant with the appropriate tax information form evidencing
payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon
receipt of written certification from the Company that all obligations of the
Company to Participants with respect to the Plan have been satisfied, and if
the Trust Fund shall have any assets remaining, the Trustee shall distribute
such remaining assets of the Trust Fund to the Company, after converting such
assets to cash if requested by the Company, subject to the Trustee's right to
retain such reasonable amount for compensation and expenses as provided in
Section 10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on or
beneficial ownership interest in the Trust Fund before such assets are paid to
the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any other General Creditor. At all times during the continuance
of this Trust, as provided in this Article VII hereof, the principal and income
of the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with no
preference whatsoever given claims of employees over claims of other unsecured
creditors of the Company.
7.2 Determination of Insolvency. Notwithstanding any other provisions of
this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive Officer of the
Company shall have the fiduciary duty and responsibility on behalf of
General Creditors to notify the Trustee promptly in writing in the event
the Company is Insolvent, and the Trustee shall have the right to rely
thereon to the exclusion of all directions or claims for payment made
thereafter by Participants.
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<PAGE> 29
(b) If the Trustee has actual knowledge that the Company is
Insolvent, the Trustee shall act in accordance with Section 7.3 hereof.
(c) Unless the Trustee receives written notice from the Board of
Directors or the Chief Executive Officer of the Company that the Company
is Insolvent, or from a person claiming to be a General Creditor and
claiming that the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. If the Trustee receives a
written allegation from a person claiming to be a General Creditor that
the Company is Insolvent, the Trustee's only duty of inquiry shall be to
request that the Company's independent public accountants determine
whether the Company is Insolvent, and shall suspend benefit payments
pending such determination. If the Company's independent public
accountants advise the Trustee that the Company is not Insolvent, it shall
resume payments in accordance with this Trust. If the Trustee receives
notice of the Company's Insolvency pursuant to this Section 7.2(c), it
shall act in accordance with this Section and Section 7.3 hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and shall
hold the Trust Fund for the benefit of the General Creditors, and shall
pay and deliver the entire amount of the Trust Fund only as a court
competent jurisdiction, or duly appointed receiver or other person
authorized to act by such court, may order or direct to make the Trust
Fund available to satisfy the claims of the General Creditors (payments to
Participants in accordance with the terms of the Plan may be resumed only
pursuant to Section 7.4 hereof); or
(b) by reason of Section 1.11(a), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and shall
(i) hold the Trust Fund for the benefit of General Creditors or (ii) pay
over all or a portion of the Trust Fund to General Creditors if directed
by the Company or an appropriate judicial forum.
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<PAGE> 30
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of notice of a
Court order to the contrary, the Trustee shall resume all of its duties and
responsibilities under the Trust, including payments to Participants if
otherwise provided for herein, within thirty (30) days of the Trustee's receipt
of a determination from the Company's independent public accounting firm that
the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event that
amounts are paid from the Trust Fund to General Creditors of the Company,
then as soon as practicable after the Company is no longer Insolvent, the
Company shall deposit into the Trust Fund a sum to equal to the Funding
Amount, determined as of the date the Company is no longer Insolvent,
which date shall be a Valuation Date. The Company (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written certification of such Funding Amount. If the Funding
Amount is not paid by the Company within ninety (90) days of the Trustee's
receipt of such notice, the Trustee shall demand payment and the
provisions of Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of Payments.
Provided that there are sufficient assets of the Trust Fund, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section
7.3 and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments due
to Participants under the terms of the Plan for the period of such
discontinuance, as determined by the Plan Administrator, less the
aggregate amount of any payments made to Participants by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance. If the Trustee suspends a payment to a Participant under
this Section, and subsequently makes such payment, the payment shall
include interest at the rate of interest per annum equal to the prime rate
as published by NBD Bank for each day from the date of suspension to the
date of payment, as calculated by the Plan Administrator.
7.5 Reserved.
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<PAGE> 31
VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for any
reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal of a
Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor Trustee
shall be appointed by the Company. If a Trustee should resign or be
removed, and the Company does not notify the Trustee of the appointment of
a successor Trustee within forty-five (45) days of its notice of its
resignation or removal, then the Company shall be deemed to have failed to
have appointed a successor Trustee, and the Trustee shall apply to a court
of competent jurisdiction for appointment of a successor Trustee.
(b) After the occurrence of a Change of Control, the Trustee who is
the Trustee on the date of the Change of Control may be removed by the
Company for three (3) years from the date of the Change of Control. If a
Trustee resigns or is removed at any time after the date of a Change of
Control, the Trustee shall apply to a court of competent jurisdiction for
appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
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<PAGE> 32
8.3 Duties of Retiring and Successor Trustees. In the event of the
resignation or removal of a Trustee, the retiring Trustee shall within thirty
(30) days after the effective date of resignation or removal furnish to the
successor Trustee and the Company a final accounting of its administration of
the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this Trust,
the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which amendment shall include the effective date of such amendment.
Any amendment of the Trust may be made:
(a) prior to a Change of Control, without limitation and in any
manner and effective as of any date, including a retroactive effective
date, if accompanied by the written certification that no Change of
Control has occurred;
(b) after a Change of Control, only if a period of three (3) years
has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific written
consent to the amendment by Participants whose actuarial interests
under the Plan, computed by the Company's independent public
accountants as of the effective date of such amendment, represent at
least 51% of the total of all actuarial interests under the Plan; or
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(2) such amendment is accompanied by the opinion of legal
counsel satisfactory to the Trustee that the amendment is necessary
for the purpose of conforming the Trust to any present or future
federal or state law (including revenue laws) relating to trusts of
this or similar nature, as such laws may be amended from time to
time, and a certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
9.2 Termination. After all assets of the Trust Fund have been
distributed by the Trustee to the Participants or their Beneficiaries in
accordance with Article VI, the Trustee shall render an accounting, which shall
be the final accounting, in the manner provided for in Section 4.3. Upon
acceptance of the accounting by the Company, any assets remaining in the Trust
Fund, after deduction of such reasonable amount for compensation and expenses
as provided for in Section 10.7, shall be returned to the Company in the manner
provided in Section 6.8, and the Trust shall terminate thereupon. The Trust and
all the rights, titles, powers, duties, discretions and immunities imposed on
or reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee shall
be governed solely by the terms of this Trust Agreement.
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10.2 Litigation. In any action or proceeding regarding the Trust,
the Company, any assets of the Trust Fund, or the administration of the Trust,
any creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or
non-exercise of its powers and discretion in good faith shall be conclusive on
all persons. No one other than the Company shall be obliged to see to the
application of any money paid or property delivered to the Trustee. The
certificate of the Trustee that it is acting according to this Trust will fully
protect all persons dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other
provision of this Trust to the contrary, the Trustee does not guarantee payment
of any amount which may become due and payable to a Participant. The Trustee
shall have no responsibility for the disclosure to Participants regarding the
terms of the Plan or of this Trust, or for the validity thereof. The Trustee
shall not be responsible for administrative functions under the Plan and shall
have only such responsibilities under this Trust Agreement as specifically set
forth herein. The Trustee will be under no liability or obligation to anyone
with respect to any failure on the part of the Company, the Plan Administrator,
the Company's independent public accounting firm, an Investment Manager, or a
Participant to perform any of their respective obligations under the Plan or
this Trust. The Trustee shall be fully protected in relying upon any notice or
direction provided to it from any party in connection with the Trustee's duties
hereunder which the Trustee in good faith believes to be genuine, and executed
and delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the amounts
held in the Trust Fund at the time of such payment or otherwise to risk or
expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the
Company shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the extent
permitted by law the Trustee and hold it harmless against Trustee's costs,
expenses and
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liabilities (including, without limitation, attorneys' fees and expenses)
arising out of or in connection with the performance of the Trustee's duties
arising hereunder (but excluding costs arising as a result of the Trustee's bad
faith or gross negligence in the performance of its responsibilities
hereunder), and to be primarily liable for such payments. If the Company does
not pay such costs, expenses and liabilities in a reasonably timely manner,
Trustee may obtain payment from the Trust. This Section shall survive the
termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid
compensation by the Company in an amount agreed to by the Company and the
Trustee. The Trustee shall be reimbursed by the Company for reasonable expenses
incurred by it in the management and administration of this Trust Agreement,
including the reasonable compensation of the Trustee's counsel and other
agents; and if the Trustee is not timely reimbursed with respect to amounts due
pursuant to this Section 10.7 (or in the case of expenses to be incurred
pursuant to Section 3.5 hereof), the Trustee may charge such amounts against
the Trust Fund. Any compensation or expenses so agreed upon or otherwise
payable not paid by the Company on a timely basis may be charged to the Trust
Fund no more frequently than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required or
permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
The Detroit Edison Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
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<PAGE> 36
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants
and their Beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
10.11 True and Correct Document. Any persons dealing with the
Trustee may rely upon a copy of this Trust and any amendments thereto certified
to be true and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may
be waived by the person entitled to such notice.
10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender
shall include the feminine and neuter genders and the singular shall include
the plural and the plural shall include the singular wherever required by the
context.
10.15 Successors. This Trust shall be binding on all persons
entitled to payments hereunder and their respective heirs and legal
representatives, and on the Company, the Trustee, and their respective
successors.
10.16 Severability. If any provision of this Trust is held to be
illegal or invalid, such illegality or invalidity shall not affect the
remaining provisions of this Trust, which shall be construed and enforced as if
such illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and
construed in accordance with the laws of the State of Michigan with respect to
the Company's obligations and in accordance with the laws of the State of
Illinois with respect to the Trustee's obligations and Trust Administration.
- 31 -
<PAGE> 37
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
THE DETROIT EDISON COMPANY
By L.L. Loomans
------------------------
Its
------------------------
THE NORTHERN TRUST COMPANY
as Trustee
By
------------------------
Its
------------------------
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<PAGE> 38
EXHIBIT A
THE DETROIT EDISON COMPANY_IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY MANAGEMENT SUPPLEMENTAL
BENEFIT PLAN
The Company has established an Irrevocable Grantor Trust to pay benefits under
the Management Supplemental Benefit Plan. A copy of such Plan, including any
amendment(s), is attached hereto.
<PAGE> 39
EXHIBIT B
THE DETROIT EDISON COMPANY IRREVOCABLE GRANTOR TRUST FOR
THE DETROIT EDISON COMPANY MANAGEMENT SUPPLEMENTAL
BENEFIT PLAN
PARTICIPANTS (as defined in the Trust)
as of December 31, 1995
Name [Date of Birth]
- -------- ---------------
<PAGE> 1
EXHIBIT 99-4
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
BENEFIT EQUALIZATION PLAN
AS RESTATED AS OF JANUARY 1, 1996
<PAGE> 2
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
BENEFIT EQUALIZATION PLAN
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS ..............................2
1.1 Beneficiary.......................................................2
1.2 Board of Directors............................................... 2
1.3 Change of Control.................................................2
1.4 Company...........................................................4
1.5 Effective Date....................................................4
1.6 Reserved..........................................................4
1.7 Excess Assets.....................................................4
1.8 Funding Amount....................................................4
1.9 General Creditors.................................................4
1.10 Reserved..........................................................4
1.11 Insolvent.........................................................4
1.12 Investment Manager................................................5
1.13 IRC...............................................................5
1.14 Participant.......................................................5
1.15 Reserved..........................................................5
1.16 Plan Administrator................................................5
1.17 Potential Change of Control.......................................5
1.18 Potential Change of Control Period................................6
1.19 Reserved..........................................................7
1.20 Trust ............................................................7
1.21 Trust Fund........................................................7
1.22 Trustee ..........................................................7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
1.23 Valuation Date.......................................................7
II. ESTABLISHMENT OF THE TRUST ...............7
2.1 Trust ...............................................................7
2.2 Description of Trust.................................................7
2.3 Irrevocability.......................................................9
2.4 Acceptance by the Trustee............................................9
III. CONTRIBUTIONS ............................9
3.1 Calculations of Funding Amount.......................................9
3.2 Contributions as of Each Valuation Date..............................10
3.3 Reserved ............................................................10
3.4 No Dilution of Trust.................................................10
3.5 Collection...........................................................10
IV. ACCOUNTING AND ADMINISTRATION ............11
4.1 Trustee Recordkeeping................................................11
4.2 Company Recordkeeping................................................11
4.3 Periodic Accounting..................................................12
4.4 Administrative Powers of Trustee.....................................13
V. INVESTMENTS ..............................15
5.1 Generally............................................................15
5.2 Investment Powers of Trustee.........................................15
5.3 Investment Managers..................................................19
5.4 Reserved ............................................................20
5.5 Single Fund..........................................................20
VI. PAYMENTS FROM THE TRUST ................ 20
6.1 Obligation of Trustee to Make Payments
to Participants......................................................20
6.2 Obligation of the Company to Make Payments to Participants...........21
6.3 Distributions to Participants........................................21
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.4 Reserved ...........................................................21
6.5 Insufficient Trust Fund Assets......................................21
6.6 Payment of Excess Assets to Company.................................22
6.7 Company to Pay Withholding and Employment Taxes.....................22
6.8 Payment in Reversion to Company.....................................23
6.9 Reserved ...........................................................23
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY .....23
7.1 No Security Interest................................................23
7.2 Determination of Insolvency.........................................23
7.3 Payments When Company Is Insolvent..................................24
7.4 Resumption of Duties after Insolvency...............................25
7.5 Reserved............................................................25
VIII. RESIGNATION OR REMOVAL OF TRUSTEE .........26
8.1 Resignation or Removal of Trustee...................................26
8.2 Successor Trustee...................................................26
8.3 Duties of Retiring and Successor Trustees...........................27
8.4 Reserved............................................................27
IX. AMENDMENT AND TERMINATION OF TRUST ........27
9.1 Amendment...........................................................27
9.2 Termination.........................................................28
9.3 Reserved............................................................28
X. GENERAL PROVISIONS ........................28
10.1 Coordination with Plan..............................................28
10.2 Litigation..........................................................29
10.3 Trustee's Action Conclusive.........................................29
10.4 No Guarantee or Responsibility......................................29
10.5 Liabilities Mutually Exclusive......................................29
10.6 Indemnification.....................................................29
10.7 Expenses and Compensation...........................................30
10.8 Reserved............................................................30
</TABLE>
<PAGE> 5
10.9 Notice ..........................................................30
10.10 Antiassignment Clause............................................31
10.11 True and Correct Document........................................31
10.12 Waiver of Notice.................................................31
10.13 Counterparts.....................................................31
10.14 Gender and Number................................................31
10.15 Successors.......................................................31
10.16 Severability.....................................................31
10.17 Applicable Law...................................................31
EXHIBIT A THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
BENEFIT EQUALIZATION PLAN
EXHIBIT B THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
BENEFIT EQUALIZATION PLAN
PARTICIPANTS (as defined in the Trust)
<PAGE> 6
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
BENEFIT EQUALIZATION PLAN
THIS TRUST AGREEMENT is made this 24th day of July, 1995, as restated in
its entirety effective January 1, 1996, by and between The Detroit Edison
Company, a Michigan corporation, and The Northern Trust Company, an Illinois
corporation, of Chicago, Illinois ("Trustee"), and any successor provided for
in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has established and maintains the Benefit
Equalization Plan ("Plan"), an unfunded benefit plan, a copy of which is
attached hereto as Exhibit A, for the benefit of certain Company Executives
listed on Exhibit B hereto, which Exhibits may be amended from time to time by
the Company prior to a potential Change of Control and/or Change of Control,
and without the Trustee's consent; and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred to
the Trust and the earnings thereon shall be used by the Trustee, subject to the
claims of the Company's creditors in the event the Company becomes Insolvent,
to satisfy the liabilities of the Company in accordance with the provisions
hereof; and, upon satisfaction of all liabilities of the Company with respect
to all Participants (and their Beneficiaries, if applicable), the assets, if
any, remaining in the Trust shall revert to the Company; and
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose
- 1 -
<PAGE> 7
of providing deferred compensation for a select group of management and/or
highly-compensated employees, and shall not be construed to provide income for
federal income tax purposes to a Participant (or his or her Beneficiary) prior
to the actual payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS Unless the context requires otherwise, definitions as used
herein shall have the same meaning as in the Plan when applied to said Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in the Plan
as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors, as
constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the following
events:
(a) a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Act of 1934, as amended (the "Exchange Act"), or any successor
provisions, whether or not the Company is then subject to such reporting
requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to vote
at elections of the Board of Directors (the "Base Capital Stock");
provided, however, that any change in the relative beneficial ownership of
securities of any person resulting solely from a reduction in the aggregate
number of outstanding shares of Base Capital Stock, and any decrease
thereafter in such person's ownership of securities, shall be disregarded
- 2 -
<PAGE> 8
until such person increases in any manner, directly or indirectly, such
person's beneficial ownership of any securities of the Company; or
(c) a change in the composition of the Company's Board of Directors, as a
result of which fewer than two-thirds of the incumbent directors are
directors who either
(1) had been directors of the Company 24 months prior to such change,
or
(2) were elected, or nominated for election, to the Company's Board of
Directors with the affirmative votes of at least a majority of the
directors who had been directors of the Company 24 months prior to
such change and who were still in office at the time of the
election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in which the
Company is not the continuing or surviving corporation or
pursuant to which shares of the Company's common stock would be
converted into cash, securities, or other property, other than a
merger of the Company in which the holders of the Company's
common stock immediately prior to the merger have the same
proportionate ownership of common stock of the surviving
corporation immediately after the merger, or
(2) any sale, lease, exchange, or other transfer (in one transaction
or a series of related transactions) of all, or substantially
all, of the assets of the Company, or
(3) the stockholders of the Company approve a plan or proposal
for the liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may
- 3 -
<PAGE> 9
be amended or supplemented from time to time), whereby it is proposed
that a corporation will become the parent holding company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means The Detroit Edison Company, a Michigan corporation,
its successors and assigns.
1.5 "Effective Date" means July 24, 1995.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of one hundred
and twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the books of
the Company as of the most recent Valuation Date, certified by the Company to
the Trustee, which shall be the amount necessary to ensure that the assets of
the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during
any Potential Change of Control Period, however, the "Funding Amount" means one
hundred and twenty per cent (120%) of the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, as certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each respective
Participant under the Plan shall be limited to benefits attributable to service
rendered by the Participant to the Company.
1.9 "General Creditors" means the unsecured general creditors of the
Company, including the Participants.
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
- 4 -
<PAGE> 10
(a) is unable to pay its debts as they become due; or
(b) is subject to a pending proceeding as a debtor under the
Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed by the
Company in the manner provided in Section 5.3 to direct the investment of any
part or all of the assets of the Trust Fund in accordance with Article V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" means an individual listed on Exhibit B attached hereto
who
(a) is a Participant in the Plan because of services rendered to the
Company; or
(b) would be a Participant in the Plan because of services rendered to
the Company but is not due to age, years of service or active employment.
The Company agrees to list all Participants on Exhibit B attached hereto.
Except after a Change of Control as provided in Section 3.4, the Company may
add or delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan as
responsible for the management, operation, and administration of the Plan.
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 9.5% or more of the combined
voting power of the Company's then outstanding securities ordinarily (and
apart from rights accruing
- 5 -
<PAGE> 11
under special circumstances) having the right to vote at elections of
the Board of Directors (the "Base Capital Stock"); provided, however, that
any change in the relative beneficial ownership of securities of any
person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter in
such person's ownership of securities, shall be disregarded until such
person increases in any manner, directly or indirectly, such person's
beneficial ownership of any securities of the Company; or
(c) the public announcement by any individual or entity, other than
the Company, that such individual or entity intends to take or to
consider taking actions which, if consummated, would constitute a Change
of Control of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company is
not the continuing or surviving corporation, or pursuant to which shares
of the Company's common stock would be converted into cash, securities,
or other property, other than a transaction in which the holders of the
Company's common stock immediately prior to the merger, acquisition,
consolidation, or reorganization have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger,
acquisition, consolidation, or reorganization, including, but not limited
to, the creation of a parent entity to oversee the Company; or
(e) the public announcement of the sale or other transfer of
substantially all of the assets of the Company to any third party; or
(f) the Board of Directors of the Company adopts a resolution to the
effect that a Potential Change of Control of the Company has occurred for
purposes of this Trust.
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year period
immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the
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<PAGE> 12
Potential Change of Control Period shall end one (1) year following the
date of the most recent Potential Change of Control.
The Company shall promptly notify the Trustee of a Potential Change of
Control and the Trustee may conclusively rely upon such notice and shall have
no duty to independently determine whether a Potential Change of Control has
occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to this
Trust Agreement and all of the terms and conditions of this Trust Agreement,
which is intended to constitute a grantor trust under IRC Section Section 671
et seq.
1.21 "Trust Fund" means all moneys, securities, and other property held by
the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any successor
trustee appointed pursuant to Article VIII.
1.23 "Valuation Date" means the day in each calendar year which is the
last day of the Company's fiscal year in each year, and such other times as the
Company may determine. Each of (a) any date of a Potential Change of Control,
(b) the date of a Change of Control, (c) the effective date of a Trustee's
resignation or removal, and (d) the date of termination of the Trust shall also
be a Valuation Date if any such date occurs other than on the last business day
of the Company's fiscal Year. The first Valuation Date shall be December 31,
1994.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the Trustee,
which Trust shall consist of such sums of money and other property acceptable
to the Trustee as from time to time have been and shall be paid or delivered by
the Company to the Trustee as provided herein. All such money and other
property, all investments and reinvestments made therewith, or the proceeds
thereof, and all investment earnings and profits thereon, less all payments and
charges as authorized herein, shall constitute the Trust Fund. The Trust Fund
shall be held in trust by the Trustee, and shall be dealt with in accordance
with the provisions of this Trust.
2.2 Description of Trust. The Company represents and agrees that:
- 7 -
<PAGE> 13
(a) the Trust is intended to be a grantor trust under IRC Section
Section 671-678, and shall be construed accordingly. The Company intends
and agrees that it is the "owner" or grantor of the Trust in its
entirety, as that term is defined in subpart E, part I, subchapter J,
chapter 1, subtitle A of the IRC and that, for income tax purposes, all
income, deductions, and credits of the Trust Fund belong to it as owner,
and will be included on its income tax or other required tax returns, and
any income tax determined to be payable as a result thereof will be the
sole obligation of, and will be paid by, the Company;
(b) a true and correct copy of the Plan, as in effect on the
Effective Date hereof, is attached hereto as Exhibit A. The Company shall
file with the Trustee, promptly upon its adoption, a true and correct
copy of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal obligations of
the Company to Participants under the Plan as provided herein, subject to
the claims of General Creditors in the event of Insolvency, and the
balance of the Trust Fund, if any, remaining after payment of the
Company's obligation to Participants under the Plan will revert to the
Company in accordance with the Trust;
(d) contributions by the Company to the Trust which are made
coincident with and subsequent to the Effective Date shall be in amounts
determined under Article III hereof. The Company agrees to fund the Trust
as provided therein;
(e) the principal of the Trust, and any earnings thereon shall be
held by the Trustee separate and apart from other funds of Company, and
shall be used exclusively for the uses and purposes as herein set forth;
(f) the Trust established under this agreement does not fund and is
not intended to fund the Plan, or any other employee benefit plan or
program of the Company. Neither the establishment of the Trust, nor the
payment or delivery of assets to the Trustee shall vest any Participant
in any right, title, or interest in or to any assets of the Trust Fund;
(g) participants shall have no preferred claim on, or any beneficial
ownership interest in, assets of the Trust. To the extent that any
Participant
- 8 -
<PAGE> 14
acquires the right to receive payment(s) under the Plan, any such right
shall be mere unsecured contractual rights of Participants against the
Company, and such Participants (or their Beneficiary(ies)) shall have only
the unsecured promise of the Company that such payment(s) will be made.
Any assets held by the Trust will be subject to the claims of General
Creditors under federal and state law in the event of Insolvency, as
defined herein, with no preference whatsoever given to claims of employees
over claims of other unsecured creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan is a plan
for a select group of management or highly compensated employees, and
as such are exempt from the application of ERISA except for the disclosure
requirements applicable to such plan, for which the Company bears full
responsibility as to compliance. The Company further represents that the
Plan is not qualified under IRC Section 401 and therefore, is not
subject to any IRC requirements applicable to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this Section
2.3, the Trust shall be irrevocable from the effective date, and the assets of
the Trust Fund shall be held in accordance with the provisions hereof for the
exclusive purpose of providing for the payment of the Company's obligations to
pay benefits to Participants under the Plan and to satisfy the claims of
General Creditors in the event of Insolvency, and defraying the expenses of the
Trust. Except as provided in Section 6.6 and Section 6.8 and in the event of
Insolvency, no part of the income or corpus of the Trust Fund shall be
recoverable by or for the benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust established
under this Trust Agreement on the terms and subject to the provisions set forth
herein, and agrees to discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1995, the Company
shall contribute to the Trust the Funding Amount as determined on the first
Valuation Date. As of each Valuation Date, and until the entire Trust Fund has
been distributed, the Company (or, after a Change of Control, the Company's
independent public accountants) shall recalculate the Funding Amounts.
- 9 -
<PAGE> 15
3.2 Contributions as of Each Valuation Date. During the life of the Trust
but no later than September 30 of each year, commencing no later than September
30, 1996, the Company shall contribute to the Trust such amount as is necessary
to make trust assets equal the Funding Amount as of the previous Valuation
Date. The Plan Administrator or its delegate (or, after a Change of Control,
the Company's independent public accountants) shall provide the Trustee with
written notice of the amount of the necessary contribution on or before the
date such contribution is due to the Trust. Any such payments to the Trustee do
not discharge or release the Company of its obligation under the Plan or
Section 6.2 to pay benefits to Participants under the Plan, and shall at all
times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit B in
effect on the date of a Change of Control shall not be amended to include a
Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of the Delivery Date of the
proposed amended Exhibit B of the Funding Amount calculated based on the
Participants named in the Exhibit B in effect on the Date of the Change of
Control and any new or additional Participants named in the proposed amended
Exhibit B (the "New Funding Amount") and (b), assets in an amount necessary to
make the trust assets equal the New Funding Amount. If the Trustee determines
that assets of the Trust Fund, including such assets as are delivered by the
Company on the Delivery Date, equal or exceed the New Funding Amount, the
Trustee shall accept the amended Exhibit B. Any amended Exhibit B so accepted
shall be deemed incorporated with the same effect as if otherwise included
herein. Unless an Exhibit B amended after a Change of Control is accepted by
the Trustee as provided in this Section, the Trustee shall have no liability,
responsibility, or obligation with respect to a Participant named in any
amended Exhibit B unless such Participant is named in the Exhibit B then in
effect on the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the Trustee
within one hundred and twenty (120) days of notice and demand from the Trustee
(or, upon the occurrence of a Potential Change of Control or a Change of
Control, within seven (7) days of notice and demand from the Trustee), any
amount determined to be payable by the Company to the Trustee under Sections
3.2, 6.5 or 7.4(a) of the Trust, the Trustee may commence legal action, (which
is expressly deemed to include without
- 10 -
<PAGE> 16
limitation an alternate dispute resolution proceeding), to compel the
Company to pay to the Trustee any amount determined to be payable to it under
the Trust. The Trustee may bring such action against the Company in any court
of competent jurisdiction, and shall be entitled to recover for the benefit of
the Trust from the Company such amount, plus interest for each day at the rate
of interest per annum of five (5) percentage points in excess of the prime
lending rate as announced by NBD Bank, from the due date specified in the
Trustee's notice and demand (or the date(s) from which pro rata payments were
made, if such action is brought by the Trustee pursuant to Section 6.5 hereof)
to the date of payment, plus all costs of collection, including reasonable
attorneys fees and costs of litigation. The Trustee is authorized to bring
action to compel payment by the Company, and, in connection with reasonable
claims for delinquent contributions by the Company, to retain, at the expense
of the Company, counsel and other appropriate experts, including actuaries and
accountants, to aid it in pursuing litigation for collection against the
Company. The Trustee's anticipated reasonable costs and expenses incurred
pursuant to this Section 3.5 are payable by the Company in advance; and should
the Company not make timely payment, the Trustee may charge the Trust Fund for
such reasonably anticipated costs and expenses. The Trustee shall in no event
be required to advance or expend its own funds in order to comply with the
provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be kept
accurate and detailed records of any investments, receipts, disbursements, and
all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
4.2 Company Recordkeeping. The Company shall keep full, accurate, and
detailed books and records with respect to the Participants and benefits paid
and payable under the Plan, which records shall be made available to the
Trustee at its request.
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<PAGE> 17
4.3 Periodic Accounting. Within sixty (60) days following a Valuation
Date, the Trustee shall deliver to Company a written accounting, dated as of
the Valuation Date, of its administration of the Trust Fund during such year or
during the period from the most recent Valuation Date to the date of such
current Valuation Date, which accounting shall be in accordance with the
following provisions:
(a) Such accounting shall set forth all investments, receipts,
disbursements, and other transactions effected the by Trust Fund during
the preceding year, or during the period from the most recent Valuation
Date to the date of such current Valuation Date, including a description
of all securities and investments purchased and sold, with the cost or net
proceeds of such purchases or sales (accrued interest paid or receivable
being shown separately), and showing all cash, securities or other
property held in the Trust Fund, less liabilities known to the Trustee
(other than liabilities to Participants entitled to benefits under the
Plans) at the end of such year or other period, as the case may be. In
making a valuation, all cash, securities or other property held in the
Trust Fund shall be valued at their then fair market value, and shall be
in a format as may be established by the Company. A copy of each
accounting so delivered to the Company shall be open to inspection at the
office of the Trustee during normal business hours.
(b) If within ninety (90) days after the filing of such written
accounting, the Company has not delivered to the Trustee notice of any
objection to any act or transaction of the Trustee, the initial
accounting shall become an account stated as between the Trustee and the
Company. If any objection has been delivered to the Trustee by the
Company, and if the Company is satisfied that it should be withdrawn, the
Company shall signify its approval of the accounting in writing filed
with the Trustee, and the accounting shall become an account stated as
between the Trustee and the Company. If the accounting is adjusted
following an objection thereto, the Trustee shall file and deliver the
adjusted accounting to the Company. If within fifteen (15) days after
such filing of an adjusted accounting, the Company has not delivered to
the Trustee notice of any objection to the transactions as so adjusted,
the adjusted accounting shall become an account stated as between the
Trustee and the Company.
(c) Unless an accounting is fraudulent, when it becomes an account
stated, it shall be finally settled, and the Trustee shall, to the extent
permitted by applicable law, be forever released and discharged from all
liability and
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accountability with respect to the propriety of its acts and transactions
shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that authority
with respect to the administration of the Trust has been allocated to others in
accordance with this Trust, and subject to Article V, the Trustee shall have
exclusive authority and discretion to manage and administer the Trust. The
Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a direction, request
or approval given by Company which is contemplated by, and in conformity with,
the terms of the Trustee's responsibilities under this Trust, and is given in
writing by Company. The responsibility for maintenance of individual benefit
records shall be retained by the Company, and may be delegated to such person
or entity as the Company may employ from time to time. Except as otherwise
provided herein, the Trustee shall have, without exclusion, all powers
conferred on trustees by law and, without limiting the foregoing, shall have
the following administrative powers, rights, and duties in addition to those
provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all assets held
by the Trustee on such terms and conditions as the Trustee shall decide;
provided however, that if the Company delivers written instructions to
the Trustee, the Trustee shall follow such instructions;
(b) when directed by the Company or requested by a Participant
pursuant to Article VI, to make payments from the Trust Fund to
Participants and, when required by Article VII, to make payments from the
Trust Fund to General Creditors entitled to payments thereunder;
(c) except as provided in Article VI and Article VII, to waive,
modify, reduce, compromise, release, contest, submit to arbitration, or
settle or extend the time of payment of any claims, debts, damages, or
demands of any nature in favor of or against the Trustee or all or any
part of the Trust Fund;
(d) to retain any disputed property until an appropriate final
adjudication or release is obtained, and to represent the Trust in, or
commence or defend, any litigation the Trustee considers in its
discretion necessary in connection with the Trust Fund;
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<PAGE> 19
(e) to withhold, if the Company so directs, all or any part of any
payment required to be made hereunder as may be necessary and proper to
protect the Trustee or the Trust Fund against any liability or claim on
account of any estate, inheritance, income or other tax or assessment
attributable to any amount payable hereunder, and to discharge any such
liability with any part or all of such payment so withheld in accordance
with Section 6.7;
(f) to maintain records reflecting all receipts and payments under
this Trust and such other records as the Company may specify and to which
the Trustee agrees, which records may be audited from time to time by the
Company or anyone named by the Company; and to furnish a written
accounting to the Company as of each Valuation Date, as provided in
Section 4.3;
(g) if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy
from a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
Notwithstanding the preceding sentence, the Trustee may loan to the
Company the proceeds of any borrowing against an insurance policy held as
an asset of the Trust;
(h) to furnish the Company with such information for tax or other
purposes which the Company may reasonably request and which the Trustee
may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal counsel (who,
except following a Change of Control, may be legal counsel to the Company
and who are not in the Company's reasonable judgment deemed to have a
conflict of interest), consultants, custodians, depositories, experts and
other providers of services, to consult with them with respect to the
implementation and construction of this Trust, the duties of the Trustee
hereunder, the transactions contemplated by this Trust, or any act which
the Trustee proposes to take or omit, and to rely upon the advice of and
services performed by such persons; to delegate discretionary powers to
such persons and to reasonably rely upon information and advice furnished
by such persons; provided that each such delegation and the acceptance
thereof by each such person shall be in writing; and provided further
that the Trustee may not delegate its responsibilities as to the
management or control of the assets of the Trust Fund;
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(j) to determine whether the Company is Insolvent, and to hold
assets of the Trust Fund for the benefit of General Creditors in the event
of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a Change
of Control, as provided in Article VI hereof;
(l) to perform all other acts which in the Trustee's judgment
are appropriate for the proper protection, management, investment, and
distribution of the Trust Fund, and to carry out the purposes of the Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has
investment responsibility, the Trustee shall invest and reinvest the principal
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income, in accordance with the written
investment guidelines established by the Company and provided to the Trustee by
the Company. If no such written investment guidelines are received by the
Trustee, the assets of the Trust Fund shall be invested in such investments as
determined by the Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that authority
with respect to the management of all or a portion of the Trust Fund has been
allocated to others in accordance with this Trust, the Trustee shall have
exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
(a) to invest and reinvest in any property wherever situated,
whether real, personal, mixed, foreign or domestic, including common and
preferred stocks, bonds, notes, and debentures (including convertible
stocks and securities, but not including any stock, securities, or debt
instruments of the Company
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<PAGE> 21
[unless held in a collective or commingled fund and such Company
securities comprise 5% or less of the assets of such fund]), leaseholds,
mortgages (including, without limitation, any collective or part interest
in any bond and mortgage or note and mortgage), certificates of deposit,
life insurance contracts, guaranteed investment contracts, and guaranteed
annuity contract, all regardless of diversification and without being
limited to investments authorized by law for the investment of trust
funds;
(b) to invest and reinvest, without distinction between principal
and income, in contracts for future delivery of United States Treasury
Bills, other financial instruments, or indices based on any group of
securities, and in options to buy or sell indices based on any group of
securities or any kind of evidences of ownership or indebtedness,
including financial instruments or futures contracts relating thereto;
(c) to invest and reinvest part or all of the Trust Fund in any
deposit accounts, deposit administration fund maintained by a legal
reserve life insurance company in accordance with an agreement between
the Trustee and such insurance company, a group annuity contract or life
insurance policies issued by such insurance company to the Trustee as
contract holder, any interest bearing deposits held by any financial
institution having total capital and surplus of at least Fifty Million
Dollars ($50,000,000), investments in any stocks, bonds, debentures,
mutual fund shares, notes, commercial paper, treasury bills, and any
mutual, common, commingled or collective trust funds or pooled investment
funds, and to diversify such investments so as to minimize the risk of
losses;
(d) to commingle assets of the Trust Fund, for investment purposes
only, with assets of any common, collective, or commingled trust fund
which has been or may hereafter be established and maintained by the
Trustee, or by any other financial institution; provided that to the
extent that any part or all of the assets of the Trust Fund for which the
Trustee has investment responsibility are invested in any such common,
collective or commingled trust fund or pooled investment fund which is
maintained by a bank or trust company (including a bank or trust company
acting as Trustee), the provisions of the documents under which such
common, collective or commingled trust fund or pooled investment fund are
maintained shall govern any investment therein and provided further that
prior to investing any portion of the Trust Fund for the first time in
any such common, collective, or commingled trust fund, the Trustee shall
advise the Company of its intent to make such an investment, and furnish
to the Company
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any information it may reasonably request with respect to such common,
collective, or commingled trust fund (other than a trust fund established
by the Company), and provided further that the Trustee shall maintain
separate records with respect to each other trust of the Trust Fund;
(e) to vote stock and other voting securities personally or by proxy
(and to delegate the Trustee's powers and discretion with respect to such
stock or other voting securities to such proxy), to exercise
subscription, conversion and other rights and options (and make payments
from the Trust Fund in connection therewith), to take any action and to
abstain from taking any action with respect to any reorganization,
consolidation, merger, dissolution, recapitalization, refinancing and any
other plan or change affecting any property constituting a part of the
Trust Fund (and in connection therewith to delegate the Trustee's
discretionary powers and pay assessments, subscriptions and other charges
from the Trust Fund), to hold or register any property from time to time
in the Trustee's name or in the name of a nominee or to hold it
unregistered or in such form that title shall pass by delivery; and to
borrow from anyone, including itself (to the extent permitted by law),
such amounts from time to time as the Trustee considers desirable to
carry out this Trust (and to mortgage or pledge all or part of the Trust
Fund as security); to participate in any plan or reorganization,
consolidation, merger, combination, liquidation, or other similar plan
relating to any such property, and to consent to or oppose any such plan
or any action thereunder, or any contract, lease, mortgage, purchase,
sale, or other action by any corporation or other entity any of the
securities of which may at any time be held in the Trust Fund, and to do
any act with reference thereto;
(f) to retain in cash such amounts as the Trustee considers
advisable and as are permitted by applicable law, and to deposit any cash
so retained in any depository (including any bank acting as Trustee)
which the Trustee may select, provided such depository must have total
capital and surplus of at least Fifty Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section 4.4(g), to
apply for, pay premiums on, and maintain in force individual, ordinary or
universal life insurance policies on the lives of Participants, which
policies may contain provisions which the Company may approve or direct;
to receive or acquire such policy or policies from the Company, but the
Trustee may purchase a life insurance policy from a person other than the
insurer which issues a policy only if the Trustee pays, transfers, or
otherwise exchanges an amount no more
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<PAGE> 23
than the cash surrender value of the policy or policies, and the policy
or policies is (are) not subject to a mortgage or similar lien which the
Trustee would be required to assume; to have with respect to such policy
or policies any rights, powers, options, privileges, and benefits usually
comprised in the term "incidents of ownership", and normally vested in an
owner of such policy or policies to be exercised only pursuant to
Company direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to dispose of,
and to grant options for the purchase or exchange with respect to it, any
property at any time held by it, by public or private sale, for cash or
on credit, or partly for cash and partly for credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited;
(k) to exercise any conversion privilege or subscription right
available in connection with any such property, and to do any act with
reference thereto, including the exercise of options, the making of
agreements or subscription, and the payment of expenses, assessment or
subscription, which may be deemed necessary or advisable in connection
therewith, and to hold and retain any securities or other property which
it may so acquire;
(l) to extend the time of payment of any obligation held in the
Trust Fund;
(m) to enter into standby agreements for future investment, either
with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the renewal or
extension of any mortgage, and to agree to a reduction in the rate of
interest on any indebtedness or mortgage or to any other modification or
change in the terms of any indebtedness or mortgage, or of any guarantee
pertaining thereto, in any manner and to any extent that may be deemed
advisable for the protection of the Trust Fund or the preservation of any
covenant or condition of any indebtedness or mortgage or in the
performance of any guarantee, or to enforce any default in
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<PAGE> 24
such manner and to such extent as may be deemed advisable; and to exercise
and enforce any and all rights of foreclosure, to bid on any property in
foreclosure, to take a deed in lieu of foreclosure with or without paying
a consideration therefor, and in connection therewith to release the
obligation on the bond secured by such mortgage; and to exercise and
enforce in any action, suit or proceeding at law or in equity any rights
or remedies in respect of any such indebtedness or mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgage, conveyance, contracts, waivers,
releases, or other instruments in writing necessary or proper for the
accomplishment of any of the foregoing powers;
(p) to organize under the laws of any state one or more corporations,
partnerships, or trusts for the purpose of acquiring and holding title to
any property that it is authorized to acquire under this Trust, and to
exercise with respect thereto any or all of the powers set forth in
this Trust;
(q) notwithstanding any powers granted to the Trustee pursuant to this
Trust Agreement or to applicable law, the Trustee shall not have any power
that could give this Trust the objective of carrying on a business and
dividing the gains therefrom, within the meaning of Section 301.7701-2 of
the Procedure and Administrative Regulations promulgated under the IRC;
and
(r) generally to do all acts, whether or not expressly authorized, that
the Trustee deems necessary or desirable for the protection of the Trust
Fund, and to carry out the purposes of the Trust.
5.3 Investment Managers. The Company may appoint one or more Investment
Managers to direct the investment of any part or all of the assets of the Trust
Fund by the Trustee. Appointment of an Investment Manager shall be made by
written notice to the Investment Manager(s) and to the Trustee, which notice
shall specify those powers, rights, and duties of the Trustee under this Trust
that are allocated to the Investment Manager(s) and the portion of the assets
of the Trust Fund subject to the Investment Manager(s). After it receives
written notice of such appointment, the Trustee shall have no obligation or
responsibility for those investment duties which are allocated to an Investment
Manager. An Investment Manager so appointed pursuant to this paragraph shall
be either a registered investment adviser under the Investment Advisers Act of
1940, a bank, as defined in said Act, or an insurance company qualified to
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manage, acquire and dispose of the assets of the Plans under the laws
of more than one state of the United States. Any such Investment Manager shall
acknowledge to the Company in writing that is accepts such appointment. The
Trustee shall not be liable for any loss or diminution of any assets managed by
an Investment Manager, including without limitation, any loss or diminution
caused by any action or inaction taken or omitted by it at the direction of an
Investment Manager. In addition, the Trustee shall not be liable for the
diversification of any assets managed by Investment Managers of the Company,
each of which shall be solely the responsibility of the Company. An Investment
Manager may resign at any time upon written notice to the Trustee and the
Company. The Company may remove an Investment Manager at any time by written
notice to the Investment Manager and the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each investment
fund, and the income thereon, shall be held and invested as a single fund, and
the Trustee shall not make any separate investment of the Trust Fund, or make
any separate investment fund, for the account of any Participant or other
General Creditors prior to receipt of directions to make payments to such
Participant or other General Creditors in accordance with Article VI or Article
VII. All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The Trustee's
obligation to distribute to any Participant out of the assets of the Trust Fund
shall be limited to payment at such times and in such amounts as are properly
in conformance with the provisions of Section 6.3. Payments to Participants
pursuant to this Article VI shall be made by the Trustee to the extent that
funds in the Trust Fund are sufficient for such purpose, and shall at all times
be subject to the provisions of Article VII. In the event the Company
determines that it will pay benefits directly to Participants as they become
due under the terms of the Plan, the Company shall notify Trustee of its
decision prior to the time amounts are payable to Participants.
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6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be made from
the Trust Fund to pay benefits in accordance with the Plan shall be initiated
by:
(a) written direction to the Trustee from the Plan Administrator,
which direction shall certify that such distribution(s) is(are) in
accordance with the Plan, and specify the timing, form, payee, and amount
of such benefit payments, including any federal, state, or local income
taxes to be withheld, and the Trustee shall make or commence the directed
distributions after receipt of such written direction; or
(b) by the submission to the Trustee by a Participant of a certified
copy of the non-appealable order of an appropriate forum with
jurisdiction to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee determines
or is advised that the Trust Fund does not have sufficient assets to permit the
Trustee to make a payment property directed pursuant to this Trust, including a
payment provided for under Section 10.7 of this Trust, the Trustee shall pay
any benefits due (if otherwise payable hereunder) to Participants on a pro rata
basis as directed by the Plan Administrator, and the Company shall make the
balance of such payments as they become due. If the Plan Administrator
determines that the Trust Fund does not have sufficient funds to provide for
the payment of all amounts otherwise payable to Participants (or their
Beneficiary(ies)) from the Trust under the Plans, it shall notify the Company
and the Trustee of the amount of the deficiency, and, within forty-five (45)
days of such notice, the Company deposit in trust with the Trustee the
additional amounts needed to make such payments. Upon receipt of such amount
by the Trustee from the Company, proceeds shall first be used by the Trustee
to pay any benefits
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<PAGE> 27
previously due remaining unpaid, in the order in which they were due,
pursuant to Plan Administrator instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII, and
except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount paid to a
Participant by the Trustee in accordance with this Article VI shall be reduced
by the amount of taxes required to be withheld pursuant to Plan Administrator
instructions, and the Trustee shall inform the Company of all amounts so
withheld. The Company shall direct that the Trustee shall either
(a) pay to the Company a sum equal to the amount of such taxes as
are required to be withheld, whereupon the Company shall have full
responsibility for the payment of all withholding taxes to the
appropriate taxing authorities, or
(b) pay such taxes directly to the appropriate taxing authorities
for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall
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<PAGE> 28
furnish each Participant with the appropriate tax information form
evidencing payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon receipt
of written certification from the Company that all obligations of the Company
to Participants with respect to the Plan have been satisfied, and if the Trust
Fund shall have any assets remaining, the Trustee shall distribute such
remaining assets of the Trust Fund to the Company, after converting such assets
to cash if requested by the Company, subject to the Trustee's right to retain
such reasonable amount for compensation and expenses as provided in Section
10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on or
beneficial ownership interest in the Trust Fund before such assets are paid to
the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any other General Creditor. At all times during the continuance
of this Trust, as provided in this Article VII hereof, the principal and income
of the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with
no preference whatsoever given claims of employees over claims of other
unsecured creditors of the Company.
7.2 Determination of Insolvency. Notwithstanding any other provisions of
this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive Officer of the
Company shall have the fiduciary duty and responsibility on behalf of
General Creditors to notify the Trustee promptly in writing in the event
the Company is Insolvent, and the Trustee shall have the right to rely
thereon to the exclusion of all directions or claims for payment made
thereafter by Participants.
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<PAGE> 29
(b) If the Trustee has actual knowledge that the Company is
Insolvent, the Trustee shall act in accordance with Section 7.3 hereof.
(c) Unless the Trustee receives written notice from the Board of
Directors or the Chief Executive Officer of the Company that the Company
is Insolvent, or from a person claiming to be a General Creditor and
claiming that the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. If the Trustee receives a
written allegation from a person claiming to be a General Creditor that
the Company is Insolvent, the Trustee's only duty of inquiry shall be to
request that the Company's independent public accountants determine
whether the Company is Insolvent, and shall suspend benefit payments
pending such determination. If the Company's independent public
accountants advise the Trustee that the Company is not Insolvent, it
shall resume payments in accordance with this Trust. If the Trustee
receives notice of the Company's Insolvency pursuant to this Section
7.2(c), it shall act in accordance with this Section and Section 7.3
hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and
shall hold the Trust Fund for the benefit of the General Creditors, and
shall pay and deliver the entire amount of the Trust Fund only as a court
competent jurisdiction, or duly appointed receiver or other person
authorized to act by such court, may order or direct to make the
Trust Fund available to satisfy the claims of the General Creditors
(payments to Participants in accordance with the terms of the Plan may be
resumed only pursuant to Section 7.4 hereof); or
(b) by reason of Section 1.11(a), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and
shall (i) hold the Trust Fund for the benefit of General Creditors or
(ii) pay over all or a portion of the Trust Fund to General Creditors if
directed by the Company or an appropriate judicial forum.
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<PAGE> 30
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of notice of a
Court order to the contrary, the Trustee shall resume all of its duties and
responsibilities under the Trust, including payments to Participants if
otherwise provided for herein, within thirty (30) days of the Trustee's receipt
of a determination from the Company's independent public accounting firm that
the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event that
amounts are paid from the Trust Fund to General Creditors of the Company,
then as soon as practicable after the Company is no longer Insolvent, the
Company shall deposit into the Trust Fund a sum to equal to the Funding
Amount, determined as of the date the Company is no longer Insolvent,
which date shall be a Valuation Date. The Company (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written certification of such Funding Amount. If the Funding
Amount is not paid by the Company within ninety (90) days of the
Trustee's receipt of such notice, the Trustee shall demand payment and
the provisions of Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of Payments.
Provided that there are sufficient assets of the Trust Fund, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section
7.3 and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments
due to Participants under the terms of the Plan for the period of such
discontinuance, as determined by the Plan Administrator, less the
aggregate amount of any payments made to Participants by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance. If the Trustee suspends a payment to a Participant under
this Section, and subsequently makes such payment, the payment shall
include interest at the rate of interest per annum equal to the prime
rate as published by NBD Bank for each day from the date of suspension to
the date of payment, as calculated by the Plan Administrator.
7.5 Reserved.
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VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for any
reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal of a
Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor Trustee
shall be appointed by the Company. If a Trustee should resign or be
removed, and the Company does not notify the Trustee of the appointment
of a successor Trustee within forty-five (45) days of its notice of its
resignation or removal, then the Company shall be deemed to have failed
to have appointed a successor Trustee, and the Trustee shall apply to a
court of competent jurisdiction for appointment of a successor Trustee.
(b) After the occurrence of a Change of Control, the Trustee who is
the Trustee on the date of the Change of Control may be removed by the
Company for three (3) years from the date of the Change of Control. If a
Trustee resigns or is removed at any time after the date of a Change of
Control, the Trustee shall apply to a court of competent jurisdiction for
appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
- 26 -
<PAGE> 32
8.3 Duties of Retiring and Successor Trustees. In the event of the
resignation or removal of a Trustee, the retiring Trustee shall within thirty
(30) days after the effective date of resignation or removal furnish to the
successor Trustee and the Company a final accounting of its administration of
the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this Trust,
the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which amendment shall include the effective date of such amendment.
Any amendment of the Trust may be made:
(a) prior to a Change of Control, without limitation and in any
manner and effective as of any date, including a retroactive effective
date, if accompanied by the written certification that no Change of
Control has occurred;
(b) after a Change of Control, only if a period of three (3) years
has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific written
consent to the amendment by Participants whose actuarial interests
under the Plan, computed by the Company's independent public
accountants as of the effective date of such amendment, represent
at least 51% of the total of all actuarial interests under the
Plan; or
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<PAGE> 33
(2) such amendment is accompanied by the opinion of legal
counsel satisfactory to the Trustee that the amendment is necessary
for the purpose of conforming the Trust to any present or future
federal or state law (including revenue laws) relating to trusts of
this or similar nature, as such laws may be amended from time to
time, and a certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
9.2 Termination. After all assets of the Trust Fund have been distributed
by the Trustee to the Participants or their Beneficiaries in accordance with
Article VI, the Trustee shall render an accounting, which shall be the final
accounting, in the manner provided for in Section 4.3. Upon acceptance of the
accounting by the Company, any assets remaining in the Trust Fund, after
deduction of such reasonable amount for compensation and expenses as provided
for in Section 10.7, shall be returned to the Company in the manner provided in
Section 6.8, and the Trust shall terminate thereupon. The Trust and all the
rights, titles, powers, duties, discretions and immunities imposed on or
reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee shall be
governed solely by the terms of this Trust Agreement.
- 28 -
<PAGE> 34
10.2 Litigation. In any action or proceeding regarding the Trust, the
Company, any assets of the Trust Fund, or the administration of the Trust, any
creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or non-exercise
of its powers and discretion in good faith shall be conclusive on all persons.
No one other than the Company shall be obliged to see to the application of any
money paid or property delivered to the Trustee. The certificate of the Trustee
that it is acting according to this Trust will fully protect all persons
dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other provision
of this Trust to the contrary, the Trustee does not guarantee payment of any
amount which may become due and payable to a Participant. The Trustee shall
have no responsibility for the disclosure to Participants regarding the terms
of the Plan or of this Trust, or for the validity thereof. The Trustee shall
not be responsible for administrative functions under the Plan and shall have
only such responsibilities under this Trust Agreement as specifically set forth
herein. The Trustee will be under no liability or obligation to anyone with
respect to any failure on the part of the Company, the Plan Administrator, the
Company's independent public accounting firm, an Investment Manager, or a
Participant to perform any of their respective obligations under the Plan or
this Trust. The Trustee shall be fully protected in relying upon any notice or
direction provided to it from any party in connection with the Trustee's duties
hereunder which the Trustee in good faith believes to be genuine, and executed
and delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the
amounts held in the Trust Fund at the time of such payment or otherwise to
risk or expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the Company
shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the extent
permitted by law the Trustee and hold it harmless against Trustee's costs,
expenses and
- 29 -
<PAGE> 35
liabilities (including, without limitation, attorneys' fees and
expenses) arising out of or in connection with the performance of the Trustee's
duties arising hereunder (but excluding costs arising as a result of the
Trustee's bad faith or gross negligence in the performance of its
responsibilities hereunder), and to be primarily liable for such payments. If
the Company does not pay such costs, expenses and liabilities in a reasonably
timely manner, Trustee may obtain payment from the Trust. This Section shall
survive the termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid compensation by
the Company in an amount agreed to by the Company and the Trustee. The Trustee
shall be reimbursed by the Company for reasonable expenses incurred by it in
the management and administration of this Trust Agreement, including the
reasonable compensation of the Trustee's counsel and other agents; and if the
Trustee is not timely reimbursed with respect to amounts due pursuant to this
Section 10.7 (or in the case of expenses to be incurred pursuant to Section 3.5
hereof), the Trustee may charge such amounts against the Trust Fund. Any
compensation or expenses so agreed upon or otherwise payable not paid by the
Company on a timely basis may be charged to the Trust Fund no more frequently
than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required or
permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
The Detroit Edison Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
- 30 -
<PAGE> 36
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants and their
Beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
10.11 True and Correct Document. Any persons dealing with the Trustee may
rely upon a copy of this Trust and any amendments thereto certified to be true
and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may be waived
by the person entitled to such notice.
10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender shall include
the feminine and neuter genders and the singular shall include the plural and
the plural shall include the singular wherever required by the context.
10.15 Successors. This Trust shall be binding on all persons entitled to
payments hereunder and their respective heirs and legal representatives, and on
the Company, the Trustee, and their respective successors.
10.16 Severability. If any provision of this Trust is held to be illegal
or invalid, such illegality or invalidity shall not affect the remaining
provisions of this Trust, which shall be construed and enforced as if such
illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and construed in
accordance with the laws of the State of Michigan with respect to the Company's
obligations and in accordance with the laws of the State of Illinois with
respect to the Trustee's obligations and Trust Administration.
- 31 -
<PAGE> 37
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
THE DETROIT EDISON COMPANY
By L.L. Loomans
-----------------------
Its
-----------------------
THE NORTHERN TRUST COMPANY
as Trustee
By
-----------------------
Its
-----------------------
- 32 -
<PAGE> 38
EXHIBIT A
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
BENEFIT EQUALIZATION PLAN
The Company has established an Irrevocable Grantor Trust to pay benefits under
the Benefit Equalization Plan. A copy of such Plan, including any amendment(s),
is attached hereto.
<PAGE> 39
EXHIBIT B
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
BENEFIT EQUALIZATION PLAN
PARTICIPANTS (as defined in the Trust)
as of December 31, 1995
Name [Date of Birth]
-------- --------------
<PAGE> 1
EXHIBIT 99-5
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
PLAN FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
AS RESTATED AS OF JANUARY 1, 1996
<PAGE> 2
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
PLAN FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS............................................................ 2
-----------
1.1 Beneficiary.................................................................... 2
1.2 Board of Directors............................................................. 2
1.3 Change of Control.............................................................. 2
1.4 Company........................................................................ 4
1.5 Effective Date................................................................. 4
1.6 Reserved....................................................................... 4
1.7 Excess Assets.................................................................. 4
1.8 Funding Amount................................................................. 4
1.9 General Creditors.............................................................. 4
1.10 Reserved....................................................................... 5
1.11 Insolvent...................................................................... 5
1.12 Investment Manager............................................................. 5
1.13 IRC ........................................................................... 5
1.14 Participant.................................................................... 5
1.15 Reserved....................................................................... 5
1.16 Plan Administrator............................................................. 5
1.17 Potential Change of Control.................................................... 5
1.18 Potential Change of Control Period............................................. 6
1.19 Reserved....................................................................... 7
1.20 Trust ......................................................................... 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
1.21 Trust Fund..................................................................... 7
1.22 Trustee ....................................................................... 7
1.23 Valuation Date................................................................. 7
II. ESTABLISHMENT OF THE TRUST............................................. 7
--------------------------
2.1 Trust ......................................................................... 7
2.2 Description of Trust........................................................... 8
2.3 Irrevocability................................................................. 9
2.4 Acceptance by the Trustee...................................................... 9
III. CONTRIBUTIONS.......................................................... 9
-------------
3.1 Calculations of Funding Amount................................................. 9
3.2 Contributions as of Each Valuation Date........................................ 10
3.3 Reserved ...................................................................... 10
3.4 No Dilution of Trust........................................................... 10
3.5 Collection..................................................................... 10
IV. ACCOUNTING AND ADMINISTRATION.......................................... 11
-----------------------------
4.1 Trustee Recordkeeping.......................................................... 11
4.2 Company Recordkeeping.......................................................... 12
4.3 Periodic Accounting............................................................ 12
4.4 Administrative Powers of Trustee............................................... 13
V. INVESTMENTS............................................................ 15
-----------
5.1 Generally...................................................................... 15
5.2 Investment Powers of Trustee................................................... 15
5.3 Investment Managers............................................................ 19
5.4 Reserved ...................................................................... 20
5.5 Single Fund.................................................................... 20
VI. PAYMENTS FROM THE TRUST................................................ 20
-----------------------
6.1 Obligation of Trustee to Make Payments
to Participants................................................................ 20
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.2 Obligation of the Company to Make Payments to Participants..................... 21
6.3 Distributions to Participants.................................................. 21
6.4 Reserved ...................................................................... 21
6.5 Insufficient Trust Fund Assets................................................. 21
6.6 Payment of Excess Assets to Company............................................ 22
6.7 Company to Pay Withholding and Employment Taxes................................ 22
6.8 Payment in Reversion to Company................................................ 23
6.9 Reserved ...................................................................... 23
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY.................................. 23
-------------------------------------
7.1 No Security Interest........................................................... 23
7.2 Determination of Insolvency.................................................... 23
7.3 Payments When Company Is Insolvent............................................. 24
7.4 Resumption of Duties after Insolvency.......................................... 25
7.5 Reserved....................................................................... 25
VIII. RESIGNATION OR REMOVAL OF TRUSTEE...................................... 26
---------------------------------
8.1 Resignation or Removal of Trustee.............................................. 26
8.2 Successor Trustee.............................................................. 26
8.3 Duties of Retiring and Successor Trustees...................................... 27
8.4 Reserved....................................................................... 27
IX. AMENDMENT AND TERMINATION OF TRUST..................................... 27
----------------------------------
9.1 Amendment...................................................................... 27
9.2 Termination.................................................................... 28
9.3 Reserved....................................................................... 28
X. GENERAL PROVISIONS..................................................... 28
------------------
10.1 Coordination with Plan......................................................... 28
10.2 Litigation..................................................................... 29
10.3 Trustee's Action Conclusive.................................................... 29
10.4 No Guarantee or Responsibility................................................. 29
10.5 Liabilities Mutually Exclusive................................................. 29
10.6 Indemnification................................................................ 29
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
10.7 Expenses and Compensation...................................................... 30
10.8 Reserved....................................................................... 30
10.9 Notice ........................................................................ 30
10.10 Antiassignment Clause.......................................................... 31
10.11 True and Correct Document...................................................... 31
10.12 Waiver of Notice............................................................... 31
10.13 Counterparts................................................................... 31
10.14 Gender and Number.............................................................. 31
10.15 Successors..................................................................... 31
10.16 Severability................................................................... 31
10.17 Applicable Law................................................................. 31
</TABLE>
EXHIBIT A THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY PLAN FOR
DEFERRING THE PAYMENT OF DIRECTORS' FEES
EXHIBIT B THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST FOR THE DETROIT
EDISON COMPANY PLAN FOR DEFERRING THE
PAYMENT OF DIRECTORS' FEES
PARTICIPANTS (as defined in the Trust)
<PAGE> 6
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY
PLAN FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
THIS TRUST AGREEMENT is made this 7th day of August, 1995, as restated in
its entirety effective January 1, 1996, by and between The Detroit Edison
Company, a Michigan corporation, and The Northern Trust Company, an Illinois
corporation, of Chicago, Illinois ("Trustee"), and any successor provided for
in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has established and maintains The Detroit Edison
Company Plan for Deferring the Payment of Directors' Fees ("Plan"), an unfunded
benefit plan, a copy of which is attached hereto as Exhibit A, for the benefit
of certain non-employee Directors of the Company listed on Exhibit B hereto,
which Exhibits may be amended from time to time by the Company prior to a
potential Change of Control and/or Change of Control, and without the Trustee's
consent; and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred to
the Trust and the earnings thereon shall be used by the Trustee, subject to the
claims of the Company's creditors in the event the Company becomes Insolvent,
to satisfy the liabilities of the Company in accordance with the provisions
hereof; and, upon satisfaction of all liabilities of the Company with respect
to all Participants (and their
- 1 -
<PAGE> 7
Beneficiaries, if applicable), the assets, if any, remaining in the
Trust shall revert to the Company; and
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose of providing deferred compensation for certain non-employee
members of the Board of Directors of the Company, and shall not be construed to
provide income for federal income tax purposes to a Participant (or his or her
Beneficiary) prior to the actual payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS Unless the context requires otherwise, definitions as used
herein shall have the same meaning as in the Plan when applied to said Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in the Plan
as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors, as
constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the following
events:
(a) a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Act of 1934, as amended (the "Exchange Act"), or any successor
provisions, whether or not the Company is then subject to such reporting
requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to
vote at elections of the Board of Directors (the
- 2 -
<PAGE> 8
"Base Capital Stock"); provided, however, that any change in the relative
beneficial ownership of securities of any person resulting solely
from a reduction in the aggregate number of outstanding shares of Base
Capital Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of any
securities of the Company; or
(c) a change in the composition of the Company's Board of Directors, as
a result of which fewer than two-thirds of the incumbent directors are
directors who either
(1) had been directors of the Company 24 months prior
to such change, or
(2) were elected, or nominated for election, to the
Company's Board of Directors with the affirmative votes of at
least a majority of the directors who had been directors of
the Company 24 months prior to such change and who were still
in office at the time of the election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in
which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's
common stock would be converted into cash, securities, or
other property, other than a merger of the Company in which
the holders of the Company's common stock immediately prior to
the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the
merger, or
(2) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or
(3) the stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of the Company.
- 3 -
<PAGE> 9
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may be amended or supplemented from time to time),
whereby it is proposed that a corporation will become the parent holding
company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means The Detroit Edison Company, a Michigan corporation,
its successors and assigns.
1.5 "Effective Date" means August 7, 1995.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of one hundred and
twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the books of
the Company as of the most recent Valuation Date, certified by the Company to
the Trustee, which shall be the amount necessary to ensure that the assets of
the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during
any Potential Change of Control Period, however, the "Funding Amount" means one
hundred and twenty per cent (120%) of the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, as certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each respective
Participant under the Plan shall be limited to benefits attributable to service
rendered by the Participant to the Company.
1.9 "General Creditors" means the unsecured general creditors of the
Company, including the Participants.
- 4 -
<PAGE> 10
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
(a) is unable to pay its debts as they become due; or
(b) is subject to a pending proceeding as a debtor under the
Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed by the
Company in the manner provided in Section 5.3 to direct the investment of any
part or all of the assets of the Trust Fund in accordance with Article V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" meansan individual listed on Exhibit B attached hereto
who
(a) is a Participant in the Plan because of services rendered to the Company;
or
(b) would be a Participant in the Plan because of services rendered to the
Company but is not due to age, years of service or active employment.
The Company agrees to list all Participants on Exhibit B attached hereto.
Except after a Change of Control as provided in Section 3.4, the Company may
add or delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan as
responsible for the management, operation, and administration of the Plan.
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit plan
- 5 -
<PAGE> 11
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 9.5% or more of the combined
voting power of the Company's then outstanding securities ordinarily (and
apart from rights accruing under special circumstances) having the right
to vote at elections of the Board of Directors (the "Base Capital
Stock"); provided, however, that any change in the relative beneficial
ownership of securities of any person resulting solely from a reduction
in the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities, shall
be disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company; or
(c) the public announcement by any individual or entity, other than
the Company, that such individual or entity intends to take or to
consider taking actions which, if consummated, would constitute a Change
of Control of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company is
not the continuing or surviving corporation, or pursuant to which shares
of the Company's common stock would be converted into cash, securities,
or other property, other than a transaction in which the holders of the
Company's common stock immediately prior to the merger, acquisition,
consolidation, or reorganization have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger,
acquisition, consolidation, or reorganization, including, but not
limited to, the creation of a parent entity to oversee the Company; or
(e) the public announcement of the sale or other transfer of
substantially all of the assets of the Company to any third party; or
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year period
immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the
- 6 -
<PAGE> 12
Potential Change of Control Period shall end one (1) year following the
date of the most recent Potential Change of Control.
The Company shall promptly notify the Trustee of a Potential Change
of Control and the Trustee may conclusively rely upon such notice and shall have
no duty to independently determine whether a Potential Change of Control has
occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to this
Trust Agreement and all of the terms and conditions of this Trust Agreement,
which is intended to constitute a grantor trust under IRC Section Section 671
et seq.
1.21 "Trust Fund" means all moneys, securities, and other property held by
the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any successor
trustee appointed pursuant to Article VIII.
1.23 "Valuation Date" means the day in each calendar year which is the
last day of the Company's fiscal year in each year, and such other times as the
Company may determine. Each of (a) any date of a Potential Change of Control,
(b) the date of a Change of Control, (c) the effective date of a Trustee's
resignation or removal, and (d) the date of termination of the Trust shall also
be a Valuation Date if any such date occurs other than on the last business day
of the Company's fiscal Year. Notwithstanding the foregoing, however, the
first Valuation Date shall be January 31, 1995.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the Trustee,
which Trust shall consist of such sums of money and other property acceptable
to the Trustee as from time to time have been and shall be paid or delivered by
the Company to the Trustee as provided herein. All such money and other
property, all investments and reinvestments made therewith, or the proceeds
thereof, and all investment earnings and profits thereon, less all payments and
charges as authorized herein, shall constitute the Trust Fund. The Trust Fund
shall be held in trust by the Trustee, and shall be dealt with in accordance
with the provisions of this Trust.
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2.2 Description of Trust. The Company represents and agrees that:
(a) the Trust is intended to be a grantor trust under IRC Section
Section 671-678, and shall be construed accordingly. The Company intends
and agrees that it is the "owner" or grantor of the Trust in its
entirety, as that term is defined in subpart E, part I, subchapter J,
chapter 1, subtitle A of the IRC and that, for income tax purposes, all
income, deductions, and credits of the Trust Fund belong to it as owner,
and will be included on its income tax or other required tax returns, and
any income tax determined to be payable as a result thereof will be the
sole obligation of, and will be paid by, the Company;
(b) a true and correct copy of the Plan, as in effect on the
Effective Date hereof, is attached hereto as Exhibit A. The Company shall
file with the Trustee, promptly upon its adoption, a true and correct
copy of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal obligations of
the Company to Participants under the Plan as provided herein, subject to
the claims of General Creditors in the event of Insolvency, and the
balance of the Trust Fund, if any, remaining after payment of the
Company's obligation to Participants under the Plan will revert to the
Company in accordance with the Trust;
(d) contributions by the Company to the Trust which are made
coincident with and subsequent to the Effective Date shall be in amounts
determined under Article III hereof. The Company agrees to fund the Trust
as provided therein;
(e) the principal of the Trust, and any earnings thereon shall be
held by the Trustee separate and apart from other funds of Company, and
shall be used exclusively for the uses and purposes as herein set forth;
(f) the Trust established under this agreement does not fund and is
not intended to fund the Plan, or any other benefit plan or program of
the Company. Neither the establishment of the Trust, nor the payment or
delivery of assets to the Trustee shall vest any Participant in any
right, title, or interest in or to any assets of the Trust Fund;
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(g) participants shall have no preferred claim on, or any beneficial
ownership interest in, assets of the Trust. To the extent that any
Participant acquires the right to receive payment(s) under the Plan, any
such right shall be mere unsecured contractual rights of Participants
against the Company, and such Participants (or their Beneficiary(ies))
shall have only the unsecured promise of the Company that such payment(s)
will be made. Any assets held by the Trust will be subject to the claims
of General Creditors under federal and state law in the event of
Insolvency, as defined herein, with no preference whatsoever given to
claims of employees or Participants over claims of other unsecured
creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan is a plan
for a select group of management or highly compensated employees, and as
such are exempt from the application of ERISA except for the disclosure
requirements applicable to such plan, for which the Company bears full
responsibility as to compliance. The Company further represents that the
Plan is not qualified under IRC Section 401 and therefore, is not
subject to any IRC requirements applicable to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this Section 2.3,
the Trust shall be irrevocable from the effective date, and the assets of the
Trust Fund shall be held in accordance with the provisions hereof for the
exclusive purpose of providing for the payment of the Company's obligations to
pay benefits to Participants under the Plan and to satisfy the claims of
General Creditors in the event of Insolvency, and defraying the expenses of the
Trust. Except as provided in Section 6.6 and Section 6.8 and in the event of
Insolvency, no part of the income or corpus of the Trust Fund shall be
recoverable by or for the benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust established
under this Trust Agreement on the terms and subject to the provisions set forth
herein, and agrees to discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1995, the Company
shall contribute to the Trust the Funding Amount as determined on the first
Valuation Date. As of each Valuation Date, and until the entire Trust Fund has
been distributed,
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the Company (or, after a Change of Control, the Company's independent public
accountants) shall recalculate the Funding Amounts.
3.2 Contributions as of Each Valuation Date. During the life of the Trust
but no later than September 30 of each year, commencing no later than September
30, 1996, the Company shall contribute to the Trust such amount as is necessary
to make trust assets equal the Funding Amount as of the previous Valuation
Date. The Plan Administrator or its delegate (or, after a Change of Control,
the Company's independent public accountants) shall provide the Trustee with
written notice of the amount of the necessary contribution on or before the
date such contribution is due to the Trust. Any such payments to the Trustee do
not discharge or release the Company of its obligation under the Plan or
Section 6.2 to pay benefits to Participants under the Plan, and shall at all
times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit B in
effect on the date of a Change of Control shall not be amended to include a
Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of the Delivery Date of the
proposed amended Exhibit B of the Funding Amount calculated based on the
Participants named in the Exhibit B in effect on the Date of the Change of
Control and any new or additional Participants named in the proposed
amended Exhibit B (the "New Funding Amount") and (b), assets in an amount
necessary to make the trust assets equal the New Funding Amount. If the Trustee
determines that assets of the Trust Fund, including such assets as are
delivered by the Company on the Delivery Date, equal or exceed the New Funding
Amount, the Trustee shall accept the amended Exhibit B. Any amended Exhibit B
so accepted shall be deemed incorporated with the same effect as if otherwise
included herein. Unless an Exhibit B amended after a Change of Control is
accepted by the Trustee as provided in this Section, the Trustee shall have no
liability, responsibility, or obligation with respect to a Participant named in
any amended Exhibit B unless such Participant is named in the Exhibit B then in
effect on the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the Trustee
within one hundred and twenty (120) days of notice and demand from the Trustee
(or, upon the occurrence of a Potential Change of Control or a Change of
Control, within
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seven (7) days of notice and demand from the Trustee), any amount determined to
be payable by the Company to the Trustee under Sections 3.2, 6.5 or 7.4(a) of
the Trust, the Trustee may commence legal action, (which is expressly deemed to
include without limitation an alternate dispute resolution proceeding), to
compel the Company to pay to the Trustee any amount determined to be payable to
it under the Trust. The Trustee may bring such action against the Company in
any court of competent jurisdiction, and shall be entitled to recover for the
benefit of the Trust from the Company such amount, plus interest for each day
at the rate of interest per annum of five (5) percentage points in excess of
the prime lending rate as announced by NBD Bank, from the due date specified in
the Trustee's notice and demand (or the date(s) from which pro rata payments
were made, if such action is brought by the Trustee pursuant to Section 6.5
hereof) to the date of payment, plus all costs of collection, including
reasonable attorneys fees and costs of litigation. The Trustee is authorized to
bring action to compel payment by the Company, and, in connection with
reasonable claims for delinquent contributions by the Company, to retain, at
the expense of the Company, counsel and other appropriate experts, including
actuaries and accountants, to aid it in pursuing litigation for collection
against the Company. The Trustee's anticipated reasonable costs and expenses
incurred pursuant to this Section 3.5 are payable by the Company in advance;
and should the Company not make timely payment, the Trustee may charge the Trust
Fund for such reasonably anticipated costs and expenses. The Trustee shall in
no event be required to advance or expend its own funds in order to comply with
the provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be kept
accurate and detailed records of any investments, receipts, disbursements, and
all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
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4.2 Company Recordkeeping. The Company shall keep full, accurate, and
detailed books and records with respect to the Participants and benefits paid
and payable under the Plan, which records shall be made available to the
Trustee at its request.
4.3 Periodic Accounting. Within sixty (60) days following a Valuation
Date, the Trustee shall deliver to Company a written accounting, dated as of
the Valuation Date, of its administration of the Trust Fund during such year or
during the period from the most recent Valuation Date to the date of such
current Valuation Date, which accounting shall be in accordance with the
following provisions:
(a) Such accounting shall set forth all investments, receipts,
disbursements, and other transactions effected the by Trust Fund during
the preceding year, or during the period from the most recent Valuation
Date to the date of such current Valuation Date, including a description
of all securities and investments purchased and sold, with the cost or
net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities or
other property held in the Trust Fund, less liabilities known to the
Trustee (other than liabilities to Participants entitled to benefits
under the Plans) at the end of such year or other period, as the
case may be. In making a valuation, all cash, securities or other
property held in the Trust Fund shall be valued at their then fair market
value, and shall be in a format as may be established by the Company. A
copy of each accounting so delivered to the Company shall be open to
inspection at the office of the Trustee during normal business hours.
(b) If within ninety (90) days after the filing of such written
accounting, the Company has not delivered to the Trustee notice of any
objection to any act or transaction of the Trustee, the initial
accounting shall become an account stated as between the Trustee and the
Company. If any objection has been delivered to the Trustee by the
Company, and if the Company is satisfied that it should be withdrawn, the
Company shall signify its approval of the accounting in writing filed
with the Trustee, and the accounting shall become an account stated as
between the Trustee and the Company. If the accounting is adjusted
following an objection thereto, the Trustee shall file and deliver the
adjusted accounting to the Company. If within fifteen (15) days after
such filing of an adjusted accounting, the Company has not delivered to
the Trustee notice of any objection to the transactions as so adjusted,
the adjusted accounting shall become an account stated as between the
Trustee and the Company.
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(c) Unless an accounting is fraudulent, when it becomes an account
stated, it shall be finally settled, and the Trustee shall, to the extent
permitted by applicable law, be forever released and discharged from all
liability and accountability with respect to the propriety of its acts
and transactions shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that authority
with respect to the administration of the Trust has been allocated to others in
accordance with this Trust, and subject to Article V, the Trustee shall have
exclusive authority and discretion to manage and administer the Trust. The
Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a direction, request
or approval given by Company which is contemplated by, and in conformity with,
the terms of the Trustee's responsibilities under this Trust, and is given in
writing by Company. The responsibility for maintenance of individual benefit
records shall be retained by the Company, and may be delegated to such person
or entity as the Company may employ from time to time. Except as otherwise
provided herein, the Trustee shall have, without exclusion, all powers
conferred on trustees by law and, without limiting the foregoing, shall
have the following administrative powers, rights, and duties in addition to
those provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all assets held
by the Trustee on such terms and conditions as the Trustee shall decide;
provided however, that if the Company delivers written instructions to
the Trustee, the Trustee shall follow such instructions;
(b) when directed by the Company or requested by a Participant
pursuant to Article VI, to make payments from the Trust Fund to
Participants and, when required by Article VII, to make payments from the
Trust Fund to General Creditors entitled to payments thereunder;
(c) except as provided in Article VI and Article VII, to waive,
modify, reduce, compromise, release, contest, submit to arbitration, or
settle or extend the time of payment of any claims, debts, damages, or
demands of any nature in favor of or against the Trustee or all or any
part of the Trust Fund;
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(d) to retain any disputed property until an appropriate final
adjudication or release is obtained, and to represent the Trust in, or
commence or defend, any litigation the Trustee considers in its
discretion necessary in connection with the Trust Fund;
(e) to withhold, if the Company so directs, all or any part of any
payment required to be made hereunder as may be necessary and proper to
protect the Trustee or the Trust Fund against any liability or claim on
account of any estate, inheritance, income or other tax or assessment
attributable to any amount payable hereunder, and to discharge any such
liability with any part or all of such payment so withheld in accordance
with Section 6.7;
(f) to maintain records reflecting all receipts and payments under
this Trust and such other records as the Company may specify and to which
the Trustee agrees, which records may be audited from time to time by the
Company or anyone named by the Company; and to furnish a written
accounting to the Company as of each Valuation Date, as provided in
Section 4.3;
(g) if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy
from a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
Notwithstanding the preceding sentence, the Trustee may loan to the
Company the proceeds of any borrowing against an insurance policy held as
an asset of the Trust;
(h) to furnish the Company with such information for tax or other
purposes which the Company may reasonably request and which the Trustee
may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal counsel (who,
except following a Change of Control, may be legal counsel to the Company
and who are not in the Company's reasonable judgment deemed to have a
conflict of interest), consultants, custodians, depositories, experts and
other providers of services, to consult with them with respect to the
implementation and construction of this Trust, the duties of the Trustee
hereunder, the transactions contemplated by this Trust, or any act which
the Trustee proposes to take or omit, and to rely upon the advice of and
services performed by such persons; to delegate discretionary powers to
such persons and to reasonably rely upon
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information and advice furnished by such persons; provided that each such
delegation and the acceptance thereof by each such person shall be in
writing; and provided further that the Trustee may not delegate its
responsibilities as to the management or control of the assets of the
Trust Fund;
(j) to determine whether the Company is Insolvent, and to hold
assets of the Trust Fund for the benefit of General Creditors in the
event of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a Change of
Control, as provided in Article VI hereof;
(l) to perform all other acts which in the Trustee's judgment are
appropriate for the proper protection, management, investment, and distribution
of the Trust Fund, and to carry out the purposes of the Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has
investment responsibility, the Trustee shall invest and reinvest the principal
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income, in accordance with the written
investment guidelines established by the Company and provided to the Trustee by
the Company. If no such written investment guidelines are received by the
Trustee, the assets of the Trust Fund shall be invested in such investments as
determined by the Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that authority
with respect to the management of all or a portion of the Trust Fund has been
allocated to others in accordance with this Trust, the Trustee shall have
exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
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(a) to invest and reinvest in any property wherever situated,
whether real, personal, mixed, foreign or domestic, including common and
preferred stocks, bonds, notes, and debentures (including convertible
stocks and securities, but not including any stock, securities, or debt
instruments of the Company [unless held in a collective or commingled
fund and such Company securities comprise 5% or less of the assets of
such fund]), leaseholds, mortgages (including, without limitation, any
collective or part interest in any bond and mortgage or note and
mortgage), certificates of deposit, life insurance contracts, guaranteed
investment contracts, and guaranteed annuity contract, all regardless of
diversification and without being limited to investments authorized by
law for the investment of trust funds;
(b) to invest and reinvest, without distinction between principal
and income, in contracts for future delivery of United States Treasury
Bills, other financial instruments, or indices based on any group of
securities, and in options to buy or sell indices based on any group of
securities or any kind of evidences of ownership or indebtedness,
including financial instruments or futures contracts relating thereto;
(c) to invest and reinvest part or all of the Trust Fund in any
deposit accounts, deposit administration fund maintained by a legal
reserve life insurance company in accordance with an agreement between
the Trustee and such insurance company, a group annuity contract or life
insurance policies issued by such insurance company to the Trustee as
contract holder, any interest bearing deposits held by any financial
institution having total capital and surplus of at least Fifty Million
Dollars ($50,000,000), investments in any stocks, bonds, debentures,
mutual fund shares, notes, commercial paper, treasury bills, and any
mutual, common, commingled or collective trust funds or pooled investment
funds, and to diversify such investments so as to minimize the risk of
losses;
(d) to commingle assets of the Trust Fund, for investment purposes
only, with assets of any common, collective, or commingled trust fund
which has been or may hereafter be established and maintained by the
Trustee, or by any other financial institution; provided that to the
extent that any part or all of the assets of the Trust Fund for which the
Trustee has investment responsibility are invested in any such common,
collective or commingled trust fund or pooled investment fund which is
maintained by a bank or trust company (including a bank or trust company
acting as Trustee), the provisions of the documents under which such
common, collective or commingled trust fund or pooled investment
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fund are maintained shall govern any investment therein and provided
further that prior to investing any portion of the Trust Fund for the
first time in any such common, collective, or commingled trust fund,
the Trustee shall advise the Company of its intent to make such an
investment, and furnish to the Company any information it may reasonably
request with respect to such common, collective, or commingled trust fund
(other than a trust fund established by the Company), and provided
further that the Trustee shall maintain separate records with respect to
each other trust of the Trust Fund;
(e) to vote stock and other voting securities personally or by proxy
(and to delegate the Trustee's powers and discretion with respect to such
stock or other voting securities to such proxy), to exercise
subscription, conversion and other rights and options (and make payments
from the Trust Fund in connection therewith), to take any action and to
abstain from taking any action with respect to any reorganization,
consolidation, merger, dissolution, recapitalization, refinancing and any
other plan or change affecting any property constituting a part of the
Trust Fund (and in connection therewith to delegate the Trustee's
discretionary powers and pay assessments, subscriptions and other charges
from the Trust Fund), to hold or register any property from time to time
in the Trustee's name or in the name of a nominee or to hold it
unregistered or in such form that title shall pass by delivery; and to
borrow from anyone, including itself (to the extent permitted by law),
such amounts from time to time as the Trustee considers desirable to
carry out this Trust (and to mortgage or pledge all or part of the Trust
Fund as security); to participate in any plan or reorganization,
consolidation, merger, combination, liquidation, or other similar plan
relating to any such property, and to consent to or oppose any such plan
or any action thereunder, or any contract, lease, mortgage, purchase,
sale, or other action by any corporation or other entity any of the
securities of which may at any time be held in the Trust Fund, and to do
any act with reference thereto;
(f) to retain in cash such amounts as the Trustee considers
advisable and as are permitted by applicable law, and to deposit any cash
so retained in any depository (including any bank acting as Trustee)
which the Trustee may select, provided such depository must have total
capital and surplus of at least Fifty Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section 4.4(g), to
apply for, pay premiums on, and maintain in force individual, ordinary or
universal life insurance policies on the lives of Participants, which
policies may
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contain provisions which the Company may approve or direct; to receive or
acquire such policy or policies from the Company, but the Trustee may
purchase a life insurance policy from a person other than the insurer
which issues a policy only if the Trustee pays, transfers, or
otherwise exchanges an amount no more than the cash surrender value of
the policy or policies, and the policy or policies is (are) not subject
to a mortgage or similar lien which the Trustee would be required to
assume; to have with respect to such policy or policies any rights,
powers, options, privileges, and benefits usually comprised in the term
"incidents of ownership", and normally vested in an owner of such policy
or policies to be exercised only pursuant to Company direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to dispose of,
and to grant options for the purchase or exchange with respect to it, any
property at any time held by it, by public or private sale, for cash or
on credit, or partly for cash and partly for credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited;
(k) to exercise any conversion privilege or subscription right
available in connection with any such property, and to do any act with
reference thereto, including the exercise of options, the making of
agreements or subscription, and the payment of expenses, assessment or
subscription, which may be deemed necessary or advisable in connection
therewith, and to hold and retain any securities or other property which
it may so acquire;
(l) to extend the time of payment of any obligation held in the
Trust Fund;
(m) to enter into standby agreements for future investment, either
with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the renewal or
extension of any mortgage, and to agree to a reduction in the rate of
interest on any indebtedness or mortgage or to any other modification or
change in the terms
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of any indebtedness or mortgage, or of any guarantee pertaining
thereto, in any manner and to any extent that may be deemed advisable for
the protection of the Trust Fund or the preservation of any covenant or
condition of any indebtedness or mortgage or in the performance of any
guarantee, or to enforce any default in such manner and to such extent as
may be deemed advisable; and to exercise and enforce any and all rights
of foreclosure, to bid on any property in foreclosure, to take a deed in
lieu of foreclosure with or without paying a consideration therefor, and
in connection therewith to release the obligation on the bond secured by
such mortgage; and to exercise and enforce in any action, suit or
proceeding at law or in equity any rights or remedies in respect of any
such indebtedness or mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgage, conveyance, contracts,
waivers, releases, or other instruments in writing necessary or proper
for the accomplishment of any of the foregoing powers;
(p) to organize under the laws of any state one or more
corporations, partnerships, or trusts for the purpose of acquiring and
holding title to any property that it is authorized to acquire under this
Trust, and to exercise with respect thereto any or all of the powers set
forth in this Trust;
(q) notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a business
and dividing the gains therefrom, within the meaning of Section
301.7701-2 of the Procedure and Administrative Regulations promulgated
under the IRC; and
(r) generally to do all acts, whether or not expressly authorized,
that the Trustee deems necessary or desirable for the protection of the
Trust Fund, and to carry out the purposes of the Trust.
5.3 Investment Managers. The Company may appoint one or more Investment
Managers to direct the investment of any part or all of the assets of the Trust
Fund by the Trustee. Appointment of an Investment Manager shall be made by
written notice to the Investment Manager(s) and to the Trustee, which notice
shall specify those powers, rights, and duties of the Trustee under this Trust
that are allocated to the Investment Manager(s) and the portion of the assets
of the Trust Fund subject to the Investment Manager(s). After it receives
written notice of such appointment, the Trustee
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shall have no obligation or responsibility for those investment duties which
are allocated to an Investment Manager. An Investment Manager so appointed
pursuant to this paragraph shall be either a registered investment adviser
under the Investment Advisers Act of 1940, a bank, as defined in said Act, or
an insurance company qualified to manage, acquire and dispose of the
assets of the Plans under the laws of more than one state of the United States.
Any such Investment Manager shall acknowledge to the Company in writing that is
accepts such appointment. The Trustee shall not be liable for any loss or
diminution of any assets managed by an Investment Manager, including without
limitation, any loss or diminution caused by any action or inaction taken or
omitted by it at the direction of an Investment Manager. In addition, the
Trustee shall not be liable for the diversification of any assets managed by
Investment Managers of the Company, each of which shall be solely the
responsibility of the Company. An Investment Manager may resign at any time
upon written notice to the Trustee and the Company. The Company may remove an
Investment Manager at any time by written notice to the Investment Manager and
the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each investment
fund, and the income thereon, shall be held and invested as a single fund, and
the Trustee shall not make any separate investment of the Trust Fund, or make
any separate investment fund, for the account of any Participant or other
General Creditors prior to receipt of directions to make payments to such
Participant or other General Creditors in accordance with Article VI or Article
VII. All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The Trustee's
obligation to distribute to any Participant out of the assets of the Trust Fund
shall be limited to payment at such times and in such amounts as are properly in
conformance with the provisions of Section 6.3. Payments to Participants
pursuant to this Article VI shall be made by the Trustee to the extent that
funds in the Trust Fund are sufficient for
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<PAGE> 26
such purpose, and shall at all times be subject to the provisions of Article
VII. In the event the Company determines that it will pay benefits directly
to Participants as they become due under the terms of the Plan, the Company
shall notify Trustee of its decision prior to the time amounts are payable to
Participants.
6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be made from
the Trust Fund to pay benefits in accordance with the Plan shall be initiated
by:
(a) written direction to the Trustee from the Plan Administrator,
which direction shall certify that such distribution(s) is(are) in
accordance with the Plan, and specify the timing, form, payee, and amount
of such benefit payments, including any federal, state, or local income
taxes to be withheld, and the Trustee shall make or commence the directed
distributions after receipt of such written direction; or
(b) by the submission to the Trustee by a Participant of a certified
copy of the non-appealable order of an appropriate forum with
jurisdiction to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee determines
or is advised that the Trust Fund does not have sufficient assets to permit the
Trustee to make a payment property directed pursuant to this Trust, including a
payment provided for under Section 10.7 of this Trust, the Trustee shall pay
any benefits due (if otherwise payable hereunder) to Participants on a pro
rata basis as directed by the Plan Administrator, and the Company shall make
the balance of such payments as they become due. If the Plan Administrator
determines that the Trust Fund does not have sufficient funds to provide
for the payment of all amounts otherwise payable to Participants (or their
Beneficiary(ies)) from the Trust under the Plans, it shall notify the
- 21 -
<PAGE> 27
Company and the Trustee of the amount of the deficiency, and, within forty-five
(45) days of such notice, the Company deposit in trust with the Trustee the
additional amounts needed to make such payments. Upon receipt of such
amount by the Trustee from the Company, proceeds shall first be used by the
Trustee to pay any benefits previously due remaining unpaid, in the order in
which they were due, pursuant to Plan Administrator instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII, and
except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount paid to a
Participant by the Trustee in accordance with this Article VI shall be reduced
by the amount of taxes required to be withheld pursuant to Plan Administrator
instructions, and the Trustee shall inform the Company of all amounts so
withheld. The Company shall direct that the Trustee shall either
(a) pay to the Company a sum equal to the amount of such taxes as
are required to be withheld, whereupon the Company shall have full
responsibility for the payment of all withholding taxes to the
appropriate taxing authorities, or
- 22 -
<PAGE> 28
(b) pay such taxes directly to the appropriate taxing authorities
for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall furnish each Participant with the appropriate tax information
form evidencing payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon receipt
of written certification from the Company that all obligations of the Company
to Participants with respect to the Plan have been satisfied, and if the Trust
Fund shall have any assets remaining, the Trustee shall distribute such
remaining assets of the Trust Fund to the Company, after converting such assets
to cash if requested by the Company, subject to the Trustee's right to retain
such reasonable amount for compensation and expenses as provided in Section
10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on or
beneficial ownership interest in the Trust Fund before such assets are paid to
the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any other General Creditor. At all times during the continuance
of this Trust, as provided in this Article VII hereof, the principal and income
of the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with
no preference whatsoever given claims of employees or Participants over claims
of other unsecured creditors of the Company.
7.2 Determination of Insolvency. Notwithstanding any other provisions of
this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive Officer of the
Company shall have the fiduciary duty and responsibility on behalf of
General
- 23 -
<PAGE> 29
Creditors to notify the Trustee promptly in writing in the event
the Company is Insolvent, and the Trustee shall have the right to rely
thereon to the exclusion of all directions or claims for payment made
thereafter by Participants.
(b) If the Trustee has actual knowledge that the Company is
Insolvent, the Trustee shall act in accordance with Section 7.3 hereof.
(c) Unless the Trustee receives written notice from the Board of
Directors or the Chief Executive Officer of the Company that the Company
is Insolvent, or from a person claiming to be a General Creditor and
claiming that the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. If the Trustee receives a
written allegation from a person claiming to be a General Creditor that
the Company is Insolvent, the Trustee's only duty of inquiry shall be to
request that the Company's independent public accountants determine
whether the Company is Insolvent, and shall suspend benefit payments
pending such determination. If the Company's independent public
accountants advise the Trustee that the Company is not Insolvent, it
shall resume payments in accordance with this Trust. If the Trustee
receives notice of the Company's Insolvency pursuant to this Section
7.2(c), it shall act in accordance with this Section and Section 7.3
hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and
shall hold the Trust Fund for the benefit of the General Creditors, and
shall pay and deliver the entire amount of the Trust Fund only as a court
competent jurisdiction, or duly appointed receiver or other person
authorized to act by such court, may order or direct to make the Trust
Fund available to satisfy the claims of the General Creditors (payments
to Participants in accordance with the terms of the Plan may be resumed
only pursuant to Section 7.4 hereof); or
(b) by reason of Section 1.11(a), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and
shall (i) hold the Trust Fund for the benefit of General Creditors or
(ii) pay over all or a portion of
- 24 -
<PAGE> 30
the Trust Fund to General Creditors if directed by the Company or an
appropriate judicial forum.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of notice of a Court
order to the contrary, the Trustee shall resume all of its duties and
responsibilities under the Trust, including payments to Participants if
otherwise provided for herein, within thirty (30) days of the Trustee's receipt
of a determination from the Company's independent public accounting firm that
the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event that
amounts are paid from the Trust Fund to General Creditors of the Company,
then as soon as practicable after the Company is no longer Insolvent, the
Company shall deposit into the Trust Fund a sum to equal to the Funding
Amount, determined as of the date the Company is no longer Insolvent,
which date shall be a Valuation Date. The Company (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written certification of such Funding Amount. If the Funding
Amount is not paid by the Company within ninety (90) days of the
Trustee's receipt of such notice, the Trustee shall demand payment and
the provisions of Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of Payments.
Provided that there are sufficient assets of the Trust Fund, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section
7.3 and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments
due to Participants under the terms of the Plan for the period of such
discontinuance, as determined by the Plan Administrator, less the
aggregate amount of any payments made to Participants by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance. If the Trustee suspends a payment to a Participant under
this Section, and subsequently makes such payment, the payment shall
include interest at the rate of interest per annum equal to the prime
rate as published by NBD Bank for each day from the date of suspension to
the date of payment, as calculated by the Plan Administrator.
7.5 Reserved.
- 25 -
<PAGE> 31
VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for any
reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal of a
Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor Trustee
shall be appointed by the Company. If a Trustee should resign or be
removed, and the Company does not notify the Trustee of the appointment
of a successor Trustee within forty-five (45) days of its notice of
its resignation or removal, then the Company shall be deemed to have
failed to have appointed a successor Trustee, and the Trustee shall apply
to a court of competent jurisdiction for appointment of a successor
Trustee.
(b) After the occurrence of a Change of Control, the Trustee who is
the Trustee on the date of the Change of Control may be removed by the
Company for three (3) years from the date of the Change of Control. If a
Trustee resigns or is removed at any time after the date of a Change of
Control, the Trustee shall apply to a court of competent jurisdiction for
appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
- 26 -
<PAGE> 32
8.3 Duties of Retiring and Successor Trustees. In the event of the
resignation or removal of a Trustee, the retiring Trustee shall within thirty
(30) days after the effective date of resignation or removal furnish to the
successor Trustee and the Company a final accounting of its administration of
the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this Trust,
the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which amendment shall include the effective date of such amendment.
Any amendment of the Trust may be made:
(a) prior to a Change of Control, without limitation and in any
manner and effective as of any date, including a retroactive effective
date, if accompanied by the written certification that no Change of
Control has occurred;
(b) after a Change of Control, only if a period of three (3) years
has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific written
consent to the amendment by Participants whose actuarial interests
under the Plan, computed by the Company's independent public
accountants as of the effective date of such amendment, represent
at least 51% of the total of all actuarial interests under the
Plan; or
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<PAGE> 33
(2) such amendment is accompanied by the opinion of legal
counsel satisfactory to the Trustee that the amendment is necessary
for the purpose of conforming the Trust to any present or future
federal or state law (including revenue laws) relating to trusts of
this or similar nature, as such laws may be amended from time to
time, and a certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
9.2 Termination. After all assets of the Trust Fund have been distributed
by the Trustee to the Participants or their Beneficiaries in accordance with
Article VI, the Trustee shall render an accounting, which shall be the final
accounting, in the manner provided for in Section 4.3. Upon acceptance of the
accounting by the Company, any assets remaining in the Trust Fund, after
deduction of such reasonable amount for compensation and expenses as provided
for in Section 10.7, shall be returned to the Company in the manner provided in
Section 6.8, and the Trust shall terminate thereupon. The Trust and all the
rights, titles, powers, duties, discretions and immunities imposed on or
reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee shall be
governed solely by the terms of this Trust Agreement.
- 28 -
<PAGE> 34
10.2 Litigation. In any action or proceeding regarding the Trust, the
Company, any assets of the Trust Fund, or the administration of the Trust, any
creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or non-exercise
of its powers and discretion in good faith shall be conclusive on all persons.
No one other than the Company shall be obliged to see to the application of any
money paid or property delivered to the Trustee. The certificate of the Trustee
that it is acting according to this Trust will fully protect all persons
dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other provision
of this Trust to the contrary, the Trustee does not guarantee payment of any
amount which may become due and payable to a Participant. The Trustee shall
have no responsibility for the disclosure to Participants regarding the terms
of the Plan or of this Trust, or for the validity thereof. The Trustee shall
not be responsible for administrative functions under the Plan and shall have
only such responsibilities under this Trust Agreement as specifically set forth
herein. The Trustee will be under no liability or obligation to anyone with
respect to any failure on the part of the Company, the Plan Administrator, the
Company's independent public accounting firm, an Investment Manager, or a
Participant to perform any of their respective obligations under the Plan or
this Trust. The Trustee shall be fully protected in relying upon any notice or
direction provided to it from any party in connection with the Trustee's duties
hereunder which the Trustee in good faith believes to be genuine, and executed
and delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the amounts
held in the Trust Fund at the time of such payment or otherwise to risk or
expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the Company
shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the extent
permitted by law the Trustee and hold it harmless against Trustee's costs,
expenses and
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<PAGE> 35
liabilities (including, without limitation, attorneys' fees and
expenses) arising out of or in connection with the performance of the Trustee's
duties arising hereunder (but excluding costs arising as a result of the
Trustee's bad faith or gross negligence in the performance of its
responsibilities hereunder), and to be primarily liable for such payments. If
the Company does not pay such costs, expenses and liabilities in a reasonably
timely manner, Trustee may obtain payment from the Trust. This Section shall
survive the termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid compensation by
the Company in an amount agreed to by the Company and the Trustee. The Trustee
shall be reimbursed by the Company for reasonable expenses incurred by it in
the management and administration of this Trust Agreement, including the
reasonable compensation of the Trustee's counsel and other agents; and if the
Trustee is not timely reimbursed with respect to amounts due pursuant to this
Section 10.7 (or in the case of expenses to be incurred pursuant to Section 3.5
hereof), the Trustee may charge such amounts against the Trust Fund. Any
compensation or expenses so agreed upon or otherwise payable not paid by the
Company on a timely basis may be charged to the Trust Fund no more frequently
than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required or
permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
The Detroit Edison Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
- 30 -
<PAGE> 36
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants and their
Beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
10.11 True and Correct Document. Any persons dealing with the Trustee may
rely upon a copy of this Trust and any amendments thereto certified to be true
and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may be waived
by the person entitled to such notice.
10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender shall include
the feminine and neuter genders and the singular shall include the plural and
the plural shall include the singular wherever required by the context.
10.15 Successors. This Trust shall be binding on all persons entitled to
payments hereunder and their respective heirs and legal representatives, and on
the Company, the Trustee, and their respective successors.
10.16 Severability. If any provision of this Trust is held to be illegal
or invalid, such illegality or invalidity shall not affect the remaining
provisions of this Trust, which shall be construed and enforced as if such
illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and construed in
accordance with the laws of the State of Michigan with respect to the Company's
obligations and in accordance with the laws of the State of Illinois with
respect to the Trustee's obligations and Trust Administration.
- 31 -
<PAGE> 37
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
THE DETROIT EDISON COMPANY
By L.L. Loomans
--------------------------
Its
-------------------------
THE NORTHERN TRUST COMPANY
as Trustee
By
--------------------------
Its
-------------------------
- 32 -
<PAGE> 38
EXHIBIT A
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY PLAN FOR DEFERRING THE
PAYMENT OF DIRECTORS' FEES
The Company has established an Irrevocable Grantor Trust to pay benefits under
The Detroit Edison Company Plan for Deferring the Payment of Directors' Fees. A
copy of such Plan, including any amendment(s), is attached hereto.
<PAGE> 39
EXHIBIT B
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DETROIT EDISON COMPANY PLAN FOR DEFERRING THE
PAYMENT OF DIRECTORS' FEES
PARTICIPANTS (as defined in the Trust)
as of December 31, 1995
Name [Date of Birth]
- ------- ---------------
<PAGE> 1
EXHIBIT 99-6
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
AS RESTATED AS OF JANUARY 1, 1996
<PAGE> 2
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
TABLE OF CONTENTS
-----------------
<TABLE>
<S> <C> <C>
I. DEFINITIONS ................................................................................ 2
-----------
1.1 Beneficiary ............................................................................................... 2
1.2 Board of Directors ........................................................................................ 2
1.3 Change of Control ......................................................................................... 2
1.4 Company ................................................................................................... 4
1.5 Effective Date ............................................................................................ 4
1.6 Reserved .................................................................................................. 4
1.7 Excess Assets ............................................................................................. 4
1.8 Funding Amount ............................................................................................ 4
1.9 General Creditors ......................................................................................... 4
1.10 Reserved .................................................................................................. 5
1.11 Insolvent ................................................................................................. 5
1.12 Investment Manager ........................................................................................ 5
1.13 IRC ....................................................................................................... 5
1.14 Participant ............................................................................................... 5
1.15 Reserved .................................................................................................. 5
1.16 Plan Administrator ........................................................................................ 5
1.17 Potential Change of Control ............................................................................... 5
1.18 Potential Change of Control Period ........................................................................ 6
1.19 Reserved .................................................................................................. 7
1.20 Trust ..................................................................................................... 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
1.21 Trust Fund ................................................................................................ 7
1.22 Trustee ................................................................................................... 7
1.23 Valuation Date ............................................................................................ 7
II. ESTABLISHMENT OF THE TRUST ................................................................ 7
--------------------------
2.1 Trust ..................................................................................................... 7
2.2 Description of Trust ...................................................................................... 7
2.3 Irrevocability ............................................................................................ 9
2.4 Acceptance by the Trustee ................................................................................. 9
III. CONTRIBUTIONS .............................................................................. 9
-------------
3.1 Calculations of Funding Amount ............................................................................ 9
3.2 Contributions as of Each Valuation Date ................................................................... 10
3.3 Reserved .................................................................................................. 10
3.4 No Dilution of Trust ...................................................................................... 10
3.5 Collection ................................................................................................ 10
IV. ACCOUNTING AND ADMINISTRATION .............................................................. 11
-----------------------------
4.1 Trustee Recordkeeping ..................................................................................... 11
4.2 Company Recordkeeping ..................................................................................... 11
4.3 Periodic Accounting ....................................................................................... 12
4.4 Administrative Powers of Trustee .......................................................................... 13
V. INVESTMENTS ................................................................................ 15
-----------
5.1 Generally ................................................................................................. 15
5.2 Investment Powers of Trustee .............................................................................. 15
5.3 Investment Managers ....................................................................................... 19
5.4 Reserved .................................................................................................. 20
5.5 Single Fund ............................................................................................... 20
VI. PAYMENTS FROM THE TRUST .................................................................... 20
-----------------------
6.1 Obligation of Trustee to Make Payments
to Participants ........................................................................................... 20
</TABLE>
<PAGE> 4
<TABLE>
<S> <C> <C>
6.2 Obligation of the Company to Make Payments to Participants .................................................. 21
6.3 Distributions to Participants ............................................................................... 21
6.4 Reserved .................................................................................................... 21
6.5 Insufficient Trust Fund Assets .............................................................................. 21
6.6 Payment of Excess Assets to Company ......................................................................... 22
6.7 Company to Pay Withholding and Employment Taxes ............................................................. 22
6.8 Payment in Reversion to Company ............................................................................. 23
6.9 Reserved .................................................................................................... 23
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY ....................................................... 23
-------------------------------------
7.1 No Security Interest ........................................................................................ 23
7.2 Determination of Insolvency ................................................................................. 23
7.3 Payments When Company Is Insolvent ......................................................................... 24
7.4 Resumption of Duties after Insolvency ....................................................................... 25
7.5 Reserved .................................................................................................... 25
VIII. RESIGNATION OR REMOVAL OF TRUSTEE ........................................................... 26
---------------------------------
8.1 Resignation or Removal of Trustee ........................................................................... 26
8.2 Successor Trustee ........................................................................................... 26
8.3 Duties of Retiring and Successor Trustees ................................................................... 27
8.4 Reserved .................................................................................................... 27
IX. AMENDMENT AND TERMINATION OF TRUST .......................................................... 27
----------------------------------
9.1 Amendment ................................................................................................... 27
9.2 Termination ................................................................................................. 28
9.3 Reserved .................................................................................................... 28
X. GENERAL PROVISIONS .......................................................................... 28
------------------
10.1 Coordination with Plan ...................................................................................... 28
10.2 Litigation .................................................................................................. 29
10.3 Trustee's Action Conclusive ................................................................................. 29
10.4 No Guarantee or Responsibility .............................................................................. 29
10.5 Liabilities Mutually Exclusive .............................................................................. 29
10.6 Indemnification ............................................................................................. 29
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
10.7 Expenses and Compensation ............................................................................... 30
10.8 Reserved ................................................................................................ 30
10.9 Notice .................................................................................................. 30
10.10 Antiassignment Clause ................................................................................... 31
10.11 True and Correct Document ............................................................................... 31
10.12 Waiver of Notice ........................................................................................ 31
10.13 Counterparts ............................................................................................ 31
10.14 Gender and Number ....................................................................................... 31
10.15 Successors .............................................................................................. 31
10.16 Severability ............................................................................................ 31
10.17 Applicable Law .......................................................................................... 31
</TABLE>
EXHIBIT A The Detroit Edison Company
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
EXHIBIT B The Detroit Edison Company
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
PARTICIPANTS (as defined in the Trust)
<PAGE> 6
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
THIS TRUST AGREEMENT is made this 7th day of August, 1995, as restated in
its entirety effective January 1, 1996, by and between The Detroit Edison
Company, a Michigan corporation, and The Northern Trust Company, an Illinois
corporation, of Chicago, Illinois ("Trustee"), and any successor provided for
in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has adopted and participates in the DTE Energy
Company Retirement Plan for Non-Employee Directors ("Plan"), an unfunded
benefit plan, a copy of which is attached hereto as Exhibit A, for the benefit
of certain non-employee Directors of the Company listed on Exhibit B hereto,
which Exhibits may be amended from time to time by the Company prior to a
potential Change of Control and/or Change of Control, and without the Trustee's
consent; and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred to
the Trust and the earnings thereon shall be used by the Trustee, subject to the
claims of the Company's creditors in the event the Company becomes Insolvent,
to satisfy the liabilities of the Company in accordance with the provisions
hereof; and, upon satisfaction of all liabilities of the Company with respect
to all Participants (and their
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Beneficiaries, if applicable), the assets, if any, remaining in the
Trust shall revert to the Company; and
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose of providing deferred compensation for certain non-employee
members of the Board of Directors, and shall not be construed to provide income
for federal income tax purposes to a Participant (or his or her Beneficiary)
prior to the actual payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS Unless the context requires otherwise, definitions as used
herein shall have the same meaning as in the Plan when applied to said Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in the Plan
as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors, as
constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the following
events:
(a) a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Act of 1934, as amended (the "Exchange Act"), or any successor
provisions, whether or not the Company is then subject to such reporting
requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights accruing under special circumstances) having the right to
vote at elections of the Board of Directors (the
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<PAGE> 8
"Base Capital Stock"); provided, however, that any change in the relative
beneficial ownership of securities of any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base Capital
Stock, and any decrease thereafter in such person's ownership of
securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of any
securities of the Company; or
(c) a change in the composition of the Company's Board of Directors, as a
result of which fewer than two-thirds of the incumbent directors are
directors who either
(1) had been directors of the Company 24 months prior
to such change, or
(2) were elected, or nominated for election, to the
Company's Board of Directors with the affirmative votes of at
least a majority of the directors who had been directors of
the Company 24 months prior to such change and who were still
in office at the time of the election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in
which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's
common stock would be converted into cash, securities, or
other property, other than a merger of the Company in which
the holders of the Company's common stock immediately prior to
the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the
merger, or
(2) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of all, or
substantially all, of the assets of the Company, or
(3) the stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of the Company.
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<PAGE> 9
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may be amended or supplemented from time to time),
whereby it is proposed that a corporation will become the parent holding
company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means The Detroit Edison Company, a Michigan
corporation, its successors and assigns.
1.5 "Effective Date" means August 7, 1995.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of
one hundred and twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the books
of the Company as of the most recent Valuation Date, certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during
any Potential Change of Control Period, however, the "Funding Amount" means one
hundred and twenty per cent (120%) of the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, as certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each respective
Participant under the Plan shall be limited to benefits attributable to
services rendered by the Participant to the Company.
1.9 "General Creditors" means the unsecured general creditors of the
Company, including the Participants.
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<PAGE> 10
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
(a) is unable to pay its debts as they become due; or
(b) is subject to a pending proceeding as a debtor under the
Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed by the
Company in the manner provided in Section 5.3 to direct the investment of any
part or all of the assets of the Trust Fund in accordance with Article V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" means an individual listed on Exhibit B attached hereto
who
(a) is a Participant in the Plan because of services rendered to the Company;
or
(b) would be a Participant in the Plan because of services rendered to the
Company but is not due to age, years of service or active employment. The
Company agrees to list all Participants on Exhibit B attached hereto. Except
after a Change of Control as provided in Section 3.4, the Company may add or
delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan as
responsible for the management, operation, and administration of the Plan.
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in
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<PAGE> 11
Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 9.5% or more of the combined
voting power of the Company's then outstanding securities ordinarily (and
apart from rights accruing under special circumstances) having the right
to vote at elections of the Board of Directors (the "Base Capital
Stock"); provided, however, that any change in the relative beneficial
ownership of securities of any person resulting solely from a reduction
in the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities, shall
be disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company; or
(c) the public announcement by any individual or entity, other than
the Company, that such individual or entity intends to take or to
consider taking actions which, if consummated, would constitute a Change
of Control of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company is
not the continuing or surviving corporation, or pursuant to which shares
of the Company's common stock would be converted into cash, securities, or
other property, other than a transaction in which the holders of the
Company's common stock immediately prior to the merger, acquisition,
consolidation, or reorganization have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger,
acquisition, consolidation, or reorganization, including, but not limited
to, the creation of a parent entity to oversee the Company; or
(e) the public announcement of the sale or other transfer of
substantially all of the assets of the Company to any third party; or
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year period
immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the
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<PAGE> 12
Potential Change of Control Period shall end one (1) year following the
date of the most recent Potential Change of Control.
The Company shall promptly notify the Trustee of a Potential Change of
Control and the Trustee may conclusively rely upon such notice and shall have
no duty to independently determine whether a Potential Change of Control has
occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to this
Trust Agreement and all of the terms and conditions of this Trust Agreement,
which is intended to constitute a grantor trust under IRC Section Section 671
et seq.
1.21 "Trust Fund" means all moneys, securities, and other property held by
the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any successor
trustee appointed pursuant to Article VIII.
1.23 "Valuation Date" means the day in each calendar year which is the
last day of the Company's fiscal year in each year, and such other times as the
Company may determine. Each of (a) any date of a Potential Change of Control,
(b) the date of a Change of Control, (c) the effective date of a Trustee's
resignation or removal, and (d) the date of termination of the Trust shall also
be a Valuation Date if any such date occurs other than on the last business day
of the Company's fiscal Year. The first Valuation Date shall be December 31,
1994.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the Trustee,
which Trust shall consist of such sums of money and other property acceptable
to the Trustee as from time to time have been and shall be paid or delivered by
the Company to the Trustee as provided herein. All such money and other
property, all investments and reinvestments made therewith, or the proceeds
thereof, and all investment earnings and profits thereon, less all payments and
charges as authorized herein, shall constitute the Trust Fund. The Trust Fund
shall be held in trust by the Trustee, and shall be dealt with in accordance
with the provisions of this Trust.
2.2 Description of Trust. The Company represents and agrees that:
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<PAGE> 13
(a) the Trust is intended to be a grantor trust under IRC Section
Section 671-678, and shall be construed accordingly. The Company intends
and agrees that it is the "owner" or grantor of the Trust in its
entirety, as that term is defined in subpart E, part I, subchapter J,
chapter 1, subtitle A of the IRC and that, for income tax purposes, all
income, deductions, and credits of the Trust Fund belong to it as owner,
and will be included on its income tax or other required tax returns, and
any income tax determined to be payable as a result thereof will be the
sole obligation of, and will be paid by, the Company;
(b) a true and correct copy of the Plan, as in effect on the
Effective Date hereof, is attached hereto as Exhibit A. The Company shall
file with the Trustee, promptly upon its adoption, a true and correct
copy of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal obligations of
the Company to Participants under the Plan as provided herein, subject to
the claims of General Creditors in the event of Insolvency, and the
balance of the Trust Fund, if any, remaining after payment of the
Company's obligation to Participants under the Plan will revert to the
Company in accordance with the Trust;
(d) contributions by the Company to the Trust which are made
coincident with and subsequent to the Effective Date shall be in amounts
determined under Article III hereof. The Company agrees to fund the Trust
as provided therein;
(e) the principal of the Trust, and any earnings thereon shall be
held by the Trustee separate and apart from other funds of Company, and
shall be used exclusively for the uses and purposes as herein set forth;
(f) the Trust established under this agreement does not fund and is
not intended to fund the Plan, or any other benefit plan or program of
the Company. Neither the establishment of the Trust, nor the payment or
delivery of assets to the Trustee shall vest any Participant in any
right, title, or interest in or to any assets of the Trust Fund;
(g) participants shall have no preferred claim on, or any beneficial
ownership interest in, assets of the Trust. To the extent that any
Participant
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<PAGE> 14
acquires the right to receive payment(s) under the Plan, any
such right shall be mere unsecured contractual rights of Participants
against the Company, and such Participants (or their Beneficiary(ies))
shall have only the unsecured promise of the Company that such payment(s)
will be made. Any assets held by the Trust will be subject to the claims
of General Creditors under federal and state law in the event of
Insolvency, as defined herein, with no preference whatsoever given to
claims of employees or Participants over claims of other unsecured
creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan is a plan
for a select group of management or highly compensated employees, and as
such are exempt from the application of ERISA except for the disclosure
requirements applicable to such plan, for which the Company bears full
responsibility as to compliance. The Company further represents that the
Plan is not qualified under IRC Section 401 and therefore, is not
subject to any IRC requirements applicable to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this Section
2.3, the Trust shall be irrevocable from the effective date, and the assets of
the Trust Fund shall be held in accordance with the provisions hereof for the
exclusive purpose of providing for the payment of the Company's obligations to
pay benefits to Participants under the Plan and to satisfy the claims of General
Creditors in the event of Insolvency, and defraying the expenses of the Trust.
Except as provided in Section 6.6 and Section 6.8 and in the event of
Insolvency, no part of the income or corpus of the Trust Fund shall be
recoverable by or for the benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust established
under this Trust Agreement on the terms and subject to the provisions set forth
herein, and agrees to discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1995, the Company
shall contribute to the Trust the Funding Amount as determined on the first
Valuation Date. As of each Valuation Date, and until the entire Trust Fund has
been distributed, the Company (or, after a Change of Control, the Company's
independent public accountants) shall recalculate the Funding Amounts.
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<PAGE> 15
3.2 Contributions as of Each Valuation Date. During the life of the Trust
but no later than September 30 of each year, commencing no later than September
30, 1996, the Company shall contribute to the Trust such amount as is necessary
to make trust assets equal the Funding Amount as of the previous Valuation
Date. The Plan Administrator or its delegate (or, after a Change of Control,
the Company's independent public accountants) shall provide the Trustee with
written notice of the amount of the necessary contribution on or before the
date such contribution is due to the Trust. Any such payments to the Trustee do
not discharge or release the Company of its obligation under the Plan or
Section 6.2 to pay benefits to Participants under the Plan, and shall at all
times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit B in
effect on the date of a Change of Control shall not be amended to include a
Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of the Delivery Date of the
proposed amended Exhibit B of the Funding Amount calculated based on the
Participants named in the Exhibit B in effect on the Date of the Change
of Control and any new or additional Participants named in the proposed amended
Exhibit B (the "New Funding Amount") and (b), assets in an amount necessary to
make the trust assets equal the New Funding Amount. If the Trustee determines
that assets of the Trust Fund, including such assets as are delivered by the
Company on the Delivery Date, equal or exceed the New Funding Amount, the
Trustee shall accept the amended Exhibit B. Any amended Exhibit B so accepted
shall be deemed incorporated with the same effect as if otherwise included
herein. Unless an Exhibit B amended after a Change of Control is accepted by the
Trustee as provided in this Section, the Trustee shall have no liability,
responsibility, or obligation with respect to a Participant named in any amended
Exhibit B unless such Participant is named in the Exhibit B then in effect on
the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the Trustee
within one hundred and twenty (120) days of notice and demand from the Trustee
(or, upon the occurrence of a Potential Change of Control or a Change of
Control, within seven (7) days of notice and demand from the Trustee), any
amount determined to be payable by the Company to the Trustee under Sections
3.2, 6.5 or 7.4(a) of the Trust, the Trustee may commence legal action, (which
is expressly deemed to include without
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<PAGE> 16
limitation an alternate dispute resolution proceeding), to compel the Company to
pay to the Trustee any amount determined to be payable to it under the Trust.
The Trustee may bring such action against the Company in any court of competent
jurisdiction, and shall be entitled to recover for the benefit of the Trust from
the Company such amount, plus interest for each day at the rate of interest per
annum of five (5) percentage points in excess of the prime lending rate as
announced by NBD Bank, from the due date specified in the Trustee's notice
and demand (or the date(s) from which pro rata payments were made, if such
action is brought by the Trustee pursuant to Section 6.5 hereof) to the date of
payment, plus all costs of collection, including reasonable attorneys fees and
costs of litigation. The Trustee is authorized to bring action to compel payment
by the Company, and, in connection with reasonable claims for delinquent
contributions by the Company, to retain, at the expense of the Company, counsel
and other appropriate experts, including actuaries and accountants, to aid it in
pursuing litigation for collection against the Company. The Trustee's
anticipated reasonable costs and expenses incurred pursuant to this Section 3.5
are payable by the Company in advance; and should the Company not make timely
payment, the Trustee may charge the Trust Fund for such reasonably anticipated
costs and expenses. The Trustee shall in no event be required to advance or
expend its own funds in order to comply with the provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be kept
accurate and detailed records of any investments, receipts, disbursements, and
all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
4.2 Company Recordkeeping. The Company shall keep full, accurate, and
detailed books and records with respect to the Participants and benefits paid
and payable under the Plan, which records shall be made available to the
Trustee at its request.
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<PAGE> 17
4.3 Periodic Accounting. Within sixty (60) days following a Valuation
Date, the Trustee shall deliver to Company a written accounting, dated as of
the Valuation Date, of its administration of the Trust Fund during such year or
during the period from the most recent Valuation Date to the date of such
current Valuation Date, which accounting shall be in accordance with the
following provisions:
(a) Such accounting shall set forth all investments, receipts,
disbursements, and other transactions effected the by Trust Fund during
the preceding year, or during the period from the most recent Valuation
Date to the date of such current Valuation Date, including a description
of all securities and investments purchased and sold, with the cost or
net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities or
other property held in the Trust Fund, less liabilities known to the
Trustee (other than liabilities to Participants entitled to benefits
under the Plans) at the end of such year or other period, as the case
may be. In making a valuation, all cash, securities or other property
held in the Trust Fund shall be valued at their then fair market value,
and shall be in a format as may be established by the Company. A copy of
each accounting so delivered to the Company shall be open to inspection
at the office of the Trustee during normal business hours.
(b) If within ninety (90) days after the filing of such written
accounting, the Company has not delivered to the Trustee notice of any
objection to any act or transaction of the Trustee, the initial
accounting shall become an account stated as between the Trustee and the
Company. If any objection has been delivered to the Trustee by the
Company, and if the Company is satisfied that it should be withdrawn, the
Company shall signify its approval of the accounting in writing filed
with the Trustee, and the accounting shall become an account stated as
between the Trustee and the Company. If the accounting is adjusted
following an objection thereto, the Trustee shall file and deliver the
adjusted accounting to the Company. If within fifteen (15) days after
such filing of an adjusted accounting, the Company has not delivered to
the Trustee notice of any objection to the transactions as so adjusted,
the adjusted accounting shall become an account stated as between the
Trustee and the Company.
(c) Unless an accounting is fraudulent, when it becomes an account
stated, it shall be finally settled, and the Trustee shall, to the extent
permitted by applicable law, be forever released and discharged from all
liability and
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<PAGE> 18
accountability with respect to the propriety of its acts and
transactions shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that authority
with respect to the administration of the Trust has been allocated to others in
accordance with this Trust, and subject to Article V, the Trustee shall have
exclusive authority and discretion to manage and administer the Trust. The
Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a direction, request
or approval given by Company which is contemplated by, and in conformity with,
the terms of the Trustee's responsibilities under this Trust, and is given in
writing by Company. The responsibility for maintenance of individual benefit
records shall be retained by the Company, and may be delegated to such person
or entity as the Company may employ from time to time. Except as otherwise
provided herein, the Trustee shall have, without exclusion, all powers conferred
on trustees by law and, without limiting the foregoing, shall have the
following administrative powers, rights, and duties in addition to those
provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all assets held
by the Trustee on such terms and conditions as the Trustee shall decide;
provided however, that if the Company delivers written instructions to
the Trustee, the Trustee shall follow such instructions;
(b) when directed by the Company or requested by a Participant
pursuant to Article VI, to make payments from the Trust Fund to
Participants and, when required by Article VII, to make payments from the
Trust Fund to General Creditors entitled to payments thereunder;
(c) except as provided in Article VI and Article VII, to waive,
modify, reduce, compromise, release, contest, submit to arbitration, or
settle or extend the time of payment of any claims, debts, damages, or
demands of any nature in favor of or against the Trustee or all or any
part of the Trust Fund;
(d) to retain any disputed property until an appropriate final
adjudication or release is obtained, and to represent the Trust in, or
commence or defend, any litigation the Trustee considers in its
discretion necessary in connection with the Trust Fund;
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<PAGE> 19
(e) to withhold, if the Company so directs, all or any part of any
payment required to be made hereunder as may be necessary and proper to
protect the Trustee or the Trust Fund against any liability or claim on
account of any estate, inheritance, income or other tax or assessment
attributable to any amount payable hereunder, and to discharge any such
liability with any part or all of such payment so withheld in accordance
with Section 6.7;
(f) to maintain records reflecting all receipts and payments under
this Trust and such other records as the Company may specify and to which
the Trustee agrees, which records may be audited from time to time by the
Company or anyone named by the Company; and to furnish a written
accounting to the Company as of each Valuation Date, as provided in
Section 4.3;
(g) if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy
from a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
Notwithstanding the preceding sentence, the Trustee may loan to the
Company the proceeds of any borrowing against an insurance policy held as
an asset of the Trust;
(h) to furnish the Company with such information for tax or other
purposes which the Company may reasonably request and which the Trustee
may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal counsel (who,
except following a Change of Control, may be legal counsel to the Company
and who are not in the Company's reasonable judgment deemed to have a
conflict of interest), consultants, custodians, depositories, experts and
other providers of services, to consult with them with respect to the
implementation and construction of this Trust, the duties of the Trustee
hereunder, the transactions contemplated by this Trust, or any act which
the Trustee proposes to take or omit, and to rely upon the advice of and
services performed by such persons; to delegate discretionary powers to
such persons and to reasonably rely upon information and advice furnished
by such persons; provided that each such delegation and the acceptance
thereof by each such person shall be in writing; and provided further
that the Trustee may not delegate its responsibilities as to the
management or control of the assets of the Trust Fund;
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<PAGE> 20
(j) to determine whether the Company is Insolvent, and to hold
assets of the Trust Fund for the benefit of General Creditors in the
event of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a Change of
Control, as provided in Article VI hereof;
(l) to perform all other acts which in the Trustee's judgment are
appropriate for the proper protection, management, investment, and
distribution of the Trust Fund, and to carry out the purposes of the
Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has
investment responsibility, the Trustee shall invest and reinvest the principal
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income, in accordance with the written
investment guidelines established by the Company and provided to the Trustee by
the Company. If no such written investment guidelines are received by the
Trustee, the assets of the Trust Fund shall be invested in such investments as
determined by the Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that authority
with respect to the management of all or a portion of the Trust Fund has been
allocated to others in accordance with this Trust, the Trustee shall have
exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
(a) to invest and reinvest in any property wherever situated,
whether real, personal, mixed, foreign or domestic, including common and
preferred stocks, bonds, notes, and debentures (including convertible
stocks and securities, but not including any stock, securities, or debt
instruments of the Company
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<PAGE> 21
[unless held in a collective or commingled fund and such Company
securities comprise 5% or less of the assets of such fund]), leaseholds,
mortgages (including, without limitation, any collective or part interest
in any bond and mortgage or note and mortgage), certificates of deposit,
life insurance contracts, guaranteed investment contracts, and guaranteed
annuity contract, all regardless of diversification and without being
limited to investments authorized by law for the investment of trust
funds;]
(b) to invest and reinvest, without distinction between principal
and income, in contracts for future delivery of United States Treasury
Bills, other financial instruments, or indices based on any group of
securities, and in options to buy or sell indices based on any group of
securities or any kind of evidences of ownership or indebtedness,
including financial instruments or futures contracts relating thereto;
(c) to invest and reinvest part or all of the Trust Fund in any
deposit accounts, deposit administration fund maintained by a legal
reserve life insurance company in accordance with an agreement between
the Trustee and such insurance company, a group annuity contract or life
insurance policies issued by such insurance company to the Trustee as
contract holder, any interest bearing deposits held by any financial
institution having total capital and surplus of at least Fifty Million
Dollars ($50,000,000), investments in any stocks, bonds, debentures,
mutual fund shares, notes, commercial paper, treasury bills, and any
mutual, common, commingled or collective trust funds or pooled investment
funds, and to diversify such investments so as to minimize the risk of
losses;
(d) to commingle assets of the Trust Fund, for investment purposes
only, with assets of any common, collective, or commingled trust fund
which has been or may hereafter be established and maintained by the
Trustee, or by any other financial institution; provided that to the
extent that any part or all of the assets of the Trust Fund for which the
Trustee has investment responsibility are invested in any such common,
collective or commingled trust fund or pooled investment fund which is
maintained by a bank or trust company (including a bank or trust company
acting as Trustee), the provisions of the documents under which such
common, collective or commingled trust fund or pooled investment fund are
maintained shall govern any investment therein and provided further that
prior to investing any portion of the Trust Fund for the first time in
any such common, collective, or commingled trust fund, the Trustee shall
advise the Company of its intent to make such an investment, and furnish
to the Company
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any information it may reasonably request with respect to such common,
collective, or commingled trust fund (other than a trust fund established
by the Company), and provided further that the Trustee shall maintain
separate records with respect to each other trust of the Trust Fund;
(e) to vote stock and other voting securities personally or by proxy
(and to delegate the Trustee's powers and discretion with respect to such
stock or other voting securities to such proxy), to exercise
subscription, conversion and other rights and options (and make payments
from the Trust Fund in connection therewith), to take any action and to
abstain from taking any action with respect to any reorganization,
consolidation, merger, dissolution, recapitalization, refinancing and any
other plan or change affecting any property constituting a part of the
Trust Fund (and in connection therewith to delegate the Trustee's
discretionary powers and pay assessments, subscriptions and other charges
from the Trust Fund), to hold or register any property from time to time
in the Trustee's name or in the name of a nominee or to hold it
unregistered or in such form that title shall pass by delivery; and to
borrow from anyone, including itself (to the extent permitted by law),
such amounts from time to time as the Trustee considers desirable to
carry out this Trust (and to mortgage or pledge all or part of the Trust
Fund as security); to participate in any plan or reorganization,
consolidation, merger, combination, liquidation, or other similar plan
relating to any such property, and to consent to or oppose any such plan
or any action thereunder, or any contract, lease, mortgage, purchase,
sale, or other action by any corporation or other entity any of the
securities of which may at any time be held in the Trust Fund, and to do
any act with reference thereto;
(f) to retain in cash such amounts as the Trustee considers
advisable and as are permitted by applicable law, and to deposit any cash
so retained in any depository (including any bank acting as Trustee)
which the Trustee may select, provided such depository must have total
capital and surplus of at least Fifty Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section 4.4(g), to
apply for, pay premiums on, and maintain in force individual, ordinary or
universal life insurance policies on the lives of Participants, which
policies may contain provisions which the Company may approve or direct;
to receive or acquire such policy or policies from the Company, but the
Trustee may purchase a life insurance policy from a person other than the
insurer which issues a policy only if the Trustee pays, transfers, or
otherwise exchanges an amount no more
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than the cash surrender value of the policy or policies, and the policy or
policies is (are) not subject to a mortgage or similar lien which the
Trustee would be required to assume; to have with respect to such policy
or policies any rights, powers, options, privileges, and benefits usually
comprised in the term "incidents of ownership", and normally vested in an
owner of such policy or policies to be exercised only pursuant to Company
direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to dispose of,
and to grant options for the purchase or exchange with respect to it, any
property at any time held by it, by public or private sale, for cash or
on credit, or partly for cash and partly for credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited;
(k) to exercise any conversion privilege or subscription right
available in connection with any such property, and to do any act with
reference thereto, including the exercise of options, the making of
agreements or subscription, and the payment of expenses, assessment or
subscription, which may be deemed necessary or advisable in connection
therewith, and to hold and retain any securities or other property which
it may so acquire;
(l) to extend the time of payment of any obligation held in the
Trust Fund;
(m) to enter into standby agreements for future investment, either
with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the renewal or
extension of any mortgage, and to agree to a reduction in the rate of
interest on any indebtedness or mortgage or to any other modification or
change in the terms of any indebtedness or mortgage, or of any guarantee
pertaining thereto, in any manner and to any extent that may be deemed
advisable for the protection of the Trust Fund or the preservation of any
covenant or condition of any indebtedness or mortgage or in the
performance of any guarantee, or to enforce any default in
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such manner and to such extent as may be deemed advisable; and to exercise
and enforce any and all rights of foreclosure, to bid on any property in
foreclosure, to take a deed in lieu of foreclosure with or without
paying a consideration therefor, and in connection therewith to release
the obligation on the bond secured by such mortgage; and to exercise and
enforce in any action, suit or proceeding at law or in equity any rights
or remedies in respect of any such indebtedness or mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgage, conveyance, contracts,
waivers, releases, or other instruments in writing necessary or proper
for the accomplishment of any of the foregoing powers;
(p) to organize under the laws of any state one or more
corporations, partnerships, or trusts for the purpose of acquiring and
holding title to any property that it is authorized to acquire under this
Trust, and to exercise with respect thereto any or all of the powers set
forth in this Trust;
(q) notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a business
and dividing the gains therefrom, within the meaning of Section
301.7701-2 of the Procedure and Administrative Regulations promulgated
under the IRC; and
(r) generally to do all acts, whether or not expressly authorized,
that the Trustee deems necessary or desirable for the protection of the
Trust Fund, and to carry out the purposes of the Trust.
5.3 Investment Managers. The Company may appoint one or more Investment
Managers to direct the investment of any part or all of the assets of the Trust
Fund by the Trustee. Appointment of an Investment Manager shall be made by
written notice to the Investment Manager(s) and to the Trustee, which notice
shall specify those powers, rights, and duties of the Trustee under this Trust
that are allocated to the Investment Manager(s) and the portion of the assets
of the Trust Fund subject to the Investment Manager(s). After it receives
written notice of such appointment, the Trustee shall have no obligation or
responsibility for those investment duties which are allocated to an Investment
Manager. An Investment Manager so appointed pursuant to this paragraph shall
be either a registered investment adviser under the Investment Advisers Act of
1940, a bank, as defined in said Act, or an insurance company qualified to
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manage, acquire and dispose of the assets of the Plans under the laws of more
than one state of the United States. Any such Investment Manager shall
acknowledge to the Company in writing that is accepts such appointment. The
Trustee shall not be liable for any loss or diminution of any assets managed by
an Investment Manager, including without limitation, any loss or diminution
caused by any action or inaction taken or omitted by it at the direction of an
Investment Manager. In addition, the Trustee shall not be liable for the
diversification of any assets managed by Investment Managers of the Company,
each of which shall be solely the responsibility of the Company. An Investment
Manager may resign at any time upon written notice to the Trustee and the
Company. The Company may remove an Investment Manager at any time by written
notice to the Investment Manager and the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each investment
fund, and the income thereon, shall be held and invested as a single fund, and
the Trustee shall not make any separate investment of the Trust Fund, or make
any separate investment fund, for the account of any Participant or other
General Creditors prior to receipt of directions to make payments to such
Participant or other General Creditors in accordance with Article VI or Article
VII. All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The Trustee's
obligation to distribute to any Participant out of the assets of the Trust Fund
shall be limited to payment at such times and in such amounts as are properly
in conformance with the provisions of Section 6.3. Payments to Participants
pursuant to this Article VI shall be made by the Trustee to the extent that
funds in the Trust Fund are sufficient for such purpose, and shall at all times
be subject to the provisions of Article VII. In the event the Company
determines that it will pay benefits directly to Participants as they become
due under the terms of the Plan, the Company shall notify Trustee of its
decision prior to the time amounts are payable to Participants.
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6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be made from
the Trust Fund to pay benefits in accordance with the Plan shall be initiated
by:
(a) written direction to the Trustee from the Plan Administrator,
which direction shall certify that such distribution(s) is (are) in
accordance with the Plan, and specify the timing, form, payee, and amount
of such benefit payments, including any federal, state, or local income
taxes to be withheld, and the Trustee shall make or commence the directed
distributions after receipt of such written direction; or
(b) by the submission to the Trustee by a Participant of a certified
copy of the non-appealable order of an appropriate forum with
jurisdiction to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee determines
or is advised that the Trust Fund does not have sufficient assets to permit the
Trustee to make a payment property directed pursuant to this Trust, including
a payment provided for under Section 10.7 of this Trust, the Trustee shall pay
any benefits due (if otherwise payable hereunder) to Participants on a pro rata
basis as directed by the Plan Administrator, and the Company shall make the
balance of such payments as they become due. If the Plan Administrator
determines that the Trust Fund does not have sufficient funds to provide for
the payment of all amounts otherwise payable to Participants (or their
Beneficiary(ies)) from the Trust under the Plans, it shall notify the Company
and the Trustee of the amount of the deficiency, and, within forty-five (45)
days of such notice, the Company deposit in trust with the Trustee the
additional amounts needed to make such payments. Upon receipt of such amount by
the Trustee from the Company, proceeds shall first be used by the Trustee to
pay any benefits
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<PAGE> 27
previously due remaining unpaid, in the order in which they were due,
pursuant to Plan Administrator instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII, and
except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount paid to
a Participant by the Trustee in accordance with this Article VI shall be reduced
by the amount of taxes required to be withheld pursuant to Plan Administrator
instructions, and the Trustee shall inform the Company of all amounts so
withheld. The Company shall direct that the Trustee shall either
(a) pay to the Company a sum equal to the amount of such taxes as are
required to be withheld, whereupon the Company shall have full
responsibility for the payment of all withholding taxes to the
appropriate taxing authorities, or
(b) pay such taxes directly to the appropriate taxing authorities
for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall
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furnish each Participant with the appropriate tax information form evidencing
payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon receipt
of written certification from the Company that all obligations of the Company
to Participants with respect to the Plan have been satisfied, and if the Trust
Fund shall have any assets remaining, the Trustee shall distribute such
remaining assets of the Trust Fund to the Company, after converting such assets
to cash if requested by the Company, subject to the Trustee's right to retain
such reasonable amount for compensation and expenses as provided in Section
10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on or
beneficial ownership interest in the Trust Fund before such assets are paid to
the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any other General Creditor. At all times during the continuance
of this Trust, as provided in this Article VII hereof, the principal and income
of the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with no
preference whatsoever given claims of employees or Participants over claims of
other unsecured creditors of the Company.
7.2 Determination of Insolvency. Notwithstanding any other provisions of
this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive Officer of the
Company shall have the fiduciary duty and responsibility on behalf of
General Creditors to notify the Trustee promptly in writing in the event
the Company is Insolvent, and the Trustee shall have the right to rely
thereon to the exclusion of all directions or claims for payment made
thereafter by Participants.
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<PAGE> 29
(b) If the Trustee has actual knowledge that the Company is
Insolvent, the Trustee shall act in accordance with Section 7.3 hereof.
(c) Unless the Trustee receives written notice from the Board of
Directors or the Chief Executive Officer of the Company that the Company
is Insolvent, or from a person claiming to be a General Creditor and
claiming that the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. If the Trustee receives a
written allegation from a person claiming to be a General Creditor that
the Company is Insolvent, the Trustee's only duty of inquiry shall be to
request that the Company's independent public accountants determine
whether the Company is Insolvent, and shall suspend benefit payments
pending such determination. If the Company's independent public
accountants advise the Trustee that the Company is not Insolvent, it
shall resume payments in accordance with this Trust. If the Trustee
receives notice of the Company's Insolvency pursuant to this Section
7.2(c), it shall act in accordance with this Section and Section 7.3
hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and shall
hold the Trust Fund for the benefit of the General Creditors, and shall
pay and deliver the entire amount of the Trust Fund only as a court
competent jurisdiction, or duly appointed receiver or other person
authorized to act by such court, may order or direct to make the Trust
Fund available to satisfy the claims of the General Creditors (payments to
Participants in accordance with the terms of the Plan may be resumed
only pursuant to Section 7.4 hereof); or
(b) by reason of Section 1.11(a), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and
shall (i) hold the Trust Fund for the benefit of General Creditors or
(ii) pay over all or a portion of the Trust Fund to General Creditors if
directed by the Company or an appropriate judicial forum.
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<PAGE> 30
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of notice of a
Court order to the contrary, the Trustee shall resume all of its duties and
responsibilities under the Trust, including payments to Participants if
otherwise provided for herein, within thirty (30) days of the Trustee's receipt
of a determination from the Company's independent public accounting firm that
the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event that
amounts are paid from the Trust Fund to General Creditors of the Company,
then as soon as practicable after the Company is no longer Insolvent, the
Company shall deposit into the Trust Fund a sum to equal to the Funding
Amount, determined as of the date the Company is no longer Insolvent,
which date shall be a Valuation Date. The Company (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written certification of such Funding Amount. If the Funding
Amount is not paid by the Company within ninety (90) days of the
Trustee's receipt of such notice, the Trustee shall demand payment and
the provisions of Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of Payments.
Provided that there are sufficient assets of the Trust Fund, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section
7.3 and subsequently resumes such payments, the first payment following
such discontinuance shall include the aggregate amount of all payments
due to Participants under the terms of the Plan for the period of such
discontinuance, as determined by the Plan Administrator, less the
aggregate amount of any payments made to Participants by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance. If the Trustee suspends a payment to a Participant under
this Section, and subsequently makes such payment, the payment shall
include interest at the rate of interest per annum equal to the prime
rate as published by NBD Bank for each day from the date of suspension to
the date of payment, as calculated by the Plan Administrator.
7.5 Reserved.
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VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for any
reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal of a
Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor Trustee
shall be appointed by the Company. If a Trustee should resign or be
removed, and the Company does not notify the Trustee of the appointment
of a successor Trustee within forty-five (45) days of its notice of its
resignation or removal, then the Company shall be deemed to have failed
to have appointed a successor Trustee, and the Trustee shall apply to a
court of competent jurisdiction for appointment of a successor Trustee.
(b) After the occurrence of a Change of Control, the Trustee who is
the Trustee on the date of the Change of Control may be removed by the
Company for three (3) years from the date of the Change of Control. If a
Trustee resigns or is removed at any time after the date of a Change of
Control, the Trustee shall apply to a court of competent jurisdiction for
appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
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8.3 Duties of Retiring and Successor Trustees. In the event of the
resignation or removal of a Trustee, the retiring Trustee shall within thirty
(30) days after the effective date of resignation or removal furnish to the
successor Trustee and the Company a final accounting of its administration of
the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this Trust,
the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which amendment shall include the effective date of such amendment.
Any amendment of the Trust may be made:
(a) prior to a Change of Control, without limitation and in any
manner and effective as of any date, including a retroactive effective
date, if accompanied by the written certification that no Change of
Control has occurred;
(b) after a Change of Control, only if a period of three (3) years
has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific written
consent to the amendment by Participants whose actuarial interests
under the Plan, computed by the Company's independent public
accountants as of the effective date of such amendment, represent
at least 51% of the total of all actuarial interests under the
Plan; or
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(2) such amendment is accompanied by the opinion of legal
counsel satisfactory to the Trustee that the amendment is necessary
for the purpose of conforming the Trust to any present or future
federal or state law (including revenue laws) relating to trusts of
this or similar nature, as such laws may be amended from time to
time, and a certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
9.2 Termination. After all assets of the Trust Fund have been distributed
by the Trustee to the Participants or their Beneficiaries in accordance with
Article VI, the Trustee shall render an accounting, which shall be the final
accounting, in the manner provided for in Section 4.3. Upon acceptance of the
accounting by the Company, any assets remaining in the Trust Fund, after
deduction of such reasonable amount for compensation and expenses as provided
for in Section 10.7, shall be returned to the Company in the manner provided in
Section 6.8, and the Trust shall terminate thereupon. The Trust and all the
rights, titles, powers, duties, discretions and immunities imposed on or
reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee shall be
governed solely by the terms of this Trust Agreement.
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10.2 Litigation. In any action or proceeding regarding the Trust, the
Company, any assets of the Trust Fund, or the administration of the Trust, any
creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or non-exercise
of its powers and discretion in good faith shall be conclusive on all persons.
No one other than the Company shall be obliged to see to the application of any
money paid or property delivered to the Trustee. The certificate of the Trustee
that it is acting according to this Trust will fully protect all persons
dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other provision
of this Trust to the contrary, the Trustee does not guarantee payment of any
amount which may become due and payable to a Participant. The Trustee shall have
no responsibility for the disclosure to Participants regarding the terms of the
Plan or of this Trust, or for the validity thereof. The Trustee shall not be
responsible for administrative functions under the Plan and shall have only such
responsibilities under this Trust Agreement as specifically set forth herein.
The Trustee will be under no liability or obligation to anyone with respect to
any failure on the part of the Company, the Plan Administrator, the Company's
independent public accounting firm, an Investment Manager, or a Participant to
perform any of their respective obligations under the Plan or this Trust. The
Trustee shall be fully protected in relying upon any notice or direction
provided to it from any party in connection with the Trustee's duties hereunder
which the Trustee in good faith believes to be genuine, and executed and
delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the amounts
held in the Trust Fund at the time of such payment or otherwise to risk or
expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the Company
shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the extent
permitted by law the Trustee and hold it harmless against Trustee's costs,
expenses and
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liabilities (including, without limitation, attorneys' fees and
expenses) arising out of or in connection with the performance of the Trustee's
duties arising hereunder (but excluding costs arising as a result of the
Trustee's bad faith or gross negligence in the performance of its
responsibilities hereunder), and to be primarily liable for such payments. If
the Company does not pay such costs, expenses and liabilities in a reasonably
timely manner, Trustee may obtain payment from the Trust. This Section shall
survive the termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid compensation by
the Company in an amount agreed to by the Company and the Trustee. The Trustee
shall be reimbursed by the Company for reasonable expenses incurred by it in
the management and administration of this Trust Agreement, including the
reasonable compensation of the Trustee's counsel and other agents; and if the
Trustee is not timely reimbursed with respect to amounts due pursuant to this
Section 10.7 (or in the case of expenses to be incurred pursuant to Section 3.5
hereof), the Trustee may charge such amounts against the Trust Fund. Any
compensation or expenses so agreed upon or otherwise payable not paid by the
Company on a timely basis may be charged to the Trust Fund no more frequently
than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required or
permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
The Detroit Edison Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
- 30 -
<PAGE> 36
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants and their
Beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
10.11 True and Correct Document. Any persons dealing with the Trustee may
rely upon a copy of this Trust and any amendments thereto certified to be true
and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may be waived
by the person entitled to such notice.
10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender shall include
the feminine and neuter genders and the singular shall include the plural and
the plural shall include the singular wherever required by the context.
10.15 Successors. This Trust shall be binding on all persons entitled to
payments hereunder and their respective heirs and legal representatives, and on
the Company, the Trustee, and their respective successors.
10.16 Severability. If any provision of this Trust is held to be illegal
or invalid, such illegality or invalidity shall not affect the remaining
provisions of this Trust, which shall be construed and enforced as if such
illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and construed in
accordance with the laws of the State of Michigan with respect to the Company's
obligations and in accordance with the laws of the State of Illinois with
respect to the Trustee's obligations and Trust Administration.
- 31 -
<PAGE> 37
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
THE DETROIT EDISON COMPANY
By L.L. Loomans
-------------------------
Its
------------------------
THE NORTHERN TRUST COMPANY
as Trustee
By
-------------------------
Its
------------------------
- 32 -
<PAGE> 38
EXHIBIT A
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
The Company has established an Irrevocable Grantor Trust to pay benefits under
the DTE Energy Company Retirement Plan for Non-Employee Directors . A copy of
such Plan, including any amendment(s), is attached hereto.
<PAGE> 39
EXHIBIT B
THE DETROIT EDISON COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
PARTICIPANTS (as defined in the Trust)
as of December 31, 1995
Name [Date of Birth]
--------- ---------------
<PAGE> 1
EXHIBIT 99-7
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPANY
PLAN FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
EFFECTIVE JANUARY 1, 1996
<PAGE> 2
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPANY
PLAN FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS...................................................2
1.1 Beneficiary...................................................2
1.2 Board of Directors............................................2
1.3 Change of Control.............................................2
1.4 Company.......................................................4
1.5 Effective Date................................................4
1.6 Reserved......................................................4
1.7 Excess Assets.................................................4
1.8 Funding Amount................................................4
1.9 General Creditors.............................................5
1.10 Reserved......................................................5
1.11 Insolvent.....................................................5
1.12 Investment Manager............................................5
1.13 IRC...........................................................5
1.14 Participant...................................................5
1.15 Reserved......................................................5
1.16 Plan Administrator............................................5
1.17 Potential Change of Control...................................6
1.18 Potential Change OF Control Period............................7
1.19 Reserved......................................................7
1.20 Trust.........................................................7
1.21 Trust Fund....................................................7
1.22 Trustee.......................................................7
1.23 Valuation Date................................................7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
II. ESTABLISHMENT OF THE TRUST...................................8
2.1 Trust........................................................8
2.2 Description of Trust.........................................8
2.3 Irrevocability...............................................9
2.4 Acceptance by the Trustee....................................10
III. CONTRIBUTIONS................................................10
3.1 Calculations of Funding Amount...............................10
3.2 Contributions as of Each Valuation Date......................10
3.3 Reserved.....................................................10
3.4 No Dilution of Trust.........................................10
3.5 Collection...................................................11
IV. ACCOUNTING AND ADMINISTRATION................................12
4.1 Trustee Recordkeeping........................................12
4.2 Company Recordkeeping........................................12
4.3 Periodic Accounting..........................................12
4.4 Administrative Powers of Trustee.............................13
V. INVESTMENTS..................................................16
5.1 Generally....................................................16
5.2 Investment Powers of Trustee.................................16
5.3 Investment Managers..........................................20
5.4 Reserved.....................................................21
5.5 Single Fund..................................................21
VI. PAYMENTS FROM THE TRUST......................................21
6.1 Obligation of Trustee to Make Payments
to Participants..............................................21
6.2 Obligation of the Company to
Make Payments to Participants................................22
6.3 Distributions to Participants................................22
6.4 Reserved.....................................................22
6.5 Insufficient Trust Fund Assets...............................22
6.6 Payment of Excess Assets to Company..........................23
6.7 Company to Pay Withholding and Employment Taxes..............23
6.8 PaymenT in Reversion To Company..............................24
6.9 Reserved.....................................................24
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY........................24
7.1 No Security Interest.........................................24
7.2 Determination of Insolvency..................................25
7.3 Payments When Company Is Insolvent...........................25
7.4 Resumption of Duties after Insolvency........................26
7.5 Reserved.....................................................27
VIII. RESIGNATION OR REMOVAL OF TRUSTEE............................27
8.1 Resignation or Removal of Trustee............................27
8.2 Successor Trustee............................................27
8.3 Duties of Retiring and Successor Trustees....................28
8.4 Reserved.....................................................28
IX. AMENDMENT AND TERMINATION OF TRUST...........................28
9.1 Amendment....................................................28
9.2 Termination..................................................30
9.3 Reserved.....................................................30
X. GENERAL PROVISIONS...........................................30
10.1 Coordination with Plan.......................................30
10.2 Litigation...................................................30
10.3 Trustee's Action Conclusive..................................30
10.4 No Guarantee or Responsibility...............................30
10.5 Liabilities Mutually Exclusive...............................31
10.6 Indemnification..............................................31
10.7 Expenses and Compensation....................................31
10.8 Reserved.....................................................32
10.9 Notice.......................................................32
10.10 Antiassignment Clause........................................32
10.11 True and Correct Document....................................32
10.12 Waiver of Notice.............................................32
10.13 Counterparts.................................................33
10.14 Gender and Number............................................33
10.15 Successors...................................................33
10.16 Severability.................................................33
10.17 Applicable Law...............................................33
</TABLE>
iv
<PAGE> 5
EXHIBIT A DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY PLAN
FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
EXHIBIT B DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
PLAN FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
PARTICIPANTS (AS DEFINED IN THE TRUST)
iv
<PAGE> 6
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPANY
PLAN FOR DEFERRING THE PAYMENT OF
DIRECTORS' FEES
THIS TRUST AGREEMENT is made this 1st day of January, 1996 by and
between DTE Energy Company, a Michigan corporation, and The Northern Trust
Company, an Illinois corporation, of Chicago Illinois ("Trustee"), and any
successor provided for in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has established and maintains the DTE Energy
Company Plan for Deferring the Payment of Directors' Fees ("Plan"), an unfunded
benefit plan, a copy of which is attached hereto as Exhibit A, for the benefit
of certain non-employee Directors of the Company listed on Exhibit B hereto,
which Exhibits may be amended from time to time by the Company prior to a
potential Change of Control and/or Change of Control, and without the Trustee's
consent; and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred
to the Trust and the earnings thereon shall be used by the Trustee, subject to
the claims of the Company's creditors in the event the Company becomes
Insolvent, to satisfy the liabilities of the Company in accordance with the
provisions hereof; and, upon satisfaction of all liabilities of the with
respect to all Participants (and their
<PAGE> 7
Beneficiaries, if applicable), the assets, if any, remaining in the Trust shall
revert to the Company; and
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose of providing deferred compensation for a select group of
Directors, and shall not be construed to provide income for federal income tax
purposes to a Participant (or his or her Beneficiary) prior to the actual
payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS. Unless the context requires otherwise, definitions as
used herein shall have the same meaning as in the Plan when applied to said
Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in
the Plan as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors,
as constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the
following events:
(a) a change of control of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A
under the Securities Act of 1934, as amended (the "Exchange Act"), or
any successor provisions, whether or not the Company is then subject
to such reporting requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit
plan maintained by the Company, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of
2
<PAGE> 8
the Company representing 30% or more of the combined voting power of
the Company's then outstanding securities ordinarily (and apart from
rights accruing under special circumstances) having the right to vote
at elections of the Board of Directors (the "Base Capital Stock");
provided, however, that any change in the relative beneficial
ownership of securities of any person resulting solely from a
reduction in the aggregate number of outstanding shares of Base
Capital Stock, and any decrease thereafter in such person's ownership
of securities, shall be disregarded until such person increases in any
manner, directly or indirectly, such person's beneficial ownership of
any securities of the Company; or
(c) a change in the composition of the Company's Board of
Directors, as a result of which fewer than two-thirds of the incumbent
directors are directors who either
(1) had been directors of the Company 24 months prior to
such change, or
(2) were elected, or nominated for election, to the
Company's Board of Directors with the affirmative
votes of at least a majority of the directors who had
been directors of the Company 24 months prior to such
change and who were still in office at the time of
the election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in which
the Company is not the continuing or surviving
corporation or pursuant to which shares of the
Company's common stock would be converted into cash,
securities, or other property, other than a merger of
the Company in which the holders of the Company's
common stock immediately prior to the merger have the
same proportionate ownership of common stock of the
surviving corporation immediately after the merger,
or
(2) any sale, lease, exchange, or other transfer (in one
transaction or a series of related transactions) of
all, or substantially all, of the assets of the
Company, or
3
<PAGE> 9
(3) the stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of the
Company.
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may be amended or supplemented from time to time),
whereby it is proposed that a corporation will become the parent holding
company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means DTE Energy Company, a Michigan corporation, its
successors and assigns.
1.5 "Effective Date" means January 1, 1996.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of one
hundred and twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during any
Potential Change of Control Period, however, the Funding Amount means one
hundred and twenty per cent (120%) of the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each
4
<PAGE> 10
respective Participant under the Plan shall be limited to benefits attributable
to service rendered by the Participant to the Company.
1.9 "General Creditors" means the unsecured general creditors of
the Company, including the Participants.
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
(a) is unable to pay its debts as they become due; or
(b) is subject to a pending proceeding as a debtor under
the Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed
by the Company in the manner provided in Section 5.3 to direct the investment
of any part or all of the assets of the Trust Fund in accordance with Article
V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" means an individual listed on Exhibit B attached
hereto who
(a) is a Participant in the Plan because of service
rendered to the Company; or
(b) would be a Participant in the Plan because of
services rendered to the Company but is not due to age, years of
service or active employment.
The Company agrees to list all Participants on Exhibit B attached hereto.
Except after a Change of Control as provided in Section 3.4, the Company may
add or delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan
as responsible for the management, operation, and administration of the Plan.
5
<PAGE> 11
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change of
Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than the Company or an employeee
benefit plan maintained by the Company, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 9.5% or more of
the combined voting power of the Company's then outstanding securities
ordinarily (and apart from rights accruing under special
circumstances) having the right to vote at elections of the Board of
Directors (the "Base Capital Stock"); provided, however, that any
change in the relative beneficial ownership of securities of any
person resulting solely from a reduction in the aggregate number of
outstanding shares of Base Capital Stock, and any decrease thereafter
in such person's ownership of securities, shall be disregarded until
such person increases in any manner, directly or indirectly, such
person's beneficial ownership of any securities of the Company; or
(c) the public announcement by any individual or entity,
other than the Company, that such individual or entity intends to take
or to consider taking actions which, if consummated, would constitute
a Change of Control of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company
is not the continuing or surviving corporation, or pursuant to which
shares of the Company's common stock would be converted into cash,
securities, or other property, other than a transaction in which the
holders of the Company's common stock immediately prior to the merger,
acquisition, consolidation, or reorganization have the same
proportionate ownership of common stock of the surviving corporation
immediately after the merger, acquisition, consolidation, or
reorganization, including, but not limited to, the creation of a
parent entity to oversee the Company; or
6
<PAGE> 12
(e) the public announcement of the sale or other transfer
of substantially all of the assets of the Company to any third party;
or
(f) the Board of Directors of the Company adopts a
resolution to the effect that a Potential Change of Control of the
Company has occurred for purposes of this Trust.
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year
period immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the Potential Change of Control Period shall end one (1) year
following the date of the most recent Potential Change of Control.
The Company shall promptly notify the Trustee of a Potential
Change of Control and the Trustee may conclusively rely upon such notice and
shall have no duty to independently determine whether a Potential Change of
Control has occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to
this Trust Agreement and all of the terms and conditions of this Trust
Agreement, which is intended to constitute a grantor trust under IRC Section
Section 671 et seq.
1.21 "Trust Fund" means all moneys, securities, and other property
held by the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any
successor trustee appointed pursuant to Article VIII.
1.23 "Valuation Date" means the day in each calendar year which is
the last day of the Company's fiscal year in each year, and such other times as
the Company may determine. Each of (a) any date of a Potential Change of
Control, (b) the date of a Change of Control, (c) the effective date of a
Trustee's resignation or removal,
7
<PAGE> 13
and (d) the date of termination of the Trust shall also be a Valuation Date if
any such date occurs other than on the last business day of the Company's
fiscal Year. The first Valuation Date shall be December 31, 1996.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the
Trustee, which Trust shall consist of such sums of money and other property
acceptable to the Trustee as from time to time have been and shall be paid or
delivered by the Company to the Trustee as provided herein. All such money and
other property, all investments and reinvestments made therewith, or the
proceeds thereof, and all investment earnings and profits thereon, less all
payments and charges as authorized herein, shall constitute the Trust Fund. The
Trust Fund shall be held in trust by the Trustee, and shall be dealt with in
accordance with the provisions of this Trust.
2.2 Description of Trust. The Company represents and agrees that:
(a) the Trust is intended to be a grantor trust under IRC
Section Section 671-678, and shall be construed accordingly. The
Company intends and agrees that it is the "owner" or grantor of the
Trust in its entirety, as that term is defined in subpart E, part I,
subchapter J, chapter 1, subtitle A of the IRC and that, for income
tax purposes, all income, deductions, and credits of the Trust Fund
belong to it as owner, and will be included on its income tax or other
required tax returns, and any income tax determined to be payable as a
result thereof will be the sole obligation of, and will be paid by,
the Company;
(b) a true and correct copy of the Plan, as in effect on
the Effective Date hereof, is attached hereto as Exhibit A. The
Company shall file with the Trustee, promptly upon its adoption, a
true and correct copy of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal
obligations of the Company to Participants under the Plan as provided
herein, subject to the claims of General Creditors in the event of
Insolvency, and the balance of the Trust Fund, if any, remaining after
payment of the Company's obligation to Participants under the Plan
will revert to the Company in accordance with the Trust;
8
<PAGE> 14
(d) contributions by the Company to the Trust which are
made coincident with and subsequent to the Effective Date shall be in
amounts determined under Article III hereof. The Company agrees to
fund the Trust as provided therein;
(e) the principal of the Trust, and any earnings thereon
shall be held by the Trustee separate and apart from other funds of
Company, and shall be used exclusively for the uses and purposes as
herein set forth;
(f) the Trust established under this agreement does not
fund and is not intended to fund the Plan, or any other employee
benefit plan or program of the Company. Neither the establishment of
the Trust, nor the payment or delivery of assets to the Trustee shall
vest any Participant in any right, title, or interest in or to any
assets of the Trust Fund;
(g) participants shall have no preferred claim on, or any
beneficial ownership interest in, assets of the Trust. To the extent
that any Participant acquires the right to receive payment(s) under
the Plan, any such right shall be mere unsecured contractual rights of
Participants against the Company, and such Participants (or their
Beneficiary(ies)) shall have only the unsecured promise of the Company
that such payment(s) will be made. Any assets held by the Trust will
be subject to the claims of General Creditors under federal and state
law in the event of Insolvency, as defined herein, with no preference
whatsoever given to claims of employees or Participants over claims of
other unsecured creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan
is a plan for a select group of management or highly compensated
employees, and as such is exempt from the application of ERISA except
for the disclosure requirements applicable to such plan, for which the
Company bears full responsibility as to compliance. The Company
further represents that the Plan is not qualified under IRC Section
401 and therefore, is not subject to any IRC requirements applicable
to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this
Section 2.3, the Trust shall be irrevocable from the effective date, and the
assets of the Trust Fund shall be held in accordance with the provisions hereof
for the exclusive purpose of providing for the payment of the Company's
obligations to pay benefits to
9
<PAGE> 15
Participants under the Plan and to satisfy the claims of General Creditors in
the event of Insolvency, and defraying the expenses of the Trust. Except as
provided in Section 6.6 and Section 6.8 and in the event of Insolvency, no part
of the income or corpus of the Trust Fund shall be recoverable by or for the
benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust
established under this Trust Agreement on the terms and subject to the
provisions set forth herein, and agrees to discharge and perform fully and
faithfully all of the duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1996, the
Company shall contribute to the Trust the Funding Amount as determined on the
first Valuation Date. As of each Valuation Date, and until the entire Trust
Fund has been distributed, the Company (or, after a Change of Control, the
Company's independent public accountants) shall recalculate the Funding
Amounts.
3.2 Contributions as of Each Valuation Date. During the life of
the Trust but no later than March 31 of each year, commencing no later than
September 30, 1997, the Company shall contribute to the Trust such amount as is
necessary to make trust assets equal the Funding Amount as of the previous
Valuation Date. The Plan Administrator or its delegate (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written notice of the amount of the necessary contribution on or
before the date such contribution is due to the Trust. Any such payments to the
Trustee do not discharge or release the Company of its obligation under the
Plan or Section 6.2 to pay benefits to Participants under the Plan, and shall
at all times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit B
in effect on the date of a Change of Control shall not be amended to include a
Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of
10
<PAGE> 16
the Delivery Date of the proposed amended Exhibit B of the Funding Amount
calculated based on the Participants named in the Exhibit B in effect on the
Date of the Change of Control and any new or additional Participants named in
the proposed amended Exhibit B (the "New Funding Amount") and (b), assets in an
amount necessary to make the trust assets equal the New Funding Amount. If the
Trustee determines that assets of the Trust Fund, including such assets as are
delivered by the Company on the Delivery Date, equal or exceed the New Funding
Amount, the Trustee shall accept the amended Exhibit B. Any amended Exhibit B
so accepted shall be deemed incorporated with the same effect as if otherwise
included herein. Unless an Exhibit B amended after a Change of Control is
accepted by the Trustee as provided in this Section, the Trustee shall have no
liability, responsibility, or obligation with respect to a Participant named in
any amended Exhibit B unless such Participant is named in the Exhibit B then in
effect on the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the
Trustee within one hundred and twenty (120) days of notice and demand from the
Trustee (or, upon the occurrence of a Potential Change of Control or a Change
of Control, within seven (7) days of notice and demand from the Trustee), any
amount determined to be payable by the Company to the Trustee under Sections
3.2, 6.5 or 7.4(a) of the Trust, the Trustee may commence legal action, (which
is expressly deemed to include without limitation an alternate dispute
resolution proceeding), to compel the Company to pay to the Trustee any amount
determined to be payable to it under the Trust. The Trustee may bring such
action against the Company in any court of competent jurisdiction, and shall be
entitled to recover for the benefit of the Trust from the Company such amount,
plus interest for each day at the rate of interest per annum of five (5)
percentage points in excess of the prime lending rate as announced by NBD Bank,
from the due date specified in the Trustee's notice and demand (or the date(s)
from which pro rata payments were made, if such action is brought by the
Trustee pursuant to Section 6.5 hereof) to the date of payment, plus all costs
of collection, including reasonable attorneys, fees and costs of litigation.
The Trustee is authorized to bring action to compel payment by the Company,
and, in connection with reasonable claims for delinquent contributions by the
Company, to retain, at the expense of the Company, counsel and other
appropriate experts, including actuaries and accountants, to aid it in pursuing
litigation for collection against the Company. The Trustee's anticipated
reasonable costs and expenses incurred pursuant to this Section 3.5 are payable
by the Company in advance; and should the Company not make timely payment, the
Trustee may charge the Trust
11
<PAGE> 17
Fund for such reasonably anticipated costs and expenses. The Trustee shall in
no event be required to advance or expend its own funds in order to comply with
the provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be
kept accurate and detailed records of any investments, receipts, disbursements,
and all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
4.2 Company Recordkeeping. The Company shall keep full, accurate,
and detailed books and records with respect to the Participants and benefits
paid and payable under the Plan, which records shall be made available to the
Trustee at its request.
4.3 Periodic Accounting. Within sixty (60) days following a
Valuation Date, the Trustee shall deliver to Company a written accounting,
dated as of the Valuation Date, of its administration of the Trust Fund during
such year or during the period from the most recent Valuation Date to the date
of such current Valuation Date, which accounting shall be in accordance with
the following provisions:
(a) Such accounting shall set forth all investments,
receipts, disbursements, and other transactions effected by the Trust
Fund during the preceding year, or during the period from the most
recent Valuation Date to the date of such current Valuation Date,
including a description of all securities and investments purchased
and sold, with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and
showing all cash, securities or other property held in the Trust Fund,
less liabilities known to the Trustee (other than liabilities to
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Participants entitled to benefits under the Plans) at the end of such
year or other period, as the case may be. In making a valuation, all
cash, securities or other property held in the Trust Fund shall be
valued at their then fair market value, and shall be in a format as
may be established by the Company. A copy of each accounting so
delivered to the Company shall be open to inspection at the office of
the Trustee during normal business hours.
(b) If within ninety (90) days after the filing of such
written accounting, the Company has not delivered to the Trustee
notice of any objection to any act or transaction of the Trustee, the
initial accounting shall become an account stated as between the
Trustee and the Company. If any objection has been delivered to the
Trustee by the Company, and if the Company is satisfied that it should
be withdrawn, the Company shall signify its approval of the accounting
in writing filed with the Trustee, and the accounting shall become an
account stated as between the Trustee and the Company. If the
accounting is adjusted following an objection thereto, the Trustee
shall file and deliver the adjusted accounting to the Company. If
within fifteen (15) days after such filing of an adjusted accounting,
the Company has not delivered to the Trustee notice of any objection
to the transactions as so adjusted, the adjusted accounting shall
become an account stated as between the Trustee and the Company.
(c) Unless an accounting is fraudulent, when it becomes
an account stated, it shall be finally settled, and the Trustee shall,
to the extent permitted by applicable law, be forever released and
discharged from all liability and accountability with respect to the
propriety of its acts and transactions shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that
authority with respect to the administration of the Trust has been allocated to
others in accordance with this Trust, and subject to Article V, the Trustee
shall have exclusive authority and discretion to manage and administer the
Trust. The Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in like capacity
and familiar with such matters would use in the conduct of an enterprise of
like character and with like aims, provided, however, that Trustee shall incur
no liability to any person for any action taken pursuant to a direction,
request or approval given by Company which is contemplated by, and in
conformity with, the terms of the Trustee's responsibilities
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under this Trust, and is given in writing by Company. The responsibility for
maintenance of individual benefit records shall be retained by the Company, and
may be delegated to such person or entity as the Company may employ from time
to time. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by law and, without limiting the
foregoing, shall have the following administrative powers, rights, and duties
in addition to those provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all
assets held by the Trustee on such terms and conditions as the Trustee
shall decide; provided however, that if the Company delivers written
instructions to the Trustee, the Trustee shall follow such
instructions;
(b) when directed by the Company or requested by a
Participant pursuant to Article VI, to make payments from the Trust
Fund to Participants and, when required by Article VII, to make
payments from the Trust Fund to General Creditors entitled to payments
thereunder;
(c) except as provided in Article VI and Article VII, to
waive, modify, reduce, compromise, release, contest, submit to
arbitration, or settle or extend the time of payment of any claims,
debts, damages, or demands of any nature in favor of or against the
Trustee or all or any part of the Trust Fund;
(d) to retain any disputed property until an appropriate
final adjudication or release is obtained, and to represent the Trust
in, or commence or defend, any litigation the Trustee considers in its
discretion necessary in connection with the Trust Fund;
(e) to withhold, if the Company so directs, all or any
part of any payment required to be made hereunder as may be necessary
and proper to protect the Trustee or the Trust Fund against any
liability or claim on account of any estate, inheritance, income or
other tax or assessment attributable to any amount payable hereunder,
and to discharge any such liability with any part or all of such
payment so withheld in accordance with Section 6.7;
(f) to maintain records reflecting all receipts and
payments under this Trust and such other records as the Company may
specify and to which
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the Trustee agrees, which records may be audited from time to time by
the Company or anyone named by the Company; and to furnish a written
accounting to the Company as of each Valuation Date, as provided in
Section 4.3;
(g) if an insurance policy is held as an asset of the
Trust, Trustee shall have no power to name a beneficiary of the policy
other than the Trust, to assign the policy (as distinct from
conversion of the policy from a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy. Notwithstanding the preceding sentence,
the Trustee may loan to the Company the proceeds of any borrowing
against an insurance policy held as an asset of the Trust;
(h) to furnish the Company with such information for tax
or other purposes which the Company may reasonably request and which
the Trustee may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal
counsel (who, except following a Change of Control, may be legal
counsel to the Company and who are not in the Company's reasonable
judgment deemed to have a conflict of interest), consultants,
custodians, depositories, experts and other providers of services, to
consult with them with respect to the implementation and construction
of this Trust, the duties of the Trustee hereunder, the transactions
contemplated by this Trust, or any act which the Trustee proposes to
take or omit, and to rely upon the advice of and services performed by
such persons; to delegate discretionary powers to such persons and to
reasonably rely upon information and advice furnished by such persons;
provided that each such delegation and the acceptance thereof by each
such person shall be in writing; and provided further that the Trustee
may not delegate its responsibilities as to the management or control
of the assets of the Trust Fund;
(j) to determine whether the Company is Insolvent, and to
hold assets of the Trust Fund for the benefit of General Creditors in
the event of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a
Change of Control, as provided in Article VI hereof;
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(l) to perform all other acts which in the Trustee's
judgment are appropriate for the proper protection, management,
investment, and distribution of the Trust Fund, and to carry out the
purposes of the Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has
investment responsibility, the Trustee shall invest and reinvest the principal
and income of the Trust Fund and keep the Trust Fund invested, without
distinction between principal and income, in accordance with the written
investment guidelines established by the Company and provided to the Trustee by
the Company. If no such written investment guidelines are received by the
Trustee, the assets of the Trust Fund shall be invested in such investments as
determined by the Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that
authority with respect to the management of all or a portion of the Trust Fund
has been allocated to others in accordance with this Trust, the Trustee shall
have exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
(a) to invest and reinvest in any property wherever
situated, whether real, personal, mixed, foreign or domestic,
including common and preferred stocks, bonds, notes, and debentures
(including convertible stocks and securities, but not including any
stock, securities, or debt instruments of the Company [unless held in
a collective or commingled fund and such Company securities comprise
5% or less of the assets of such fund]), leaseholds, mortgages
(including, without limitation, any collective or part interest in any
bond and mortgage or note and mortgage), certificates of deposit, life
insurance contracts, guaranteed investment contracts, and guaranteed
annuity
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contract, all regardless of diversification and without being limited
to investments authorized by law for the investment of trust funds;
(b) to invest and reinvest, without distinction between
principal and income, in contracts for future delivery of United
States Treasury Bills, other financial instruments, or indices based
on any group of securities, and in options to buy or sell indices
based on any group of securities or any kind of evidences of ownership
or indebtedness, including financial instruments or futures contracts
relating thereto;
(c) to invest and reinvest part or all of the Trust Fund
in any deposit accounts, deposit administration fund maintained by a
legal reserve life insurance company in accordance with an agreement
between the Trustee and such insurance company, a group annuity
contract or life insurance policies issued by such insurance company
to the Trustee as contract holder, any interest bearing deposits held
by any financial institution having total capital and surplus of at
least Fifty Million Dollars ($50,000,000), investments in any stocks,
bonds, debentures, mutual fund shares, notes, commercial paper,
treasury bills, and any mutual, common, commingled or collective trust
funds or pooled investment funds, and to diversify such investments so
as to minimize the risk of losses;
(d) to commingle assets of the Trust Fund, for investment
purposes only, with assets of any common, collective, or commingled
trust fund which has been or may hereafter be established and
maintained by the Trustee, or by any other financial institution;
provided that to the extent that any part or all of the assets of the
Trust Fund for which the Trustee has investment responsibility are
invested in any such common, collective or commingled trust fund or
pooled investment fund which is maintained by a bank or trust company
(including a bank or trust company acting as Trustee), the provisions
of the documents under which such common, collective or commingled
trust fund or pooled investment fund are maintained shall govern any
investment therein and provided further that prior to investing any
portion of the Trust Fund for the first time in any such common,
collective, or commingled trust fund, the Trustee shall advise the
Company of its intent to make such an investment, and furnish to the
Company any information it may reasonably request with respect to such
common, collective, or commingled trust fund (other than a trust fund
established by the Company), and provided
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further that the Trustee shall maintain separate records with respect
to each other trust of the Trust Fund;
(e) to vote stock and other voting securities personally
or by proxy (and to delegate the Trustee's powers and discretion with
respect to such stock or other voting securities to such proxy), to
exercise subscription, conversion and other rights and options (and
make payments from the Trust Fund in connection therewith), to take
any action and to abstain from taking any action with respect to any
reorganization, consolidation, merger, dissolution, recapitalization,
refinancing and any other plan or change affecting any property
constituting a part of the Trust Fund (and in connection therewith to
delegate the Trustee's discretionary powers and pay assessments,
subscriptions and other charges from the Trust Fund), to hold or
register any property from time to time in the Trustee's name or in
the name of a nominee or to hold it unregistered or in such form that
title shall pass by delivery; and to borrow from anyone, including
itself (to the extent permitted by law), such amounts from time to
time as the Trustee considers desirable to carry out this Trust (and
to mortgage or pledge all or part of the Trust Fund as security); to
participate in any plan or reorganization, consolidation, merger,
combination, liquidation, or other similar plan relating to any such
property, and to consent to or oppose any such plan or any action
thereunder, or any contract, lease, mortgage, purchase, sale, or other
action by any corporation or other entity any of the securities of
which may at any time be held in the Trust Fund, and to do any act
with reference thereto;
(f) to retain in cash such amounts as the Trustee
considers advisable and as are permitted by applicable law, and to
deposit any cash so retained in any depository (including any bank
acting as Trustee) which the Trustee may select, provided such
depository must have total capital and surplus of at least Fifty
Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section
4.4(g), to apply for, pay premiums on, and maintain in force
individual, ordinary or universal life insurance policies on the lives
of Participants, which policies may contain provisions which the
Company may approve or direct; to receive or acquire such policy or
policies from the Company, but the Trustee may purchase a life
insurance policy from a person other than the insurer which issues a
policy only if the Trustee pays, transfers, or otherwise exchanges an
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amount no more than the cash surrender value of the policy or
policies, and the policy or policies is (are) not subject to a
mortgage or similar lien which the Trustee would be required to
assume; to have with respect to such policy or policies any rights,
powers, options, privileges, and benefits usually comprised in the
term "incidents of ownership", and normally vested in an owner of such
policy or policies to be exercised only pursuant to Company direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to
dispose of, and to grant options for the purchase or exchange with
respect to it, any property at any time held by it, by public or
private sale, for cash or on credit, or partly for cash and partly for
credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power
to any such committee; and to pay part of the expenses and
compensation of any such committee and any assessments levied with
respect to any property so deposited;
(k) to exercise any conversion privilege or subscription
right available in connection with any such property, and to do any
act with reference thereto, including the exercise of options, the
making of agreements or subscription, and the payment of expenses,
assessment or subscription, which may be deemed necessary or advisable
in connection therewith, and to hold and retain any securities or
other property which it may so acquire;
(l) to extend the time of payment of any obligation held
in the Trust Fund;
(m) to enter into standby agreements for future
investment, either with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the
renewal or extension of any mortgage, and to agree to a reduction in
the rate of interest on any indebtedness or mortgage or to any other
modification or change in the terms of any indebtedness or mortgage,
or of any guarantee pertaining thereto, in any manner and to any
extent that may be deemed advisable for the
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protection of the Trust Fund or the preservation of any covenant or
condition of any indebtedness or mortgage or in the performance of any
guarantee, or to enforce any default in such manner and to such extent
as may be deemed advisable; and to exercise and enforce any and all
rights of foreclosure, to bid on any property in foreclosure, to take
a deed in lieu of foreclosure with or without paying a consideration
therefor, and in connection therewith to release the obligation on the
bond secured by such mortgage; and to exercise and enforce in any
action, suit or proceeding at law or in equity any rights or remedies
in respect of any such indebtedness or mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and
all deeds, leases, notes, bonds, guarantees, mortgage, conveyance,
contracts, waivers, releases, or other instruments in writing
necessary or proper for the accomplishment of any of the foregoing
powers;
(p) to organize under the laws of any state one or more
corporations, partnerships, or trusts for the purpose of acquiring and
holding title to any property that it is authorized to acquire under
this Trust, and to exercise with respect thereto any or all of the
powers set forth in this Trust;
(q) notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the Trustee
shall not have any power that could give this Trust the objective of
carrying on a business and dividing the gains therefrom, within the
meaning of Section 301.7701-2 of the Procedure and Administrative
Regulations promulgated under the IRC; and
(r) generally to do all acts, whether or not expressly
authorized, that the Trustee deems necessary or desirable for the
protection of the Trust Fund, and to carry out the purposes of the
Trust.
5.3 Investment Managers. The Company may appoint one or more
Investment Managers to direct the investment of any part or all of the assets
of the Trust Fund by the Trustee. Appointment of an Investment Manager shall be
made by written notice to the Investment Manager(s) and to the Trustee, which
notice shall specify those powers, rights, and duties of the Trustee under this
Trust that are allocated to the Investment Manager(s) and the portion of the
assets of the Trust Fund subject to the Investment Manager(s). After it
receives written notice of such appointment, the Trustee shall have no
obligation or responsibility for those
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investment duties which are allocated to an Investment Manager. An Investment
Manager so appointed pursuant to this paragraph shall be either a registered
investment adviser under the Investment Advisers Act of 1940, a bank, as
defined in said Act, or an insurance company qualified to manage, acquire and
dispose of the assets of the Plans under the laws of more than one state of the
United States. Any such Investment Manager shall acknowledge to the Company in
writing that is accepts such appointment. The Trustee shall not be liable for
any loss or diminution of any assets managed by an Investment Manager,
including without limitation, any loss or diminution caused by any action or
inaction taken or omitted by it at the direction of an Investment Manager. In
addition, the Trustee shall not be liable for the diversification of any assets
managed by Investment Managers of the Company, each of which shall be solely
the responsibility of the Company. An Investment Manager may resign at any time
upon written notice to the Trustee and the Company. The Company may remove an
Investment Manager at any time by written notice to the Investment Manager and
the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each
investment fund, and the income thereon, shall be held and invested as a single
fund, and the Trustee shall not make any separate investment of the Trust Fund,
or make any separate investment fund, for the account of any Participant or
other General Creditors prior to receipt of directions to make payments to such
Participant or other General Creditors in accordance with Article VI or Article
VII. All rights associated with assets of the Trust shall be exercised by
Trustee or the person designated by Trustee, and shall in no event be
exercisable by or rest with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The
Trustee's obligation to distribute to any Participant out of the assets of the
Trust Fund shall be limited to payment at such times and in such amounts as are
properly in conformance with the provisions of Section 6.3. Payments to
Participants pursuant
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to this Article VI shall be made by the Trustee to the extent that funds in the
Trust Fund are sufficient for such purpose, and shall at all times be subject
to the provisions of Article VII. In the event the Company determines that it
will pay benefits directly to Participants as they become due under the terms
of the Plan, the Company shall notify Trustee of its decision prior to the
time amounts are payable to Participants.
6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be
made from the Trust Fund to pay benefits in accordance with the Plan shall be
initiated by:
(a) written direction to the Trustee from the Plan
Administrator, which direction shall certify that such distribution(s)
is(are) in accordance with the Plan, and specify the timing, form,
payee, and amount of such benefit payments, including any federal,
state, or local income taxes to be withheld, and the Trustee shall
make or commence the directed distributions after receipt of such
written direction; or
(b) by the submission to the Trustee by a Participant of
a certified copy of the non-appealable order of an appropriate forum
with jurisdiction to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee
determines or is advised that the Trust Fund does not have sufficient assets to
permit the Trustee to make a payment properly directed pursuant to this Trust,
including a payment provided for under Section 10.7 of this Trust, the Trustee
shall pay any benefits due (if otherwise payable hereunder) to Participants on
a pro rata basis as directed by the Plan Administrator, and the Company shall
make the balance of such payments
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as they become due. If the Plan Administrator determines that the Trust Fund
does not have sufficient funds to provide for the payment of all amounts
otherwise payable to Participants (or their Beneficiary(ies)) from the Trust
under the Plans, it shall notify the Company and the Trustee of the amount of
the deficiency, and, within forty-five (45) days of such notice, the Company
deposit in trust with the Trustee the additional amounts needed to make such
payments. Upon receipt of such amount by the Trustee from the Company, proceeds
shall first be used by the Trustee to pay any benefits previously due remaining
unpaid, in the order in which they were due, pursuant to Plan Administrator
instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII,
and except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount
paid to a Participant by the Trustee in accordance with this Article VI shall
be reduced by the amount of taxes required to be withheld pursuant to Plan
Administrator instructions, and the Trustee shall inform the Company of all
amounts so withheld. The Company shall direct that the Trustee shall either
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(a) pay to the Company a sum equal to the amount of such
taxes as are required to be withheld, whereupon the Company shall have
full responsibility for the payment of all withholding taxes to the
appropriate taxing authorities, or
(b) pay such taxes directly to the appropriate taxing
authorities for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall furnish each Participant with the appropriate tax information
form evidencing payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon
receipt of written certification from the Company that all obligations of the
Company to Participants with respect to the Plan have been satisfied, and if
the Trust Fund shall have any assets remaining, the Trustee shall distribute
such remaining assets of the Trust Fund to the Company, after converting such
assets to cash if requested by the Company, subject to the Trustee's right to
retain such reasonable amount for compensation and expenses as provided in
Section 10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on
or beneficial ownership interest in the Trust Fund before such assets are paid
to the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any General Creditor. At all times during the continuance of
this Trust, as provided in this Article VII hereof, the principal and income of
the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with no
preference whatsoever given claims of employees or Participants over claims of
other unsecured creditors of the Company.
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7.2 Determination of Insolvency. Notwithstanding any other
provisions of this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive
Officer of the Company shall have the fiduciary duty and
responsibility on behalf of General Creditors to notify the Trustee
promptly in writing in the event the Company is Insolvent, and the
Trustee shall have the right to rely thereon to the exclusion of all
directions or claims for payment made thereafter by Participants.
(b) If the Trustee has actual knowledge that the Company
is Insolvent, the Trustee shall act in accordance with Section 7.3
hereof.
(c) Unless the Trustee receives written notice from the
Board of Directors or the Chief Executive Officer of the Company that
the Company is Insolvent, or from a person claiming to be a General
Creditor and claiming that the Company is Insolvent, the Trustee shall
have no duty to inquire whether the Company is Insolvent. If the
Trustee receives a written allegation from a person claiming to be a
General Creditor that the Company is Insolvent, the Trustee's only
duty of inquiry shall be to request that the Company's independent
public accountants determine whether the Company is Insolvent, and
shall suspend benefit payments pending such determination. If the
Company's independent public accountants advise the Trustee that the
Company is not Insolvent, it shall resume payments in accordance with
this Trust. If the Trustee receives notice of the Company's Insolvency
pursuant to this Section 7.2(c), it shall act in accordance with this
Section and Section 7.3 hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall
suspend payments to Participants and shall notify Participants of the
suspension, and shall hold the Trust Fund for the benefit of the
General Creditors, and shall pay and deliver the entire amount of the
Trust Fund only as a court competent
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jurisdiction, or duly appointed receiver or other person authorized to
act by such court, may order or direct to make the Trust Fund
available to satisfy the claims of the General Creditors (payments to
Participants in accordance with the terms of the Plan may be resumed
only pursuant to Section 7.4 hereof); or
(b) by reason of Section 1.11(a), the Trustee shall
suspend payments to Participants and shall notify Participants of the
suspension, and shall (i) hold the Trust Fund for the benefit of
General Creditors or (ii)_pay over all or a portion of the Trust Fund
to General Creditors if directed by the Company or an appropriate
judicial forum.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of
notice of a Court order to the contrary, the Trustee shall resume all of its
duties and responsibilities under the Trust, including payments to Participants
if otherwise provided for herein, within thirty (30) days of the Trustee's
receipt of a determination from the Company's independent public accounting
firm notice pursuant to Section 7.2(c) that the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event
that amounts are paid from the Trust Fund to General Creditors of the
Company, then as soon as practicable after the Company is no longer
Insolvent, the Company shall deposit into the Trust Fund a sum to
equal to the Funding Amount, determined as of the date the Company is
no longer Insolvent, which date shall be a Valuation Date. The
Company (or, after a Change of Control, the Company's independent
public accountants) shall provide the Trustee with written
certification of such Funding Amount. If the Funding Amount is not
paid by the Company within ninety (90) days of the Trustee's receipt
of such notice, the Trustee shall demand payment and the provisions of
Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of
Payments. Provided that there are sufficient assets of the Trust Fund,
if Trustee discontinues the payment of benefits from the Trust
pursuant to Section 7.3 and subsequently resumes such payments, the
first payment following such
26
<PAGE> 32
discontinuance shall include the aggregate amount of all payments due
to Participants under the terms of the Plan for the period of such
discontinuance, as determined by the Plan Administrator, less the
aggregate amount of any payments made to Participants by the Company
in lieu of the payments provided for hereunder during any such period
of discontinuance. If the Trustee suspends a payment to a Participant
under this Section, and subsequently makes such payment, the payment
shall include interest at the rate of interest per annum equal to the
prime rate as published by NBD Bank for each day from the date of
suspension to the date of payment, as calculated by the Plan
Administrator.
7.5 Reserved.
VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for
any reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal
of a Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor
Trustee shall be appointed by the Company. If a Trustee should resign
or be removed, and the Company does not notify the Trustee of the
appointment of a successor Trustee within forty-five (45) days of its
notice of its resignation or removal, then the Company shall be deemed
to have failed to have appointed
27
<PAGE> 33
a successor Trustee, and the Trustee shall apply to a court of
competent jurisdiction for appointment of a successor Trustee.
(b) After the occurrence of a Change of Control, the
Trustee who is the Trustee on the date of the Change of Control may be
removed by the Company for three (3) years from the date of the Change
of Control. If a Trustee resigns or is removed at any time after the
date of a Change of Control, the Trustee shall apply to a court of
competent jurisdiction for appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
8.3 Duties of Retiring and Successor Trustees. In the event of the
resignation or removal of a Trustee, the retiring Trustee shall within thirty
(30) days after the effective date of resignation or removal furnish to the
successor Trustee and the Company a final accounting of its administration of
the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this
Trust, the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which
28
<PAGE> 34
amendment shall include the effective date of such amendment. Any amendment of
the Trust may be made:
(a) prior to a Change of Control, without limitation and
in any manner and effective as of any date, including a retroactive
effective date, if accompanied by the written certification that no
Change of Control has occurred;
(b) after a Change of Control, only if a period of three
(3) years has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific
written consent to the amendment by Participants whose
actuarial interests under the Plan, computed by the Company's
independent public accountants as of the effective date of
such amendment, represent at least 51% of the total of all
actuarial interests under the Plan; or
(2) such amendment is accompanied by the opinion
of legal counsel satisfactory to the Trustee that the
amendment is necessary for the purpose of conforming the Trust
to any present or future federal or state law (including
revenue laws) relating to trusts of this or similar nature, as
such laws may be amended from time to time, and a
certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
29
<PAGE> 35
9.2 Termination. After all assets of the Trust Fund have been
distributed by the Trustee to the Participants or their Beneficiaries in
accordance with Article VI, the Trustee shall render an accounting, which shall
be the final accounting, in the manner provided for in Section 4.3. Upon
acceptance of the accounting by the Company, any assets remaining in the Trust
Fund, after deduction of such reasonable amount for compensation and expenses
as provided for in Section 10.7, shall be returned to the Company in the manner
provided in Section 6.8, and the Trust shall terminate thereupon. The Trust and
all the rights, titles, powers, duties, discretions and immunities imposed on
or reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee
shall be governed solely by the terms of this Trust Agreement.
10.2 Litigation. In any action or proceeding regarding the Trust,
the Company, any assets of the Trust Fund, or the administration of the Trust,
any creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or
non-exercise of its powers and discretion in good faith shall be conclusive on
all persons. No one other than the Company shall be obliged to see to the
application of any money paid or property delivered to the Trustee. The
certificate of the Trustee that it is acting according to this Trust will fully
protect all persons dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other
provision of this Trust to the contrary, the Trustee does not guarantee payment
of any amount
30
<PAGE> 36
which may become due and payable to a Participant. The Trustee shall have no
responsibility for the disclosure to Participants regarding the terms of the
Plan or of this Trust, or for the validity thereof. The Trustee shall not be
responsible for administrative functions under the Plan and shall have only
such responsibilities under this Trust Agreement as specifically set forth
herein. The Trustee will be under no liability or obligation to anyone with
respect to any failure on the part of the Company, the Plan Administrator, the
Company's independent public accounting firm, an Investment Manager, or a
Participant to perform any of their respective obligations under the Plan or
this Trust. The Trustee shall be fully protected in relying upon any notice or
direction provided to it from any party in connection with the Trustee's duties
hereunder which the Trustee in good faith believes to be genuine, and executed
and delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the amounts
held in the Trust Fund at the time of such payment or otherwise to risk or
expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the
Company shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the extent
permitted by law the Trustee and hold it harmless against Trustee's costs,
expenses and liabilities (including, without limitation, attorneys' fees and
expenses) arising out of or in connection with the performance of the Trustee's
duties arising hereunder (but excluding costs arising as a result of the
Trustee's bad faith or gross negligence in the performance of its
responsibilities hereunder), and to be primarily liable for such payments. If
the Company does not pay such costs, expenses and liabilities in a reasonably
timely manner, Trustee may obtain payment from the Trust. This Section shall
survive the termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid
compensation by the Company in an amount agreed to by the Company and the
Trustee. The Trustee shall be reimbursed by the Company for reasonable expenses
incurred by it in the management and administration of this Trust Agreement,
including the reasonable compensation of the Trustee's counsel and other
agents; and if the Trustee is not timely reimbursed with respect to amounts due
pursuant to this Section 10.7 (or in the case of expenses to be incurred
pursuant to Section 3.5 hereof), the Trustee may charge such amounts against
the Trust Fund. Any compensation or expenses so agreed upon or otherwise
payable not paid by the
31
<PAGE> 37
Company on a timely basis may be charged to the Trust Fund no more frequently
than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required
or permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
DTE Energy Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants
and their Beneficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged, encumbered or
subjected to attachment, garnishment, levy, execution or other legal or
equitable process.
10.11 True and Correct Document. Any persons dealing with the
Trustee may rely upon a copy of this Trust and any amendments thereto certified
to be true and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may
be waived by the person entitled to such notice.
32
<PAGE> 38
10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender
shall include the feminine and neuter genders and the singular shall include
the plural and the plural shall include the singular wherever required by the
context.
10.15 Successors. This Trust shall be binding on all persons
entitled to payments hereunder and their respective heirs and legal
representatives, and on the Company, the Trustee, and their respective
successors.
10.16 Severability. If any provision of this Trust is held to be
illegal or invalid, such illegality or invalidity shall not affect the
remaining provisions of this Trust, which shall be construed and enforced as if
such illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and
construed in accordance with the laws of the State of Michigan with respect to
the Company's obligations and in accordance with the laws of the State of
Illinois with respect to the Trustee's obligations and Trust Administration.
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
DTE ENERGY COMPANY
By L.L. Loomans
------------------------
Its
-----------------------
THE NORTHERN TRUST COMPANY
as Trustee
By
------------------------
Its
-----------------------
33
<PAGE> 39
EXHIBIT A
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY PLAN FOR DEFERRING THE PAYMENT OF DIRECTORS' FEES
The Company has established an Irrevocable Grantor Trust to pay benefits under
the DTE Energy Company Plan for Deferring the Payment of Directors' Fees. A
copy of such Plan, including any amendment(s), is attached hereto.
<PAGE> 40
EXHIBIT B
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPAny
PLAN FOR DEFERRING THE Payment of
DIRECTORS' FEES
PARTICIPANTS (as defined in the Trust)
as of January 1, 1996
Name [Date of Birth]
- --------------- -------------
<PAGE> 1
EXHIBIT 99-8
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
EFFECTIVE JANUARY 1, 1996
<PAGE> 2
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
I. DEFINITIONS ...................................... 2
1.1 Beneficiary ...................................... 2
1.2 Board of Directors ............................... 2
1.3 Change of Control ................................ 2
1.4 Company .......................................... 4
1.5 Effective Date ................................... 4
1.6 Reserved ......................................... 4
1.7 Excess Assets .................................... 4
1.8 Funding Amount ................................... 4
1.9 General Creditors ................................ 5
1.10 Reserved ......................................... 5
1.11 Insolvent ........................................ 5
1.12 Investment Manager ............................... 5
1.13 IRC .............................................. 5
1.14 Participant ...................................... 5
1.15 Reserved ......................................... 5
1.16 Plan Administrator ............................... 5
1.17 Potential Change of Control ...................... 6
1.18 Potential Change of Control Period ............... 7
1.19 Reserved ......................................... 7
1.20 Trust ............................................ 7
1.21 Trust Fund ....................................... 7
1.22 Trustee .......................................... 7
1.23 Valuation Date ................................... 7
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
II. ESTABLISHMENT OF THE TRUST ....................... 8
2.1 Trust ............................................ 8
2.2 Description of Trust ............................. 8
2.3 Irrevocability ................................... 9
2.4 Acceptance by the Trustee ........................ 10
III. CONTRIBUTIONS .................................... 10
3.1 Calculations of Funding Amount ................... 10
3.2 Contributions as of Each Valuation Date .......... 10
3.3 Reserved ......................................... 10
3.4 No Dilution of Trust ............................. 10
3.5 Collection ....................................... 11
IV. ACCOUNTING AND ADMINISTRATION .................... 12
4.1 Trustee Recordkeeping ............................ 12
4.2 Company Recordkeeping ............................ 12
4.3 Periodic Accounting .............................. 12
4.4 Administrative Powers of Trustee ................. 13
V. INVESTMENTS ...................................... 16
5.1 Generally ........................................ 16
5.2 Investment Powers of Trustee ..................... 16
5.3 Investment Managers .............................. 20
5.4 Reserved ......................................... 21
5.5 Single Fund ...................................... 21
VI. PAYMENTS FROM THE TRUST .......................... 21
6.1 Obligation of Trustee to Make Payments
to Participants .................................. 21
6.2 Obligation of the Company to
Make Payments to Participants .................... 22
6.3 Distributions to Participants .................... 22
6.4 Reserved ......................................... 22
6.5 Insufficient Trust Fund Assets ................... 22
6.6 Payment of Excess Assets to Company .............. 23
6.7 Company to Pay Withholding and Employment Taxes .. 23
6.8 Payment in Reversion to Company .................. 24
6.9 Reserved ......................................... 24
</TABLE>
ii
<PAGE> 4
<TABLE>
<S> <C> <C>
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY ............ 24
7.1 No Security Interest ............................. 24
7.2 Determination of Insolvency ...................... 25
7.3 Payments When Company Is Insolvent ............... 25
7.4 Resumption of Duties after Insolvency ............ 26
7.5 Reserved ......................................... 27
VIII. RESIGNATION OR REMOVAL OF TRUSTEE ................ 27
8.1 Resignation or Removal of Trustee ................ 27
8.2 Successor Trustee ................................ 27
8.3 Duties of Retiring and Successor Trustees ........ 28
8.4 Reserved ......................................... 28
IX. AMENDMENT AND TERMINATION OF TRUST ............... 28
9.1 Amendment ........................................ 28
9.2 Termination ...................................... 30
9.3 Reserved ......................................... 30
X. GENERAL PROVISIONS ............................... 30
10.1 Coordination with Plan ........................... 30
10.2 Litigation ....................................... 30
10.3 Trustee's Action Conclusive ...................... 30
10.4 No Guarantee or Responsibility ................... 30
10.5 Liabilities Mutually Exclusive ................... 31
10.6 Indemnification .................................. 31
10.7 Expenses and Compensation ........................ 31
10.8 Reserved ......................................... 32
10.9 Notice ........................................... 32
10.10 Antiassignment Clause ............................ 32
10.11 True and Correct Document ........................ 32
10.12 Waiver of Notice ................................. 32
10.13 Counterparts ..................................... 33
10.14 Gender and Number ................................ 33
10.15 Successors ....................................... 33
10.16 Severability ..................................... 33
10.17 Applicable Law ................................... 33
</TABLE>
iii
<PAGE> 5
EXHIBIT A DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE
DIRECTORS
EXHIBIT B DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY
RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
PARTICIPANTS (as defined in the Trust)
iv
<PAGE> 6
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
THIS TRUST AGREEMENT is made this 1st day of January, 1996 by and between
DTE Energy Company, a Michigan corporation, and The Northern Trust Company, an
Illinois corporation, of Chicago Illinois ("Trustee"), and any successor
provided for in the Trust hereby evidenced, as Trustee.
WITNESSETH THAT:
WHEREAS, the Company has established and maintains the DTE Energy Company
Retirement Plan for Non-Employee Directors ("Plan"), an unfunded benefit plan,
a copy of which is attached hereto as Exhibit A, for the benefit of certain
non-employee Directors of the Company listed on Exhibit B hereto, which
Exhibits may be amended from time to time by the Company prior to a potential
Change of Control and/or Change of Control, and without the Trustee's consent;
and
WHEREAS, the Company has incurred and expects to continue to incur
liabilities pursuant to the terms of the Plan, and wishes to establish an
irrevocable trust by placing assets in trust, subject to the claims of the
Company's creditors in the event the Company becomes Insolvent, to pay benefits
under the Plan or to be applied as otherwise provided for herein; and
WHEREAS, it is the intention of the Company that amounts transferred to
the Trust and the earnings thereon shall be used by the Trustee, subject to the
claims of the Company's creditors in the event the Company becomes Insolvent,
to satisfy the liabilities of the Company in accordance with the provisions
hereof; and, upon satisfaction of all liabilities of the with respect to all
Participants (and their Beneficiaries, if applicable), the assets, if any,
remaining in the Trust shall revert to the Company; and
<PAGE> 7
WHEREAS, the Company intends that the existence of the Trust shall not
alter the characteristics of the Plan as an unfunded plan maintained primarily
for the purpose of providing deferred compensation for a select group of
Directors, and shall not be construed to provide income for federal income tax
purposes to a Participant (or his or her Beneficiary) prior to the actual
payment of benefits under the Plans; and
WHEREAS, the Trustee has agreed to serve as trustee of such trust;
NOW, THEREFORE, in consideration of the mutual undertakings of the Company and
the Trustee, the parties do hereby establish the Trust, and agree that the
Trust shall be comprised, held, and disposed of as follows:
I. DEFINITIONS. Unless the context requires otherwise, definitions as used
herein shall have the same meaning as in the Plan when applied to said Plan.
1.1 "Beneficiary" means the beneficiary designated as provided in the Plan
as set forth in Exhibit A.
1.2 "Board of Directors" means the Company's Board of Directors, as
constituted from time to time.
1.3 "Change of Control" means the occurrence of any of the following
events:
(a) a change of control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A under the
Securities Act of 1934, as amended (the "Exchange Act"), or any successor
provisions, whether or not the Company is then subject to such reporting
requirement; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d) of the
Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 30% or more of the combined voting
power of the Company's then outstanding securities ordinarily (and apart
from rights
2
<PAGE> 8
accruing under special circumstances) having the right to vote at
elections of the Board of Directors (the "Base Capital Stock"); provided,
however, that any change in the relative beneficial ownership of
securities of any person resulting solely from a reduction in the
aggregate number of outstanding shares of Base Capital Stock, and any
decrease thereafter in such person's ownership of securities, shall be
disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company; or
(c) a change in the composition of the Company's Board of Directors,
as a result of which fewer than two-thirds of the incumbent directors
are directors who either
(1) had been directors of the Company 24 months prior
to such change, or
(2) were elected, or nominated for election, to the
Company's Board of Directors with the affirmative votes of at
least a majority of the directors who had been directors of
the Company 24 months prior to such change and who were still
in office at the time of the election or nomination; or
(d) there shall be consummated
(1) any consolidation or merger of the Company in
which the Company is not the continuing or surviving
corporation or pursuant to which shares of the Company's
common stock would be converted into cash, securities, or
other property, other than a merger of the Company in which
the holders of the Company's common stock immediately prior to
the merger have the same proportionate ownership of common
stock of the surviving corporation immediately after the
merger, or
(2) any sale, lease, exchange, or other transfer (in
one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Company, or
3
<PAGE> 9
(3) the stockholders of the Company approve a plan or
proposal for the liquidation or dissolution of the
Company.
Notwithstanding the foregoing provisions of this Section 1.3 a "Change of
Control" shall not be deemed to have occurred by reason of the corporate
reorganization (the "Reorganization") of the Company implemented pursuant to
the resolution adopted by the Board of Directors of the Company on December 5,
1994 (as such resolution may be amended or supplemented from time to time),
whereby it is proposed that a corporation will become the parent holding
company of the Company.
The Company shall promptly notify the Trustee of a Change of Control and the
Trustee may conclusively rely upon such notice and shall have no duty to
independently determine whether a Change of Control has occurred.
1.4 "Company" means DTE Energy Company, a Michigan corporation, its
successors and assigns.
1.5 "Effective Date" means January 1, 1996.
1.6 Reserved.
1.7 "Excess Assets" means assets of the Trust in excess of one hundred and
twenty-five per cent (125%) of the Funding Amount.
1.8 "Funding Amount" means the actual benefit obligation on the books of
the Company as of the most recent Valuation Date, certified by the Company to
the Trustee, which shall be the amount necessary to ensure that the assets of
the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. Upon any Potential Change of Control and during any
Potential Change of Control Period, however, the Funding Amount means one
hundred and twenty per cent (120%) of the actual benefit obligation on the
books of the Company as of the most recent Valuation Date, certified by the
Company to the Trustee, which shall be the amount necessary to ensure that the
assets of the Trust Fund would, as of the most recent Valuation Date, have been
sufficient to satisfy the Company's obligations due to each respective
Participant under the Plan. The Company's obligations to each respective
Participant under the Plan shall be limited to benefits attributable to service
rendered by the Participant to the Company.
4
<PAGE> 10
1.9 "General Creditors" means the unsecured general creditors of the
Company, including the Participants.
1.10 Reserved.
1.11 "Insolvent" and "Insolvency" mean that the Company
(a) is unable to pay its debts as they become due; or
(b) is subject to a pending proceeding as a debtor under the
Bankruptcy Code.
1.12 "Investment Manager" means the investment manager(s) appointed by the
Company in the manner provided in Section 5.3 to direct the investment of any
part or all of the assets of the Trust Fund in accordance with Article V.
1.13 "IRC" means the Internal Revenue Code of 1986, as amended.
1.14 "Participant" means an individual listed on Exhibit B attached
hereto who
(a) is a Participant in the Plan because of services rendered to the
Company; or
(b) would be a Participant in the Plan because of services rendered
to the Company but is not due to age, years of service or active
employment.
The Company agrees to list all Participants on Exhibit B attached hereto.
Except after a Change of Control as provided in Section 3.4, the Company may
add or delete Participants by delivering a new Exhibit B to the Trustee.
1.15 Reserved.
1.16 "Plan Administrator" means the party designated under the Plan as
responsible for the management, operation, and administration of the Plan.
5
<PAGE> 11
1.17 "Potential Change of Control" means the date of the earliest
occurrence of any of the following events:
(a) the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change of Control of the Company; or
(b) any "person" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act), other than the Company or an employee benefit plan
maintained by the Company, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 9.5% or more of the combined
voting power of the Company's then outstanding securities ordinarily (and
apart from rights accruing under special circumstances) having the right
to vote at elections of the Board of Directors (the "Base Capital
Stock"); provided, however, that any change in the relative beneficial
ownership of securities of any person resulting solely from a reduction
in the aggregate number of outstanding shares of Base Capital Stock, and
any decrease thereafter in such person's ownership of securities, shall
be disregarded until such person increases in any manner, directly or
indirectly, such person's beneficial ownership of any securities of the
Company; or
(c) the public announcement by any individual or entity, other than
the Company, that such individual or entity intends to take or to
consider taking actions which, if consummated, would constitute a Change
of Control of the Company; or
(d) the public announcement of any merger, acquisition,
consolidation, or reorganization of the Company in which the Company is
not the continuing or surviving corporation, or pursuant to which shares
of the Company's common stock would be converted into cash, securities,
or other property, other than a transaction in which the holders of the
Company's common stock immediately prior to the merger, acquisition,
consolidation, or reorganization have the same proportionate ownership of
common stock of the surviving corporation immediately after the merger,
acquisition, consolidation, or reorganization, including, but not limited
to, the creation of a parent entity to oversee the Company; or
6
<PAGE> 12
(e) the public announcement of the sale or other transfer of
substantially all of the assets of the Company to any third party; or
(f) the Board of Directors of the Company adopts a resolution to the
effect that a Potential Change of Control of the Company has occurred for
purposes of this Trust.
Notwithstanding the foregoing provisions of this Section 1.17, a "Potential
Change of Control" shall not be deemed to have occurred by reason of the
Reorganization (as defined in Section 1.3).
1.18 "Potential Change of Control Period" means the one (1) year period
immediately following the date of a Potential Change of Control. If a
subsequent Potential Change of Control occurs during any Potential Change of
Control Period, the Potential Change of Control Period shall end one (1) year
following the date of the most recent Potential Change of Control.
The Company shall promptly notify the Trustee of a Potential Change of
Control and the Trustee may conclusively rely upon such notice and shall have
no duty to independently determine whether a Potential Change of Control has
occurred.
1.19 Reserved.
1.20 "Trust" means the irrevocable trust established pursuant to this
Trust Agreement and all of the terms and conditions of this Trust Agreement,
which is intended to constitute a grantor trust under IRC Section Section
et seq.
1.21 "Trust Fund" means all moneys, securities, and other property held by
the Trustee, any custodian, or any insurance company under this Trust.
1.22 "Trustee" shall mean the trustee named herein, and any 1.20 "Trust"
means the irrevocable trust established pursuant to this Trust Agreement and
all of the terms and conditions of this Trust Agreement, which is intended to
constitute a grantor trust under IRC Section Section 671 et seq.
1.23 "Valuation Date" means the day in each calendar year which is the
last day of the Company's fiscal year in each year, and such other times as the
Company may determine. Each of (a) any date of a Potential Change of Control,
(b) the date of a Change of Control, (c) the effective date of a Trustee's
resignation or removal,
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and (d) the date of termination of the Trust shall also be a Valuation Date if
any such date occurs other than on the last business day of the Company's
fiscal Year. The first Valuation Date shall be December 31, 1996.
II. ESTABLISHMENT OF THE TRUST
2.1 Trust. The Company hereby establishes the Trust with the Trustee,
which Trust shall consist of such sums of money and other property acceptable
to the Trustee as from time to time have been and shall be paid or delivered by
the Company to the Trustee as provided herein. All such money and other
property, all investments and reinvestments made therewith, or the proceeds
thereof, and all investment earnings and profits thereon, less all payments and
charges as authorized herein, shall constitute the Trust Fund. The Trust Fund
shall be held in trust by the Trustee, and shall be dealt with in accordance
with the provisions of this Trust.
2.2 Description of Trust. The Company represents and agrees that:
(a) the Trust is intended to be a grantor trust under IRC Section
Section 671-678, and shall be construed accordingly. The Company intends
and agrees that it is the "owner" or grantor of the Trust in its
entirety, as that term is defined in subpart E, part I, subchapter J,
chapter 1, subtitle A of the IRC and that, for income tax purposes, all
income, deductions, and credits of the Trust Fund belong to it as owner,
and will be included on its income tax or other required tax returns, and
any income tax determined to be payable as a result thereof will be the
sole obligation of, and will be paid by, the Company;
(b) a true and correct copy of the Plan, as in effect on the
Effective Date hereof, is attached hereto as Exhibit A. The Company shall
file with the Trustee, promptly upon its adoption, a true and correct
copy of each amendment to the Plan;
(c) the Trust Fund is to be used to satisfy the legal obligations of
the Company to Participants under the Plan as provided herein, subject to
the claims of General Creditors in the event of Insolvency, and the
balance of the Trust Fund, if any, remaining after payment of the
Company's obligation to Participants under the Plan will revert to the
Company in accordance with the Trust;
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(d) contributions by the Company to the Trust which are made
coincident with and subsequent to the Effective Date shall be in amounts
determined under Article III hereof. The Company agrees to fund the Trust
as provided therein;
(e) the principal of the Trust, and any earnings thereon shall be
held by the Trustee separate and apart from other funds of Company, and
shall be used exclusively for the uses and purposes as herein set forth;
(f) the Trust established under this agreement does not fund and is
not intended to fund the Plan, or any other employee benefit plan or
program of the Company. Neither the establishment of the Trust, nor the
payment or delivery of assets to the Trustee shall vest any Participant
in any right, title, or interest in or to any assets of the Trust Fund;
(g) participants shall have no preferred claim on, or any beneficial
ownership interest in, assets of the Trust. To the extent that any
Participant acquires the right to receive payment(s) under the Plan, any
such right shall be mere unsecured contractual rights of Participants
against the Company, and such Participants (or their Beneficiary(ies))
shall have only the unsecured promise of the Company that such payment(s)
will be made. Any assets held by the Trust will be subject to the claims
of General Creditors under federal and state law in the event of
Insolvency, as defined herein, with no preference whatsoever given to
claims of employees or Participants over claims of other unsecured
creditors of the Company; and
(h) to the extent the Plan is covered by ERISA, the Plan is a plan
for a select group of management or highly compensated employees, and as
such is exempt from the application of ERISA except for the disclosure
requirements applicable to such plan, for which the Company bears full
responsibility as to compliance. The Company further represents that the
Plan is not qualified under IRC Section 401 and therefore, is not
subject to any IRC requirements applicable to tax-qualified plans.
2.3 Irrevocability. Except as provided in Article 9 and this Section 2.3,
the Trust shall be irrevocable from the effective date, and the assets of the
Trust Fund shall be held in accordance with the provisions hereof for the
exclusive purpose of providing for the payment of the Company's obligations to
pay benefits to
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Participants under the Plan and to satisfy the claims of General Creditors in
the event of Insolvency, and defraying the expenses of the Trust. Except as
provided in Section 6.6 and Section 6.8 and in the event of Insolvency, no part
of the income or corpus of the Trust Fund shall be recoverable by or for the
benefit of the Company.
2.4 Acceptance by the Trustee. The Trustee accepts the Trust established
under this Trust Agreement on the terms and subject to the provisions set forth
herein, and agrees to discharge and perform fully and faithfully all of the
duties and obligations imposed upon it under this Trust.
III. CONTRIBUTIONS
3.1 Calculations of Funding Amount. By September 30, 1996, the Company
shall contribute to the Trust the Funding Amount as determined on the first
Valuation Date. As of each Valuation Date, and until the entire Trust Fund has
been distributed, the Company (or, after a Change of Control, the Company's
independent public accountants) shall recalculate the Funding Amounts.
3.2 Contributions as of Each Valuation Date. During the life of the Trust
but no later than March 31 of each year, commencing no later than September 30,
1997, the Company shall contribute to the Trust such amount as is necessary to
make trust assets equal the Funding Amount as of the previous Valuation Date.
The Plan Administrator or its delegate (or, after a Change of Control, the
Company's independent public accountants) shall provide the Trustee with
written notice of the amount of the necessary contribution on or before the
date such contribution is due to the Trust. Any such payments to the Trustee do
not discharge or release the Company of its obligation under the Plan or
Section 6.2 to pay benefits to Participants under the Plan, and shall at all
times be subject to the provisions of Article VII.
3.3 Reserved.
3.4 No Dilution of Trust. After a Change of Control, the Exhibit B in
effect on the date of a Change of Control shall not be amended to include a
Participant not named in the Exhibit B in effect on the date of a Change of
Control, unless pursuant to the requirements of this Section 3.4, at the time
of delivery to the Trustee of a proposed amended Exhibit B (the "Delivery
Date"), the Company shall deliver to the Trustee a determination by the
Company's independent public accountants as of
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the Delivery Date of the proposed amended Exhibit B of the Funding Amount
calculated based on the Participants named in the Exhibit B in effect on the
Date of the Change of Control and any new or additional Participants named in
the proposed amended Exhibit B (the "New Funding Amount") and (b), assets in an
amount necessary to make the trust assets equal the New Funding Amount. If the
Trustee determines that assets of the Trust Fund, including such assets as are
delivered by the Company on the Delivery Date, equal or exceed the New Funding
Amount, the Trustee shall accept the amended Exhibit B. Any amended Exhibit B
so accepted shall be deemed incorporated with the same effect as if otherwise
included herein. Unless an Exhibit B amended after a Change of Control is
accepted by the Trustee as provided in this Section, the Trustee shall have no
liability, responsibility, or obligation with respect to a Participant named in
any amended Exhibit B unless such Participant is named in the Exhibit B then in
effect on the date of a Change of Control.
3.5 Collection. In the event the Company fails to pay over to the Trustee
within one hundred and twenty (120) days of notice and demand from the Trustee
(or, upon the occurrence of a Potential Change of Control or a Change of
Control, within seven (7) days of notice and demand from the Trustee), any
amount determined to be payable by the Company to the Trustee under Sections
3.2, 6.5 or 7.4(a) of the Trust, the Trustee may commence legal action, (which
is expressly deemed to include without limitation an alternate dispute
resolution proceeding), to compel the Company to pay to the Trustee any amount
determined to be payable to it under the Trust. The Trustee may bring such
action against the Company in any court of competent jurisdiction, and shall be
entitled to recover for the benefit of the Trust from the Company such amount,
plus interest for each day at the rate of interest per annum of five (5)
percentage points in excess of the prime lending rate as announced by NBD Bank,
from the due date specified in the Trustee's notice and demand (or the date(s)
from which pro rata payments were made, if such action is brought by the
Trustee pursuant to Section 6.5 hereof) to the date of payment, plus all costs
of collection, including reasonable attorneys, fees and costs of litigation.
The Trustee is authorized to bring action to compel payment by the Company,
and, in connection with reasonable claims for delinquent contributions by the
Company, to retain, at the expense of the Company, counsel and other
appropriate experts, including actuaries and accountants, to aid it in pursuing
litigation for collection against the Company. The Trustee's anticipated
reasonable costs and expenses incurred pursuant to this Section 3.5 are payable
by the Company in advance; and should the Company not make timely payment, the
Trustee may charge the Trust
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Fund for such reasonably anticipated costs and expenses. The Trustee shall in
no event be required to advance or expend its own funds in order to comply with
the provisions of this Section 3.5.
IV. ACCOUNTING AND ADMINISTRATION
4.1 Trustee Recordkeeping. The Trustee shall keep or cause to be kept
accurate and detailed records of any investments, receipts, disbursements, and
all other transactions required to be made by the Trustee hereunder, in
accordance with such rules as may be established by the Company, including such
specific records as shall be agreed upon in writing between the Company and the
Trustee. All accounts, books, and records relating thereto shall be open to
inspection and audit at all reasonable times by any person designated by the
Company. All such accounts, books, and records shall be preserved (in original
form, or on microfilm, magnetic tape, or any other similar process) for such
period as the Company may determine, and the Trustee may only destroy such
accounts, books, and records after first notifying the Company in writing of
its intention to so, and transferring to the Company any of such accounts,
books, and records requested by the Company.
4.2 Company Recordkeeping. The Company shall keep full, accurate, and
detailed books and records with respect to the Participants and benefits paid
and payable under the Plan, which records shall be made available to the
Trustee at its request.
4.3 Periodic Accounting. Within sixty (60) days following a Valuation
Date, the Trustee shall deliver to Company a written accounting, dated as of
the Valuation Date, of its administration of the Trust Fund during such year or
during the period from the most recent Valuation Date to the date of such
current Valuation Date, which accounting shall be in accordance with the
following provisions:
(a) Such accounting shall set forth all investments, receipts,
disbursements, and other transactions effected by the Trust Fund during
the preceding year, or during the period from the most recent Valuation
Date to the date of such current Valuation Date, including a description
of all securities and investments purchased and sold, with the cost or
net proceeds of such purchases or sales (accrued interest paid or
receivable being shown separately), and showing all cash, securities or
other property held in the Trust Fund, less liabilities known to the
Trustee (other than liabilities to
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Participants entitled to benefits under the Plans) at the end of such
year or other period, as the case may be. In making a valuation, all
cash, securities or other property held in the Trust Fund shall be valued
at their then fair market value, and shall be in a format as may be
established by the Company. A copy of each accounting so delivered to the
Company shall be open to inspection at the office of the Trustee during
normal business hours.
(b) If within ninety (90) days after the filing of such written
accounting, the Company has not delivered to the Trustee notice of any
objection to any act or transaction of the Trustee, the initial
accounting shall become an account stated as between the Trustee and the
Company. If any objection has been delivered to the Trustee by the
Company, and if the Company is satisfied that it should be withdrawn, the
Company shall signify its approval of the accounting in writing filed
with the Trustee, and the accounting shall become an account stated as
between the Trustee and the Company. If the accounting is adjusted
following an objection thereto, the Trustee shall file and deliver the
adjusted accounting to the Company. If within fifteen (15) days after
such filing of an adjusted accounting, the Company has not delivered to
the Trustee notice of any objection to the transactions as so adjusted,
the adjusted accounting shall become an account stated as between the
Trustee and the Company.
(c) Unless an accounting is fraudulent, when it becomes an account
stated, it shall be finally settled, and the Trustee shall, to the extent
permitted by applicable law, be forever released and discharged from all
liability and accountability with respect to the propriety of its acts
and transactions shown in such accounting.
4.4 Administrative Powers of Trustee. Except to the extent that authority
with respect to the administration of the Trust has been allocated to others in
accordance with this Trust, and subject to Article V, the Trustee shall have
exclusive authority and discretion to manage and administer the Trust. The
Trustee shall act with the care, skill, prudence and diligence under the
circumstances then prevailing that a prudent person acting in like capacity and
familiar with such matters would use in the conduct of an enterprise of like
character and with like aims, provided, however, that Trustee shall incur no
liability to any person for any action taken pursuant to a direction, request
or approval given by Company which is contemplated by, and in conformity with,
the terms of the Trustee's responsibilities
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under this Trust, and is given in writing by Company. The responsibility for
maintenance of individual benefit records shall be retained by the Company, and
may be delegated to such person or entity as the Company may employ from time
to time. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by law and, without limiting the
foregoing, shall have the following administrative powers, rights, and duties
in addition to those provided elsewhere in this Trust:
(a) to manage, sell, insure, and otherwise deal with all assets held
by the Trustee on such terms and conditions as the Trustee shall decide;
provided however, that if the Company delivers written instructions to
the Trustee, the Trustee shall follow such instructions;
(b) when directed by the Company or requested by a Participant
pursuant to Article VI, to make payments from the Trust Fund to
Participants and, when required by Article VII, to make payments from the
Trust Fund to General Creditors entitled to payments thereunder;
(c) except as provided in Article VI and Article VII, to waive,
modify, reduce, compromise, release, contest, submit to arbitration, or
settle or extend the time of payment of any claims, debts, damages, or
demands of any nature in favor of or against the Trustee or all or any
part of the Trust Fund;
(d) to retain any disputed property until an appropriate final
adjudication or release is obtained, and to represent the Trust in, or
commence or defend, any litigation the Trustee considers in its
discretion necessary in connection with the Trust Fund;
(e) to withhold, if the Company so directs, all or any part of any
payment required to be made hereunder as may be necessary and proper to
protect the Trustee or the Trust Fund against any liability or claim on
account of any estate, inheritance, income or other tax or assessment
attributable to any amount payable hereunder, and to discharge any such
liability with any part or all of such payment so withheld in accordance
with Section 6.7;
(f) to maintain records reflecting all receipts and payments under
this Trust and such other records as the Company may specify and to which
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the Trustee agrees, which records may be audited from time to time by the
Company or anyone named by the Company; and to furnish a written
accounting to the Company as of each Valuation Date, as provided in
Section 4.3;
(g) if an insurance policy is held as an asset of the Trust, Trustee
shall have no power to name a beneficiary of the policy other than the
Trust, to assign the policy (as distinct from conversion of the policy
from a different form) other than to a successor Trustee, or to loan to
any person the proceeds of any borrowing against such policy.
Notwithstanding the preceding sentence, the Trustee may loan to the
Company the proceeds of any borrowing against an insurance policy held as
an asset of the Trust;
(h) to furnish the Company with such information for tax or other
purposes which the Company may reasonably request and which the Trustee
may not unreasonably withhold;
(i) to employ accountants, advisors, agents, legal counsel (who,
except following a Change of Control, may be legal counsel to the Company
and who are not in the Company's reasonable judgment deemed to have a
conflict of interest), consultants, custodians, depositories, experts and
other providers of services, to consult with them with respect to the
implementation and construction of this Trust, the duties of the Trustee
hereunder, the transactions contemplated by this Trust, or any act which
the Trustee proposes to take or omit, and to rely upon the advice of and
services performed by such persons; to delegate discretionary powers to
such persons and to reasonably rely upon information and advice furnished
by such persons; provided that each such delegation and the acceptance
thereof by each such person shall be in writing; and provided further
that the Trustee may not delegate its responsibilities as to the
management or control of the assets of the Trust Fund;
(j) to determine whether the Company is Insolvent, and to hold
assets of the Trust Fund for the benefit of General Creditors in the
event of Insolvency, as provided in Article VII hereof;
(k) to make payments to Participants, including after a Change of
Control, as provided in Article VI hereof;
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(l) to perform all other acts which in the Trustee's judgment are
appropriate for the proper protection, management, investment, and
distribution of the Trust Fund, and to carry out the purposes of the
Trust.
V. INVESTMENTS
5.1 Generally. With respect to assets for which the Trustee has investment
responsibility, the Trustee shall invest and reinvest the principal and income
of the Trust Fund and keep the Trust Fund invested, without distinction between
principal and income, in accordance with the written investment guidelines
established by the Company and provided to the Trustee by the Company. If no
such written investment guidelines are received by the Trustee, the assets of
the Trust Fund shall be invested in such investments as determined by the
Trustee in accordance with the powers contained herein.
5.2 Investment Powers of Trustee. Except to the extent that authority with
respect to the management of all or a portion of the Trust Fund has been
allocated to others in accordance with this Trust, the Trustee shall have
exclusive authority and discretion to manage and control the Trust Fund,
subject only to broad investment guidelines the Company may establish from time
to time. The authority to assume responsibility for investment of assets of the
Trust Fund has been retained by the Company, and the authority to hold assets
of the Trust Fund may be allocated to one or more custodians or insurance
companies. Except as otherwise provided herein, the Trustee shall have, without
exclusion, all powers conferred on trustees by applicable law and, without
limiting the foregoing, shall have the following powers, rights, and duties in
addition to those provided elsewhere in this Trust:
(a) to invest and reinvest in any property wherever situated,
whether real, personal, mixed, foreign or domestic, including common and
preferred stocks, bonds, notes, and debentures (including convertible
stocks and securities, but not including any stock, securities, or debt
instruments of the Company [unless held in a collective or commingled
fund and such Company securities comprise 5% or less of the assets of
such fund]), leaseholds, mortgages (including, without limitation, any
collective or part interest in any bond and mortgage or note and
mortgage), certificates of deposit, life insurance contracts, guaranteed
investment contracts, and guaranteed annuity
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contract, all regardless of diversification and without being limited to
investments authorized by law for the investment of trust funds;
(b) to invest and reinvest, without distinction between principal
and income, in contracts for future delivery of United States Treasury
Bills, other financial instruments, or indices based on any group of
securities, and in options to buy or sell indices based on any group of
securities or any kind of evidences of ownership or indebtedness,
including financial instruments or futures contracts relating thereto;
(c) to invest and reinvest part or all of the Trust Fund in any
deposit accounts, deposit administration fund maintained by a legal
reserve life insurance company in accordance with an agreement between
the Trustee and such insurance company, a group annuity contract or life
insurance policies issued by such insurance company to the Trustee as
contract holder, any interest bearing deposits held by any financial
institution having total capital and surplus of at least Fifty Million
Dollars ($50,000,000), investments in any stocks, bonds, debentures,
mutual fund shares, notes, commercial paper, treasury bills, and any
mutual, common, commingled or collective trust funds or pooled investment
funds, and to diversify such investments so as to minimize the risk of
losses;
(d) to commingle assets of the Trust Fund, for investment purposes
only, with assets of any common, collective, or commingled trust fund
which has been or may hereafter be established and maintained by the
Trustee, or by any other financial institution; provided that to the
extent that any part or all of the assets of the Trust Fund for which the
Trustee has investment responsibility are invested in any such common,
collective or commingled trust fund or pooled investment fund which is
maintained by a bank or trust company (including a bank or trust company
acting as Trustee), the provisions of the documents under which such
common, collective or commingled trust fund or pooled investment fund are
maintained shall govern any investment therein and provided further that
prior to investing any portion of the Trust Fund for the first time in
any such common, collective, or commingled trust fund, the Trustee shall
advise the Company of its intent to make such an investment, and furnish
to the Company any information it may reasonably request with respect to
such common, collective, or commingled trust fund (other than a trust
fund established by the Company), and provided
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further that the Trustee shall maintain separate records with respect to
each other trust of the Trust Fund;
(e) to vote stock and other voting securities personally or by proxy
(and to delegate the Trustee's powers and discretion with respect to such
stock or other voting securities to such proxy), to exercise
subscription, conversion and other rights and options (and make payments
from the Trust Fund in connection therewith), to take any action and to
abstain from taking any action with respect to any reorganization,
consolidation, merger, dissolution, recapitalization, refinancing and any
other plan or change affecting any property constituting a part of the
Trust Fund (and in connection therewith to delegate the Trustee's
discretionary powers and pay assessments, subscriptions and other charges
from the Trust Fund), to hold or register any property from time to time
in the Trustee's name or in the name of a nominee or to hold it
unregistered or in such form that title shall pass by delivery; and to
borrow from anyone, including itself (to the extent permitted by law),
such amounts from time to time as the Trustee considers desirable to
carry out this Trust (and to mortgage or pledge all or part of the Trust
Fund as security); to participate in any plan or reorganization,
consolidation, merger, combination, liquidation, or other similar plan
relating to any such property, and to consent to or oppose any such plan
or any action thereunder, or any contract, lease, mortgage, purchase,
sale, or other action by any corporation or other entity any of the
securities of which may at any time be held in the Trust Fund, and to do
any act with reference thereto;
(f) to retain in cash such amounts as the Trustee considers
advisable and as are permitted by applicable law, and to deposit any cash
so retained in any depository (including any bank acting as Trustee)
which the Trustee may select, provided such depository must have total
capital and surplus of at least Fifty Million Dollars ($50,000,000);
(g) when directed by the Company, and subject to Section 4.4(g), to
apply for, pay premiums on, and maintain in force individual, ordinary or
universal life insurance policies on the lives of Participants, which
policies may contain provisions which the Company may approve or direct;
to receive or acquire such policy or policies from the Company, but the
Trustee may purchase a life insurance policy from a person other than the
insurer which issues a policy only if the Trustee pays, transfers, or
otherwise exchanges an
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amount no more than the cash surrender value of the policy or policies,
and the policy or policies is (are) not subject to a mortgage or similar
lien which the Trustee would be required to assume; to have with respect
to such policy or policies any rights, powers, options, privileges, and
benefits usually comprised in the term "incidents of ownership", and
normally vested in an owner of such policy or policies to be exercised
only pursuant to Company direction;
(h) to retain any property at any time received by it;
(i) to sell, to exchange, to convey, to transfer, or to dispose of,
and to grant options for the purchase or exchange with respect to it, any
property at any time held by it, by public or private sale, for cash or
on credit, or partly for cash and partly for credit;
(j) to deposit any such property with any protective,
reorganization, or similar committee; to delegate discretionary power to
any such committee; and to pay part of the expenses and compensation of
any such committee and any assessments levied with respect to any
property so deposited;
(k) to exercise any conversion privilege or subscription right
available in connection with any such property, and to do any act with
reference thereto, including the exercise of options, the making of
agreements or subscription, and the payment of expenses, assessment or
subscription, which may be deemed necessary or advisable in connection
therewith, and to hold and retain any securities or other property which
it may so acquire;
(l) to extend the time of payment of any obligation held in the
Trust Fund;
(m) to enter into standby agreements for future investment, either
with or without a standby fee;
(n) to acquire, renew, or extend, or participate in the renewal or
extension of any mortgage, and to agree to a reduction in the rate of
interest on any indebtedness or mortgage or to any other modification or
change in the terms of any indebtedness or mortgage, or of any guarantee
pertaining thereto, in any manner and to any extent that may be deemed
advisable for the
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protection of the Trust Fund or the preservation of any covenant or
condition of any indebtedness or mortgage or in the performance of any
guarantee, or to enforce any default in such manner and to such extent as
may be deemed advisable; and to exercise and enforce any and all rights
of foreclosure, to bid on any property in foreclosure, to take a deed in
lieu of foreclosure with or without paying a consideration therefor, and
in connection therewith to release the obligation on the bond secured by
such mortgage; and to exercise and enforce in any action, suit or
proceeding at law or in equity any rights or remedies in respect of any
such indebtedness or mortgage or guarantee;
(o) to make, execute, and deliver, as Trustee, any and all deeds,
leases, notes, bonds, guarantees, mortgage, conveyance, contracts,
waivers, releases, or other instruments in writing necessary or proper
for the accomplishment of any of the foregoing powers;
(p) to organize under the laws of any state one or more
corporations, partnerships, or trusts for the purpose of acquiring and
holding title to any property that it is authorized to acquire under this
Trust, and to exercise with respect thereto any or all of the powers set
forth in this Trust;
(q) notwithstanding any powers granted to the Trustee pursuant to
this Trust Agreement or to applicable law, the Trustee shall not have any
power that could give this Trust the objective of carrying on a business
and dividing the gains therefrom, within the meaning of Section
301.7701-2 of the Procedure and Administrative Regulations promulgated
under the IRC; and
(r) generally to do all acts, whether or not expressly authorized,
that the Trustee deems necessary or desirable for the protection of the
Trust Fund, and to carry out the purposes of the Trust.
5.3 Investment Managers. The Company may appoint one or more Investment
Managers to direct the investment of any part or all of the assets of the Trust
Fund by the Trustee. Appointment of an Investment Manager shall be made by
written notice to the Investment Manager(s) and to the Trustee, which notice
shall specify those powers, rights, and duties of the Trustee under this Trust
that are allocated to the Investment Manager(s) and the portion of the assets
of the Trust Fund subject to the Investment Manager(s). After it receives
written notice of such appointment, the Trustee shall have no obligation or
responsibility for those
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investment duties which are allocated to an Investment Manager. An Investment
Manager so appointed pursuant to this paragraph shall be either a registered
investment adviser under the Investment Advisers Act of 1940, a bank, as
defined in said Act, or an insurance company qualified to manage, acquire and
dispose of the assets of the Plans under the laws of more than one state of the
United States. Any such Investment Manager shall acknowledge to the Company in
writing that is accepts such appointment. The Trustee shall not be liable for
any loss or diminution of any assets managed by an Investment Manager,
including without limitation, any loss or diminution caused by any action or
inaction taken or omitted by it at the direction of an Investment Manager. In
addition, the Trustee shall not be liable for the diversification of any assets
managed by Investment Managers of the Company, each of which shall be solely
the responsibility of the Company. An Investment Manager may resign at any time
upon written notice to the Trustee and the Company. The Company may remove an
Investment Manager at any time by written notice to the Investment Manager and
the Trustee.
The Company may by written notice to the Trustee assume investment
responsibility for any portion or all of the Trust assets. The Trustee shall
have no responsibility for any investments or review of such investments and
shall act with respect to such assets only as directed by the Company.
5.4 Reserved.
5.5 Single Fund. All assets of the Trust Fund and of each investment fund,
and the income thereon, shall be held and invested as a single fund, and the
Trustee shall not make any separate investment of the Trust Fund, or make any
separate investment fund, for the account of any Participant or other General
Creditors prior to receipt of directions to make payments to such Participant
or other General Creditors in accordance with Article VI or Article VII. All
rights associated with assets of the Trust shall be exercised by Trustee or the
person designated by Trustee, and shall in no event be exercisable by or rest
with Participants.
VI. PAYMENTS FROM THE TRUST
6.1 Obligation of Trustee to Make Payments to Participants. The Trustee's
obligation to distribute to any Participant out of the assets of the Trust Fund
shall be limited to payment at such times and in such amounts as are properly
in conformance with the provisions of Section 6.3. Payments to Participants
pursuant
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to this Article VI shall be made by the Trustee to the extent that funds in the
Trust Fund are sufficient for such purpose, and shall at all times be subject
to the provisions of Article VII. In the event the Company determines that it
will pay benefits directly to Participants as they become due under the terms
of the Plan, the Company shall notify Trustee of its decision prior to the time
amounts are payable to Participants.
6.2 Obligation of the Company to Make Payments to Participants.
Notwithstanding anything in the Trust to the contrary, the Company shall remain
primarily liable to pay benefits under the Plan. Distributions to Participants
from the Trust Fund shall discharge, reduce, and offset the Company's
obligation to pay benefits to or on behalf of the Participant, to the extent of
the distributions, with respect to the Plan. If the Company's obligation to pay
a benefit under the Plan is not fully discharged, reduced, and offset by a
distribution from the Trust, then the Company shall make the balance of each
such benefit payment as it becomes due.
6.3 Distributions to Participants. Distributions which shall be made from
the Trust Fund to pay benefits in accordance with the Plan shall be initiated
by:
(a) written direction to the Trustee from the Plan Administrator,
which direction shall certify that such distribution(s) is(are) in
accordance with the Plan, and specify the timing, form, payee, and amount
of such benefit payments, including any federal, state, or local income
taxes to be withheld, and the Trustee shall make or commence the directed
distributions after receipt of such written direction; or
(b) by the submission to the Trustee by a Participant of a certified
copy of the non-appealable order of an appropriate forum with
jurisdiction to settle a claim for payment(s) under the Plan.
6.4 Reserved.
6.5 Insufficient Trust Fund Assets. If at any time the Trustee determines
or is advised that the Trust Fund does not have sufficient assets to permit the
Trustee to make a payment properly directed pursuant to this Trust, including a
payment provided for under Section 10.7 of this Trust, the Trustee shall pay
any benefits due (if otherwise payable hereunder) to Participants on a pro rata
basis as directed by the Plan Administrator, and the Company shall make the
balance of such payments
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<PAGE> 28
as they become due. If the Plan Administrator determines that the Trust Fund
does not have sufficient funds to provide for the payment of all amounts
otherwise payable to Participants (or their Beneficiary(ies)) from the Trust
under the Plans, it shall notify the Company and the Trustee of the amount of
the deficiency, and, within forty-five (45) days of such notice, the Company
deposit in trust with the Trustee the additional amounts needed to make such
payments. Upon receipt of such amount by the Trustee from the Company, proceeds
shall first be used by the Trustee to pay any benefits previously due remaining
unpaid, in the order in which they were due, pursuant to Plan Administrator
instructions.
6.6 Payment of Excess Assets to Company. Subject to Article VII, and
except as otherwise provided in this Section and Section 6.8 hereof, the
Company shall have no right or power to direct the Trustee to return to the
Company or to divert to others any of the Trust Fund before payment of all
benefits due or to become due have been made to Participants (or their
Beneficiary(ies)) pursuant to the terms of the Plan. If, as of a Valuation
Date, and based on the fair market value of the Trust Fund as determined by the
Trustee in accordance with Section 4.3 hereof, the Trust Fund holds Excess
Assets, then in the event the Trustee has received within ninety (90) days
after the most recent Valuation Date a written request executed by the Company,
the Trustee shall transfer to the Company, within thirty (30) days after the
receipt of the request, and provided that a Potential Change of Control Period
does not exist on the date of the transfer, such assets of the Trust Fund
selected by the Company which have a fair market value equal to the amount of
such Excess Assets, after converting such assets to cash if requested by the
Company. Any payment of Excess Assets to the Company under this Section shall
not discharge or release the Company of its obligation to make any contribution
required under Article III (including the requirement of a Company contribution
to the Trust upon the occurrence of a Potential Change of Control or a Change
of Control), and its obligation to pay benefits to Participants under the Plan.
Any payment of Excess Assets in accordance with this Section shall be subject
to the provisions of Article VII.
6.7 Company to Pay Withholding and Employment Taxes. Any amount paid to a
Participant by the Trustee in accordance with this Article VI shall be reduced
by the amount of taxes required to be withheld pursuant to Plan Administrator
instructions, and the Trustee shall inform the Company of all amounts so
withheld. The Company shall direct that the Trustee shall either
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<PAGE> 29
(a) pay to the Company a sum equal to the amount of such taxes as
are required to be withheld, whereupon the Company shall have full
responsibility for the payment of all withholding taxes to the
appropriate taxing authorities, or
(b) pay such taxes directly to the appropriate taxing authorities
for the benefit of the Company.
The Company shall be solely responsible for the payment of any employment taxes
for which it is directly liable as a result of payments by the Trustee. The
Company shall furnish each Participant with the appropriate tax information
form evidencing payments under the Trust and the amount(s) thereof.
6.8 Payment in Reversion to Company. Subject to Article VII, upon receipt
of written certification from the Company that all obligations of the Company
to Participants with respect to the Plan have been satisfied, and if the Trust
Fund shall have any assets remaining, the Trustee shall distribute such
remaining assets of the Trust Fund to the Company, after converting such assets
to cash if requested by the Company, subject to the Trustee's right to retain
such reasonable amount for compensation and expenses as provided in Section
10.7. The Trust shall thereafter terminate as provided in Section 9.2.
6.9 Reserved.
VII. PAYMENTS ON INSOLVENCY OF THE COMPANY
7.1 No Security Interest. No Participant shall have any claim on or
beneficial ownership interest in the Trust Fund before such assets are paid to
the Participant, except as an unsecured creditor of the Company. The Company
shall not create a security interest in the Trust Fund in favor of any
Participant or any General Creditor. At all times during the continuance of
this Trust, as provided in this Article VII hereof, the principal and income of
the Trust Fund shall be subject to the claims of General Creditors under
federal and state law. If at any time the Trustee has received notice as
provided below that Company is Insolvent, Trustee shall discontinue payments to
Participants, and shall hold assets of the Trust Fund for the benefit of the
Company's General Creditors, pursuant to the provisions of Section 7.3, with no
preference whatsoever given claims of employees or Participants over claims of
other unsecured creditors of the Company.
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7.2 Determination of Insolvency. Notwithstanding any other provisions of
this Trust, the following provisions shall apply:
(a) The Board of Directors and the Chief Executive Officer of the
Company shall have the fiduciary duty and responsibility on behalf of
General Creditors to notify the Trustee promptly in writing in the event
the Company is Insolvent, and the Trustee shall have the right to rely
thereon to the exclusion of all directions or claims for payment made
thereafter by Participants.
(b) If the Trustee has actual knowledge that the Company is
Insolvent, the Trustee shall act in accordance with Section 7.3 hereof.
(c) Unless the Trustee receives written notice from the Board of
Directors or the Chief Executive Officer of the Company that the Company
is Insolvent, or from a person claiming to be a General Creditor and
claiming that the Company is Insolvent, the Trustee shall have no duty to
inquire whether the Company is Insolvent. If the Trustee receives a
written allegation from a person claiming to be a General Creditor that
the Company is Insolvent, the Trustee's only duty of inquiry shall be to
request that the Company's independent public accountants determine
whether the Company is Insolvent, and shall suspend benefit payments
pending such determination. If the Company's independent public
accountants advise the Trustee that the Company is not Insolvent, it
shall resume payments in accordance with this Trust. If the Trustee
receives notice of the Company's Insolvency pursuant to this Section
7.2(c), it shall act in accordance with this Section and Section 7.3
hereof.
7.3 Payments When Company Is Insolvent. Notwithstanding any other
provision of this Trust to the contrary, if the Trustee has actual knowledge as
described in 7.2(b), has been advised pursuant to 7.2(c) or receives actual
notice described in Section 7.2(a) that the Company is Insolvent
(a) by reason of Section 1.11(b), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and
shall hold the Trust Fund for the benefit of the General Creditors, and
shall pay and deliver the entire amount of the Trust Fund only as a court
competent
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<PAGE> 31
jurisdiction, or duly appointed receiver or other person authorized to
act by such court, may order or direct to make the Trust Fund available
to satisfy the claims of the General Creditors (payments to Participants
in accordance with the terms of the Plan may be resumed only pursuant to
Section 7.4 hereof); or
(b) by reason of Section 1.11(a), the Trustee shall suspend payments
to Participants and shall notify Participants of the suspension, and
shall (i) hold the Trust Fund for the benefit of General Creditors or
(ii) pay over all or a portion of the Trust Fund to General Creditors if
directed by the Company or an appropriate judicial forum.
Nothing in this Trust Agreement shall in any way diminish any rights of
Participants to pursue their rights as unsecured creditors of Company with
respect to benefits under the Plan, or otherwise.
7.4 Resumption of Duties after Insolvency. In the absence of notice of a
Court order to the contrary, the Trustee shall resume all of its duties and
responsibilities under the Trust, including payments to Participants if
otherwise provided for herein, within thirty (30) days of the Trustee's receipt
of a determination from the Company's independent public accounting firm notice
pursuant to Section 7.2(c) that the Company is no longer Insolvent.
(a) Trust Recovery of Payments to Creditors. In the event that
amounts are paid from the Trust Fund to General Creditors of the Company,
then as soon as practicable after the Company is no longer Insolvent, the
Company shall deposit into the Trust Fund a sum to equal to the Funding
Amount, determined as of the date the Company is no longer Insolvent,
which date shall be a Valuation Date. The Company (or, after a Change of
Control, the Company's independent public accountants) shall provide the
Trustee with written certification of such Funding Amount. If the Funding
Amount is not paid by the Company within ninety (90) days of the
Trustee's receipt of such notice, the Trustee shall demand payment and
the provisions of Section 3.5 shall apply.
(b) Determination of Payment Amount; Resumption of Payments.
Provided that there are sufficient assets of the Trust Fund, if Trustee
discontinues the payment of benefits from the Trust pursuant to Section
7.3 and subsequently resumes such payments, the first payment following
such
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discontinuance shall include the aggregate amount of all payments due to
Participants under the terms of the Plan for the period of such
discontinuance, as determined by the Plan Administrator, less the
aggregate amount of any payments made to Participants by the Company in
lieu of the payments provided for hereunder during any such period of
discontinuance. If the Trustee suspends a payment to a Participant under
this Section, and subsequently makes such payment, the payment shall
include interest at the rate of interest per annum equal to the prime
rate as published by NBD Bank for each day from the date of suspension to
the date of payment, as calculated by the Plan Administrator.
7.5 Reserved.
VIII. RESIGNATION OR REMOVAL OF TRUSTEE
8.1 Resignation or Removal of Trustee. The Trustee may resign for any
reason or for no reason and at any time by giving thirty (30) days prior
written notice to the Company (or such shorter notice as may be agreed to by
the Company and the Trustee). Subject to Section 8.2(b) hereof, the Company may
remove the Trustee, for any reason and with or without cause, by giving thirty
(30) days prior written notice to the Trustee (or such shorter notice as may be
agreed to by the Company and the Trustee).
8.2 Successor Trustee. In the event of the resignation or removal of a
Trustee, a successor Trustee shall be appointed. Any successor Trustee
appointed pursuant to this Section must be a corporation which is not an
affiliate of the Company and which is authorized under the laws of the United
States or of any state to administer trusts and has at the time of its
appointment total capital and surplus of at least Fifty Million Dollars
($50,000,000). The Company shall give notice of any such appointment to the
retiring Trustee and the successor Trustee. A successor Trustee shall be
appointed in accordance with the following provisions:
(a) At any time prior to a Change of Control, a successor Trustee
shall be appointed by the Company. If a Trustee should resign or be
removed, and the Company does not notify the Trustee of the appointment
of a successor Trustee within forty-five (45) days of its notice of its
resignation or removal, then the Company shall be deemed to have failed
to have appointed
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a successor Trustee, and the Trustee shall apply to a court of competent
jurisdiction for appointment of a successor Trustee.
(b) After the occurrence of a Change of Control, the Trustee who is
the Trustee on the date of the Change of Control may be removed by the
Company for three (3) years from the date of the Change of Control. If a
Trustee resigns or is removed at any time after the date of a Change of
Control, the Trustee shall apply to a court of competent jurisdiction for
appointment of a successor Trustee.
Notwithstanding Section 8.1, no resignation by or removal of the Trustee shall
be effective prior to the effective date of the appointment of a successor
Trustee by the Company or a court of competent jurisdiction.
8.3 Duties of Retiring and Successor Trustees. In the event of the
resignation or removal of a Trustee, the retiring Trustee shall within thirty
(30) days after the effective date of resignation or removal furnish to the
successor Trustee and the Company a final accounting of its administration of
the Trust. A successor Trustee shall succeed to the right and title of the
predecessor Trustee in the assets of the Trust Fund and the retiring Trustee
shall deliver the property comprising the assets of the Trust Fund (less any
unpaid fees and expenses of the retiring trustee) to the successor Trustee,
together with any instruments of transfer, conveyance, assignment, and further
assurance as the successor Trustee may reasonably require. All of the
provisions of the Trust set forth herein with respect to the Trustee shall
relate to each successor Trustee with the same force and effect as if such
successor Trustee had been originally named as the Trustee hereunder. To the
extent permitted by law, neither the Trustee nor the successor Trustee shall be
liable for any act or failure to act, and shall not be required to examine the
accounts, records, or acts of the other.
8.4 Reserved.
IX. AMENDMENT AND TERMINATION OF TRUST
9.1 Amendment. Except as otherwise provided in Section 2.3 of this Trust,
the Trust may be amended (but may not be not revoked unless all of the
Company's obligations with respect to the Plan have been satisfied) in writing
from time to time by delivery to the Trustee of such amendment executed by the
Company, which
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amendment shall include the effective date of such amendment. Any amendment of
the Trust may be made:
(a) prior to a Change of Control, without limitation and in any
manner and effective as of any date, including a retroactive effective
date, if accompanied by the written certification that no Change of
Control has occurred;
(b) after a Change of Control, only if a period of three (3) years
has elapsed since the Change of Control, and either:
(1) such amendment is accompanied by the specific written
consent to the amendment by Participants whose actuarial interests
under the Plan, computed by the Company's independent public
accountants as of the effective date of such amendment, represent
at least 51% of the total of all actuarial interests under the
Plan; or
(2) such amendment is accompanied by the opinion of legal
counsel satisfactory to the Trustee that the amendment is necessary
for the purpose of conforming the Trust to any present or future
federal or state law (including revenue laws) relating to trusts of
this or similar nature, as such laws may be amended from time to
time, and a certification that a copy of such notice and opinion of
counsel has been delivered to each Participant.
No amendment shall conflict with the terms of the Plan subject to amendment,
and no amendment may reduce the "Funding Amount" or the contribution
requirements of Article III to less than 50% of the actual benefit obligation
on the books of the Company; provided such amendment shall be effective prior
to a Potential Change of Control or a Change of Control. No amendment shall
operate to change the duties and liabilities of the Trustee without its
consent, or make the Trust revocable after it has become irrevocable in
accordance with Section 2.3 hereof unless the Company has satisfied all
obligations it may have with respect to the Plan as of the date of such
amendment. The Company and the Trustee shall execute such amendments of the
Trust as shall be necessary to give effect to any amendment made in accordance
with this Section.
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9.2 Termination. After all assets of the Trust Fund have been distributed
by the Trustee to the Participants or their Beneficiaries in accordance with
Article VI, the Trustee shall render an accounting, which shall be the final
accounting, in the manner provided for in Section 4.3. Upon acceptance of the
accounting by the Company, any assets remaining in the Trust Fund, after
deduction of such reasonable amount for compensation and expenses as provided
for in Section 10.7, shall be returned to the Company in the manner provided in
Section 6.8, and the Trust shall terminate thereupon. The Trust and all the
rights, titles, powers, duties, discretions and immunities imposed on or
reserved to the Trustee and the Company, shall continue in effect until all
assets of the Trust Fund have been distributed as provided herein.
9.3 Reserved.
X. GENERAL PROVISIONS
10.1 Coordination with Plan. The responsibilities of the Trustee shall be
governed solely by the terms of this Trust Agreement.
10.2 Litigation. In any action or proceeding regarding the Trust, the
Company, any assets of the Trust Fund, or the administration of the Trust, any
creditors who are not parties to such action or proceedings and any other
persons having or claiming to have a beneficial interest in the Trust shall not
be necessary parties and shall not be entitled to any notice of process. Any
final judgment which is not appealed or appealable and which may be entered in
any such action or proceeding shall be binding and conclusive on the parties
hereto and all persons having or claiming to have a beneficial interest in the
Trust. Acceptance by a creditor of assets of the Trust Fund shall constitute a
release of an equal amount of any obligations of the Company to such creditor.
10.3 Trustee's Action Conclusive. The Trustee's exercise or non-exercise
of its powers and discretion in good faith shall be conclusive on all persons.
No one other than the Company shall be obliged to see to the application of any
money paid or property delivered to the Trustee. The certificate of the Trustee
that it is acting according to this Trust will fully protect all persons
dealing with the Trustee.
10.4 No Guarantee or Responsibility. Notwithstanding any other provision
of this Trust to the contrary, the Trustee does not guarantee payment of any
amount
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which may become due and payable to a Participant. The Trustee shall have no
responsibility for the disclosure to Participants regarding the terms of the
Plan or of this Trust, or for the validity thereof. The Trustee shall not be
responsible for administrative functions under the Plan and shall have only
such responsibilities under this Trust Agreement as specifically set forth
herein. The Trustee will be under no liability or obligation to anyone with
respect to any failure on the part of the Company, the Plan Administrator, the
Company's independent public accounting firm, an Investment Manager, or a
Participant to perform any of their respective obligations under the Plan or
this Trust. The Trustee shall be fully protected in relying upon any notice or
direction provided to it from any party in connection with the Trustee's duties
hereunder which the Trustee in good faith believes to be genuine, and executed
and delivered in accordance with this Trust. Nothing in this Trust shall be
construed as requiring the Trustee to make any payment in excess of the amounts
held in the Trust Fund at the time of such payment or otherwise to risk or
expend its own funds.
10.5 Liabilities Mutually Exclusive. Each of the Trustee and the Company
shall be responsible only for its own acts or omissions.
10.6 Indemnification. The Company agrees to indemnify to the extent
permitted by law the Trustee and hold it harmless against Trustee's costs,
expenses and liabilities (including, without limitation, attorneys' fees and
expenses) arising out of or in connection with the performance of the Trustee's
duties arising hereunder (but excluding costs arising as a result of the
Trustee's bad faith or gross negligence in the performance of its
responsibilities hereunder), and to be primarily liable for such payments. If
the Company does not pay such costs, expenses and liabilities in a reasonably
timely manner, Trustee may obtain payment from the Trust. This Section shall
survive the termination of the Trust.
10.7 Expenses and Compensation. The Trustee shall be paid compensation by
the Company in an amount agreed to by the Company and the Trustee. The Trustee
shall be reimbursed by the Company for reasonable expenses incurred by it in
the management and administration of this Trust Agreement, including the
reasonable compensation of the Trustee's counsel and other agents; and if the
Trustee is not timely reimbursed with respect to amounts due pursuant to this
Section 10.7 (or in the case of expenses to be incurred pursuant to Section 3.5
hereof), the Trustee may charge such amounts against the Trust Fund. Any
compensation or expenses so agreed upon or otherwise payable not paid by the
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Company on a timely basis may be charged to the Trust Fund no more frequently
than quarter-annually upon notice to the Company.
10.8 Reserved.
10.9 Notice. Any notice to the Trustee or to the Company required or
permitted under this Trust shall be duly and properly given and delivered if
sent by certified United States mail, return receipt requested, to the Trustee
at:
The Northern Trust Company
Attn: Trust Department
Fifty South LaSalle Street
Chicago, Illinois 60675
and to the Company at:
DTE Energy Company
Attn: Vice President and Treasurer
2000 Second Street
Detroit, Michigan 48226
or to such other address as the Trustee or the Company may specify by written
notice to the other.
10.10 Antiassignment Clause. Benefits payable to Participants and their
Beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy, execution or other legal or equitable process.
10.11 True and Correct Document. Any persons dealing with the Trustee may
rely upon a copy of this Trust and any amendments thereto certified to be true
and correct by the Trustee.
10.12 Waiver of Notice. Any notice required under this Trust may be waived
by the person entitled to such notice.
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10.13 Counterparts. This Trust may be executed in two or more
counterparts, any one of which will be an original without reference to the
others.
10.14 Gender and Number. Words denoting the masculine gender shall include
the feminine and neuter genders and the singular shall include the plural and
the plural shall include the singular wherever required by the context.
10.15 Successors. This Trust shall be binding on all persons entitled to
payments hereunder and their respective heirs and legal representatives, and on
the Company, the Trustee, and their respective successors.
10.16 Severability. If any provision of this Trust is held to be illegal
or invalid, such illegality or invalidity shall not affect the remaining
provisions of this Trust, which shall be construed and enforced as if such
illegal or invalid provisions had never been inserted herein.
10.17 Applicable Law. The Trust shall be governed by and construed in
accordance with the laws of the State of Michigan with respect to the Company's
obligations and in accordance with the laws of the State of Illinois with
respect to the Trustee's obligations and Trust Administration.
IN WITNESS WHEREOF, the Company and the Trustee have caused this trust
agreement to be signed by their duly authorized representatives, and have
caused their respective seals to be hereunto affixed, as of the Effective Date.
DTE Energy Company
By L.L. Loomans
------------------------
Its
------------------------
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<PAGE> 39
THE NORTHERN TRUST COMPANY
as Trustee
By
-------------------------------
Its
-------------------------------
34
<PAGE> 40
EXHIBIT A
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE DTE ENERGY COMPANY RETIREMENT PLAN FOR NON-EMPLOYEE DIRECTORS
The Company has established an Irrevocable Grantor Trust to pay benefits under
the DTE Energy Company Retirement Plan for Non-Employee Directors. A copy of
such Plan, including any amendment(s), is attached hereto.
<PAGE> 41
EXHIBIT B
DTE ENERGY COMPANY
IRREVOCABLE GRANTOR TRUST
FOR THE
DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
PARTICIPANTS (as defined in the Trust)
as of January 1, 1996
Name [Date of Birth]
- --------------- ---------------
