<PAGE> 1
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
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
COMMISSION REGISTRANTS; STATE OF INCORPORATION; I.R.S. EMPLOYER
FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO.
- ----------- ------------------------------------ ------------------
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
Securities registered pursuant to Section 12(b) of the Act:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
DTE ENERGY COMPANY
- ------------------
Common Stock, without par value, New York and Chicago Stock Exchanges
with contingent preferred stock
purchase rights
THE DETROIT EDISON COMPANY
- --------------------------
Preferred Stock (7.74% and New York Stock Exchange
7.75% Series), Cumulative,
$100 par value
General and Refunding Mortgage New York Stock Exchange
Bonds (only Series S)
Quarterly Income Debt Securities
(QUIDS)
(Junior Subordinated Deferrable
Interest Debentures
- 8.50% and 7-5/8% Series) New York Stock Exchange
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. [ ]
At January 31, 1998, 145,097,829 shares of DTE Energy's Common Stock,
substantially all held by non-affiliates, were outstanding, with an aggregate
market value of approximately $5,205,384,615 based upon the closing price on the
New York Stock Exchange.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information in DTE Energy Company's definitive Proxy Statement for its
1998 Annual Meeting of Common Shareholders to be held April 27, 1998, which will
be filed with the Securities and Exchange Commission pursuant to Regulation 14A,
not later than 120 days after the end of the Registrants' fiscal year covered by
this report on Form 10-K, is incorporated herein by reference to Part III (Items
10, 11, 12 and 13) of this Form 10-K.
<PAGE> 2
DTE ENERGY COMPANY
AND
THE DETROIT EDISON COMPANY
FORM 10-K
YEAR ENDED DECEMBER 31, 1997
This document contains the Annual Reports on Form 10-K for the fiscal year
ended December 31, 1997 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 DTE Energy Company or any other companies affiliated
with DTE Energy Company.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Definitions............................................................................................. 4
ANNUAL REPORT ON FORM 10-K FOR DTE ENERGY COMPANY:
Part I - Item 1 - Business..................................................................... 5
Item 2 - Properties................................................................... 11
Item 3 - Legal Proceedings............................................................ 12
Item 4 - Submission of Matters to a Vote of Security Holders.......................... 12
Part II - Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters..................................................... 13
Item 6 - Selected Financial Data...................................................... 14
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 15
Item 8 - Financial Statements and Supplementary Data.................................. 26
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................... 61
Part III - Items 10, 11, 12 and 13 - (Incorporated by
reference from DTE Energy Company's definitive
Proxy Statement which will be filed with the
Securities and Exchange Commission, pursuant to
Regulation 14A, not later than 120 days after
the end of the fiscal year)............................................. 61
ANNUAL REPORT ON FORM 10-K FOR THE DETROIT EDISON COMPANY:
Part I - Item 1 - Business..................................................................... 62
Item 2 - Properties................................................................... 63
Item 3 - Legal Proceedings............................................................ 63
Item 4 - Submission of Matters to a Vote of Security Holders.......................... 63
</TABLE>
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<TABLE>
<S> <C>
Part II - Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters..................................................... 63
Item 6 - Selected Financial Data...................................................... 64
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 64
Item 8 - Financial Statements and Supplementary Data.................................. 64
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................... 66
Part III - Item 10 - Directors and Executive Officers of the Registrant.......................... 66
Item 11 - Executive Compensation...................................................... 66
Item 12 - Security Ownership of Certain Beneficial Owners and
Management.............................................................. 66
Item 13 - Certain Relationships and Related Transactions.............................. 66
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............................................................. 67
Signature Page to DTE Energy Company Annual Report on Form 10-K......................................... 81
Signature Page to The Detroit Edison Company Annual Report on Form 10-K................................. 82
</TABLE>
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DEFINITIONS
Company........... DTE Energy Company and Subsidiary Companies
Consumers......... Consumers Energy 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
EPA............... United States Environmental Protection Agency
ERA............... Department of Energy Economic Regulatory Administration
FERC.............. Federal Energy Regulatory Commission
kWh............... Kilowatthour
Ludington......... Ludington Hydroelectric Pumped Storage Plant (owned jointly
with Consumers)
MDEQ.............. Michigan Department of Environmental Quality
MPSC.............. Michigan Public Service Commission
MW................ Megawatt
Note.............. Notes to Consolidated Financial Statements of the Company
and Detroit Edison
NRC............... Nuclear Regulatory Commission
PSCR.............. Power Supply Cost Recovery
Registrant........ Company or Detroit Edison, as the case may be
SALP.............. Systematic Assessment of Licensee Performance
SEC............... Securities and Exchange Commission
SFAS.............. Statement of Financial Accounting Standards
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ANNUAL REPORT ON FORM 10-K FOR DTE ENERGY COMPANY
PART I
ITEM 1 - BUSINESS.
GENERAL
The Company, a Michigan corporation incorporated in 1995, is an exempt
holding company under the Public Utility Holding Company Act. As a result of the
1996 corporate restructuring, the Company became the parent holding company of
Detroit Edison and certain previously wholly-owned Detroit Edison subsidiaries.
The Company has no significant operations of its own. Detroit Edison is the
Company's principal operating subsidiary, representing approximately 96% and
97% of the Company's assets and revenues, respectively, at December 31, 1997.
The Company has no employees. Detroit Edison has 8,506 employees and other
Company affiliates have 226 employees.
NON-REGULATED OPERATIONS
Seven wholly-owned subsidiaries, along with various affiliates, of the
Company are engaged in non-regulated businesses, including energy-related
services and products. Such services and products include the operation of a
pulverized coal facility and a coke oven battery, coal sales and brokering,
landfill gas-to-energy facilities, providing expertise in the application of new
energy technologies, real estate development, power marketing, specialty
engineering services and retail marketing of energy and other convenience
products. An eighth wholly-owned subsidiary, DTE Capital Corporation, provides
financial services to the Company's non-regulated subsidiaries.
At February 23, 1998, DTE Capital Corporation had a $400 million revolving
credit agreement, backed by a Support Agreement from the Company. The Credit
Agreement provides liquidity support for a $400 million commercial paper
program, the proceeds of which are utilized to fund non-regulated operations.
At February 23, 1998, $252 million of DTE Capital commercial paper was
outstanding. DTE Capital Corporation also provides credit support for the
obligations of various non-regulated affiliates. These credit support
obligations are backed by a $60 million Support Agreement from the Company.
Non-regulated operating revenues of $107 million for 1997 were derived
primarily from projects related to the steel industry.
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
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waters. 3,695 of Detroit Edison's 8,506 employees are represented by unions
under two collective bargaining agreements. One agreement expires in June 1999
for 3,134 employees and the other agreement expires in August 2000 for 561
employees.
Operating revenues, sales and customer data by rate class are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
Operating Revenues (millions)
------------------
<S> <C> <C> <C>
Electric
Residential...................... $ 1,179 $ 1,198 $ 1,211
Commercial....................... 1,501 1,506 1,496
Industrial....................... 726 731 728
Other............................ 251 207 201
-------------- ------------- -------------
Total.......................... $ 3,657 $ 3,642 $ 3,636
============== ============= =============
<CAPTION>
1997 1996 1995
---- ---- ----
Sales (millions of kWh)
-----
<S> <C> <C> <C>
Electric
Residential...................... 12,898 12,949 13,006
Commercial....................... 17,997 17,706 17,471
Industrial....................... 14,345 14,062 13,825
Other............................ 1,855 1,690 1,671
-------------- ------------- -------------
Total System................... 47,095 46,407 45,973
Interconnection.................. 3,547 2,046 2,969
-------------- ------------- -------------
Total.......................... 50,642 48,453 48,942
============== ============= =============
<CAPTION>
1997 1996 1995
---- ---- ----
Electric Customers at Year-End (thousands)
------------------------------
<S> <C> <C> <C>
Electric
Residential...................... 1,870 1,847 1,825
Commercial....................... 178 175 174
Industrial....................... 1 1 1
Other............................ 2 2 2
-------------- ------------- -------------
Total.......................... 2,051 2,025 2,002
============== ============= =============
</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.
During 1997, sales to automotive and automotive-related customers accounted
for approximately 10% of total Detroit Edison operating revenues. Detroit
Edison's 30 largest industrial customers accounted for approximately 17% of
total operating revenues in 1997, 1996 and 1995, but no one customer accounted
for more than 3% of total operating revenues.
Detroit Edison's generating capability is primarily dependent upon coal.
Detroit Edison expects to obtain the majority of its coal requirements through
long-term contracts and the balance through short-term agreements and spot
purchases. Detroit Edison has contracts with four coal suppliers for a total
purchase of up to 80 million tons of low-sulfur western coal to be delivered
during the period from 1998 through 2005. It also has several contracts for the
purchase of approximately 6 million tons of Appalachian coal
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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.
CERTAIN FACTORS AFFECTING PUBLIC UTILITIES
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 and deregulation of generation assets.
Deregulation, cogeneration, independent power production, open access to
transmission lines, competitive bulk power supply markets, municipalization,
retail customer choice or open access and the unbundling of utility products and
services are issues under consideration.
Detroit Edison is participating at both the federal and state (Michigan)
levels in legislative and administrative proceedings attempting to make the
electric energy market competitive. These proceedings, which include matters
under appeal, are dealing with the effects of competition on both public
utilities and consumers. Issues under consideration include: (1) the recovery of
stranded costs (possibly including securitization) 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 and state energy-related statutes,
as well as new implementing legislation.
Although various MPSC Orders and proposed Michigan legislation would alter
the regulatory process in Michigan and provide a plan for transition to
competition for the generation segment of the business, Detroit Edison believes
it continues to qualify under the accounting model prescribed by SFAS No. 71. In
guidance issued in 1997, the Emerging Issues Task Force (EITF) of the Financial
Accounting Standards Board concluded that the application of SFAS No. 71 to a
separable portion of a business which is subject to a deregulation plan should
cease when legislation is passed and/or a rate order is issued that contains
sufficient detail on a transition plan. The EITF also concluded that regulatory
assets and liabilities originating in the separable portion of the business
which is no longer under SFAS No. 71 should not be written off if they are
recoverable from a separable portion of business which still meets the criteria
of SFAS No. 71.
Detroit Edison 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. In addition, the impact of proposed EPA ozone transport
regulations and final new air quality standards relating to particulate air
pollution are unknown. The costs of future nuclear decommissioning activities
are the subject of increased regulatory attention.
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
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to Detroit Edison's conditions of service, rates and recovery of certain costs,
accounting and various other matters.
A restructuring of utility regulation is currently under consideration in
Michigan. While the orders discussed below are presently in effect, approval and
implementation of a statutory restructuring may result in substantial changes
to, if not reversal of, these orders and possible termination of the
proceedings.
MPSC orders issued in December 1988, January 1994 and November 1997 are
currently in effect with respect to Detroit Edison's rates and certain other
revenue and operating-related matters.
In January 1994, the MPSC issued an order reducing Detroit Edison's rates
in the amount of $78 million annually. The order was appealed before the
Michigan Court of Appeals, which issued a favorable opinion on February 7, 1997.
The Court's decision is now the subject of a motion for rehearing. See "Item 7
Electric Industry Deregulation" for a complete discussion of MPSC matters
related to deregulation.
PSCR - A July 1997 order of the MPSC was issued directing Detroit Edison to
credit $20.1 million, a total of the 1995 PSCR reconciliation and Fermi 2
Performance Standard disallowances, against the performance standard bank
established in the 1994 settlement of the Fermi 2 turbine outage.
A January 1998 order, addressing restructuring issues, instructed Detroit
Edison to amend its 1998 PSCR filing to address the level at which the PSCR
clause, currently a negative 2.30 mills/kWh billing factor, should be suspended,
as well as how the Fermi 2 performance standard adjustment should be modified
when this suspension becomes effective.
Retail Wheeling - The MPSC has been considering the propriety of an
experimental retail wheeling program. In June 1995, the MPSC issued a final
order finding that a 90 MW experimental retail wheeling program for Detroit
Edison was appropriate. Detroit Edison appealed asserting that the MPSC lacks
authority to compel retail wheeling. In January 1998, the Michigan Court of
Appeals ruled that the MPSC had sufficient statutory authority under Michigan
law to authorize an experimental retail wheeling program.
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, certain transmission services, issuances of securities, the
licensing of hydro-electric and pumping stations 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. See "Item 7 - Federal Energy Regulatory
Commission" for further discussion of FERC related matters.
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NUCLEAR REGULATORY COMMISSION. The NRC has regulatory jurisdiction over all
phases of the operation, construction (including plant modifications), licensing
and decommissioning of Fermi 2.
In January 1998, the NRC issued a SALP report on Fermi 2 operations during
the period from March 31, 1996 through November 7, 1997. The NRC increased the
rating of plant operations from "adequate" to "good." The ratings for the three
other areas remained unchanged from the last report; maintenance - "good",
engineering - "good" and plant support - "superior."
ENVIRONMENTAL MATTERS
DETROIT EDISON
Detroit Edison, in common with other electric utilities, is subject to
applicable permit and associated record keeping 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.
AIR. During 1997, the EPA issued proposed ozone transport regulations and
final new air quality standards relating to ozone and particulate air pollution.
The proposed new rules will lead to additional controls on fossil-fueled power
plants to reduce nitrogen oxides, sulfur dioxide, carbon dioxide and particulate
emissions. See "Item 7 - Environmental Matters" for further discussion.
WATER. 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 and the MDEQ Staff accepted all of them except those
relating to the St. Clair and Monroe Power Plants for which it requested further
information. Detroit Edison has subsequently submitted the information. In the
event of a final adverse decision, Detroit Edison may be required to install
additional control technologies to further minimize the impact.
WASTES AND TOXIC SUBSTANCES. The Michigan Solid Waste and Hazardous Waste
Management Acts, the Michigan Environmental Response Act, the Federal Resource
Conservation and Recovery Act, Toxic Substances Control Act, and the Federal
Comprehensive Environmental Response, Compensation and Liability Act of 1980
regulate Detroit Edison's handling, storage and disposal of its waste materials.
The EPA and the MDEQ have aggressive programs regarding the clean-up of
contaminated property. Detroit Edison has extensive land holdings and, from time
to time, must investigate claims of improperly disposed of contaminants. Detroit
Edison anticipates that it will be periodically included in these types of
environmental proceedings.
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NON-REGULATED
The Company's non-regulated subsidiaries and affiliates are subject to a
number of environmental laws and regulations dealing with the protection of the
environment from various pollutants. These non-regulated subsidiaries and
affiliates are in substantial compliance with all environmental requirements.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
PRESENT
POSITION
NAME AGE(a) PRESENT POSITION HELD SINCE (b)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John E. Lobbia.............. 56(c) Chairman of the Board and Chief Executive Officer 1-26-95
Anthony F. Earley, Jr....... 48(c) President and Chief Operating Officer 1-26-95
Larry G. Garberding......... 59 Executive Vice President and Chief Financial Officer 1-26-95
Gerard M. Anderson.......... 39 Executive Vice President 4-1-97
Robert J. Buckler........... 48 Executive Vice President 4-1-97
Michael E. Champley......... 49 Senior Vice President 4-1-97
Susan M. Beale.............. 49 Vice President and Corporate Secretary 12-11-95
Leslie L. Loomans........... 54 Vice President and Treasurer 1-26-95
David E. Meador............. 40 Vice President and Controller 3-29-97
Christopher C. Nern......... 53 Vice President and General Counsel 1-26-95
</TABLE>
(a) As of December 31, 1997
(b) The Company was incorporated in January 1995, and, at that time,
certain officers of Detroit Edison were appointed officers of the
Company.
(c) On February 23, 1998 John E. Lobbia, Chairman and Chief Executive
Officer of the Company and Detroit Edison announced that he will
retire effective August 1, 1998. The Boards of both companies have
elected current President and Chief Operating Officer, Anthony F.
Earley, Jr. to fill both positions effective August 1, 1998 while
continuing with his present duties. Mr. Lobbia will remain a
director of both companies.
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 directors 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.
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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 $95 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 at 13.
ITEM 2 - PROPERTIES.
DETROIT EDISON
The summer net rated capability of Detroit Edison's generating units is as
follows:
<TABLE>
<CAPTION>
Summer Net
Location By Rated Capability (1) (2)
Michigan ------------------------ Year
Plant Name County (MW) % in Service
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fossil-fueled Steam-Electric
Belle River (3) St. Clair 1,026 10.0% 1984 and 1985
Greenwood St. Clair 785 7.7 1979
Harbor Beach Huron 103 1.0 1968
Marysville St. Clair 167 1.6 1930, 1943 and 1947
Monroe (4) Monroe 3,000 29.3 1971, 1973 and 1974
River Rouge Wayne 500 4.9 1957 and 1958
St. Clair St. Clair 1,379 13.5 1953, 1954, 1961 and 1969
Trenton Channel Wayne 725 7.1 1949, 1950 and 1968
------- ------
7,685 75.1%
Oil or Gas-fueled Peaking Units Various 525 5.1 1966-1971 and 1981
Nuclear-fueled Steam-Electric
Fermi 2 (5) Monroe 1,098 10.7 1988
Hydroelectric Pumped Storage
Ludington (6) Mason 917 9.1 1973
------- ------
10,225 100%
======= ======
</TABLE>
- ----------------------------
(1) 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.
(2) 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.
(3) The Belle River capability represents Detroit Edison's entitlement
to 81.39% of the capacity and energy of the plant. See Note 4.
(4) The Monroe Power Plant provided approximately 43% of Detroit Edison's
total 1997 power plant generation.
(5) Fermi 2 has a design electrical rating (net) of 1,139 MW.
(6) Represents Detroit Edison's 49% interest in Ludington with a total
capability of 1,872 MW. Detroit Edison is leasing 312 MW to The Toledo
Edison Company for the six-year period June 1, 1996 through May 31, 2002.
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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 $31.3 million, $28.3 million and $20.6 million for
1997, 1996 and 1995, respectively, and is currently estimated at $35.3 million
for 1998.
Detroit Edison's electric generating plants are interconnected by a
transmission system operating at up to 345 kilovolts through 94 transmission
stations. As of December 31, 1997, electric energy was being distributed in
Detroit Edison's service area through 583 substations over 3,013 distribution
circuits.
NON-REGULATED
Non-regulated property primarily consists of a coke oven battery facility
and a coal processing facility located in River Rouge, Michigan, along with 13
landfill gas projects located throughout the United States.
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, 1997, Detroit Edison was named as defendant in 125
lawsuits involving claims for personal injuries and property damage and had been
advised of 30 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.
See "Note 11 - Commitments and Contingencies" for additional information.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1997.
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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:
<TABLE>
<CAPTION>
PRICE RANGE DIVIDENDS
----------- PAID
CALENDAR QUARTER HIGH LOW PER SHARE
---------------- ---- --- ---------
<S> <C> <C> <C> <C>
1996 First 37-4/16 33-2/16 $0.515
Second 34-4/16 28 0.515
Third 31 27-10/16 0.515
Fourth 33-2/16 27-14/16 0.515
1997 First 32-14/16 26-4/16 $0.515
Second 28-6/16 26-2/16 0.515
Third 32-14/16 27-8/16 0.515
Fourth 34-12/16 28-1/16 0.515
</TABLE>
At December 31, 1997, there were 145,097,829 shares of the Company's Common
Stock outstanding. These shares were held by a total of 121,864 shareholders of
record.
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. 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. See "Note 6 - Shareholders' Equity" for additional
information.
The amount of future dividends will depend on the Company's earnings,
financial condition and other factors, including the effects of utility
restructuring efforts, each of which is periodically reviewed by the Company's
Board of Directors.
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ITEM 6 - SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues........................ $ 3,764 $ 3,645 $ 3,636 $ 3,519 $ 3,555
Net Income................................ $ 417 $ 309 $ 406 $ 390 $ 491
Earnings Per Common Share - Basic
and Diluted............................ $ 2.88 $ 2.13 $ 2.80 $ 2.67 $ 3.34
Dividends Declared Per
Share of Common Stock.................. $ 2.06 $ 2.06 $ 2.06 $ 2.06 $ 2.06
At year end:
Total Assets........................... $ 11,223 $ 11,015 $ 11,131 $10,993 $ 11,135
Long-Term Debt Obligations
(including capital leases) and
Redeemable Preferred and
Preference Stock Outstanding......... $ 4,058 $ 4,038 $ 4,004 $ 3,980 $ 4,008
</TABLE>
14
<PAGE> 15
ITEM 7-MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
This discussion and analysis should be read in conjunction with the
Consolidated Financial Statements and accompanying Notes thereto, contained
herein.
The Detroit Edison Company (Detroit Edison) is the principal subsidiary of DTE
Energy Company (Company) and, as such, unless otherwise identified, 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.
CORPORATE STRUCTURE
On January 1, 1996, Detroit Edison's common stock was exchanged on a
share-for-share basis for the common stock of the Company; and the Company
became the parent holding company of Detroit Edison. The holding company
structure was adopted to position the Company for changes in the electric
utility industry by providing financial flexibility for the development of new
non-regulated energy-related businesses. It is also a mechanism for separating
the regulated utility business of Detroit Edison from non-regulated businesses
thereby ensuring compliance with regulatory requirements.
GROWTH
The Company and its principal subsidiary, Detroit Edison, are developing
business strategies to remain competitive and stimulate growth. Detroit Edison
will continue to focus on the success of its core generation business and local
distribution company. Aggressive cost control efforts are expected to place
Detroit Edison among the top tier of coal-fired generators in North America.
An Operational Excellence Plan at Fermi 2 is designed to ensure safety and
reliability, while reducing operating and maintenance costs. The Systematic
Assessment of Licensee Performance (SALP) Report, covering the period March 1996
through November 1997, recognized that successful implementation of this plan
resulted in significant improvements in operations. Detroit Edison's
transmission and distribution network will be strengthened by continued
emphasis on customer service and reliability.
Detroit Edison's electric power sales and system demand have grown at
compounded annual rates of about 3% per year for the past five years. While
the introduction of competition is expected to reduce system growth, electric
power sales for the service territory are projected to increase at a compound
annual rate of about 2% over the next five years.
Non-regulated affiliates and joint ventures have been established as the
Company pursues businesses apart from the regulated operations of Detroit
Edison. The
15
<PAGE> 16
Company is pursuing a variety of energy related business opportunities. In
1997:
- - The Company, through its non-regulated subsidiary, EES Coke Battery
Company, Inc., acquired a coke oven battery (a facility to process coal
used in the production of steel) and related assets in River Rouge,
Michigan.
- - The Company has formed a new power marketing subsidiary, DTE Energy
Trading, Inc., in response to industry deregulation and related market
opportunities. The new subsidiary will market and trade electricity and
natural gas physical products and financial instruments and provide risk
management services.
- - The Company formed DTE-CoEnergy L.L.C., a joint venture with CoEnergy
Trading Co., a MCN Energy Group, Inc. subsidiary, to sell natural gas and
electricity to customers.
- - The Company formed Plug Power L.L.C., a joint venture with Mechanical
Technology, Inc. The primary focus of Plug Power will be to develop small
fuel cells for use in homes.
- - The Company, through its non-regulated subsidiary, DTE Rail Services,
Inc., acquired railcar maintenance, repair, storage and interchange
facilities.
ELECTRIC INDUSTRY DEREGULATION
Federal and state legislators and regulators are working to introduce
competition and customer choice into the generation segment of the electric
public utility industry, believing that competition will lead to reduced
electric rates and stimulate economic growth. Detroit Edison has been
voluntarily participating in these efforts. Traditional utility services are
being unbundled, with many of such services becoming non-regulated; and a
demand is being created for new energy-related services.
As discussed below, there are ongoing Michigan legislative, judicial and
administrative proceedings considering the deregulation of the generation
segment of the Michigan electric public utility industry, among other things.
Neither the Company nor Detroit Edison are able to predict the outcome or
timing of these proceedings.
Michigan Public Service Commission (MPSC)
Detroit Edison is regulated at the state level by the MPSC, which agency has
been considering various proposals to implement a competitive electric utility
marketplace. The December 1996 MPSC Staff Report on Electric Utility
Restructuring set forth principles Detroit Edison believes to be vital to a
fair and orderly transition to competition.
In a February 1997 Order, the MPSC requested that Detroit Edison make an
informational filing disclosing how the Staff Report would be implemented. In
March
16
<PAGE> 17
1997, Detroit Edison filed its response with the MPSC. Detroit Edison
continues to support its position that direct access must be coupled with the
opportunity to recover stranded costs. Detroit Edison also proposed a plan for
the recovery of stranded costs, including securitization of approximately $2.8
billion and transition charges to be assessed to customers leaving the system.
Detroit Edison proposed to mitigate approximately $800 million of stranded
costs through reductions in operation and maintenance expenses. In addition,
because deregulation of electric markets will result in financial uncertainty
and risk to the shareholders of the Company, Detroit Edison will bear the risk
of lost electricity sales due to customer choice.
In a June 1997 Order implementing restructuring, the Commission modified
several of the recommendations contained in the Staff Report and Detroit
Edison's March filing, and left several key items to be resolved through
additional hearings. It supported a phased-in approach to open access, but
indicated it was premature to support securitization because legislation is
required and there are unresolved tax issues. It indicated that, due to
uncertainty regarding the future price of electricity, a true-up mechanism
should be established to adjust revenues intended to recover potential stranded
costs. The MPSC also required additional hearings to consider how the true-up
mechanism would work, and to consider the appropriate level to freeze the Power
Supply Cost Recovery Clause (PSCR). Detroit Edison was required to file
tariffs, subject to additional hearings. The June Order also indicated that
December 31, 2007 would be the last day for collecting revenues to recover
stranded costs.
Thereafter, in October 1997, the MPSC issued a series of Orders, with one of
the three MPSC Commissioners dissenting, which provided for a competitive
direct access program for Detroit Edison. These Orders did not provide a
definitive basis for Detroit Edison to recover its potentially stranded costs,
substantially all of which costs were fully litigated in previous rate
proceedings before the MPSC. On January 14, 1998, in response to motions for
rehearing, the MPSC, with one Commissioner dissenting, issued a
Restructuring Order. In this Order, the MPSC expressed its long-standing view
(disputed by Detroit Edison) that it has authority under Michigan state law to
establish a mandatory direct access program. The Order established a phase-in
schedule for open access, providing for Detroit Edison to implement the program
in incremental blocks of 225 megawatts in March and June 1998 and January 1999,
2000 and 2001, with all remaining customers having the option of choosing open
access service on January 1, 2002. Portions of the program are subject to the
final approvals of the Federal Energy Regulatory Commission (FERC). Using an
estimated market price for power of 2.9 cents per kilowatthour, the Commission
found that Detroit Edison's stranded costs were $2.48 billion and that a
transition charge of 1.25 cents per kilowatthour was appropriate. Detroit
Edison is uncertain whether the transition charge will be sufficient to recover
its stranded costs. A securitization charge was not established, with the
Commission indicating that such a determination should await enabling state
legislation. The Commission also determined that Detroit Edison's PSCR should
be suspended one month after open access load reaches 225 megawatts and that
open access customers should have rates providing for the collection of nuclear
decommissioning and site security charges.
17
<PAGE> 18
The provisions of the October 1997 Orders providing for an annual proceeding
for stranded cost recovery true-up based upon the actual price paid by direct
access customers and the limitation of reciprocity prior to completion of the
phase-in period only to utilities and utility affiliates remained unchanged by
the Restructuring Order.
The January 14, 1998 MPSC Order called for the filing of tariffs to implement
the restructuring plan by June 28, 1998. On January 21, 1998, the Commission
issued an Order indefinitely delaying the filing of tariffs and requiring,
instead, the filing of any motions for clarification by January 28, 1998
addressing issues raised by the January 14th Order. As directed by the MPSC,
Detroit Edison has made filings requesting, among other things, clarification
of the manner in which the stranded cost true-up mechanism would work. Detroit
Edison indicated in its filing that the mechanism as currently contemplated may
be insufficient to allow recovery of all stranded costs.
The implementation of a competitive electric industry in Michigan will also
require new state legislation. On October 7, 1997, Michigan House Bill 5245
was introduced. While this proposed legislation provides for the restructuring
of the electric utility industry, it substantially differs from the competitive
program contemplated by the MPSC. Legislation more consistent with 1997 and
1998 MPSC Orders is expected to be introduced in the Michigan Legislature in
the first quarter of 1998.
On January 20, 1998, the Michigan Court of Appeals ruled that the MPSC had
sufficient statutory authority under Michigan law to authorize an experimental
retail wheeling program. On February 10, 1998, Detroit Edison requested the
Michigan Supreme Court to grant leave to appeal the January 20, 1998, Michigan
Court of Appeals decision.
Federal Energy Regulatory Commission
Detroit Edison is regulated at the federal level by the FERC with respect to
accounting, sales for resale in interstate commerce, certain transmission
services, issuances of securities, licensing of hydro-electric and pumping
stations and other matters.
In 1996, the FERC issued Order 888 which requires public utilities to file open
access transmission tariffs for wholesale transmission services in accordance
with non-discriminatory terms and conditions and Order 889 which requires
public utilities and others to obtain transmission information for wholesale
transactions through a system on the Internet. Order 889 also requires public
utilities to separate transmission operations from wholesale marketing
functions. During 1997, the FERC issued clarifications of these Orders.
In July 1996, Detroit Edison filed its Pro Forma Open Access Transmission
Tariff in compliance with FERC Order 888. During 1997, Detroit Edison was able
to negotiate a partial settlement regarding the price and terms and conditions
of certain services provided as part of the tariff. Several remaining issues
could not be resolved through negotiation and are being litigated. A decision
on the litigated issues is expected in 1998. Rates currently being utilized
for transmission are consistent with the settlement
18
<PAGE> 19
achieved and are subject to refund upon the FERC's decision regarding the
issues being litigated.
Detroit Edison has a power pooling agreement with Consumers Energy Company
(Consumers Energy). In March 1997, the joint transmission tariff, filed by
Detroit Edison and Consumers Energy with the FERC in December 1996, became
effective. In compliance with FERC Order 888, the tariff modified the pooling
agreement to permit third-party access to transmission facilities utilized for
pooled operations under non-discriminatory terms and conditions. As Detroit
Edison and Consumers Energy were unable to agree on other modifications to the
pooling agreement, Detroit Edison has requested that the FERC approve its
termination. Consumers Energy has requested that the pooling agreement be
continued. The FERC has not ruled on either of these requests.
In February 1997, Detroit Edison received permission to sell wholesale power at
cost-based and market-based rates per tariffs approved by the FERC. In
September 1997, Detroit Edison received permission from the FERC to sell power
to affiliates under various terms and conditions. As a condition of the
agreement, the FERC imposed posting requirements on an electronic bulletin
board to prevent Detroit Edison from providing preferential market information
to an affiliate, or engaging in preferential wholesale power sales discounting.
Detroit Edison is unable to estimate the revenue impact, if any, of these newly
required tariffs and procedures.
ENVIRONMENTAL MATTERS
Protecting the environment from damage, as well as correcting past
environmental damage, continues to be a focus of state and federal regulators.
Legislation and/or rulemaking could further impact the electric utility
industry including Detroit Edison. The Environmental Protection Agency (EPA)
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.
During 1997, the EPA issued proposed ozone transport regulations and final new
air quality standards relating to ozone and particulate air pollution. A
tentative international agreement was reached to address global climate change.
The proposed new rules will lead to additional controls on fossil-fueled power
plants to reduce nitrogen oxides, sulfur dioxide, carbon dioxide and fine
particulate emissions. Unless the rulemaking process results in major
revisions to the proposal, Detroit Edison estimates that controls could cost
more than $400 million to meet the ozone transport regulations. Until the
timing and required level of emissions reduction is determined, Detroit Edison
is unable to predict what impact the initiatives may have. Following the
conclusion of all proceedings, it is expected that Detroit Edison's costs will
increase, perhaps substantially. Additional environmental costs would be
expected to be recovered under traditional ratemaking
19
<PAGE> 20
principles. However, Detroit Edison is unable to predict what effect,
if any, deregulation of the electric utility industry would have on
recoverability of such environmental costs.
LIQUIDITY AND CAPITAL RESOURCES
Cash Provided by Operating Activities
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 $1,006
million in 1997, $1,079 million in 1996 and $913 million in 1995. Net cash
from operating activities decreased in 1997 compared to 1996 due primarily to
changes in inventory levels. Net cash from operating activities increased in
1996 compared to 1995 due primarily to changes in accounts receivable, mainly
as a result of the 1995 repurchase of customer accounts receivable and unbilled
revenues.
Internal cash generation is expected to be sufficient to meet cash requirements
for Detroit Edison's capital expenditures as well as the Company's scheduled
long-term debt redemption requirements.
Cash Used for Investing Activities
Net cash used for investing activities was higher for the Company in 1997 due
to the acquisition of the coke oven battery, a non-regulated expenditure. For
Detroit Edison, net cash used for investing was lower in 1997 due primarily to
lower plant and equipment expenditures. In 1996, net cash used for investing
activities increased due primarily to higher plant and equipment expenditures.
Cash requirements for 1997 non-regulated investments and capital expenditures
were $228 million and are estimated to be approximately $400 million in 1998.
Significant non-regulated investments are expected to be externally financed.
Detroit Edison's cash requirements for capital expenditures are expected to be
approximately $2.5 billion for the period 1998 through 2002. In 1998, cash
requirements for capital expenditures are estimated at $575 million. Detroit
Edison has no plans to build any additional electric generating plants.
Cash Used for Financing Activities
Net cash used for Company financing activities decreased in 1997 compared to
1996 due primarily to the issuance of non-recourse debt for the acquisition of
a coke oven battery, an increase in short-term borrowings, and a reduction in
redemption of preferred stock, partially offset by higher redemptions of
long-term debt.
20
<PAGE> 21
Net cash used for financing activities increased in 1996 compared to 1995 due
primarily to the redemption of preferred stock.
The following securities were redeemed by the Company in 1997:
<TABLE>
<S> <C>
DETROIT EDISON GENERAL AND REFUNDING MORTGAGE BONDS
Mandatory Redemptions
1990 Series A, B, C
7.9% - 8.4% redeemed in March $ 19
1993 Series G
5.4% redeemed in May 125
------------
144
------------
Open Market Purchases
1993 Series E, J
7.7% - 7.8% redeemed in January,
March and April 41
------------
TOTAL 185
------------
NON-RECOURSE DEBT
7.2% redeemed in October and December 11
------------
TOTAL REDEMPTIONS $ 196
============
</TABLE>
In February 1998, Detroit Edison will redeem $150 million of 6.4% Series S
General and Refunding Mortgage Bonds due October 1, 1998.
MARKET RISK SENSITIVITY
Detroit Edison has investments valued at market of $239 million in three
nuclear decommissioning trust funds. These investments consist of
approximately 40% in fixed debt instruments and approximately 60% in
publicly traded equity securities. A hypothetical 10% increase in interest
rates and a 10% decrease in equity prices quoted by stock exchanges would
result in an $8 million and $10 million reduction in the fair value of debt and
equity securities, respectively, held by the trusts at December 31, 1997.
Adjustments to market value would result in a corresponding adjustment to
accumulated depreciation or other liabilities, as applicable, based on current
regulatory treatment.
A hypothetical 10% decrease in interest rates would increase the fair value of
long-term debt from $4.2 billion to $4.6 billion at December 31, 1997.
YEAR 2000
The Company has been involved in an enterprise-wide program to modify its
computer applications and operating systems to be Year 2000 compliant. The
total cost of the
21
<PAGE> 22
program is being determined as part of the planning process. Initial
estimates of the costs are approximately $50 million. Modification costs will
be expensed as incurred, while the costs of new software will be capitalized and
amortized over the software's useful life. The Company believes that with the
above modifications, the Year 2000 will not have a material impact on the
operations of the Company. The Company also believes that the cost of these
modifications will not have a material effect on its financial position,
liquidity and results of operations.
RESULTS OF OPERATIONS
Net income for 1997 was $417 million, or $2.88 per share, up $108 million over
1996 earnings. After adjusting 1996 earnings for the steam heating special
charge, 1997 earnings reflect a 2.7% increase over the prior year.
The decrease in net income for 1996 was due to a $149 million ($97 million
after-tax), or $0.67 per share, special charge following completion of Detroit
Edison's review of its steam heating operations.
The increase in net income for 1995 was due to higher sales of electricity.
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."
<TABLE>
<CAPTION>
OPERATING REVENUES
Total operating revenues increased (decreased) due to the following factors:
1997 1996
----------------------
Detroit Edison (Millions)
<S> <C> <C>
Rate Changes $ (62) $ (29)
System sales volume and mix 27 28
Sales between utilities 48 (6)
Fermi 2 performance disallowances (3) 12
Other - net 5 1
----------------------
Total Detroit Edison 15 6
Non-regulated 104 3
----------------------
Total $ 119 $ 9
======================
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
Detroit Edison kilowatthour sales increased (decreased) from the prior year as
follows:
1997 1996
----------------------------
<S> <C> <C>
Residential (0.4) % (0.4) %
Commercial 1.6 1.3
Industrial 2.0 1.7
Other (primarily sales for resale) 9.7 1.2
Total System 1.5 0.9
Sales between utilities 73.4 (31.1)
Total 4.5 (1.0)
</TABLE>
In 1997 and 1996, residential sales decreased due to less heating and cooling
demand which more than offset growth in the customer base. Commercial and
industrial sales increased for both periods reflecting a continuation of good
economic conditions. Sales to other customers increased in both periods due to
a greater demand for energy. Sales between utilities also increased in 1997
due to greater demand for energy and increased availability of energy for sale.
Sales between utilities decreased in 1996 due to lower demand for energy.
In 1997, other non-regulated operating revenues increased due primarily to
revenues from EES Coke Battery Company, Inc. and PCI Enterprises Company (DTE
Energy Services, Inc. subsidiaries).
OPERATING EXPENSES
Fuel and Purchased Power
Net system output and average fuel and purchased power unit costs per
Megawatthour (MWh) were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
-----------------------------
(Thousands of MWh)
<S> <C> <C> <C>
Power plant generation
Fossil 42,162 41,829 41,636
Nuclear 5,523 4,750 5,092
Purchased power 6,146 5,149 5,423
-----------------------------
Net system output 53,831 51,728 52,151
=============================
Average unit cost ($/MWh) $ 14.54 $ 15.03 $ 15.29
=============================
</TABLE>
In 1997, fuel expense decreased due to the termination of high cost long-term
coal contracts, reduction in coal contract buyout expense and a decrease in
nuclear fuel costs. Higher purchased power expense was due primarily to
increased purchases of power while Fermi 2 was shut down.
In 1996, fuel and purchased power expense decreased due to lower average unit
costs related to declining fuel prices resulting from greater use of lower-cost
western low-sulfur coal and a decrease in nuclear fuel costs, and lower net
system output, partially offset by a reduction in the receipt of Fermi 2
business interruption insurance proceeds.
23
<PAGE> 24
Operation and Maintenance
In 1997, Company operation and maintenance expenses increased $49 million due
primarily to increased non-regulated subsidiary (mainly EES Coke Battery
Company, Inc. and PCI Enterprises Company) expenses of $95 million offset by
lower net Detroit Edison operation and maintenance expenses.
As a result of stringent cost controls, Detroit Edison operation and
maintenance expenses decreased in 1997 due primarily to lower postretirement
benefit ($18.8 million) and fossil generation ($15.1 million) expenses, lower
minor storm and trouble work ($13.6 million), the Fermi 2 outage accrual in 1996
($13 million) and receipt of additional insurance proceeds related to the
1993 Fermi 2 turbine replacement ($9.8 million), partially offset by higher
compensation expenses related to a shareholder value improvement plan
($25.7 million).
Operation and maintenance expense increased in 1996 due primarily to higher
overhead and underground lines support ($26.1 million), nuclear plant expenses
($16.6 million), operating and development expense related to new computer
systems ($12 million), non-utility operations expense ($8.2 million),
administrative and general expenses ($8.2 million) and employee benefits ($7.9
million) expenses. These increases were partially offset by lower compensation
expenses related to a shareholder value improvement plan ($14.2 million),
expenses recorded in the year earlier period for the write-off of obsolete and
excess stock material ($12 million) and lower major storm expenses
($8.8 million).
Depreciation and Amortization
Depreciation and amortization expense increased in 1997 due primarily to
increases in property, plant and equipment.
Depreciation and amortization expense increased in 1996 due primarily to
increases in property, plant and equipment, including internally developed
software costs, and increased Fermi 2 decommissioning costs.
Other
Other operating expense increased in 1997 due to increased legal expenses
($19.5 million).
Other operating expense decreased in 1996 due to lower promotional expense
($5.3 million) and expenses recorded in the prior year for the formation of a
holding company ($3.1 million).
24
<PAGE> 25
INTEREST EXPENSE AND OTHER
Interest Expense
Interest expense increased in 1997 due primarily to the issuance of debt to
finance asset acquisitions of non-regulated subsidiaries, partially offset by
Detroit Edison's mandatory and optional redemption of debt.
Interest expense decreased in 1996 due primarily to Detroit Edison's mandatory
and optional redemption of debt.
Other - net
Other-net increased in 1997 due primarily to higher accretion expense ($9.5
million), lower accretion income ($3 million) and the write down of an equity
investment ($5 million).
Other-net decreased in 1996 due primarily to expenses recorded in the prior
year for the sale of accounts receivable and unbilled revenues ($3.1 million).
FORWARD-LOOKING STATEMENTS
Certain information presented herein is based on the expectations of the
Company and Detroit Edison, and, as such, is forward-looking. The Private
Securities Litigation Reform Act of 1995 encourages reporting companies to
provide analyses and estimates of future prospects and also permits reporting
companies to point out that actual results may differ from those anticipated.
Actual results for the Company and Detroit Edison may differ from those
expected due to a number of variables including, but not limited to, the impact
of newly required FERC tariffs, actual sales, the effects of competition, the
implementation of utility restructuring in Michigan (which involves pending
regulatory proceedings, pending and proposed statutory changes and the recovery
of stranded costs), environmental and nuclear requirements and the success of
non-regulated lines of business. While the Company and Detroit Edison believe
that estimates given accurately measure the expected outcome, actual results
could vary materially due to the variables mentioned as well as others.
25
<PAGE> 26
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and schedules are included
herein.
Page
----
Independent Auditors' Report...................................27
DTE Energy Company:
Consolidated Statement of Income.............................28
Consolidated Statement of Cash Flows.........................29
Consolidated Balance Sheet ..................................30
Consolidated Statement of Changes in Shareholders' Equity....32
The Detroit Edison Company:
Consolidated Statement of Income.............................33
Consolidated Balance Sheet ..................................34
Consolidated Statement of Cash Flows.........................36
Consolidated Statement of Changes in Shareholders' Equity....37
Notes to Consolidated Financial Statements.....................38
Schedule II - Valuation and Qualifying Accounts................80
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.
26
<PAGE> 27
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
subsidiaries and of The Detroit Edison Company and subsidiaries(together, the
"Companies") as of December 31, 1997 and 1996, and the related consolidated
statements of income, cash flows, and changes in common shareholders' equity
for each of the three years in the period ended December 31, 1997. 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 consolidated 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 subsidiaries and of The Detroit Edison Company and subsidiaries at
December 31, 1997 and 1996, and the results of their operations and their cash
flows for each of the years in the period ended December 31, 1997 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 26, 1998
27
<PAGE> 28
DTE ENERGY COMPANY
CONSOLIDATED STATEMENT OF INCOME
(In Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Years Ended December 31
----------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
OPERATING REVENUES $ 3,764 $ 3,645 $ 3,636
-------- ------- --------
OPERATING EXPENSES
Fuel and purchased power 837 846 850
Operation and maintenance 979 930 875
Depreciation and amortization 660 625 588
Steam heating special charges - 149 42
Taxes other than income 265 259 252
Other 22 4 14
-------- ------- --------
Total Operating Expenses 2,763 2,813 2,621
-------- ------- --------
OPERATING INCOME 1,001 832 1,015
-------- ------- --------
INTEREST EXPENSE AND OTHER
Interest expense 297 288 294
Preferred stock dividends of subsidiary 12 16 28
Other - net 18 (2) 4
-------- ------- --------
Total Interest Expense and Other 327 302 326
-------- ------- --------
INCOME BEFORE INCOME TAXES 674 530 689
INCOME TAXES 257 221 283
-------- ------- --------
NET INCOME $ 417 $ 309 $ 406
======== ======= ========
AVERAGE COMMON SHARES OUTSTANDING 145 145 145
-------- ------- --------
EARNINGS PER COMMON SHARE - BASIC AND DILUTED $ 2.88 $ 2.13 $ 2.80
-------- ------- --------
</TABLE>
(See notes to consolidated financial statements.)
28
<PAGE> 29
DTE ENERGY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------
1997 1996 1995
----------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $ 417 $ 309 $ 406
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 660 625 588
Steam heating special charges - 149 42
Other (29) (30) 70
Changes in current assets and liabilities:
Accounts receivable (36) (32) (222)
Inventories (36) 42 (19)
Payables 16 2 17
Other 14 14 31
- -----------------------------------------------------------------------------------------------------------------
Net cash from operating activities 1,006 1,079 913
- -----------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (456) (531) (454)
Purchase of Coke Oven Battery (211) - -
Nuclear decommissioning trust funds (68) (52) (43)
Other (6) (34) (25)
- -----------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (741) (617) (522
- -----------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt 250 224 -
Funds received from Trustees: Installment sales contracts
and loan agreements - - 202
Increase (decrease) in short-term borrowings 32 (27) (2)
Redemption of long-term debt (196) (176) (221)
Redemption of preferred stock - (185) (1)
Dividends on common stock (299) (299) (299)
Other (6) (11) (13)
- -----------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (219) (474) (334)
- -----------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 46 (12) 57
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 53 65 8
- -----------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 99 $ 53 $ 65
=================================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 290 $ 277 $ 274
Income taxes paid 243 207 231
New capital lease obligations 34 35 27
Exchange of preferred stock of subsidiary for long-term debt - - 50
</TABLE>
(See notes to consolidated financial statements.)
29
<PAGE> 30
DTE ENERGY COMPANY
CONSOLIDATED BALANCE SHEET
(In Millions, Except Per Share Amounts and Shares)
<TABLE>
<CAPTION>
December 31
----------------
1997 1996
------- -------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 99 $ 53
Accounts receivable
Customer (less allowance for doubtful
accounts of $20) 305 304
Accrued unbilled revenues 137 136
Other 78 44
Inventories (at average cost)
Fuel 130 120
Materials and supplies 173 144
Other 13 9
------- -------
935 810
------- -------
INVESTMENTS
Nuclear decommissioning trust funds 239 172
Other 57 48
------- -------
296 220
------- -------
PROPERTY
Property, plant and equipment 14,495 13,797
Property under capital leases 256 228
Nuclear fuel under capital lease 607 608
Construction work in progress 16 143
------- -------
15,374 14,776
------- -------
Less accumulated depreciation and amortization 6,440 5,943
------- -------
8,934 8,833
------- -------
OTHER ASSETS
Regulatory assets 856 975
Other 202 177
------- -------
1,058 1,152
------- -------
TOTAL ASSETS $11,223 $11,015
======= =======
</TABLE>
(See notes to consolidated financial statements.)
30
<PAGE> 31
<TABLE>
<CAPTION>
December 31
----------------
1997 1996
------- -------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Long-term debt $ 205 $ 144
Capital leases 110 144
Accounts payable 161 161
Accrued interest 57 60
Dividends payable 78 78
Accrued payroll 81 81
Accumulated deferred income taxes 64 44
Other 261 190
------- -------
1,017 902
------- -------
OTHER LIABILITIES
Accumulated deferred income taxes 1,983 2,024
Accumulated deferred investment tax credits 301 315
Capital leases 137 115
Other 302 292
------- -------
2,723 2,746
------- -------
LONG-TERM DEBT 3,777 3,779
------- -------
SHAREHOLDERS' EQUITY
Detroit Edison cumulative preferred stock, $100
par value, 6,747,484 shares authorized,
5,207,657 issued, 1,501,223 shares outstanding 144 144
Common stock, without par value, 400,000,000 shares
authorized, 145,097,829 and 145,119,875 issued
and outstanding, respectively 1,951 1,951
Retained earnings 1,611 1,493
------- -------
TOTAL SHAREHOLDERS' EQUITY 3,706 3,588
------- -------
COMMITMENTS AND CONTINGENCIES (NOTES 1, 2, 3, 9, 11 AND 12)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $11,223 $11,015
======= =======
</TABLE>
(See notes to consolidated financial statements.)
31
<PAGE> 32
DTE ENERGY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In Millions, Except Per Share Amounts; Shares in Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
---------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DETROIT EDISON CONVERTIBLE PREFERRED STOCK
Balance at beginning of year - $ - - $ - 56 $ 6
Conversion of convertible preferred stock to
common stock - - - - (46) (5)
Redemption of convertible preferred stock - - - - (10) (1)
------- ------ ------- ------ ------ ------
Balance at end of year - $ - - $ - - $ -
- -----------------------------------------------------------------------------------------------------
DETROIT EDISON CUMULATIVE PREFERRED STOCK
Balance at beginning of year 1,501 $ 144 3,351 $ 327 3,850 $ 375
Exchange of cumulative preferred stock for debt - - - - (499) (50)
Redemption of cumulative preferred stock - - (1,850) (185) - -
Preferred stock expense - - - 2 - 2
------- ------ ------- ------ ------- ------
Balance at end of year 1,501 $ 144 1,501 $ 144 3,351 $ 327
- -----------------------------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of year 145,120 $1,951 145,120 $1,951 144,863 $1,947
Repurchase and retirement of common stock (22) - - - - -
Conversion of cumulative preferred stock to
common stock - - - - 257 4
------- ------ ------- ------ ------- ------
Balance at end of year 145,098 $1,951 145,120 $1,951 145,120 $1,951
- -----------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year $1,493 $1,485 $1,379
Net income 417 309 406
Dividends declared on common stock ($2.06
per share in 1997, 1996 and 1995) (299) (299) (299)
Preferred stock expense - (2) (1)
------ ------ ------
Balance at end of year $1,611 $1,493 $1,485
- -----------------------------------------------------------------------------------------------------
Total Shareholders' Equity $3,706 $3,588 $3,763
=====================================================================================================
</TABLE>
(See notes to consolidated financial statements.)
32
<PAGE> 33
THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF INCOME
(In Millions)
<TABLE>
<CAPTION>
Years Ended December 31
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
OPERATING REVENUES $3,657 $3,642 $3,636
------ ------ ------
OPERATING EXPENSES
Fuel and purchased power 837 846 850
Operation and maintenance 873 919 875
Depreciation and amortization 658 624 588
Steam heating special charges - 149 42
Taxes other than income 264 259 252
Other 22 4 14
------ ------ ------
Total Operating Expenses 2,654 2,801 2,621
------ ------ ------
OPERATING INCOME 1,003 841 1,015
------ ------ ------
INTEREST EXPENSE AND OTHER
Interest expense 282 288 294
Other - net 16 - 4
------ ------ ------
Total Interest Expense and Other 298 288 298
------ ------ ------
INCOME BEFORE INCOME TAXES 705 553 717
INCOME TAXES 288 225 283
------ ------ ------
NET INCOME 417 328 434
PREFERRED STOCK DIVIDENDS 12 16 28
------ ------ ------
NET INCOME AVAILABLE FOR COMMON STOCK $ 405 $ 312 $ 406
====== ====== ======
</TABLE>
(See notes to consolidated financial statements)
33
<PAGE> 34
THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(In Millions)
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------
1997 1996 1995
OPERATING ACTIVITIES -----------------------------
<S> <C> <C> <C>
Net Income $ 417 $ 328 $ 434
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 658 624 588
Steam heating special charges - 149 42
Other (3) (30) 70
Changes in current assets and liabilities:
Accounts receivable (18) (30) (222)
Inventories (14) 42 (19)
Payables 12 1 17
Other (1) 2 31
- -------------------------------------------------------------------------------------------------------------
Net cash from operating activities 1,051 1,086 941
- -------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (439) (479) (454)
Nuclear decommissioning trust funds (68) (52) (43)
Other (5) (18) (25)
- -------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (512) (549) (522)
- -------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt - 185 -
Funds received from Trustees: Installment sales contracts
and loan agreements - - 202
Decrease in short-term borrowings (10) (27) (2)
Redemption of long-term debt (185) (176) (221)
Redemption of preferred stock - (185) (1)
Dividends on common stock and preferred stock (331) (332) (327)
Cash portion of restructuring dividend to parent - (56) -
Other - (9) (13)
- -------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (526) (600) (362)
- -------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 13 (63) 57
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 2 65 8
- -------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 15 $ 2 $ 65
=============================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 277 $ 277 $ 274
Income taxes paid 277 209 231
New capital lease obligations 34 35 27
Exchange of preferred stock of subsidiary for long-term debt - - 50
Non-cash portion of restructuring dividend to parent - 27 -
</TABLE>
(See notes to consolidated financial statements)
36
<PAGE> 35
THE DETROIT EDISON COMPANY
CONSOLIDATED BALANCE SHEET
(In Millions, Except Per Share Amounts and Shares)
<TABLE>
<CAPTION>
December 31
-------------------
1997 1996
------ ------
ASSETS:
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 15 $ 2
Accounts receivable
Customer (less allowance for doubtful
accounts of $20) 300 304
Accrued unbilled revenues 137 136
Other 63 42
Inventories (at average cost)
Fuel 130 120
Materials and supplies 150 144
Other 11 9
------- -------
806 757
------- -------
INVESTMENTS
Nuclear decommissioning trust funds 239 172
Other 38 31
------- -------
277 203
------- -------
PROPERTY
Property, plant and equipment 14,204 13,784
Property under capital leases 256 228
Nuclear fuel under capital lease 607 608
Construction work in progress 12 91
------- -------
15,079 14,711
------- -------
Less accumulated depreciation and amortization 6,431 5,943
------- -------
8,648 8,768
------- -------
OTHER ASSETS
Regulatory assets 856 975
Other 158 171
------- -------
1,014 1,146
------- -------
TOTAL ASSETS $10,745 $10,874
======= =======
</TABLE>
(See notes to consolidated financial statements)
34
<PAGE> 36
<TABLE>
<CAPTION>
December 31
--------------------
1997 1996
-------- --------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY:
CURRENT LIABILITIES
Long-term debt $ 169 $ 144
Capital leases 110 144
Accounts payable 150 159
Accrued interest 56 60
Dividends payable 83 83
Accrued payroll 80 81
Accumulated deferred income taxes 64 44
Other 218 189
-------- --------
930 904
-------- --------
OTHER LIABILITIES
Accumulated deferred income taxes 1,973 2,023
Accumulated deferred investment tax credits 301 315
Capital leases 137 116
Other 300 289
-------- --------
2,711 2,743
-------- --------
LONG-TERM DEBT 3,531 3,740
-------- --------
SHAREHOLDERS' EQUITY
Cumulative preferred stock, $100 par value,
6,747,484 shares authorized, 5,207,657 issued,
1,501,223 shares outstanding 144 144
Common stock, $10 par value, 400,000,000 shares
authorized, 145,119,875 issued and outstanding 1,451 1,451
Premium on common stock 548 548
Common stock expense (48) (48)
Retained earnings 1,478 1,392
-------- --------
TOTAL SHAREHOLDERS' EQUITY 3,573 3,487
-------- --------
COMMITMENTS AND CONTINGENCIES (NOTES 1, 2, 3, 9, 11 AND 12)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 10,745 10,874
======== ========
</TABLE>
(See notes to consolidated financial statements)
35
<PAGE> 37
THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(In Millions, Except Per Share Amounts; Shares in Thousands)
<TABLE>
<CAPTION>
1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
CONVERTIBLE PREFERRED STOCK
Balance at beginning of year - $ - - $ - 56 $ 6
Conversion of convertible preferred stock to
common stock - - - - (46) (5)
Redemption of convertible preferred stock - - - - (10) (1)
--------- --------- --------- ------ -- --------- ---------
Balance at end of year - $ - - $ - - $ -
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE PREFERRED STOCK
Balance at beginning of year 1,501 $ 144 3,351 $ 327 3,850 $ 375
Exchange of cumulative preferred stock for debt - - - - (499) (50)
Redemption of cumulative preferred stock - - (1,850) (185) - -
Preferred stock expense - - - 2 - 2
--------- --------- --------- --------- --------- ---------
Balance at end of year 1,501 $ 144 1,501 $ 144 3,351 $ 327
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of year 145,120 $ 1,451 145,120 $ 1,451 144,863 $ 1,448
Conversion of cumulative preferred stock to
common stock - - - - 257 3
--------- --------- --------- --------- --------- ---------
Balance at end of year 145,120 $ 1,451 145,120 $ 1,451 145,120 $ 1,451
-----------------------------------------------------------------------------------------------------------------------------------
PREMIUM ON COMMON STOCK
Balance at beginning of year $ 548 $ 548 $ 546
Conversion of cumulative preferred
stock to common stock - - 2
--------- --------- ---------
Balance at end of year $ 548 $ 548 $ 548
-----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK EXPENSE
Balance at beginning of year $ (48) $ (48) $ (47)
Conversion of cumulative preferred
stock to common stock - - (1)
--------- --------- ---------
Balance at end of year $ (48) $ (48) $ (48)
-----------------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year $ 1,392 $ 1,485 $ 1,379
Net income 417 328 434
Dividends declared
Common stock ($2.20 per share in 1997 and 1996,
$2.06 per share in 1995) (319) (319) (299)
Cumulative preferred stock* (12) (16) (28)
Preferred stock expense - (2) (1)
Restructuring dividend to parent - (84) -
--------- --------- ---------
Balance at end of year $ 1,478 $ 1,392 $ 1,485
-----------------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 3,573 $ 3,487 $ 3,763
====================================================================================================================================
</TABLE>
* At established rate for each series.
37
<PAGE> 38
DTE ENERGY COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
CORPORATE STRUCTURE AND PRINCIPLES OF CONSOLIDATION - DTE Energy Company
(Company), a Michigan corporation incorporated in 1995, is 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 The Detroit
Edison Company (Detroit Edison), an electric utility, and other energy-related
businesses. 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; and certain Detroit Edison subsidiaries were transferred to the
Company in the form of a dividend.
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.
This service area includes about 13% of Michigan's total land area, and about
half of its population (approximately 5 million people), electric energy
consumption and industrial capacity. At December 31, 1997, Detroit Edison
represented approximately 96% of the Company's assets.
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 had existed in all periods
shown. All significant intercompany balances and transactions have been
eliminated. Investments in limited liability companies, partnerships and joint
ventures are accounted for using the equity method when significant control
provisions are met.
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). 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 cost based ratemaking process which results in differences in the
application of generally accepted accounting principles between regulated and
non-regulated businesses. SFAS No. 71 permits the recording of regulatory
assets and liabilities that would have been treated as revenue and expense in
non-regulated businesses. The deferred amounts are being amortized to revenue
and expense as they are included in rates. Continued applicability of SFAS No.
38
<PAGE> 39
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 to and collected from customers. Although various MPSC
Orders and proposed Michigan legislation would alter the regulatory process in
Michigan and provide a plan for transition to competition for the generation
segment of the business, Detroit Edison believes it continues to qualify under
the accounting model prescribed by SFAS No. 71. In guidance issued in 1997, the
Emerging Issues Task Force (EITF) of the Financial Accounting Standards Board
(FASB) concluded that the application of SFAS No. 71 to a separable portion of a
business which is subject to a deregulation plan should cease when legislation
is passed and/or a rate order is issued that contains sufficient detail on a
transition plan. The EITF also concluded that regulatory assets and liabilities
originating in the separable portion of the business which is no longer under
SFAS No. 71 should not be written off if they are recoverable from a separable
portion of business which still meets the criteria of SFAS No. 71.
Detroit Edison has recorded the following regulatory assets and liabilities at
December 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------------
Recovery (Millions)
Through*
--------
<S> <C> <C> <C>
ASSETS
Unamortized loss on reacquired debt 2033 $ 101 $ 111
Recoverable income taxes 2027 562 588
Fermi 2 phase-in plan 1998 84 196
Fermi 2 deferred amortization 2008 66 63
1997 storm damage costs 1999 30 -
Other 2022 13 17
------- ----------
Total Assets $ 856 $ 975
======= ==========
LIABILITIES
Unamortized deferred investment tax
credits 2025 $ 301 $ 315
Fermi 2 capacity factor performance
standard 1999 74 73
Other 2003 25 6
------- ----------
Total Liabilities $ 400 $ 394
======= ==========
</TABLE>
- -----------------------------------------------------------------------------
* Year through which the assets and liabilities will be recovered. As
discussed later herein, the potential deregulation of the Michigan
electric industry may affect the recovery periods.
- - 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.
39
<PAGE> 40
- - RECOVERABLE INCOME TAXES - See Note 5.
- - FERMI 2 PHASE-IN PLAN - SFAS No. 92, "Regulated Enterprises -
Accounting for Phase-in Plans," permits the capitalization of costs
deferred for future recovery under a phase-in plan. Based on a MPSC
authorized phase-in plan, Detroit Edison recorded a receivable totaling
$506.5 million from 1988 through 1992. Beginning in 1993 and continuing
through 1998, these amounts will be amortized to operating expense as they
are included in rates. Amortization of these amounts totaled $112 million,
$102 million and $93 million in 1997, 1996 and 1995, respectively.
- - FERMI 2 DEFERRED AMORTIZATION - A December 1988 MPSC rate order provided
for Detroit Edison's February 1990 purchase of Wolverine Power Supply
Cooperative, Inc.'s (Cooperative) ownership interest in Fermi 2. 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 capitalizing deferred amortization, totaling $67.2
million through 1999. For 1997, 1996 and 1995, the amounts deferred were
$3 million, $4.5 million and $6 million, respectively. The deferred
amounts will be amortized to operating expense as they are included in
rates during the years 2000 through 2008.
- - 1997 STORM DAMAGE COSTS - The costs of major storms in 1997, as
authorized by the MPSC, were deferred and will be amortized into
expense in 1998 and 1999 as they are recovered through rates.
- - UNAMORTIZED DEFERRED INVESTMENT TAX CREDITS - Investment tax credits
utilized which relate to utility property were deferred and are amortized
over the estimated composite service life of the related property.
- - FERMI 2 CAPACITY FACTOR PERFORMANCE STANDARD - The MPSC has established a
capacity factor performance standard which provides for the disallowance
of net incremental replacement power cost if Fermi 2 does not perform to
certain operating criteria. A disallowance 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%. An estimate of the incremental cost of replacement
power is required in computing the reserve for amounts due customers under
this performance standard.
CASH EQUIVALENTS - 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.
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 for the steam plant in 1995. In general, the cost of
properties retired in the normal
40
<PAGE> 41
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 1997, 1996 and 1995. See Note 3. Provision for depreciation of
all other utility plant, as a percent of average depreciable property, was
3.29% for 1997, 1996 and 1995.
SOFTWARE COSTS - Detroit Edison capitalizes the cost of software developed for
internal use. These costs are amortized on a straight-line basis over a
five-year period beginning with a project's completion.
ACCRETION INCOME - SFAS No. 90, "Regulated Enterprises - Accounting for
Abandonments and Disallowances of Plant Costs," permits losses recorded due to
discounting indirect disallowances of plant costs to be restored to income.
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 from 1988-1998 as Detroit Edison records a non-cash return (accretion
income). The net after-tax income was $3.4 million, $5.3 million and $7.2
million in 1997, 1996 and 1995, respectively.
CAPITALIZATION - DISCOUNT AND EXPENSE - The discount 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 and
expense related to debt redeemed without refunding are written off to expense.
Expense related to redeemed preferred stock of Detroit Edison is 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.
POWER SUPPLY COST RECOVERY (PSCR) - The MPSC determines the amount that Detroit
Edison can recover for changes in power supply costs for purchased power and
generation based on usage.
STOCK-BASED COMPENSATION - The Company accounts for stock-based compensation
using the intrinsic value method. Compensation expense is not recorded for
stock options granted with an exercise price equal to the fair market value at
the date of grant. For grants of restricted stock, compensation equal to the
market value of the shares at the date of grant is deferred and amortized to
expense over the vesting period.
EARNINGS PER SHARE - In 1997, the Company adopted SFAS No. 128, "Earnings Per
Share." Under the new statement, two earnings per share (EPS) amounts are
calculated,
41
<PAGE> 42
basic and diluted. The adoption of this statement did not affect the
Company's calculation of EPS due to the insignificant number of potential
common shares.
RECLASSIFICATIONS - Certain prior year balances have been reclassified to
conform to the 1997 presentation.
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). This unit represents approximately 24% of total assets, 10% of total
operation and maintenance expenses and 11% of summer net rated capability.
Ownership of an operating nuclear generating unit subjects Detroit Edison to
significant additional risks. Fermi 2 is regulated by a number of different
governmental agencies concerned with public health, safety and environmental
protection. Consequently, Fermi 2 is subjected to greater scrutiny than a
conventional fossil-fueled plant.
MPSC rate orders issued in April 1986, 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.
LICENSING AND OPERATION - The Nuclear Regulatory Commission (NRC) maintains
jurisdiction over the licensing and operation of Fermi 2.
Due to a December 1993 turbine-generator failure, Fermi 2 was out of service
during 1994 through early 1995 and thereafter operated at a reduced power
output through September 26, 1996. Detroit Edison's insurance reimbursement
was $93 million for property damage and $89.6 million for replacement power
costs related to the 1993 turbine-generator failure.
Detroit Edison removed Fermi 2 from service as of September 27, 1996 through
January 3, 1997 to replace a portion of the plant's nuclear fuel and install
three new low-pressure turbines. The $49 million cost of replacing the
turbines, not covered by insurance, was capitalized and is expected to be
recovered in rates under a provision of a December 1988 MPSC Order.
A January 17, 1997 electrical components failure damaged Fermi 2's main
generator and required the unit to be removed from service until May 2, 1997.
Subject to a $1 million deductible, repair costs related to the electrical
failure are expected to be reimbursed by insurance. Fermi 2 was removed from
service during the period October 3-19, 1997 for the replacement of defective
fuel assemblies.
See Note 3 for a discussion of applicable MPSC Orders.
42
<PAGE> 43
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, effective January 22, 1997,
a $10 million deductible for the turbine-generator unit) 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 $26 million per loss if any
one loss should exceed the accumulated funds available to NML and 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, 1997, 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 at any
of these facilities.
DECOMMISSIONING - The NRC has jurisdiction over the decommissioning of nuclear
power plants and requires decommissioning funding based upon a formula. 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. Detroit Edison is continuing to
fund for decommissioning even though explicit provisions are not included in
FERC rates. Detroit Edison believes that the MPSC and FERC collections 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
1997, 1996 and 1995, Detroit Edison collected $35.4 million, $37.7 million and
$36.2 million, respectively, from customers for decommissioning and 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. In accordance with SFAS No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," net unrealized gains of $31.5 million and $8.7
million in 1997 and 1996, respectively, were recorded as increases to the
nuclear
43
<PAGE> 44
decommissioning trust funds and accumulated depreciation and
amortization in the Consolidated Balance Sheets.
At December 31, 1997, Detroit Edison had a reserve of $202.6 million for the
future decommissioning of Fermi 2 and $9.7 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. It is estimated that the cost of decommissioning
Fermi 2 when its license expires in the year 2025 will be $523 million in 1997
dollars and $3 billion in 2025 dollars using a 6% growth rate.
Detroit Edison also had a reserve of $26.7 million at December 31, 1997 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 $22 million in 1997 dollars and
$114 million in 2025 dollars using a 6% growth rate.
During 1995, shipment of low-level radioactive waste to a permanent disposal
site resumed. Detroit Edison's disposal costs of $5.5 million and $3.5 million
during 1997 and 1996, respectively, were reimbursed by the external trust
funds.
The FASB is reviewing the accounting for obligations associated with the
retirement of long lived assets, including decommissioning of nuclear power
plants.
NUCLEAR FUEL DISPOSAL COSTS - In accordance with the Federal Nuclear Waste
Policy Act of 1982, Detroit Edison has a contract with the U.S. Department of
Energy (DOE) for the future storage and disposal of spent nuclear fuel from
Fermi 2. Detroit Edison is obligated to pay DOE a fee of one mill per net
kilowatthour of Fermi 2 electricity generated and sold. The fee is a
component of nuclear fuel expense. Delays have occurred in the DOE's program
for the acceptance and disposal of spent nuclear fuel at a permanent
repository. Until the DOE is able to fulfill its obligation under the
contract, Detroit Edison is responsible for the spent nuclear fuel storage and
estimates that existing storage capacity will be sufficient until the year
2001, or until 2017 with expansion of such storage capacity.
NOTE 3 - REGULATORY 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 January 1994
are currently in effect with respect to Detroit Edison's rates and certain
other revenue and operating-related matters.
ELECTRIC INDUSTRY DEREGULATION - There are ongoing Michigan administrative,
judicial and legislative proceedings considering electric industry
deregulation. Detroit Edison has been participating in these proceedings on a
voluntary basis. Issues concerning
44
<PAGE> 45
deregulation are the subject of several MPSC orders that are under appeal; and
Michigan legislation is currently pending with respect to the issue, with
additional legislation expected to be introduced in the first quarter of
1998. In an opinion released on January 20, 1998, the Michigan Court of
Appeals indicated that the MPSC has sufficient statutory authority under
Michigan law to authorize an experimental retail wheeling program. Detroit
Edison has filed an application for leave to appeal in the Michigan Supreme
Court. Neither the Company nor Detroit Edison are able to predict the outcome
and timing of these proceedings.
COMMERCIAL AND INDUSTRIAL RATES - Detroit Edison addressed the competitive
environment by entering into long-term service contracts with certain of its
large commercial and industrial customers. These contracts accounted for
revenues of approximately $378 million and $299 million for 1997 and 1996,
respectively.
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 include the investment in rate base.
Under the cap on Fermi 2 capital expenditures, the cumulative amount available
totals $65 million (in 1997 dollars) at December 31, 1997. Under the cap on
non-fuel operation and maintenance expenses, the cumulative amount available
totals $99.3 million (in 1997 dollars) at December 31, 1997.
The capacity factor disallowance for 1996 has not yet been determined by the
MPSC. At December 31, 1997 and 1996, Detroit Edison had accruals of $74
million and $72.9 million, respectively, for the Fermi 2 capacity factor
performance standard disallowances that are expected to be imposed by the MPSC
during the period 1996-1999.
Also, Detroit Edison has a liability of $8.8 million at December 31, 1997 for
reduced efficiency of the Fermi 2 turbine in 1996 when the unit operated at a
reduced power output.
In accordance with the 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, beginning
in 1989, (3) $513 million amortized over 19 years with associated interest of
8%, beginning in 1990 and (4) $1.027 billion disallowed and written off in
1988. At December 31, 1997, Detroit Edison's net plant investment in Fermi 2
was $2.7 billion ($4 billion less accumulated depreciation and amortization
of $1.3 billion).
45
<PAGE> 46
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 would 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 will reduce rates by $53 million in 1998 to reflect the
scheduled reduction in the revenue requirement for Fermi 2, in accordance with
the 1988 settlement agreement. In addition, in accordance with a November 1997
MPSC Order, Detroit Edison will recover approximately $15 million in rates for
the amortization of 1997 storm damage costs. The total costs of $30 million
were deferred and will be amortized to expense over a 24 month period beginning
January 1998. In December 1997, the Association of Businesses Advocating
Tariff Equity and the Residential Ratepayer Consortium filed a lawsuit in
Ingham County Michigan Circuit Court contending that Detroit Edison and the
MPSC breached the December 1988 MPSC Order by offsetting the stipulated 1998
revenue reduction with the amortization of the storm costs. On February 18,
1998, the Ingham County Michigan Circuit Court denied Detroit Edison's motion
for summary judgment and indicated it would request the Michigan Court of
Appeals to determine its jurisdiction over the matter. The Company is
uncertain of the outcome of this matter.
NOTE 4 - JOINTLY-OWNED UTILITY PLANT
Detroit Edison's portion of jointly-owned utility plant is as follows:
<TABLE>
<CAPTION>
Belle River Ludington Pumped Storage
<S> <C> <C>
In-service date 1984-1985 1973
Ownership interest * 49%
Investment (millions) $ 1,030 $ 190
Accumulated depreciation (millions) $ 368 $ 82
</TABLE>
* Detroit Edison's 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, 1997, 75% in facilities used in
common with Unit No. 2.
BELLE RIVER - The Michigan Public Power Agency (MPPA) has an ownership interest
in Belle River Unit No. 1 and certain other related facilities. MPPA is
entitled to 18.61% of
46
<PAGE> 47
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.
LUDINGTON PUMPED STORAGE - Operation, maintenance and other expenses of the
Ludington Pumped Storage Plant (Ludington) are shared by Detroit Edison and
Consumers Energy in proportion to their respective ownership interests in the
plant.
NOTE 5 - 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
----------------------------------
1997 1996 1995
<S> <C> <C> <C>
Statutory income tax rate 35.0% 35.0% 35.0%
Deferred Fermi 2 depreciation and return 4.6 5.3 3.7
Investment tax credit (2.1) (2.8) (2.1)
Depreciation 4.6 6.0 3.3
Removal costs (1.5) (2.2) (1.5)
Alternate fuels credit (3.5) (0.4) (0.2)
Other-net 0.4 (0.4) 1.3
----------------------------------
Effective income tax rate 37.5% 40.5% 39.5%
==================================
- ------------------------------------------------------------------------------------
</TABLE>
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Current federal tax expense $267 $219 $221
Deferred federal tax expense - net 5 17 79
Investment tax credit (15) (15) (17)
---------------------------------
Total $257 $221 $283
=================================
- -----------------------------------------------------------------------------------
</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.
Recoverable income taxes, a regulatory asset, represents future revenue
recovery from customers for deferred income taxes recorded upon the adoption of
SFAS No. 109 in 1993. At that time, an increase in accumulated deferred income
tax liabilities was recorded
47
<PAGE> 48
representing the tax effect of temporary differences not previously
recognized and the recomputation of the tax liability at the current tax rate.
The MPSC issued an order 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>
1997 1996
(Millions)
<S> <C> <C>
Property $(2,233) $(2,220)
Fermi 2 deferred depreciation
and return (37) (85)
Property taxes (62) (58)
Investment tax credit 162 170
Reacquired debt losses (35) (39)
Contributions in aid of construction 55 47
Other 103 117
-------- --------
$(2,047) $(2,068)
======== ========
Deferred income tax liabilities $(2,572) $(2,594)
Deferred income tax assets 525 526
-------- --------
$(2,047) $(2,068)
======== ========
</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, 1997.
NOTE 6 - SHAREHOLDERS' EQUITY
At December 31, 1997, the Company had Cumulative Preferred Stock, without par
value, 5 million shares authorized with no shares issued. At December 31,
1997, 1.5 million shares of preferred stock are reserved for issuance in
accordance with the Shareholders Rights Agreement.
At December 31, 1997, Detroit Edison had Cumulative Preference Stock of $1 par
value, 30 million shares authorized with no shares issued.
48
<PAGE> 49
Detroit Edison had the following Cumulative Preferred Stock at December 31,
1997 and 1996:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Shares Outstanding Amount
- --------------------------------------------------------------------------------
(Thousands) (Millions)
<S> <C> <C>
7.75% Series 1,001 $100
7.74% Series 500 50
Preferred stock expense - (6)
----- ----
1,501 $144
===== ====
- --------------------------------------------------------------------------------
</TABLE>
The 7.75% Series and the 7.74% Series of Cumulative Preferred Stock are
redeemable solely at the option of Detroit Edison at a per share redemption
price of $100, plus accrued dividends, on or after April 15, 1998 and July 15,
1998, respectively.
In September 1997, the Board of Directors of the Company declared a
dividend distribution of one right (Right) for each share of Company common
stock outstanding. Under certain circumstances, each Right entitles the
shareholder to purchase one one-hundredth of a share of Company Series A Junior
Participating Preferred Stock at a price of $90. The Right is transferable
apart from the Company common stock until 10 days following a public
announcement that a person or group has acquired beneficial ownership of 10% or
more of outstanding Company common shares, or the commencement or announcement
of a reclassification, merger or consolidation which would result in a 10% plus
shareholder increasing its ownership of the Company more than 1% . If the
acquiring person or group acquires 10% or more of the Company Common Stock, and
the Company survives, each Right (other than those held by the acquiror) will
entitle its holder to buy Company common stock having a value of $180 for $90.
If the acquiring person or group acquires 10% or more of the Company Common
Stock, and the Company does not survive, each Right (other than those held by
the surviving or acquiring company) will entitle its holder to buy shares of
common stock of the surviving or acquiring company having a value of $180 for
$90. The Rights will expire on October 6, 2007 unless redeemed by the Company
at $0.01 per Right at any time prior to an event which would permit the Rights
to be exercised. The Company may amend the Rights agreement without the
approval of the holders of the Rights Certificates, except that the redemption
price may not be less than $0.01 per Right.
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 stock by
Detroit Edison.
There are no legal restrictions on the issuance of additional authorized shares
of the Company's common and preferred stock.
49
<PAGE> 50
NOTE 7 - 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 General and Refunding Mortgage Bonds (Mortgage Bonds).
At December 31, 1997, approximately $3.6 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 7.12% on any such
additional Mortgage Bonds. An additional $1.4 billion principal amount of
Mortgage Bonds could have been issued on the basis of bond retirements.
Unless an event of default has occurred, and is continuing, each series of
Quarterly Income Debt Securities (QUIDS) provides that interest will be paid
quarterly. However, Detroit Edison also has the right to extend the interest
payment period on the QUIDS for up to 20 consecutive interest payment periods.
Interest would continue to accrue during the deferral period. If this right
is exercised, Detroit Edison may not declare or pay dividends on, or redeem,
purchase or acquire, any of its capital stock during the deferral period.
Detroit Edison may redeem any series of capital stock pursuant to the terms of
any sinking fund provisions during the deferral period. Additionally, during
any deferral period, Detroit Edison may not enter into any inter-company
transactions with any affiliate of Detroit Edison, including the Company, to
enable the payment of dividends on any equity securities of the Company.
At December 31, 1997, $100 million of the Remarketed Notes and $103 million of
Tax Exempt Revenue Bonds are subject to periodic remarketings. At December 31,
1996 there were $103 million in Tax Exempt Revenue Bonds subject to periodic
remarketings. Remarketing agents remarket the notes at the lowest interest
rate necessary to produce a par bid. In the event that a Remarketed Note or
Tax Exempt Revenue Bond remarketing fails, Standby Note Purchase Agreements and
Letters of Credit provide that banks will purchase the notes or bonds,
respectively; and, after the conclusion of all necessary proceedings, remarket
the notes or bonds. In the event the banks' obligations under the Standby
Note Purchase Agreements and Letters of Credit are not honored, then, Detroit
Edison would be required to purchase any notes or bonds subject to a failed
remarketing.
<TABLE>
<CAPTION>
Long-term debt outstanding at December 31 was:
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
DETROIT EDISON
MORTGAGE BONDS
6.4% to 8.4% due 1998 to 2023 $ 1,911 $ 2,096
REMARKETED NOTES
5.9% to 6.4% due 2028 to 2034 (a) 410 410
TAX EXEMPT REVENUE BONDS
SECURED BY MORTGAGE BONDS
Installment Sales Contracts
7.1% due 2004 to 2024 (b) 282 282
Loan Agreements
6.7% due 2008 to 2025 (b) 607 607
</TABLE>
50
<PAGE> 51
<TABLE>
<S> <C> <C>
UNSECURED
Installment Sales Contracts
7.5% due 2004 to 2019 (b) 142 142
Loan Agreements
5.0% due 2024 to 2030 (a) 113 113
QUIDS
7.6% to 8.5% due 2025 to 2026 235 235
Less amount due within one year (169) (144)
Less unamortized debt discount - (1)
---------------
Total Detroit Edison Long-Term Debt 3,531 3,740
---------------
NON-RECOURSE DEBT
7.8% due 1998 to 2009 (b) (c) 282 39
Less amount due within one year (36) -
---------------
TOTAL COMPANY LONG-TERM DEBT $3,777 $3,779
===============
</TABLE>
(a) Variable rate at December 31, 1997.
(b) Weighted average interest rate at December 31, 1997.
(c) The Company held $54 million in cash and cash equivalents restricted by
debt requirements at December 31, 1997.
In the years 1998 - 2002, the Company's long-term debt maturities are $205,
$260, $234, $158 and $237 million, respectively.
NOTE 8 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
At December 31, 1997, Detroit Edison had total short-term credit arrangements
of approximately $688 million, under which there were no amounts outstanding.
At December 31, 1996, $10 million of short-term borrowings were outstanding.
The weighted average interest rates for short-term borrowings during 1997, 1996
and 1995 were 5.7%, 5.6% and 6.1%, respectively.
Detroit Edison had bank lines of credit of $200 million, all of which had
commitment fees in lieu of compensating balances. Commitment fees of $0.3
million were incurred for each of the years 1997 and 1996. 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, 1997, approximately $288 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.
51
<PAGE> 52
Detroit Edison has a $200 million short-term financing agreement secured by its
customer accounts receivable and unbilled revenues portfolio. Borrowings are
at prevailing money market rates. Commitment fees of $0.3 million were
incurred for each of the years 1997 and 1996. There were no outstanding
borrowings under this agreement at December 31, 1997 and 1996.
At December 31, 1997, DTE Capital Corporation (DTE Capital), a Company
subsidiary, had a $200 million Revolving Credit Agreement, backed by a Support
Agreement from the Company, under which $42 million was outstanding.
Commitment fees incurred in 1997 for this credit agreement were approximately
$0.3 million. The amount available under the Revolving Credit Agreement was
increased to $400 million in January 1998. Also in January 1998, the Company
entered into a $60 million Support Agreement with DTE Capital for the purpose
of DTE Capital's credit enhancing activities on behalf of DTE-CoEnergy L.L.C.
and DTE Energy Trading, Inc.
NOTE 9 - LEASES
Future minimum lease payments under long-term noncancellable leases, consisting
of nuclear fuel ($104 million computed on a projected units of production
basis), lake vessels ($30 million), locomotives and coal cars ($190 million),
office space ($14 million), and computers, vehicles and other equipment ($2
million) at December 31, 1997 are as follows:
- --------------------------------------------------------------------------------
(Millions)
<TABLE>
<CAPTION>
Remaining
1998 1999 2000 2001 2002 Years Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 71 $ 57 $ 36 $ 29 $ 20 $ 127 $ 340
===========
- --------------------------------------------------------------------------------
</TABLE>
Rental expenses for both capital and operating leases were $72 million
(including $42 million for nuclear fuel), $78 million (including $53 million
for nuclear fuel) and $97 million (including $67 million for nuclear fuel) for
1997, 1996 and 1995, respectively.
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.
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.
52
<PAGE> 53
NOTE 10 - FINANCIAL INSTRUMENTS
TRADING ACTIVITIES - DTE Energy Trading, Inc., a power marketing subsidiary,
was formed in 1997 and is expected to begin trading in early 1998.
NON-TRADING ACTIVITIES - In October 1996, Detroit Edison entered into a
three-year interest rate swap agreement based on a notional amount of $25
million, which is nominally linked to the Detroit Edison 1993 Series B
Remarketed Notes. Detroit Edison receives a rate equal to the London Interbank
Offered Rate (LIBOR) and pays a rate equal to the quarterly weighted average
Public Securities Association Municipal Swap Index divided by 67.3%. The
intent of the swap is to shift floating rate exposure from taxable to
tax-exempt markets. In 1997 the average rate received was 5.70% and the
average rate paid was 5.36%. The net of interest received and interest
paid on the swap is accrued as a component of interest expense in the current
period. The swap is subject to market risk of changes in both interest rates
and tax rates.
PCI Enterprises Company (PCI), a coal pulverizing subsidiary of DTE Energy
Services, Inc., entered into a seven-year interest rate swap agreement
beginning June 30, 1997, with the intent of reducing the impact of changes in
interest rates on its variable rate non-recourse debt. The initial notional
amount was $30 million which was based on 60% of its term loan of $50 million.
The notional amount outstanding at December 31, 1997, was $29.2 million and
will decline throughout the term of the loan based on amortization of principal
amounts. PCI pays a fixed interest rate of 6.96% on the notional amount and
receives a variable interest rate based on LIBOR. In 1997, the average rate
received was 5.69%. The net of interest received and interest paid on the swap
is accrued as a component of interest expense in the current period. The swap
is subject to market risk of changes in interest rates.
FINANCIAL INSTRUMENTS - The fair value of financial instruments is determined
by reference to various market data and other valuation techniques as
appropriate. The carrying amount of financial instruments, except for
long-term debt, approximates fair value. The estimated fair value of total
long-term debt at December 31, 1997 and 1996 was $4.2 billion and $4 billion,
respectively, compared to the carrying amount of $4 billion and $3.9 billion,
respectively. Investments in debt and equity securities are classified as
"available for sale."
NOTE 11 - COMMITMENTS AND CONTINGENCIES
COMMITMENTS - Detroit Edison has entered into purchase commitments of
approximately $621 million at December 31, 1997, which includes, among other
things, line construction and clearance costs. Detroit Edison also has entered
into long-term fuel supply commitments of approximately $500 million.
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,
53
<PAGE> 54
2024. Purchases of steam and electricity were $34.3 million, $30.2
million and $28.2 million for 1997, 1996 and 1995, respectively. Annual
purchase commitments are approximately $36 million, $37 million, $39 million,
$40 million and $41 million for 1998, 1999, 2000, 2001 and 2002, respectively.
See Note 13 relating to steam heating special charges.
In October 1995, the MPSC issued an Order approving Detroit Edison's six-year
capacity and energy purchase agreement with Ontario Hydro. Ontario Hydro
agreed to sell Detroit Edison 300 MW of capacity from mid-May through
mid-September. This purchase will offset a concurrent agreement to lease
approximately a third of Detroit Edison's Ludington 917 MW capacity to Toledo
Edison for the same time period. The net economic effect of the Ludington lease
and the Ontario Hydro purchase is an estimated reduction in PSCR expense of $74
million which will be refunded to Detroit Edison customers over the life of the
agreement.
In December 1997, Detroit Edison and Consumers Energy entered into a three-year
contract to implement an energy exchange and also to sell additional off-peak
energy to Ontario Hydro. The energy exchange requires Detroit Edison and
Consumers Energy to jointly supply 1,500 GWh of off-peak energy during the
first four months of each year to Ontario Hydro. Ontario Hydro is required to
return the energy to Detroit Edison and Consumers Energy during the summer
months. The energy exchange agreement modifies the existing six-year capacity
and energy agreement with Detroit Edison, by allowing an energy exchange
instead of an energy purchase. In addition, Ontario Hydro agreed to purchase
an additional 1,500 to 2,000 GWh annually of off-peak energy from Detroit
Edison and Consumers Energy.
CONTINGENCIES - LEGAL PROCEEDINGS - Plaintiffs in a class action pending in the
Circuit Court for Wayne County, Michigan (Gilford, et al v. Detroit Edison,) as
well as plaintiffs in two other pending actions which make class claims
(Sanchez, et al v. Detroit Edison, Circuit Court for Wayne County, Michigan;
and Frazier v. Detroit Edison, United States District Court, Eastern District
of Michigan,) allege that Detroit Edison has engaged in age, racial and
national origin discrimination in employment. On February 6, 1998, Detroit
Edison and the other parties to the three actions agreed to settle the Gilford,
Sanchez and Frazier individual and class claims through binding arbitration.
The agreement provides that Detroit Edison's monetary liability is to be no
less than $17.5 million and no greater than $65 million (subject to a potential
$3 million upward adjustment that may be possible if the class size increases
by a specified number) after the conclusion of all related proceedings. An
amount related to this agreement was accrued in 1997.
OTHER - 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, results of operations and cash flows.
54
<PAGE> 55
See Notes 2 and 3 for a discussion of contingencies related to Fermi 2 and
Regulatory Matters.
NOTE 12 - 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 employees' 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. The Company was
operating under the IRS full funding limitation and, therefore, did not make a
contribution to the Plan in 1997. Contributions were made to the Plan totaling
$16 million and $29.6 million for 1996 and 1995, respectively.
<TABLE>
<CAPTION>
Net pension cost included the following components:
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
(Millions)
Service cost - benefits earned during the period $ 27 $ 25 $ 22
Interest cost on projected benefit obligation 86 82 79
Actual return on Plan assets (163) (120) (164)
Net amortization and deferral 60 19 65
----------------------------------------------------------------------------
Net pension cost $ 10 $ 6 $ 2
============================================================================
- ---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Assumptions used in determining net pension cost are as follows:
- ---------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.0%
Annual increase in future compensation levels 4.5 4.5 4.5
Expected long-term rate of return on Plan assets 9.0 9.0 9.5
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following reconciles the funded status of the Plan to the amount recorded
in the Consolidated Balance Sheet:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
December 31
------------------
1997 1996
- -------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Plan assets at fair value, primarily equity
and debt securities $ 1,347 $ 1,232
---------------------
Less actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $1,047 and $994, respectively 1,123 1,022
Increase in future compensation levels 171 154
---------------------
Projected benefit obligation 1,294 1,176
---------------------
</TABLE>
55
<PAGE> 56
<TABLE>
<S> <C> <C>
Plan assets in excess of projected benefit obligation 53 56
Unrecognized net asset resulting from initial
application (20) (24)
Unrecognized net (gain) loss (4) 2
Unrecognized prior service cost 52 58
--------------
Asset recorded in the Consolidated Balance Sheet $ 81 $ 92
==============
- ----------------------------------------------------------------------------------
</TABLE>
Assumptions used in determining the projected benefit obligation are as
follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
December 31
-----------------
1997 1996
- ----------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.0 % 7.5 %
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 PLAN - The Company adopted a Long-Term Incentive Plan
(LTIP) in 1995. Under the LTIP, certain key employees may be granted
restricted common stock, stock options, stock appreciation rights, performance
shares and performance units. Common stock granted under the LTIP may not
exceed 7.2 million shares. Performance units (which have face amount of $1)
granted under the LTIP may not exceed 25 million in the aggregate. As of
December 31, 1997, no stock appreciation rights, performance shares or
performance units have been granted under the LTIP.
Under the LTIP, shares of restricted common stock were awarded to officers of
Detroit Edison and are restricted for a period not exceeding four years. 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 recipient has all the voting, dividend 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. The shares
were recorded at the market value on the date of grant and amortized to expense
based on the award that was expected to vest and the period to which the
related employee services were to be rendered. Restricted common stock awarded
and annual expense for the year ended December 31 was:
56
<PAGE> 57
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1997 1996 1995
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Restricted common shares awarded 68,500 56,000 66,500
Weighted average market price of shares awarded $ 28.38 $ 34.28 $ 28.90
Annual expense (in thousands) $ 222 $ 1,165 $ 571
- ------------------------------------------------------------------------------
</TABLE>
Under the LTIP, stock options were issued in 1997 and will become exercisable
at a rate of 25% each year over the next four years. The options will expire
10 years after the date of the grant. The option exercise price equals the
fair market value of the stock on the date that the option was granted. In
1997, 310,500 shares were granted at a weighted average exercise price of
$28.38. No amounts were forfeited or expired during 1997.
The Company continues to apply APB Opinion 25, "Accounting for Stock Issued to
Employees." Accordingly, no compensation expense has been recorded for options
granted. As required by SFAS No. 123, "Accounting for Stock-Based
Compensation," the Company has determined the pro forma information as if the
Company has accounted for its employee stock options under the fair value
method. The fair value for these options was estimated at the date of grant
using a modified Black/Scholes option pricing model - American style, a
risk-free interest rate of 6.83%, a dividend yield of 7.26%, an expected
volatility of 18.31%, and an expected life of 10 years. The fair value of the
options granted in 1997 was $4.15 per option. The pro forma effect of these
options was to reduce net income for the year ending December 31, 1997, by
$244,000. There was no pro forma effect on EPS.
SAVINGS & INVESTMENT PLANS - Detroit Edison has voluntarily defined
contribution plans qualified under Section 401 (a) and (k) of the Internal
Revenue Code for all eligible employees. Detroit Edison matches employee
contributions up to 8% of base compensation. Matching contributions were $19.8
million, $17.2 million and $13.7 million for 1997, 1996 and 1995, 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.
57
<PAGE> 58
<TABLE>
<CAPTION>
Net other postretirement benefits cost included the following components:
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 19 $ 20 $ 17
Interest cost on accumulated postretirement
benefit obligation 39 40 40
Actual return on assets (39) (19) (17)
Net amortization and deferral 40 26 32
--------------------------------------------------------------------
Net other postretirement benefits cost $ 59 $ 67 $ 72
====================================================================
<CAPTION>
Assumptions used in determining net other postretirement benefits cost are as follows:
- -----------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.5% 7.5% 8.0%
Annual increase in future compensation levels 4.5 4.5 4.5
Expected long-term rate of return on assets 8.5 8.5 8.5
</TABLE>
The following reconciles the funded status to the amount recorded in the
Consolidated Balance Sheet:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
December 31
-------------------------------------------
1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
(Millions)
Actuarial present value of benefit obligation:
Retirees, spouses and surviving spouses $ 289 $ 312
Fully eligible active participants 91 74
Other active participants 200 197
-------------------------------------------
Accumulated postretirement benefit obligation 580 583
Less assets at fair value, primarily
equity and debt securities 309 208
-------------------------------------------
Benefit obligation in excess of assets 271 375
Unrecognized transition obligation (308) (328)
Unrecognized net gain (loss) 16 (41)
-------------------------------------------
(Asset) Liability recorded as (Deferred Debits)
Other Non-Current Liabilities in the Consolidated
Balance Sheet $ (21) $ 6
===========================================
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
58
<PAGE> 59
Assumptions used in determining the accumulated benefit obligation are
as follows:
<TABLE>
- -------------------------------------------------------------------------------
December 31
1997 1996
- -------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 7.0 % 7.5 %
Annual increase in future compensation levels 4.5 4.5
- -------------------------------------------------------------------------------
</TABLE>
Benefit costs were calculated assuming health care cost trend rates beginning
at 9.1% for 1998 and decreasing to 5.0% in 2008 and thereafter for persons
under age 65 and decreasing from 6.1% to 5.0% for persons age 65 and over. 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 $9 million for 1997 and increase the accumulated benefit obligation by $75
million at December 31, 1997.
NOTE 13 - STEAM HEATING SPECIAL CHARGES
As part of a review of the operations of Detroit Edison's steam heating
business, in 1995, the remaining book value of steam heating plant assets of
$42 million ($32 million after-tax) or $0.22 cents per share, was written off.
In 1996, a special charge to net income of $149 million ($97 million after-tax)
or $0.67 cents per share was recorded. The special charge included a reserve
for steam purchase commitments during the period from 1997 through 2008 under
the agreement with the Detroit Resource Recovery Facility, expenditures for
closure of a portion of the steam heating system and improvements in service to
remaining customers. The reserve for steam purchase commitments was recorded
at its present value, therefore Detroit Edison will record non-cash accretion
expense during the period 1997 through 2008. In addition, beginning in 1997,
amortization of the reserve for steam purchase commitments is netted against
losses on steam purchases recorded in fuel and purchased power expense.
NOTE 14 - SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1997 Quarter Ended
--------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- -----------------------------------------------------------------------------------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $ 868 $ 892 $ 1,030 $ 974
Operating Income 202 225 285 289
Net Income 71 85 132 129
Earnings Per Common Share 0.49 0.59 0.91 0.89
- -----------------------------------------------------------------------------------
</TABLE>
59
<PAGE> 60
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1996 Quarter Ended
-----------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- -------------------------------------------------------------------------------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $ 910 $ 871 $ 977 $ 887
Operating Income 263 211 154 204
Net Income 108 78 45 78
Earnings Per Common Share 0.75 0.54 0.31 0.54
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
The third quarter of 1996 includes the steam heating special charge to net
income of $149 million ($97 million after-tax) or $0.67 per share. See Note
13.
The fourth quarter of 1996 includes a provision for Fermi 2 capacity factor
disallowances in the period 1996-1998 and for reduced efficiency of the Fermi 2
turbine in 1995 and 1996 of $20 million ($13 million after-tax) or $0.09 per
share. See Note 3.
EPS amounts for each quarter are required to be computed independently and,
therefore, may not equal the amount computed for the total year.
60
<PAGE> 61
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEMS 10, 11, 12 AND 13
Information required by Part III (Items 10, 11, 12 and 13) of this Form
10-K is incorporated by reference from DTE Energy Company's definitive Proxy
Statement for its 1998 Annual Meeting of Common Shareholders to be held April
27, 1998, which will be filed with the Securities and Exchange Commission,
pursuant to Regulation 14A, not later than 120 days after the end of the
Company's fiscal year covered by this report on Form 10-K, all of which
information is hereby incorporated by reference in, and made part of, this Form
10-K, except that the information required by Item 10 with respect to executive
officers of the Registrant is included in Part I of this report.
61
<PAGE> 62
ANNUAL REPORT ON FORM 10-K FOR THE DETROIT EDISON COMPANY
PART I
ITEM 1 - BUSINESS.
See the Company's "Item 1 - Business" which is incorporated herein by this
reference.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
PRESENT
POSITION
NAME AGE(a) PRESENT POSITION HELD SINCE
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John E. Lobbia............... 56 Chairman of the Board and Chief Executive Officer 5-1-90
Anthony F. Earley, Jr........ 48 President and Chief Operating Officer 3-1-94
Larry G. Garberding.......... 59 Executive Vice President and Chief Financial Officer 8-1-90
Gerard M. Anderson........... 39 Executive Vice President 4-1-97
Robert J. Buckler............ 48 Executive Vice President 4-1-97
Michael E. Champley.......... 49 Senior Vice President 4-1-97
Douglas R. Gipson............ 50 Senior Vice President-Nuclear Generation 4-1-93
Susan M. Beale............... 49 Vice President and Corporate Secretary 3-27-95
Leslie L. Loomans............ 54 Vice President and Treasurer 10-1-89
David E. Meador.............. 40 Vice President and Controller 3-29-97
Christopher C. Nern.......... 53 Vice President and General Counsel 6-1-93
Michael C. Porter............ 44 Vice President - Corporate Communications 9-22-97
Haven E. Cockerham........... 50 Vice President 6-1-94
William R. Roller............ 52 Vice President 4-22-96
S. Martin Taylor............. 57 Vice President 11-28-94
</TABLE>
(a) As of December 31, 1997
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 directors or until their respective
successors are chosen and qualified. With the exception of Messrs. Anderson,
Cockerham, Earley, Meador and Porter, 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 and effective April 1,
1997, he was elected Executive Vice President.
Haven E. Cockerham was president of Cockerham, McCain & Associates, Inc., a
management, business development and human resources consulting firm in
Columbia, South Carolina, from 1991 until 1994.
Anthony F. Earley, Jr., was President and Chief Operating Officer of Long
Island Lighting Company, an electric and gas utility company serving Long
Island, New York, from 1989 to 1994. Effective March 1, 1994, he was elected
President and Chief Operating Officer and a member of the Board of Directors of
Detroit Edison.
62
<PAGE> 63
David E. Meador was Controller, Mopar Parts Division, at Chrysler
Corporation, an international automotive manufacturer, from November 1996 until
February 1997. From 1986 to 1996, he held a variety of executive financial
positions at Chrysler. Effective February 28, 1997, he was elected Vice
President and effective March 29, 1997, he assumed the duties of Controller.
Michael C. Porter was Senior Vice President and Managing Director at
McCann-Erickson in Detroit from 1994 to September 1997 and Vice President of
Marketing for The Stroh Brewery Company in Detroit from 1990 to 1994. Effective
September 22, 1997, he was elected Vice President - Corporate Communications.
ITEM 2 - PROPERTIES.
See the Company's "Item 2 - Properties - Detroit Edison," which is
incorporated herein by this reference.
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," the third paragraph of 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 amount of future dividends paid by Detroit Edison to the Company will
depend on Detroit Edison's earnings, financial condition and other factors,
including the effects of utility restructuring efforts, each of which is
periodically reviewed by Detroit Edison's Board of Directors.
63
<PAGE> 64
ITEM 6 - SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(Millions)
<S> <C> <C> <C> <C> <C>
Operating Revenues.................... $ 3,657 $ 3,642 $ 3,636 $ 3,519 $ 3,555
Net Income............................ $ 417 $ 328 $ 434 $ 420 $ 522
Net Income Available
for Common Stock................... $ 405 $ 312 $ 406 $ 390 $ 491
At year end:
Total Assets....................... $ 10,745 $ 10,874 $ 11,131 $ 10,993 $ 11,135
Long-Term Debt
Obligations (including capital
leases) and Redeemable
Preferred and Preference
Stock Outstanding................ $ 3,812 $ 4,000 $ 4,004 $ 3,980 $ 4,008
</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.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See pages 26 through 60 (except for Note 5 and Note 14 below).
NOTE 5 - 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
----------------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory income tax rate 35.0 % 35.0 % 35.0 %
Deferred Fermi 2 depreciation and return 4.5 5.2 3.7
Investment tax credit (2.0) (2.7) (2.1)
Depreciation 4.5 5.9 3.3
Removal costs (1.5) (2.2) (1.5)
Other-net 0.4 (0.5) 1.1
-------------------------------
Effective income tax rate 40.9 % 40.7 % 39.5 %
===============================
- --------------------------------------------------------------------------------
</TABLE>
64
<PAGE> 65
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -------------------------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Current federal tax expense $ 308 $ 224 $ 221
Deferred federal tax expense - net (6) 16 79
Investment tax credits (14) (15) (17)
-------------- ------------- -------------
Total $ 288 $ 225 $ 283
------------- ------------- -------------
- -------------------------------------------------------------------------------------------------------------------
</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.
Deferred income tax assets (liabilities) are comprised of the following at
December 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Property $ (2,233) $ (2,220)
Fermi 2 deferred depreciation
and return (37) (85)
Property taxes (62) (58)
Investment tax credit 162 170
Reacquired debt losses (35) (39)
Contributions in aid of construction 55 47
Other $ 114 118
----------------- ----------------
(2,036) $ (2,067)
================== ================
Deferred income tax liabilities $ (2,560) $ (2,593)
Deferred income tax assets 524 526
----------------- ----------------
$ (2,036) $ (2,067)
================== ================
</TABLE>
NOTE 14 - SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1997 Quarter Ended
------------------------------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- -------------------------------------------------------------------------------------------------------------------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $ 864 $ 878 $ 985 $ 930
Operating Income 203 225 285 290
Net Income 74 86 128 129
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE> 66
<TABLE>
<CAPTION>
1996 Quarter Ended
---------------------------------------------------
Mar. 31 June 30 Sept. 30 Dec. 31
- --------------------------------------------------------------------------------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $ 909 $ 871 $ 976 $ 886
Operating Income 264 212 156 209
Net Income 116 81 48 83
- --------------------------------------------------------------------------------
================================================================================
</TABLE>
The third quarter of 1996 includes the steam heating special charge to net
income of $149 million ($97 million after-tax) or $0.67 per share. See Note 13.
The fourth quarter of 1996 includes a provision for Fermi 2 capacity factor
disallowances in the period 1996-1998 and for reduced efficiency of the Fermi 2
turbine in 1995 and 1996 of $20 million ($13 million after-tax) or $0.09 per
share. See Note 3.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEMS 10, 11, 12 AND 13
See the Company's "Items 10, 11, 12 and 13" which is incorporated herein by
this reference, except for the information required by Item 10 with respect to
executive officers of the Registrant which is included in Part 1 of this report.
All of Detroit Edison's directors are the same as the Company's directors.
66
<PAGE> 67
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 26.
(2) Financial statement schedules. See "Item 8 Financial
Statements and Supplementary Data" on page 26.
(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
-----
4-183 - $60,000,000 Support Agreement
dated as of January 21, 1998
between DTE Energy Company and DTE
Capital Corporation.
4-184 - $400,000,000 Support Agreement,
dated as of January 21, 1998, between
DTE Energy Company and DTE Capital
Corporation.
4-185 - Fourth Amendment to Trust Agreement
Between Fidelity Management Trust
Company and The Detroit Edison Company
(July 1996).
4-186 - Fifth Amendment to Trust Agreement
Between Fidelity Management Trust
Company and The Detroit Edison Company
(December 1997).
10-10* - Fourth Restatement of The Retirement
Reparation Plan for Certain Employees
of The Detroit Edison Company (October
1997).
67
<PAGE> 68
Exhibit
Number
-----
10-11* - Fourth Restatement of The Benefit
Equalization Plan for Certain
Employees of The Detroit Edison
Company (October 1997).
10-12* - The Detroit Edison Company Key
Employee Deferred Compensation Plan
(October 1997).
10-13* - The Detroit Edison Company Executive
Incentive Plan (October 1997).
10-14* - Fifth Restatement of The Detroit
Edison Company Management Supplemental
Benefit Plan (October 1977).
10-15* - The Detroit Edison Company Shareholder
Value Improvement Plan-A (October
1997).
10-16* - Trust Agreement for DTE Energy
Company Change-In-Control Severance
Agreements between DTE Energy Company
and Wachovia Bank, N.A.
11-10 - DTE Energy Company Basic and Diluted
Earnings Per Share of Common Stock.
12-8 - DTE Energy Company Computation of
Ratio of Earnings to Fixed Charges.
12-9 - The Detroit Edison Company
Computation of Ratio of Earnings to
Fixed Charges.
12-10 - DTE Energy Company Computation of
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends.
12-11 - The Detroit Edison Company
Computation of Ratio of Earnings to
Fixed Charges and Preferred Stock
Dividends.
21-2 - Subsidiaries of the Company and
Detroit Edison.
23-11 - Consent of Deloitte & Touche LLP.
27-17 - Financial Data Schedule for the
period ended December 31, 1997 for
DTE Energy Company.
27-18 - Financial Data Schedule for the
period ended December 31, 1997
for The Detroit Edison Company.
68
<PAGE> 69
Exhibit
Number
------
99-27 - Amended and Restated Credit Agreement,
Dated as of January 21, 1998 among DTE
Capital Corporation, the Initial
Lenders, Citibank, N.A., as Agent, and
Barclays Bank PLC, New York Branch and
The First National Bank of Chicago, as
Co-Agents, and Citicorp Securities,
Inc., as Arranger.
(ii) Exhibits incorporated herein by reference.
3(a) - Amended and Restated Articles of
Incorporation of DTE Energy Company,
dated December 13, 1995. (Exhibit 3-5
to Form 10-Q for quarter ended
September 30, 1997).
3(b) - Certificate of Designation of Series
A Junior Participating Preferred Stock
of DTE Energy Company. (Exhibit 3-6 to
Form 10-Q for quarter ended September
30, 1997).
3(c) - 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(d) - 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(e) - 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(f) - Rights Agreement, dated as of
September 23, 1997, by and between DTE
Energy Company and The Detroit Edison
Company, as Rights Agent (Exhibit 4-1
to DTE Energy Company Current Report
on Form 8-K, dated September 22,
1997).
3(g) - Agreement and Plan of Exchange
(Exhibit 1(2) to DTE Energy Form 8-B
filed January 2, 1996, File No.
1-11607).
69
<PAGE> 70
Exhibit
Number
------
3(h) - Bylaws of DTE Energy Company, as
amended through September 22, 1997.
(Exhibit 3-7 to Form 10-Q for quarter
ended September 30, 1997).
3(i) - Bylaws of The Detroit Edison
Company, as amended through September
22, 1997. (Exhibit 3-8 to Form 10-Q
for quarter ended September 30, 1997).
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
April 1, 1991 Exhibit 4-15 to Form 10-K for
year ended December 31, 1996
May 1, 1991 Exhibit 4-178 to Form 10-K for
year ended December 31, 1996
May 15, 1991 Exhibit 4-179 to Form 10-K for
year ended December 31, 1996
70
<PAGE> 71
Exhibit
Number
------
September 1, 1991 Exhibit 4-180 to Form 10-K for
year ended December 31, 1996
November 1, 1991 Exhibit 4-181 to Form 10-K for
year ended December 31, 1996
January 15, 1992 Exhibit 4-182 to Form 10-K for
year ended December 31, 1996
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
71
<PAGE> 72
Exhibit
Number
------
August 1, 1995 Exhibit 4-174 to Form 10-Q for
quarter ended September 30, 1995
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) - First Amendment, dated as of August
15, 1996, to Second Supplemental Note
Indenture (Exhibit 4-17 to Form 10-Q
for quarter ended September 30, 1996).
4(f) - Third Supplemental Note Indenture,
dated as of August 15, 1994 (Exhibit
4-169 to Form 10-Q for quarter ended
September 30, 1994).
4(g) - 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(h) - 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(i) - Fifth Supplemental Note Indenture,
dated as of February 1, 1996
(Exhibit 4-14 to Form 10-K for year
ended December 31, 1996).
4(j) - 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).
*10(a) - Certain arrangements pertaining to
the employment of Michael C.
Porter. (Exhibit 10-8* to Form 10-Q
for Quarter ended September 30, 1997).
72
<PAGE> 73
Exhibit
Number
------
10(b) - Form of Change-in-Control Severance
Agreement, dated as of October 1,
1997, between DTE Energy Company and
Gerard M. Anderson, Susan M. Beale,
Robert J. Buckler, Michael C.
Champley, Haven C. Cockerham, Anthony
F. Earley, Jr., Larry G. Garberding,
Douglas R. Gipson, John E. Lobbia,
Leslie L. Loomans, David E. Meador,
Christopher C. Nern, Michael C.
Porter, William R. Roller and S.
Martin Taylor. (Exhibit 10-9* to Form
10-Q for quarter ended September 30,
1997).
*10(c) - Form of 1995 Indemnification
Agreement between the Company and its
directors and officers (Exhibit 3L
(10-1) to DTE Energy Company Form 8-B
dated January 2, 1996).
*10(d) - Form of Indemnification Agreement
between Detroit Edison and its
officers other than those identified
in *10(l) (Exhibit 10-41 to Detroit
Edison's Form 10-Q for quarter ended
June 30, 1993).
*10(e) - 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(f) - 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(g) - Amended and Restated Detroit Edison
Company Savings Reparation Plan
(Exhibit 10-4 to Form 10-Q for quarter
ended March 31, 1996).
*10(h) - 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(i) - 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(j) - 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).
73
<PAGE> 74
Exhibit
Number
------
*10(k) - Form of Indemnification Agreement
between Detroit Edison and its
directors (Exhibit 19-8 to Detroit
Edison's Form 10-Q for quarter ended
March 31, 1992).
*10(l) - Executive Vehicle Program, dated
October 1, 1993 (Exhibit 10-47 to
Detroit Edison's Form 10-Q for quarter
ended September 30, 1993).
*10(m) - 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).
*10(n) - 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(o) - 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(p) - 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(q) - 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).
*10(r) - Long-Term Incentive Plan (Exhibit
10-3 to Form 10-K for year ended
December 31, 1996).
*10(s) - 1997 Executive Incentive Plan
Measures (Exhibit *10-7 to Form 10-Q
for quarter ended March 31, 1997).
*10(t) - Certain arrangements pertaining to
the employment of David E. Meador
(Exhibit 10-5 to Form 10-K for year
ended December 31, 1996).
*10(u) - Amended and Restated Supplemental
Long-Term Disability Plan, dated
January 27, 1997. (Exhibit *10-4 to
Form 10-K for year ended December 31,
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).
74
<PAGE> 75
Exhibit
Number
------
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).
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
28, 1997, to 1988 Amended and Restated
Loan Agreement between Detroit Edison
and Renaissance. (Exhibit 99-22 to
Form 10-Q for quarter ended September
30, 1997).
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, 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) - Third Amendment, dated as of March
8, 1996, to $200,000,000 364-Day
Credit Agreement, dated September 1,
1993, as amended, among Detroit
Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent (Exhibit 99-11
to Form 10-Q for quarter ended March
31, 1996).
75
<PAGE> 76
Exhibit
Number
------
99(j) - Fourth Amendment, dated as of August
29, 1996, to $200,000,000 364-Day
Credit Agreement as of September 1,
1990, as amended, among Detroit
Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent (Exhibit 99-13
to Form 10-Q for quarter ended
September 30, 1996).
99(k) - Fifth Amendment, dated as of September
1, 1997, to $200,000,000 Multi-Year
Credit Agreement, dated as of
September 1, 1993, as amended, among
Detroit Edison, Renaissance, the Banks
Party thereto and Barclays Bank PLC,
New York Branch, as Agent. (Exhibit
99-24 to Form 10-Q for quarter ended
September 30, 1997).
99(l) - $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(m) - First Amendment, dated as of
September 1, 1994, to $200,000,000
Three-Year Credit Agreement, dated as
of September 1, 1993, among Detroit
Edison, Renaissance, 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) - Third Amendment, dated as of March
8, 1996, to $200,000,000 Three-Year
Credit Agreement, dated September 1,
1993, as amended among Detroit Edison,
Renaissance, the Banks party thereto
and Barclays Bank, PLC, New York
Branch, as Agent (Exhibit 99-12 to
Form 10-Q for quarter ended March 31,
1996).
99(o) - Fourth Amendment, dated as of
September 1, 1996, to $200,000,000
Multi-Year (formerly Three-Year)
Credit Agreement, dated as of
September 1, 1993, as amended among
Detroit Edison, Renaissance, the Banks
party thereto and Barclays Bank, PLC,
New York Branch, as Agent (Exhibit
99-14 to Form 10-Q for quarter ended
September 30, 1996).
76
<PAGE> 77
Exhibit
Number
------
99(p) - Fifth Amendment, dated as of August
28, 1997, to $200,000,000 364-Day
Credit Agreement, dated as of
September 1, 1990, as amended, among
Detroit Edison, Renaissance, the Banks
Party thereto and Barclays Bank PLC,
New York Branch, as Agent. (Exhibit
99-25 to Form 10-Q for quarter ended
September 30, 1997).
99(q) - 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).
99(r) - 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(s) - 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(t) - Third Amendment, dated as of August
31, 1994, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between
Detroit Edison and Renaissance
(Exhibit 99-21 to Form 10-Q for
quarter ended September 30, 1994).
99(u) - Fourth Amendment, dated as of March
8, 1996, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
Agreement, dated as of October 4,
1988, between Detroit Edison and
Renaissance (Exhibit 99-10 to Form
10-Q for quarter ended March 31,
1996).
99(v) - Sixth Amendment, dated as of August
28, 1997, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
between Detroit Edison and
Renaissance. (Exhibit 99-23 to Form
10-Q for quarter ended September 30,
1997).
77
<PAGE> 78
Exhibit
Number
------
99(w) - Standby Note Purchase Credit
Facility, dated as of September 12,
1997, among Detroit Edison and the
Bank's Signatory thereto and The
Chase Manhattan Bank, as
Administrative Agent, and Citicorp
Securities, Inc., Lehman Brokers,
Inc., as Remarketing Agents and Chase
Securities, Inc. as Arranger. (Exhibit
999-26 to Form 10-Q for quarter ended
September 30, 1997).
99(x) - 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(y) - First Amendment, effective as of
February 1, 1995, to Master Trust
(Exhibit 4-10 to Registration No.
333-00023).
99(z) - Second Amendment, effective as of
February 1, 1995 to Master Trust
(Exhibit 4-11 to Registration No.
333-00023).
99(aa) - Third Amendment, effective
January 1, 1996, to Master Trust
(Exhibit 4-12 to Registration No.
333-00023).
99(bb) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Savings
Reparation Plan (Exhibit 99-1 to Form
10-K for year ended December 31,
1996).
99(cc) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Retirement
Reparation Plan (Exhibit 99-2 to Form
10-K for year ended December 31,
1996).
99(dd) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Management
Supplemental Benefit Plan (Exhibit
99-3 to Form 10-K for year ended
December 31, 1996).
99(ee) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Benefit
Equalization Plan (Exhibit 99-4 to
Form 10-K for year ended December 31,
1996).
78
<PAGE> 79
Exhibit
Number
------
99(ff) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Plan for
Deferring the Payment of Directors'
Fees (Exhibit 99-5 to Form 10-K for
year ended December 31, 1996).
99(gg) - Detroit Edison Irrevocable
Grantor Trust for DTE Energy
Company Retirement Plan for
Non-Employee Directors (Exhibit 99-6
to Form 10-K for year ended December
31, 1996).
99(hh) - DTE Energy Company Irrevocable
Grantor Trust for DTE Energy
Company Plan for Deferring the Payment
of Directors' Fees (Exhibit 99-7 to
Form 10-K for year ended December 31,
1996).
99(ii) - DTE Energy Company Irrevocable
Grantor Trust for DTE Energy
Company Retirement Plan for
Non-Employee Directors (Exhibit 99-8
to Form 10-K for year ended December
31, 1996).
(b) Registrants filed a report on Form 8-K, dated November 4, 1997,
discussing a series of MPSC Orders providing for a competitive
direct access program for Detroit Edison.
(c) *Denotes management contract or compensatory plan or arrangement
required to be entered as an exhibit to this report.
79
<PAGE> 80
DTE ENERGY COMPANY AND
THE DETROIT EDISON COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at ---------------------------- Balance
Beginning Charged to Charged to at End
of Costs and Other of
Description Period Expenses Accounts(a) Deductions(b) Period
- ----------- ------ -------- ----------- ------------- ------
(Thousands)
<S> <C> <C> <C> <C> <C>
YEAR 1997
Allowance for
uncollectible accounts
(shown as deduction
from accounts receivable
in balance sheet).................. $ 20,000 $ 18,738 $ 2,657 $ (21,395) $ 20,000
YEAR 1996
Allowance for
uncollectible accounts
(shown as deduction
from accounts receivable
in balance sheet).................. $ 22,000 $ 12,756 $ 2,763 $ (17,519) $ 20,000
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
</TABLE>
- -----------------
(a) Collection of accounts previously written off.
(b) Uncollectible accounts written off.
80
<PAGE> 81
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/ DAVID E. MEADOR
-------------------------------------------------- --------------------------------------------------
Anthony F. Earley, Jr. David E. Meador
President, Vice President and Controller
Chief Operating Officer and Director
By /s/ TERENCE E. ADDERLEY By /s/ LILLIAN BAUDER
-------------------------------------------------- --------------------------------------------------
Terence E. Adderley, Director Lillian Bauder, Director
By /s/ EUGENE A. MILLER By /s/ DAVID BING
-------------------------------------------------- --------------------------------------------------
Eugene A. Miller, Director David Bing, Director
By /s/ DEAN E. RICHARDSON By /s/ WILLIAM C. BROOKS
-------------------------------------------------- --------------------------------------------------
Dean E. Richardson, Director William C. Brooks, 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: February 23, 1998
81
<PAGE> 82
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/ DAVID E. MEADOR
-------------------------------------------------- --------------------------------------------------
Anthony F. Earley, Jr. David E. Meador
President, Vice President and Controller
Chief Operating Officer and Director
By /s/ TERENCE E. ADDERLEY By /s/ LILLIAN BAUDER
-------------------------------------------------- --------------------------------------------------
Terence E. Adderley, Director Lillian Bauder, Director
By /s/ EUGENE A. MILLER By /s/ DAVID BING
-------------------------------------------------- --------------------------------------------------
Eugene A. Miller, Director David Bing, Director
By /s/ DEAN E. RICHARDSON By /s/ WILLIAM C. BROOKS
-------------------------------------------------- --------------------------------------------------
Dean E. Richardson, Director William C. Brooks, 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: February 23, 1998
82
<PAGE> 83
DTE ENERGY COMPANY
FILE NO. 1-11707
THE DETROIT EDISON COMPANY
FILE NO. 1-2198
ANNUAL REPORTS ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 1997
EXHIBIT INDEX
Exhibits filed herewith.
Exhibit
Number Page No.
-------- -----
4-183 - $60,000,000 Support Agreement dated
as of January 21, 1998 between DTE
Energy Company and DTE Capital
Corporation.
4-184 - $400,000,000 Support Agreement,
dated as of January 21, 1998, between
DTE Energy Company and DTE Capital
Corporation.
4-185 - Fourth Amendment to Trust Agreement
Between Fidelity Management Trust
Company and The Detroit Edison Company
(July 1996).
4-186 - Fifth Amendment to Trust Agreement
Between Fidelity Management Trust
Company and The Detroit Edison Company
(December 1997).
10-10* - Fourth Restatement of The Retirement
Reparation Plan for Certain Employees
of The Detroit Edison Company (October
1997).
10-11* - Fourth Restatement of The Benefit
Equalization Plan for Certain
Employees of The Detroit Edison
Company (October 1997).
10-12* - The Detroit Edison Company Key
Employee Deferred Compensation
Plan (October 1997).
10-13* - The Detroit Edison Company Executive
Incentive Plan (October 1997).
1
<PAGE> 84
10-14* - Fifth Restatement of The Detroit
Edison Company Management Supplemental
Benefit Plan (October 1977).
10-15* - The Detroit Edison Company
Shareholder Value Improvement Plan-A
(October 1997).
10-16* - Trust Agreement for DTE Energy
Company Change-In-Control Severance
Agreements between DTE Energy Company
and Wachovia Bank, N.A.
11-10 - DTE Energy Company and Subsidiary
Companies Primary and Fully Diluted
Earnings Per Share of Common Stock.
12-8 - DTE Energy Company and Subsidiary
Companies Computation of Ratio of
Earnings to Fixed Charges.
12-9 - The Detroit Edison Company and
Subsidiary Companies Computation of
Ratio of Earnings to Fixed Charges.
12-10 - DTE Energy Company and Subsidiary
Companies Computation of Ratio of
Earnings to Fixed Charges and
Preferred Stock Dividends.
12-11 - The Detroit Edison Company and
Subsidiary Companies Computation of
Ratio of Earnings to Fixed Charges and
Preferred Stock Dividends.
21-2 - Subsidiaries of the Companies and
Detroit Edison.
23-11 - Consent of Deloitte & Touche LLP.
27-17 - Financial Data Schedule for the
period ended December 31, 1997 for DTE
Energy Company and Subsidiary
Companies.
27-18 - Financial Data Schedule for the
period ended December 31, 1997 for The
Detroit Edison Company and Subsidiary
Companies.
99-27 - Amended and Restated Credit Agreement,
Dated as of January 21, 1998 among DTE
Capital Corporation, the Initial
Lenders, Citibank, N.A., as Agent, and
Barclays Bank PLC, New York Branch and
The First National Bank of Chicago, as
Co-Agents, and Citicorp Securities,
Inc., as Arranger.
2
<PAGE> 85
(ii) Exhibits incorporated herein by reference. See Page Nos.
___ through ___
for location
3(a) - Amended and Restated Articles of
Incorporation of DTE Energy Company,
dated December 13, 1995.
3(b) - Certificate of Designation of Series
A Junior Participating Preferred Stock
of DTE Energy Company.
3(c) - Restated Articles of Incorporation
of Detroit Edison, as filed December
10, 1991 with the State of Michigan,
Department of Commerce - Corporation
and Securities Bureau.
3(d) - 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.
3(e) - 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.
3(f) - Rights Agreement, dated as of
September 23, 1997, by and between DTE
Energy Company and The Detroit Edison
Company, as Rights Agent .
3(g) - Agreement and Plan of Exchange.
3(h) - Bylaws of DTE Energy Company, as
amended through September 22, 1997.
3(i) - Bylaws of The Detroit Edison
Company, as amended through September
22, 1997.
4(a) - Mortgage and Deed of Trust, dated as
of October 1, 1924, between Detroit
Edison and Bankers Trust Company as
Trustee and indentures supplemental
thereto, dated as of dates indicated
below.
September 1, 1947
October 1, 1968
3
<PAGE> 86
November 15, 1971
January 15, 1973
June 1, 1978
June 30, 1982
August 15, 1982
October 15, 1985
December 31, 1994
November 30, 1987
December 31, 1992
July 15, 1989
December 1, 1989
February 15, 1990
April 1, 1991
May 1, 1991
May 15, 1991
September 1, 1991
November 1, 1991
January 15, 1992
February 29, 1992
April 15, 1992
July 15, 1992
July 31, 1992
November 30, 1992
January 1, 1993
March 1, 1993
March 15, 1993
April 1, 1993
April 26, 1993
May 31, 1993
June 30, 1993
June 30, 1993
September 15, 1993
March 1, 1994
June 15, 1994
August 15, 1994
December 1, 1994
August 1, 1995
4(b) - Collateral Trust Indenture (notes),
dated as of June 30, 1993.
4(c) - First Supplemental Note Indenture,
dated as of June 30, 1993.
4(d) - Second Supplemental Note Indenture,
dated as of September 15, 1993.
4
<PAGE> 87
4(e) - First Amendment, dated as of August
15, 1996, to Second Supplemental Note
Indenture.
4(f) - Third Supplemental Note Indenture,
dated as of August 15, 1994.
4(g) - First Amendment, dated as of
December 12, 1995, to Third
Supplemental Note Indenture, dated as
of August 15, 1994.
4(h) - Fourth Supplemental Note Indenture,
dated as of August 15, 1995.
4(i) - Fifth Supplemental Note Indenture,
dated as of February 1, 1996.
4(j) - 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.
*10(a) - Certain arrangements pertaining to
the employment of Michael C. Porter.
*10(b) - Form of Change-in-Control Severance
Agreement, dated as of October 1,
1997, between DTE Energy Company and
Gerard M. Anderson, Susan M. Beale,
Robert J. Buckler, Michael C.
Champley, Haven C. Cockerham, Anthony
F. Earley, Jr., Larry G. Garberding,
Douglas R. Gipson, John E. Lobbia,
Leslie L. Loomans, David E. Meador,
Christopher C. Nern, Michael C.
Porter, William R. Roller and S.
Martin Taylor.
*10(c) - Form of 1995 Indemnification
Agreement between the Company and its
directors and officers.
*10(d) - Form of Indemnification Agreement
between Detroit Edison and its
officers other than those identified
in *10(l).
*10(e) - Certain arrangements pertaining to
the employment of S. Martin Taylor.
*10(f) - Certain arrangements pertaining to
the employment of Anthony F. Earley,
Jr.
5
<PAGE> 88
*10(g) - Amended and Restated Detroit Edison
Company Savings Reparation Plan.
*10(h) - Certain arrangements pertaining to
the employment of Haven E. Cockerham.
*10(i) - Certain arrangements pertaining to
the employment of Larry G. Garberding.
*10(j) - Form of Indemnification Agreement,
between Detroit Edison and (1) John E.
Lobbia, (2) Larry G. Garberding and
(3) Anthony F. Earley, Jr.
*10(k) - Form of Indemnification Agreement
between Detroit Edison and its
directors.
*10(l) - Executive Vehicle Program, dated
October 1, 1993.
*10(m) - Amendment No. 1 to Executive Vehicle
Plan, November 1993.
*10(n) - Certain arrangements pertaining to
the employment of Gerard M. Anderson.
*10(o) - Third Restatement of The Detroit
Edison Company Plan for Deferring the
Payment of Directors' Fees.
*10(p) - DTE Energy Company Retirement Plan
for Non-Employee Directors (January 1,
1996).
*10(q) - DTE Energy Company Plan for
Deferring the Payment of Directors'
Fees (January 1, 1996).
*10(r) - Long-Term Incentive Plan.
*10(s) - 1997 Executive Incentive Plan
Measures.
*10(t) - Certain arrangements pertaining to
the employment of David E. Meador.
*10(u) - Amended and Restated Supplemental
Long-Term Disability Plan, dated
January 27, 1997.
99(a) - Belle River Participation Agreement
between Detroit Edison and Michigan
Public Power Agency, dated as of
December 1, 1982.
6
<PAGE> 89
99(b) - Belle River Transmission Ownership
and Operating Agreement between
Detroit Edison and Michigan Public
Power Agency, dated as of December 1,
1982.
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.
99(d) - First Amendment to 1988 Amended and
Restated Loan Agreement, dated as of
February 1, 1990, between Detroit
Edison and Renaissance.
99(e) - Second Amendment to 1988 Amended and
Restated Loan Agreement, dated as of
September 1, 1993, between Detroit
Edison and Renaissance.
99(f) - Third Amendment, dated as of August
28, 1997, to 1988 Amended and Restated
Loan Agreement between Detroit Edison
and Renaissance.
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.
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, the Banks
party thereto and Barclays
Bank, PLC, New York Branch, as Agent.
99(i) - Third Amendment, dated as of
March 8, 1996, to $200,000,000 364-Day
Credit Agreement, dated September 1,
1993, as amended, among Detroit
Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent.
99(j) - Fourth Amendment, dated as of August
29, 1996, to $200,000,000 364-Day
Credit Agreement as of September 1,
1990, as amended, among Detroit
Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent.
99(k) - Fifth Amendment, dated as of September
1, 1997, to $200,000,000 Multi-Year
Credit Agreement, dated as of
September 1, 1993, as amended, among
Detroit Edison,
7
<PAGE> 90
Renaissance, the Banks Party thereto
and Barclays Bank PLC, New York
Branch, as Agent.
99(l) - $200,000,000 Three-Year Credit
Agreement, dated September 1, 1993,
among Detroit Edison, Renaissance and
Barclays Bank, PLC, New York Branch,
as Agent.
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 Detroit
Edison, Renaissance, the Banks party
thereto and Barclays Bank, PLC, New
York Branch, as Agent.
99(n) - Third Amendment, dated as of March
8, 1996, to $200,000,000 Three-Year
Credit Agreement, dated September 1,
1993, as amended among Detroit Edison,
Renaissance, the Banks party thereto
and Barclays Bank, PLC, New York
Branch, as Agent.
99(o) - Fourth Amendment, dated as of
September 1, 1996, to $200,000,000
Multi-Year (formerly Three-Year)
Credit Agreement, dated as of
September 1, 1993, as amended among
Detroit Edison, Renaissance, the Banks
party thereto and Barclays Bank, PLC,
New York Branch, as Agent.
99(p) - Fifth Amendment, dated as of August
28, 1997, to $200,000,000 364-Day
Credit Agreement, dated as of
September 1, 1990, as amended, among
Detroit Edison, Renaissance, the Banks
Party thereto and Barclays Bank PLC,
New York Branch, as Agent.
99(q) - 1988 Amended and Restated Nuclear
Fuel Heat Purchase Contract, dated
October 4, 1988, between Detroit
Edison and Renaissance.
99(r) - First Amendment to 1988 Amended and
Restated Nuclear Fuel Heat Purchase
Contract, dated as of February 1,
1990, between Detroit Edison and
Renaissance.
99(s) - Second Amendment, dated as of
September 1, 1993, to 1988 Amended and
Restated Nuclear Fuel Heat Purchase
Contract between Detroit Edison and
Renaissance.
99(t) - Third Amendment, dated as of August
31, 1994, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase
8
<PAGE> 91
Contract, dated October 4, 1988,
between Detroit Edison and
Renaissance.
99(u) - Fourth Amendment, dated as of March
8, 1996, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
Agreement, dated as of October 4,
1988, between Detroit Edison and
Renaissance.
99(v) - Sixth Amendment, dated as of August
28, 1997, to 1988 Amended and Restated
Nuclear Fuel Heat Purchase Contract
between Detroit Edison and
Renaissance.
99(w) - Standby Note Purchase Credit
Facility, dated as of September 12,
1997, among Detroit Edison
and the Bank's Signatory thereto and
The Chase Manhattan Bank, as
Administrative Agent, and Citicorp
Securities, Inc., Lehman Brokers,
Inc., as Remarketing Agents and Chase
Securities, Inc. as Arranger.
99(x) - 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.
99(y) - First Amendment, effective as of
February 1, 1995, to Master Trust .
99(z) - Second Amendment, effective as of
February 1, 1995 to Master Trust.
99(aa) - Third Amendment, effective January
1, 1996, to Master Trust.
99(bb) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Savings
Reparation Plan.
99(cc) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Retirement
Reparation Plan.
99(dd) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Management
Supplemental Benefit Plan.
99(ee) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Benefit
Equalization Plan.
9
<PAGE> 92
99(ff) - The Detroit Edison Company
Irrevocable Grantor Trust for The
Detroit Edison Company Plan for
Deferring the Payment of Directors'
Fees.
99(gg) - Detroit Edison Irrevocable Grantor
Trust for DTE Energy Company
Retirement Plan for Non-Employee
Directors.
99(hh) - DTE Energy Company Irrevocable
Grantor Trust for DTE Energy Company
Plan for Deferring the Payment
of Directors' Fees.
99(ii) - DTE Energy Company Irrevocable
Grantor Trust for DTE Energy
Company Retirement Plan for
Non-Employee Directors.
(c) *Denotes management contract or compensatory plan or
arrangement required to be entered as an exhibit to this report.
10
<PAGE> 1
EXHIBIT 4.183
SUPPORT AGREEMENT BETWEEN
DTE ENERGY COMPANY
AND
DTE CAPITAL CORPORATION
THIS SUPPORT AGREEMENT, dated as of January 21, 1998 is between DTE
ENERGY COMPANY, a Michigan corporation ("Parent"), and DTE CAPITAL CORPORATION,
a Michigan corporation ("Subsidiary").
WHEREAS, Parent is the owner of 100% of the outstanding common stock of
Subsidiary; and further
WHEREAS, Subsidiary intends from time to time to guarantee up to $60
million in the aggregate of the obligations of DTE Energy Trading, Inc., a
Michigan corporation and wholly-owned subsidiary of Parent ("Trading"), and
DTE-CoEnergy, L. L.C., formed in Michigan and an affiliate of Parent and
Subsidiary ("DTE-CoEnergy"); and further
WHEREAS, Subsidiary may from time to time make borrowings from the
lenders party to the $400,000,000 Amended and Restated Credit Agreement (such
agreement as it may be amended and in effect from time to time, the "Credit
Agreement"), dated as of January 21, 1998 among the Subsidiary, the lenders
party thereto, Citibank, N.A., as Agent and Barclays Bank PLC., New York Branch
and The First National Bank of Chicago, as Co-Agents; and further
WHEREAS, Parent and Subsidiary desire to take certain actions to
enhance and maintain the financial condition of Subsidiary as hereinafter set
forth in order to enable Subsidiary and Trading and DTE-CoEnergy to guarantee
and incur indebtedness, respectively, on more advantageous and reasonable terms;
and further
WHEREAS, the parties receiving guarantees from Subsidiary of the
obligations of Trading and/or DTE-CoEnergy may rely upon this Agreement in
extending credit to Trading and/or DTE-CoEnergy and in accepting Subsidiary's
guarantee(s);
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Parent and Subsidiary agree as follows:
<PAGE> 2
1. STOCK OWNERSHIP. During the term of this Agreement, Parent will
own all of the voting common stock of Subsidiary and The Detroit
Edison Company ("DECo") now or hereafter issued and outstanding.
2. NEGATIVE PLEDGE. During the term of this Agreement, Parent will
not create or suffer to exist any lien, security interest or other
charge or encumbrance, upon or with respect to any voting common
stock of DECo from time to time owned by Parent or any capital
stock of Subsidiary from time to time owned by Parent, provided,
however, that any restriction on the payment of dividends by DECo
or Subsidiary contained in any subordinated debt instrument,
preferred stock or preference stock of DECo or Subsidiary shall
not constitute a lien, security interest or other charge or
encumbrance.
3. LIQUIDITY PROVISION. If, during the term of this Agreement,
Subsidiary is unable to make timely payment of such amounts as
shall be due and payable pursuant to a guarantee issued by
Subsidiary and running to the benefit of any obligee ("Obligee")
of Trading and/or DTE-CoEnergy, then, Parent promptly shall
provide to Subsidiary, at its request, such funds (in the form of
cash or liquid assets) in an amount sufficient to permit
Subsidiary to make timely payment in respect of such guarantee. If
such funds are advanced to Subsidiary as a loan, such loan shall
be on such terms and conditions, including maturity and rate of
interest, as Parent and Subsidiary shall agree. Notwithstanding
the foregoing, any such loan shall be subordinated to any and all
obligations of Subsidiary owing to any Lender pursuant to the
terms of the Credit Agreement and such amounts as shall be owing
pursuant to guarantees issued by Subsidiary for the benefit of
Obligees of Trading and/or DTE-CoEnergy. Each of the parties
hereto acknowledges that Parent's obligations hereunder do not
constitute a guarantee by Parent of the obligations of Subsidiary.
4. WAIVERS. Parent hereby waives any failure or delay on the part of
Subsidiary in asserting or enforcing any of its rights or in
making any claims or demands hereunder.
5. AMENDMENT, - SUSPENSION. This Agreement may be amended or
terminated at any time by written amendment or agreement signed by
both parties; provided, however, that except as set forth in the
next succeeding sentence, no amendment to the Agreement which
adversely affects the rights of Subsidiary or any Obligee and no
termination of this Agreement shall be effective as to Subsidiary
or
2
<PAGE> 3
any Obligee until such time as all amounts contingently owing
to all Obligees by Subsidiary on the date of such amendment or
termination shall have been paid in full or adequate provision has
been made for the payment of same unless such Obligees shall
consent in writing to the contrary.
6. RIGHTS OF OBLIGEE. Subsidiary hereby grants to the Obligees,
Subsidiary's rights under Sections 1, 2, 3 and 4 of this
Agreement, and, if Subsidiary fails or refuses to take timely
action to enforce its rights under Sections 1, 2, 3 or 4 of this
Agreement, any Obligee may enforce such rights on behalf of
Subsidiary directly against Parent. Parent hereby consents to such
grant.
7. PARITY. Parent's obligations hereunder shall be pari passau with
Parent's obligations (a) under that certain Support Agreement
("Credit Agreement Support Agreement") dated as of January 21,
1998, between Parent and Subsidiary and relating to the Credit
Agreement and (b) under such additional support agreements as are
contemplated by the Credit Agreement Support Agreement.
8. NOTICES. Any notice, instruction, request, consent, demand or
other communication required or contemplated by this Agreement
shall be in writing, shall be given or made by United States first
class mail, telex, facsimile transmission or hand delivery,
addressed as follows:
If to parent: 2000 2nd Avenue
Detroit, Michigan 48226-1279
Attention: Assistant Treasurer-Banking
Telephone: (313) 235-6898
Facsimile: (313) 235-9490
If to Subsidiary: 2000 2nd Avenue, 833 WCB
Detroit, Michigan 48226-1279
Attention: Assistant Treasurer
Telephone: (313) 235-6898
Facsimile: (313) 235-9490
9. SUCCESSORS. This Agreement shall be binding upon the parties
hereto and their respective successors and assigns and is also
intended for the benefit of Obligees, and, notwithstanding that
such Obligees are not parties hereto, Obligees shall be entitled
to the full benefits of this Agreement and to enforce the
covenants
3
<PAGE> 4
and agreements contained herein as set forth in Section
6. This Agreement is not intended for the benefit of any person
other than Obligees and shall not confer or be deemed to confer
upon any such person any benefits, rights or remedies hereunder.
10. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Michigan.
DTE ENERGY COMPANY
BY
------------------------------------
NAME: L. L. LOOMANS
TITLE: VICE-PRESIDENT AND TREASURER
DTE CAPITAL CORPORATION
BY
------------------------------------
NAME: C. C. ARVANI
TITLE: ASSISTANT TREASURER
4
<PAGE> 1
EXHIBIT 4.184
SUPPORT AGREEMENT BETWEEN
DTE ENERGY COMPANY
AND
DTE CAPITAL CORPORATION
THIS SUPPORT AGREEMENT, dated as of January 21, 1998, is
between DTE ENERGY COMPANY, a Michigan corporation ("Parent"), and DTE CAPITAL
CORPORATION, a Michigan corporation ("Subsidiary").
WHEREAS, Parent is the owner of 100% of the outstanding common
stock of Subsidiary;
WHEREAS, Subsidiary intends from time to time to make
borrowings from the lenders party to the Amended and Restated $400,000,000
Credit Agreement (such agreement as it may be amended and in effect from time to
time, the "Credit Agreement"), dated on or about January 21, 1998 among the
Subsidiary, the lenders party thereto and Citibank, N.A. as Administrative Agent
(such lenders and the Administrative Agent being hereinafter collectively
referred to as the "Lenders"), and to issue debt securities to the Lenders
pursuant to the Credit Agreement (such borrowings and debt securities, including
without limitation all interest, fees, expenses and other amounts payable in
accordance with the documentation relating to such borrowings and debt
securities being hereinafter collectively referred to as "Debt");
WHEREAS, Parent and Subsidiary desire to take certain actions
to enhance and maintain the financial condition of Subsidiary as hereinafter set
forth in order to enable Subsidiary and its subsidiaries to incur indebtedness
on more advantageous and reasonable terms; and
WHEREAS, the Lenders will rely upon this Agreement in making
loans or extending credit to Subsidiary;
NOW, THEREFORE, in consideration of the premises, and other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Stock Ownership. During the term of this Agreement, Parent
will own all of the voting common stock of Subsidiary and The Detroit Edison
Company ("DECO") now or hereafter issued and outstanding.
2. Negative Pledge. During the term of this Agreement, Parent
will not create or suffer to exist any lien, security interest or other charge
of encumbrance, upon or with respect to any voting common stock of DECO from
time to time owned by Parent or any capital stock of Subsidiary from time to
time owned by Parent, provided, however, that any restriction on the payment of
dividends by DECO or Subsidiary contained in any subordinated debt instrument,
preferred stock or preference stock of DECO or Subsidiary shall not constitute a
lien, security interest or other charge or encumbrance.
3. Liquidity Provision. If, during the term of this Agreement,
Subsidiary is unable to make timely payment of interest, principal or premium,
if any, on any Debt owing to any Lender by Subsidiary, Parent promptly shall
provide to Subsidiary, at its request, such funds (in the form of cash or liquid
assets) in an amount sufficient to permit Subsidiary to make timely payment in
respect of such Debt as equity or as a loan, as Parent shall determine
<PAGE> 2
2
in its sole discretion. If such funds are advanced to Subsidiary as a loan, such
loan shall be on such terms and conditions, including maturity and rate of
interest, as Parent and Subsidiary shall agree. Notwithstanding the foregoing,
any such loan shall be subordinated to any and all Debt of Subsidiary owing to
any Lender to the extent and in the manner set forth in Section 7 below. Each of
the parties hereto acknowledges that Parent's obligations hereunder do not
constitute a guarantee by Parent of Debt of the Subsidiary.
4. Waivers. Parent hereby waives any failure or delay on the
part of Subsidiary in asserting or enforcing any of its rights or in making any
claims or demands hereunder. Subsidiary or any Lender may at any time, without
Parent's consent, without notice to Parent and without affecting or impairing
Subsidiary's or such Lender's rights or Parent's obligations hereunder, do any
of the following with respect to any Debt: (a) make changes modifications,
amendments or alterations, by operation of law or otherwise, including, without
limitation, any increase in the principal amount of such Debt or the rate of
interest payable thereon or any changes in the method of calculating the rate of
interest payable thereon, (b) grant renewals and extensions and extensions of
time, for payment or otherwise, (c) accept new or additional documents,
instruments or agreements relating to or in substitution of said Debt, or (d)
otherwise handle the enforcement of their respective rights and remedies in
accordance with their business judgment.
5. Amendment; Suspension. This Agreement may be amended or
terminated at any time by written amendment or agreement signed by both parties;
provided, however, that except as set forth in the next succeeding sentence, no
amendment to the Agreement which adversely affects the rights of Subsidiary or
any Lender and no termination of this Agreement shall be effective as to
Subsidiary or any Lender until such time as all Debt owing to such Lender by
Subsidiary on the date of such amendment or termination shall have been paid in
full and such Lender's Commitment (as defined in the Credit Agreement) shall
have been terminated, unless such Lender shall consent in writing to the
contrary. Notwithstanding the foregoing, Parent's obligations under this
Agreement shall be suspended and shall be of no force and effect as to the
parties hereto and as to all Lenders if and for so long as (i) Subsidiary shall
have (A) a long-term debt rating of not less than "A-" from Standard & Poor's
Corporation or its successor ("S&P) or a long-term debt rating of not less than
"A3" from Moody's Investors Service or its successor ("Moody's") or (B) a
short-term debt rating of not less that "A-2" from S&P or a short-term debt
rating of not less than "Prime-2" from Moody's and (ii) Parent shall have
submitted a written request to the Subsidiary that its obligations under this
Agreement be so suspended (with a copy to the Administrative Agent) and shall
not have revoked such request in writing. Parent covenants that it will revoke
any such request to the extent that the suspension of Parent's obligations under
this Agreement has an adverse effect on any debt rating of Subsidiary. For
purposes of this Section 5, ratings shall be based upon unsecured non-credit
enhanced debt of Subsidiary.
6. Rights of Lender. Subsidiary hereby assigns and pledges to
the Lenders, for the ratable benefit of each Lender, Subsidiary's rights under
Sections 1, 2, 3 and 4 of this Agreement, and, if Subsidiary fails or refuses to
take timely action to enforce its rights under Section 1, 2, 3 or 4 of this
Agreement, any Lender may enforce such rights on behalf of Subsidiary directly
against Parent. Parent hereby consents to such assignment and pledge. This
assignment and pledge secures all obligations of Subsidiary under the Credit
Agreement
<PAGE> 3
3
and the Notes (as defined in the Credit Agreement). Subsidiary and Parent agree,
for the benefit of the Lenders, to execute and deliver all further instruments
and documents, and take all further action, that Lenders may request in order to
perfect and protect any security interest purported to be granted hereby or to
enable the Lenders to enforce their rights and remedies hereunder.
7. Subordination. All loans made by Parent to Subsidiary
pursuant to Section 3 hereof (the "Subordinated Loans") shall be subordinate and
junior in right of payment to the prior payment in full of all Debt from time to
time outstanding owing to any Lender, to the extent and in the manner provided
below:
(a) Unless and until all Debt owing to the Lenders shall have
been paid in full and the Commitments shall have been terminated:
(i) Parent will not sell, assign or otherwise
transfer any claim against Subsidiary in respect of any
Subordinated Loan unless such transfer is made expressly
subject to this Agreement and the transferee shall execute an
instrument whereby the transferee agrees to be bound by the
provisions of this Section 7;
(ii) Subsidiary will not make, and Parent will not
demand, accept or receive, any direct or indirect payment (in
cash, property, by set-off or otherwise) of or on account of
any Subordinated Loan, and no such payment shall be due,
except that nothing contained in this Section 7(a) shall
prevent Subsidiary from making, or Parent from accepting and
receiving, any payment on account of Subordinated Loans, if
there is not then in existence a default by Subsidiary under
the Credit Agreement or the Notes (as defined in the Credit
Agreement) or a default by Parent under this Agreement.
(b) In the event of (x) any insolvency, bankruptcy,
receivership, liquidation, reorganization, readjustment, composition or
other similar proceeding relative to Subsidiary or its creditors of its
property, or (y) any proceeding for the voluntary liquidation,
dissolution or other winding up of subsidiary, whether or not involving
insolvency or bankruptcy proceedings, or (z) any assignment for the
benefit of creditors or other marshalling of the assets of Subsidiary,
then and in any such event:
(i) all Debt owing to the Lenders shall be paid in
full before any payment or distribution of any character
(whether in cash, securities or other property) shall be made
in respect of any Subordinated Loans;
(ii) any payment or distribution of any character
(whether in cash, securities or other property) which would
otherwise (but for the provisions of this Section 7) be
payable or deliverable in respect of any Subordinated Loan
shall be paid or delivered directly to the Lenders until all
Debt owing to the Lenders shall have been paid in full;
(iii) Parent irrevocably authorizes and empowers the
Lenders to demand, sue for, collect and receive any such
payment or distribution and to
<PAGE> 4
4
receipt therefor and to file all such claims and take all such
other action, in the name of Parent or the Lenders or
otherwise, as the Lenders may determine to be necessary or
appropriate for the enforcement of the provisions of this
Section 7 (Parent hereby agreeing to execute and deliver to
the Lenders such further instruments confirming such
authorization and such powers of attorney, proofs of claim,
assignments of claim and other instruments as may be requested
by the Lenders in order to enable them to enforce any and all
claims with respect to any Subordinated Loans); and
(iv) in case any payment or distribution shall,
despite the foregoing provisions, be paid or delivered to
Parent before all Debt owing to the Lenders shall have been
paid in full, such payment or distribution shall be held in
trust for, and shall be paid and delivered to, the Lenders
until all Debt owing to the Lenders shall have been paid in
full.
(c) Until all Debt shall be paid in full, Parent hereby defers
all rights of subrogation in respect of any payment of Debt made by
Parent. Upon payments in full of Debt owing to Lenders, Parent shall be
subrogated to the rights of Lenders to receive any further payment or
distributions in respect of Debt, provided, however, that nothing in
this Section 7(c) will prohibit the Parent from receiving any payments
permitted under Section 7(a)(ii).
(d) Notwithstanding anything contained in this Section 7, the
Parent shall have the right to loan up to $200,000,000 to the
Subsidiary pursuant to one or more "make-well", "keep-well" or support
agreements, which loans may be pari passu in right of payment with the
payment in full of all Debt from time to time outstanding owing to any
Lender.
8. Notices. Any notice, instruction, request, consent, demand
or other communication required or contemplated by this Agreement shall be in
writing, shall be given or made by United States first class mail, telex,
facsimile transmission or hand delivery, addressed as follows:
If to Parent: 2000 Second Avenue
Detroit, Michigan 48226-1279
Attention: Assistant Treasurer-Banking
If to Subsidiary: 2000 Second Avenue
Detroit, Michigan 48226-1279
Attention: Assistant Treasurer
9. Successors. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and is also intended
for the benefit of Lenders, and, notwithstanding that such Lenders are not
parties hereto, each Lender shall be entitled to the full benefits of this
Agreement and to enforce the covenants and agreements contained herein as set
forth in Section 6. This Agreement is not intended for the benefit of any person
other than Lenders and shall not confer or be deemed to confer upon any such
person any benefits, rights or remedies hereunder.
<PAGE> 5
5
10. Governing Law. This Agreement shall be governed by the
laws of the State of New York.
DTE ENERGY COMPANY
By
-----------------------------------
Name:
Title:
DTE CAPITAL CORPORATION
By
-----------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 4.185
FOURTH AMENDMENT TO TRUST AGREEMENT BETWEEN
FIDELITY MANAGEMENT TRUST COMPANY AND
THE DETROIT EDISON COMPANY
THIS FOURTH AMENDMENT, dated as of the first day of August, 1996, by
and between Fidelity Management Trust Company (the "Trustee") and The Detroit
Edison Company (the "Sponsor"):
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a Master
Trust Agreement dated June 30, 1994, with regard to The Detroit Edison Savings
& Investment Plan, The Detroit Edison Savings & Investment Plan for Employees
Represented by Local 17 of the International Brotherhood of Electric Workers,
and The Detroit Edison Savings & Investment Plan for Employees Represented by
Local 223 of the Utility Workers Union of America (collectively and
individually, the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said trust
agreement as provided for in Section 14 thereof;
NOW THEREOFRE, in consideration of the above premises the Trustee and
the Sponsor hereby amend the trust agreement by:
(1) Amending the "money classification" portion of Section "A"
by adding the following:
Additional Company Match
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Fourth
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written
THE DETROIT EDISON FIDELITY MANAGEMENT TRUST COMPANY
COMPANY
By: /s/ By /s/ 7/31/96
------------------------- -----------------------------
7/18/96 Date Date
<PAGE> 1
EXHIBIT 4.186
FIFTH AMENDMENT TO TRUST AGREEMENT BETWEEN
FIDELITY MANAGEMENT TRUST COMPANY AND
THE DETROIT EDISON COMPANY
THIS FIFTH AMENDMENT, dated as of the first day of January, 1998, by
and between Fidelity Management Trust Company (the "Trustee") and The
Detroit Edison Company (the "Sponsor");
W I T N E S S E T H:
WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust
Agreement dated June 30, 1994, and amended February 5,1995, June 30, 1994
and August 1, 1996, with regard to The Detroit Edison Savings & Investment
Plan, The Detroit Edison Savings & Investment Plan for Employees
Represented by Local 17 of the International Brotherhood of Electrical
Workers, and The Detroit Edison Savings & & Investment Plan for Employees
Represented by Local 223 of the Utility Workers Union of America (
collectively and individually, the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said Trust
Agreement as provided for in Section 14 thereof;
NOW THEREFORE, in consideration of the above premises the Trustee and
the Sponsor hereby amend the Trust Agreement by:
(1) Amending Section 4 by inserting a new subsection (b) and
relettering existing subsections accordingly:
(b) Participant Withdrawal Requests . The Sponsor hereby
directs that, pursuant to the Plan, a participant withdrawal
request (in-service or full withdrawal) may be made by the
participant by telephone, or in such other manner as may
be agreed to from time to time by the Sponsor and Trustee,
and the Trustee shall process such request only after the
identity of the participant is verified by use of a personal
identification number ("PIN") and social security number.
The Trustee shall process such withdrawal in accordance with
written guidelines provided by the Sponsor and documented in
the Plan Administrative Manual.
(2) Amending Section 5 by restated subsection (f) as follows:
(f) Participant Loans. The Administrator shall act as the
Trustee's agent for participant loan notes and as such
shall (i) separately account for repayments of such loans
and clearly identify such assets as Plan assets and (ii)
collect and remit all principal and
<PAGE> 2
interest payments to the Trustee. To originate a participant loan,
the Plan participant shall direct the Trustee as to the term and
amount of the loan to be made from the participant's individual
account. Such directions shall be made by Plan participants by use of
the telephone exchange system maintained for such purpose by the
Trustee or its agent. The Trustee shall determine based on the
current value of the participant's account on the date of the request
and any guidelines provided by the Sponsor, the amount available for
the loan. Based on the interest rate supplied by the Sponsor in
accordance with the terms of the Plan, the Trustee shall advise the
participant of such interest rate, as well as the installment payment
amounts. The Trustee shall distribute the Participant loan agreement
and truth-in-lending disclosure with the proceeds check to the
participant. To facilitate recordkeeping, the Trustee may destroy the
original of any promissory note made in connection with a loan to a
participant under the Plan, provided that the Trustee first creates a
duplicate by a photographic or optical scanning or other process
yielding a reasonable facsimile of the promissory note and the Plan
participant's signature thereon, which duplicate may be reduced or
enlarged in size from the actual size of the original promissory note.
(3) Amending Section 6(e) Returns, Reports and Information by replacing the last
sentence with the following:
The Sponsor shall also be responsible for making any disclosures to
Participants required by law, except such disclosure as may be required under
federal or state truth-in-lending laws with regard to Participant loans, which
shall be provided by the Trustee.
(4) Amending the "investment options" section of Schedule "A" and "C" to add the
following:
- Fidelity Freedom Income Fund
- Fidelity Freedom 2000 Fund
- Fidelity Freedom 2010 Fund
- Fidelity Freedom 2020 Fund
- Fidelty Freedom 2030 Fund
- Fidelity Low-Priced Stock Fund
- Fidelity Growth Company Fund
- Fidelity Value Fund
- MAS Value Portfolio
- MAS Mid Cap Growth Portfolio
- Neuberger & Berman Genesis Trust
<PAGE> 3
- Neuberger & Berman Partners Trust
- Janus Worldwide Fund
- Janus Flexible Income Fund
(5) Amending Schedule "A" by restating the bullet point regarding Participants
initiating in-service withdrawals as follows:
- Process in-service withdrawal via telephone due to certain
circumstances previously approved by the sponsor
(6) Amending Schedule "B" by restating the "Annual Participant Fee,"
"Non-Fidelity Mutual Funds," and "Note" sections as follows
Annual Participant Fee $4.00 per Participant*, billed and
payable quarterly by the Sponsor.
Non-Fidelity Mutual Funds .25% annual administration fee on all
Non-Fidelity Mutual Fund assets (to be
paid by the Non-Fidelity Mutual Fund
vendor.)
Note: These fees have been negotiated and accepted based on the following Plan
characteristics" 3 plans in the relationship, total current plan assets of
$685 million, current participation of 8,453 participants, current stock assets
of $159.4 million, total Fidelity managed Mutual Fund assets of $450 million,
total Fidelity non-actively managed Mutual Fund assets of $75.6 million and
projected net cash flows of $33 million per year. Fees will be subject to
revision if these Plan characteristics change significantly by either falling
below or exceeding current or projected levels.
(7) Adding a Schedule "I" Operational Guidelines for Non-Fidelity Mutual Funds
as attached.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this Fifth
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
THE DETROIT EDISON COMPANY FIDELITY MANAGEMENT TRUST
COMPANY
By____________________________ By____________________________
Date Vice President Date
<PAGE> 1
EXHIBIT 10-10
FOURTH RESTATEMENT OF
THE RETIREMENT REPARATION PLAN
FOR CERTAIN EMPLOYEES OF
THE DETROIT EDISON COMPANY
The Retirement Reparation Plan for Certain Employees of The Detroit Edison
Company (the "Plan"), established by The Detroit Edison Company (the "Company")
effective January 1, 1989, as amended and restated effective May 22, 1989, June
26, 1995, and January 1, 1996, is hereby amended and restated as of October 27,
1997 by this Fourth Restatement.
SECTION 1 - PURPOSE
The sole purpose of this Plan is to assure that all eligible persons who become
eligible to and do receive benefits under the Employees' Retirement Plan of The
Detroit Edison Company (the "Retirement Plan") will receive the same aggregate
dollar amount of benefits (after taking into account any benefits such persons
are eligible to receive under the Benefit Equalization Plan for Certain
Employees of The Detroit Edison Company (the "BEP")) as they would have received
under the Retirement Plan, but for the limitations on contributions and benefits
imposed from time to time by the compensation limitation of Section 401(a)(17)
of the Internal Revenue Code, whether such limitations result solely from the
application of Section 401(a)(17) of the Internal Revenue Code or result from
the combination of the application of Section 401(a)(17) of the Internal Revenue
Code and the application of the limitations on contributions and benefits
imposed from time to time by Section 415 of the Internal Revenue Code. This Plan
is not intended to and shall not be construed so as to provide any person
receiving benefits under the Retirement Plan, the BEP, if applicable, and this
Plan, if applicable, with benefits in the aggregate which are either larger or
smaller than the benefit which would result from the calculation made under the
applicable provisions of the Retirement Plan, and the BEP, if applicable,
without giving effect to or recognition of the contribution and benefit
limitation provisions of Section 401(a) (17) of the Internal Revenue Code,
whether such limitations result solely from the application of Section
401(a)(17) of the Internal Revenue Code or result from the combination of the
application of Section 401(a)(17) of the Internal Revenue Code and the
application of the limitations on contributions and benefits under Section 415
of the Internal Revenue Code. The benefit provided under this Plan to any person
shall be separate from and in addition to any benefit provided under the
Retirement Plan, the BEP, if applicable, and any other plan or program
maintained by the Company.
SECTION 2 - ELIGIBILITY
Each retired employee of the Company and, as applicable, the spouse or
beneficiary of a former Company employee whose benefits under the Retirement
Plan are limited by the provisions set forth therein to conform to Section
401(a)(17) of the Internal Revenue
<PAGE> 2
Code shall be eligible for the benefits provided by this Plan. In no
event shall a person who is not entitled to benefits under the Retirement
Plan be eligible for any benefits under this Plan.
SECTION 3 - AMOUNT OF BENEFITS
The benefits payable under this Plan shall equal the excess, if any, of:
(a) the aggregate benefits which would have been paid to such retired
employee, an employee's spouse or beneficiary under the Retirement Plan
and the BEP, if applicable, if the provisions of such plans were
administered and benefits paid without regard to either the limitations
on contributions and benefits imposed by the compensation limitation of
Section 401(a)(17) of the Internal Revenue Code, or the special benefit
limitations added to the Retirement Plan to conform it to Section 415
of the Internal Revenue Code, over
(b) the aggregate benefits which are payable to such retired employee, an
employee's spouse or beneficiary under the Retirement Plan and the BEP,
if applicable.
SECTION 4 - PAYMENT OF BENEFITS
(a) Payment of benefits under this Plan shall be made coincident with the
payment of benefits under the Retirement Plan or as soon as practicable
thereafter.
(b) In the event an employee receives an assessment of income taxes from
the Internal Revenue Service which treats any amount payable under this
Plan as being includible in such employee's gross income prior to the
actual payment of such amount to such employee, the Company shall pay
an amount equal to such income taxes to the employee within 30 days
after written notice from such employee of such assessment. The amount
of income taxes paid to the employee hereunder shall be considered an
advance of and shall reduce the benefits ultimately paid to the
employee under this Plan.
(c) Each payment under this Plan shall be reduced by any federal,
state, or local taxes which the Detroit Edison Company determines
should be withheld from such payment.
(d) Benefits under this Plan shall be payable to or in respect of a
Company's former employees solely from the general assets of such
Company; provided, however, that no provision of the Plan shall
preclude a Company from segregating assets which are intended to be a
source for payment of benefits under the Plan. Each participant in this
Plan shall have the status of an unsecured creditor of the Company.
This Plan constitutes a promise by the Company to make benefit payments
in the future. It is intended that this Plan be unfunded for tax
purposes and for purposes of Title I of ERISA and that this Plan shall
remain unfunded
2
<PAGE> 3
during the entire period of its existence. The Company intends that
this Plan be maintained primarily for a select group of management or
highly compensated employees.
SECTION 5 - RIGHTS OF EMPLOYEES
Except to the extent provided in Section 7 herein below, no employee or an
employee's spouse or beneficiary shall at any time have any vested right to
receive the benefits provided by this Plan. The employee, employee's spouse or
beneficiary is merely a general creditor of the Company and the obligation of
the Company hereunder is purely contractual and shall not be funded or secured
in any way.
The right of an employee, employee's spouse or beneficiary to payment of any
benefit hereunder shall not be anticipated, alienated, sold, assigned,
transferred, pledged, encumbered, attached, or garnished by an employee, an
employee's spouse or beneficiary, or creditors of an employee and shall not be
subject to garnishment, execution, attachment, or similar process. Any attempted
anticipation, sale, assignment, transfer, pledge, levy, encumbrance, attachment,
garnishment or similar process shall be null and void and without effect.
SECTION 6 - ADMINISTRATION; ARBITRATION
(a) This Plan shall be administered by the Organization and Compensation
Committee of the Board of Directors (the "Administrator") as an
unfunded plan which is not intended to meet the qualification
requirements of Section 401 of the Internal Revenue Code. The
Administrator's decisions in all matters involving the interpretation
and application of this Plan made prior to a Change in Control, as
defined in Addendum I, shall be conclusive.
(b) The Plan shall at all times be maintained by the Company and
administered by the Administrator as a plan wholly separate from the
Retirement Plan, the BEP and any other plan or program maintained by
the Company.
(c) For purposes of the Plan, "Company" shall mean The Detroit Edison
Company and any Controlled Group Member which has adopted the Plan with
the approval of the Chairman of the Board of Directors and the Chairman
of the board of directors of the Controlled Group Member. As a
condition to participating in the Plan, such Controlled Group Member
shall authorize the Chairman of the Board of Directors and the
Administrator to act for it in all matters arising under the Plan and
shall agree to comply with such other terms and conditions as may be
imposed by the Chairman of the Board of Directors. Where the context
requires in respect of the liability for the payment of any benefit to
any former employee or spouse or beneficiary thereof, the term
"Company" shall mean The Detroit Edison Company or such other
Controlled Group Member who employed the employee. Unless otherwise
defined herein, all defined terms shall have the same meaning as
3
<PAGE> 4
provided under the Retirement Plan. All corporate officers and other
administrative personnel referred to herein refer to officers and
administrative personnel of The Detroit Edison Company.
(d) Notwithstanding Section 6(a) hereof, in the event of any dispute,
claim, or controversy (hereinafter referred to as a "Grievance")
between an employee who is eligible to elect to receive the benefits
provided under this Plan and the Company with respect to the payment of
benefits to such employee under this Plan, the computation of benefits
under this Plan, or any of the terms and conditions of this Plan, such
Grievance shall be resolved by arbitration in accordance with this
Section 6(d).
(1) Arbitration shall be the sole and exclusive remedy
to redress any Grievance.
(2) The arbitration decision shall be final and binding,
and a judgment on the arbitration award may be
entered in any court of competent jurisdiction and
enforcement may be had according to its terms.
(3) The arbitration shall be conducted by the American
Arbitration Association with the Commercial
Arbitration Rules of the American Arbitration
Association and expenses of the arbitrators and the
American Arbitration Association shall be borne by
the Company. Neither the Company nor such employee
shall be entitled to attorneys' fees, expert witness
fees, or any other expenses expended in the course of
such arbitration or the enforcement of any award
rendered thereunder.
(4) The place of the arbitration shall be the offices of
the American Arbitration Association in the Detroit
Metropolitan area, Michigan.
(5) The arbitrator(s) shall not have the jurisdiction or
authority to change any of the provisions of this
Plan by alteration of, addition to, or subtraction
from the terms thereof. The arbitrator(s)' sole
authority shall be to apply any terms and conditions
of this Plan. Since arbitration is the exclusive
remedy with respect to any Grievance, no employee
eligible to receive benefits provided under this Plan
has the right to resort to any federal court, state
court, local court, or administrative agency
concerning breaches of any terms and provisions
hereunder, and the decision of the arbitrator(s)
shall be a complete defense to any suit, action, or
proceeding instituted in any federal court, state
court, local court, or administrative agency by such
employee or the Company with respect to any Grievance
which is arbitrable as herein set forth.
4
<PAGE> 5
(6) The arbitration provisions shall, with respect to any
Grievance, survive the termination of this Plan.
SECTION 7 - AMENDMENT AND DISCONTINUANCE
The Detroit Edison Company expects to continue this Plan indefinitely, but
reserves the right to amend or discontinue it. The Vice President, Human
Resources, or, should the Vice President, Human Resources, become a Participant
in this Plan, the Manager, Human Resources Operations, shall review the Plan
from time to time and as part of such review is hereby directed and authorized
to amend such Plan to the extent necessary for ease of administration and/or to
comply with applicable federal and state laws. If the Plan should be amended or
discontinued, the Company shall be liable for any benefits that have accrued
under this Plan (determined on the basis of each employee 's presumed
termination of employment as of the date of such amendment or discontinuance) as
of the date of such action, and no amendment, discontinuance, withdrawal from or
termination of the Plan shall adversely affect the rights of any person to any
such accrued benefits without such person's prior written consent. Any
Controlled Group Member which has adopted the Plan may as to itself withdraw
from the Plan at any time by action of the Chairman of its board of directors.
In the event of the dissolution, merger, consolidation or reorganization of a
Company, the Plan shall terminate as to such Company unless the Plan is
continued by a successor thereto (subject to the consent of the Chairman of the
Board of Directors).
SECTION 8 - CHANGE-IN-CONTROL BENEFIT FOR CERTAIN PERSONS
Notwithstanding the foregoing provisions of the Plan, an employee who has
entered into a Change-in-Control Severance Agreement with DTE Energy Company
("Change-in-Control Severance Agreement") shall receive a benefit as provided in
Addendum I to the Plan upon termination of employment in certain circumstances
following a Change in Control, as defined in Addendum I. In addition, any former
employee, spouse or beneficiary receiving a benefit under the Plan at the time
of the occurrence of a Change in Control, as defined in Addendum I, shall
receive payment as provided in Addendum I. If a benefit is payable to any
employee or former employee, spouse or beneficiary pursuant to Addendum I,
neither the employee or former employee or any spouse or beneficiary thereof,
shall be entitled to any payments or further payments, as the case may be, under
the foregoing provisions of the Plan.
5
<PAGE> 6
ADDENDUM I
CHANGE-IN-CONTROL BENEFITS
A change in control ("Change in Control") for purposes of the
Plan and this Addendum I shall have occurred if at any time on or after October
1, 1997 any of the following events shall occur:
(1) DTE Energy Company ("DTE") is merged, consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 55% of the combined voting power of
the then-outstanding securities of such corporation or person
immediately after such transaction is held in the aggregate by
the holders of the then-outstanding securities entitled to
vote generally in the election of directors (the "Voting
Stock") of DTE immediately prior to such transaction;
(2) DTE sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and
as a result of such sale or transfer, less 55% of the combined
voting power of the then-outstanding Voting Stock of such
corporation or person immediately after such sale or transfer
is held in the aggregate (directly or through ownership of
Voting Stock of DTE or a Subsidiary (as hereinafter defined))
by the holders of Voting Stock of DTE immediately prior to
such sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding Voting Stock of DTE;
(4) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of DTE cease for any reason to constitute at least a
majority thereof; provided, however, that for purposes of this
paragraph (4) each director who is first elected, or first
nominated for election, by DTE's stockholders, by a vote of at
least two-thirds of the directors
6
<PAGE> 7
of DTE (or a committtee thereof) then still in office who
were directors of DTE at the beginning of any such period
will be deemed to have been a director of DTE at the
beginning of such period; or
(5) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3)
above, unless otherwise determined in a specific case by
majority vote of the Board of Directors of DTE, a "Change in
Control" shall not be deemed to have occurred for purposes of
paragraph (3) solely because (i) DTE, (ii) an entity in which
DTE directly or indirectly beneficially owns 50% or more of
the outstanding Voting Stock (a "Subsidiary"), or (iii) any
DTE-sponsored employee stock ownership plan or any other
employee benefit plan of DTE or any Subsidiary either files or
becomes obligated to file a report or a proxy statement under
or in response to Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report or item therein) under the
Exchange Act disclosing beneficial ownership by it of shares
of Voting Stock, whether in excess of 20% or otherwise.
In the event a Change in Control occurs, any former employee,
spouse or beneficiary thereof who as of the date of the occurrence of the Change
in Control is receiving benefits under the Plan shall be paid in cash in a lump
sum an amount equal to the actuarial equivalent present value of the remaining
benefits, determined as of the date of payment, that are payable to or in
respect of such person under the Plan (including survivor benefits, if
applicable).
In the event a Change in Control occurs, any employee who has
entered into a Change-in-Control Severance Agreement and whose employment is
terminated after the occurrence of the Change in Control in circumstances
entitling the individual to severance compensation under Section 4 of the
Change-in-Control Severance Agreement shall be entitled to a cash lump sum
payment under the Plan. The amount of lump sum payment payable hereunder shall
be equal to the actuarial equivalent present value of the benefit that would
otherwise be payable to the employee under the Plan determined as otherwise
provided in the Plan.
Upon the foregoing payment, no further benefits shall be
payable under the Plan to such employee or former employee, spouse or
beneficiary thereof. Payments under this Addendum I shall be made within 30 days
after the date on which the Change in Control occurs or, if later, the date the
employee terminates employment.
For purposes of this Addendum I, the interest/discount rate
and mortality
7
<PAGE> 8
table used to determine actuarial equivalence shall be as follows:
(1) Interest/discount Rate - an annual rate equal to the
Fed's Fund Rate (as of the first business day of the
calendar month in which the Change in Control or
termination, if later, occurs) plus 1%, but in no
event shall the interest/discount rate exceed 8% or
be less than 5%.
(2) Mortality Table - the unisex version of the mortality
table used for funding purposes of the most recent
actuarial valuation for the Plan issued prior to the
date of the Change in Control as defined in the DTE
Change-in-Control Severance Agreements.
8
<PAGE> 1
EXHIBIT 10.11
FOURTH RESTATEMENT OF
THE BENEFIT EQUALIZATION PLAN
FOR CERTAIN EMPLOYEES OF
THE DETROIT EDISON COMPANY
The Benefit Equalization Plan for Certain Employees of The Detroit Edison
Company (the "Plan"), established by The Detroit Edison Company (the "Company")
effective March 1, 1978, as amended and restated effective May 22, 1989, June
26, 1995, and January 1, 1996, is hereby amended and restated as of October 27,
1997, by this Fourth Restatement.
SECTION 1 - PURPOSE
The sole purpose of this Plan is to assure that all eligible persons who become
eligible to and do receive benefits under the Employees' Retirement Plan of The
Detroit Edison Company (the "Retirement Plan") will receive the same dollar
amount of benefits as they would have received but for the limitations on
contributions and benefits imposed from time to time solely by Section 415 of
the Internal Revenue Code. This Plan is not intended to and shall not be
construed so as to provide any person receiving benefits under the Retirement
Plan and, where applicable, this Plan with benefits in the aggregate which are
either larger or smaller than the benefit which would result from the
calculation made under the applicable provisions of the Retirement Plan without
giving effect to or recognition of solely the benefit limitation provisions of
Section 415 of the Internal Revenue Code. The benefit under this Plan provided
to any person shall be separate from and in addition to any benefit provided
under the Retirement Plan or any other plan or program maintained by the
Company.
SECTION 2 - ELIGIBILITY
Each retired employee of the Company and, as applicable, the spouse or
beneficiary of a former Company employee whose benefits under the Retirement
Plan are limited by the provisions set forth therein to conform to Section 415
of the Internal Revenue Code shall be eligible for the benefits provided by
this Plan. In no event shall a person who is not entitled to benefits under the
Retirement Plan be eligible for any benefits under this Plan.
SECTION 3 - AMOUNT OF BENEFITS
The benefits payable hereunder shall equal the excess, if any, of:
(a) the benefits which would have been paid to a retired employee, such
employee's spouse or beneficiary under the Retirement Plan if the
provisions of such plan were administered and benefits paid without
regard solely to the special benefit
1
<PAGE> 2
limitations added to such plan to conform it to Section 415 of the
Internal Revenue Code, over
(b) the benefits which would be otherwise payable to such retired
employee, such employee's spouse or beneficiary under the Retirement
Plan taking into account solely the special benefit limitations added
to such plan to conform it to Section 415 of the Internal Revenue
Code.
SECTION 4 - PAYMENT OF BENEFITS; AMENDMENTS
(a) Payment of benefits under this Plan shall be made coincident with the
payment of benefits under the Retirement Plan or as soon as
practicable thereafter.
(b) In the event an employee receives an assessment of income taxes from
the Internal Revenue Service which treats any amount payable under
this Plan as being includible in such employee's gross income prior to
the actual payment of such amount to such employee, the Company shall
pay an amount equal to such income taxes to such employee within
thirty days after written notice from such employee of such
assessment. The amount of income taxes paid to the employee hereunder
shall be considered an advance of and shall reduce the benefits
ultimately paid to the employee under this Plan.
(c) Each payment under this Plan shall be reduced by any federal, state,
or local taxes which the Detroit Edison Company determines should be
withheld from such payment.
(d) Benefits under this Plan shall be payable to or in respect of a
Company's former employees solely from the general assets of such
Company; provided, however, that no provision of the - Plan shall
preclude a Company from segregating assets which are intended to be a
source for payment of benefits under the Plan. Each participant in
this Plan shall have the status of a general unsecured creditor of the
Company. This Plan constitutes a promise by the Company to make
benefit payments in the future. It is intended that this Plan be
unfunded for tax purposes and that this Plan shall remain unfunded
during the entire period of its existence. The Company intends to
maintain this Plan similarly for a select group of management or
highly compensated employees.
SECTION 5 - RIGHTS OF EMPLOYEES
Except as to the extent provided in Section 7 herein, no employee or an
employee's spouse or beneficiary shall at any time have any vested right to
receive the benefits
2
<PAGE> 3
provided by this Plan. The rights of any participant to receive benefits under
this Plan are not subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance, attachment or garnishment by such
participant, the creditors of such participant, such participant's spouse or
such participant's beneficiary.
SECTION 6 - ADMINISTRATION; ARBITRATION
(a) This Plan shall be administered by the Organization and Compensation
Committee of the Board of Directors (the "Administrator") as an
unfunded plan which is not intended to meet the qualification
requirements of Section 401 of the Internal Revenue Code. The
Administrator's decisions in all matters involving the interpretation
and application of this Plan made prior to a Change in Control, as
defined in Addendum I, shall be conclusive.
(b) The Plan shall at all times be maintained by the Company and
administered by the Administrator as a plan wholly separate from the
Retirement Plan and any other plan or program maintained by the
Company.
(c) For purposes of the Plan, "Company" shall mean The Detroit Edison
Company and any Controlled Group Member which has adopted the Plan
with the approval of the Chairman of the Board of Directors and the
Chairman of the board of directors of the Controlled Group Member. As
a condition to participating in the Plan, such Controlled Group Member
shall authorize the Chairman of the Board of Directors and the
Administrator to act for it in all matters arising under the Plan and
shall agree to comply with such other terms and conditions as may be
imposed by the Chairman of the Board of Directors. Where the context
requires in respect of the liability for the payment of any benefit to
any former employee or spouse or beneficiary thereof, the term
"Company" shall mean The Detroit Edison Company or such other
Controlled Group Member who employed the employee. Unless otherwise
defined herein, all defined terms shall have the same meaning as
provided under the Retirement Plan. All corporate officers and other
administrative personnel referred to herein refer to officers and
administrative personnel of The Detroit Edison Company.
(d) Notwithstanding Section 6(a) hereof, in the event of any dispute,
claim, or controversy (the "Grievance") between an employee whose
eligible to elect to receive the benefits provided under this Plan and
the Company with respect to the payment of benefits to such employee
under this Plan, the computation of benefits under this Plan, or any
of the terms and conditions of this Plan, such Grievance shall be
resolved by arbitration and in accordance with this Section 6(d).
(1) Arbitration shall be the sole and exclusive remedy to redress any
Grievance.
3
<PAGE> 4
(2) The arbitration decision shall be final and binding, and a
judgment on the arbitration award may be entered in any court of
competent jurisdiction and enforcement may be had according to
its terms.
(3) The arbitration shall be conducted by the American Arbitration
Association in accordance with the Commercial Arbitration Rules
of the American Arbitration Association and expenses of the
arbitrators and the American Arbitration Association shall be
borne by the Company. Neither the Company nor such employee shall
be entitled to attorneys' fees, expert witness fees, or other
expenses expended in the course of such arbitration or the
enforcement of any award rendered thereunder.
(4) The place of the arbitration shall be the offices of the American
Arbitration Association in the Detroit Metropolitan area,
Michigan.
(5) The arbitrator(s) shall not have the jurisdiction or authority to
change any provisions of this Plan by alteration of, addition to,
or subtraction from the terms thereof. The arbitrator(s)' sole
authority shall be to apply any terms and conditions of this
Plan. Since arbitration is the exclusive remedy with respect to
any Grievance, no employee eligible to receive benefits provided
under this Plan has the right to resort to any federal court,
state court, local court, or administrative agency concerning
breeches of any terms and provisions hereunder, and the decision
of the arbitrator(s) shall be a complete defense to any suit,
action, or proceeding instituted in any federal court, state
court, local court, or administrative agency by such employee or
the Company with respect to any Grievance which is arbitrable as
herein set forth.
(6) The arbitration provision shall, with respect to any Grievance,
survive the termination of this Plan.
SECTION 7 - AMENDMENT AND DISCONTINUANCE
The Detroit Edison Company expects to continue this Plan indefinitely, but
reserves the right to amend or discontinue it. The Vice President, Human
Resources, or, should the Vice President, Human Resources, become a Participant
in this Plan, the Manager, Human Resources Operations, shall review the Plan
from time to time and as part of such review is hereby directed and authorized
to amend such Plan to the extent necessary for ease of administration and/or to
comply with applicable federal and state laws. If the Plan should be amended or
discontinued, the Company shall be liable for any benefits that have accrued
under this Plan (determined on the basis of each employee's presumed
termination of employment as of the date of such amendment or discontinuance)
as of the date of such action, and no amendment, discontinuance, withdrawal
from or termination of the Plan
4
<PAGE> 5
shall adversely affect the rights of any person to any such accrued
benefits without such person's prior written consent. Any Controlled Group
Member which has adopted the Plan may as to itself withdraw from the Plan at
any time by action of the Chairman of its board of directors. In the event of
the dissolution, merger, consolidation or reorganization of a Company, the Plan
shall terminate as to such Company unless the Plan is continued by a successor
thereto (subject to the consent of the Chairman of the Board of Directors).
SECTION 8 - CHANGE-IN-CONTROL BENEFIT FOR CERTAIN PERSONS
Notwithstanding the foregoing provisions of the Plan, an employee who has
entered into a Change-in-Control Severance Agreement with DTE Energy Company
("Change-in-Control Severance Agreement") shall receive a benefit as provided
in Addendum I to the Plan upon termination of employment in certain
circumstances following a Change in Control, as defined in Addendum I. In
addition, any former employee, spouse or beneficiary receiving a benefit under
the Plan at the time of the occurrence of a Change in Control, as defined in
Addendum I, shall receive payment as provided in Addendum I. If a benefit is
payable to any employee or former employee, spouse or beneficiary pursuant to
Addendum I, neither the employee or former employee or any spouse or
beneficiary thereof, shall be entitled to any payments or further payments, as
the case may be, under the foregoing provisions of the Plan.
5
<PAGE> 6
ADDENDUM I
CHANGE-IN-CONTROL BENEFITS
A change in control ("Change in Control") for purposes of the
Plan and this Addendum I shall have occurred if at any time on or after October
1, 1997 any of the following events shall occur:
(1) DTE Energy Company ("DTE") is merged, consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 55% of the combined voting power of
the then-outstanding securities of such corporation or person
immediately after such transaction is held in the aggregate
by the holders of the then-outstanding securities entitled to
vote generally in the election of directors (the "Voting
Stock") of DTE immediately prior to such transaction;
(2) DTE sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and
as a result of such sale or transfer, less 55% of the
combined voting power of the then-outstanding Voting Stock of
such corporation or person immediately after such sale or
transfer is held in the aggregate (directly or through
ownership of Voting Stock of DTE or a Subsidiary (as
hereinafter defined)) by the holders of Voting Stock of DTE
immediately prior to such sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding Voting Stock of DTE;
(4) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of DTE cease for any reason to constitute at least
a majority thereof; provided, however, that for purposes of
this paragraph (4) each
6
<PAGE> 7
director who is first elected, or first nominated for
election, by DTE's stockholders, by a vote of at least
two-thirds of the directors of DTE (or a committee thereof)
then still in office who were directors of DTE at the
beginning of any such period will be deemed to have been a
director of DTE at the beginning of such period; or
(5) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3)
above, unless otherwise determined in a specific case by
majority vote of the Board of Directors of DTE, a "Change in
Control" shall not be deemed to have occurred for purposes of
paragraph (3) solely because (i) DTE, (ii) an entity in which
DTE directly or indirectly beneficially owns 50% or more of
the outstanding Voting Stock (a "Subsidiary"), or (iii) any
DTE-sponsored employee stock ownership plan or any other
employee benefit plan of DTE or any Subsidiary either files
or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of
shares of Voting Stock, whether in excess of 20% or
otherwise.
In the event a Change in Control occurs, any former employee,
spouse or beneficiary thereof who as of the date of the occurrence of the
Change in Control is receiving benefits under the Plan shall be paid in cash in
a lump sum an amount equal to the actuarial equivalent present value of the
remaining benefits, determined as of the date of payment, that are payable to
or in respect of such person under the Plan (including survivor benefits, if
applicable).
In the event a Change in Control occurs, any employee who has
entered into a Change-in-Control Severance Agreement and whose employment is
terminated after the occurrence of the Change in Control in circumstances
entitling the individual to severance compensation under Section 4 of the
Change-in-Control Severance Agreement shall be entitled to a cash lump sum
payment under the Plan. The amount of lump sum payment payable hereunder shall
be equal to the actuarial equivalent present value of the benefit that would
otherwise be payable to the employee under the Plan determined as otherwise
provided in the Plan.
Upon the foregoing payment, no further benefits shall be
payable under the Plan to such employee or former employee, spouse or
beneficiary thereof. Payments
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<PAGE> 8
under this Addendum I shall be made within 30 days after the date on which the
Change in Control occurs or, if later, the date the employee terminates
employment.
For purposes of this Addendum I, the interest/discount rate
and mortality table used to determine actuarial equivalence shall be as
follows:
(1) Interest/discount Rate - an annual rate equal to the
Fed's Fund Rate (as of the first business day of the
calendar month in which the Change in Control or
termination, if later, occurs) plus 1%, but in no
event shall the interest/discount rate exceed 8% or
be less than 5%.
(2) Mortality Table - the unisex version of the
mortality table used for funding purposes of the
most recent actuarial valuation for the Plan issued
prior to the date of the Change in Control as
defined in the DTE Change-in-Control Severance
Agreements.
8
<PAGE> 1
EXHIBIT 10.12
KEY EMPLOYE DEFERRED COMPENSATION PLAN
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
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.
<PAGE> 2
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>
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.
2
<PAGE> 3
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
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 adversely affect the right of any
participant (or such participant's beneficiary) to receive benefits theretofore
accrued, without such person's prior written amount. Notwithstanding the
foregoing, no amendment, modification, supplement or termination may be made
after the occurrence of a Change in Control, as defined in Addendum I, that
shall adversely affect the rights of any person who is receiving or upon
termination would thereupon be entitled to receive a benefit under the Plan,
without such person's prior written consent. The foregoing does not preclude
voluntary waiver of benefits by a participant or beneficiary or a deemed waiver
of benefits by a participant pursuant to Addendum I.
CHANGE-IN-CONTROL BENEFIT FOR CERTAIN PERSONS
Notwithstanding the foregoing provisions of the Plan, a participant
who has entered into a Change-in-Control Severance Agreement with DTE Energy
Company ("Change-in-Control Severance Agreement") shall receive a benefit as
provided in Addendum I to the Plan upon termination of employment in certain
circumstances following a Change in Control, as defined in Addendum I. In
addition, any participant or beneficiary receiving a benefit under the Plan at
the time of the occurrence of a Change in Control, as defined in Addendum I,
shall receive payment as provided in Addendum I. If a benefit is payable to a
participant or any beneficiary pursuant to Addendum I, neither the participant
or any beneficiary thereof, shall be entitled to any payments or further
payments, as the case may be, under the foregoing provisions of the Plan.
3
<PAGE> 4
ADDENDUM I
CHANGE-IN-CONTROL BENEFITS
A change in control ("Change in Control") for purposes of the
Plan and this Addendum I shall have occurred if at any time on or after October
1, 1997 any of the following events shall occur:
(1) DTE Energy Company ("DTE") is merged, consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 55% of the combined voting power of
the then-outstanding securities of such corporation or person
immediately after such transaction is held in the aggregate by
the holders of the then-outstanding securities entitled to
vote generally in the election of directors (the "Voting
Stock") of DTE immediately prior to such transaction;
(2) DTE sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and
as a result of such sale or transfer, less 55% of the combined
voting power of the then-outstanding Voting Stock of such
corporation or person immediately after such sale or transfer
is held in the aggregate (directly or through ownership of
Voting Stock of DTE or a Subsidiary (as hereinafter defined))
by the holders of Voting Stock of DTE immediately prior to
such sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding Voting Stock of DTE;
(4) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of DTE cease for any reason to constitute at least a
majority thereof; provided, however, that for purposes of this
paragraph (4) each director who is first elected, or first
nominated for election, by DTE's stockholders, by a vote of at
least two-thirds of the directors of DTE (or a committee
thereof) then still in office who were directors of DTE at the
beginning of any such period will be deemed to have been a
director of DTE at the beginning of such period; or
(5) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3)
above, unless otherwise determined in a specific case by
majority vote of the Board of Directors of DTE, a "Change in
Control" shall not be deemed to have
4
<PAGE> 5
occurred for purposes of paragraph (3) solely because (i) DTE,
(ii) an entity in which DTE directly or indirectly
beneficially owns 50% or more of the outstanding Voting Stock
(a "Subsidiary"), or (iii) any DTE-sponsored employee stock
ownership plan or any other employee benefit plan of DTE or
any Subsidiary either files or becomes obligated to file a
report or a proxy statement under or in response to Schedule
13D or Schedule 14D-1 (or any successor schedule, form or
report or item therein) under the Exchange Act disclosing
beneficial ownership by it of shares of Voting Stock, whether
in excess of 20% or otherwise.
In the event a Change in Control occurs, any participant or
beneficiary thereof who as of the date of the occurrence of the Change in
Control is receiving benefits under the Plan shall be paid in cash in a lump
sum an amount equal to the actuarial equivalent present value of the remaining
benefits, determined as of the date of payment, that are payable to or in
respect of such person under the Plan (including survivor benefits, if
applicable).
In the event a Change in Control occurs, any participant who
has entered into a Change-in-Control Severance Agreement and whose employment
is terminated after the occurrence of the Change in Control in circumstances
entitling the individual to severance compensation under Section 4 of the
Change-in-Control Severance Agreement shall be entitled to a cash lump sum
payment under the Plan; provided, however, that if the participant is eligible
for and would be entitled to a lump sum payment under the terms of the
Management Supplemental Benefit Plan ("MSBP") sponsored by The Detroit Edison
Company that is greater than the lump sum payment to which the participant
would be entitled under this Plan as determined in this Addendum I, then the
participant shall be deemed to have elected to participate in the MSBP and
waived his or her right to any benefit under this Plan including under this
Addendum I. The amount of lump sum payment payable hereunder shall be equal to
the actuarial equivalent present value of the benefit that would otherwise be
payable to the participant under the Plan determined as otherwise provided in
the Plan but with the following modification:
(1) For any Plan Year ending after the occurrence of the
Change in Control the participant's Basic Award under
"Calculation of Basic Award Amounts" shall be no less
than one percent (1%) of the participant's total base
salary paid or accrued during full months for which
the eligibility criteria have been met; provided,
however, that for a participant who has met the
eligibility criteria during the Plan year but whose
employment is terminated during such year, the amount
of Basic Award shall be credited at termination and
shall be equal to not less than one percent (1%) of
the participant's total base salary paid or accrued
during the full months prior to termination.
Upon the foregoing payment, no further benefits shall be
payable under the Plan to such participant or beneficiary thereof. Payments
under this Addendum I shall be made within 30 days after the date on which the
Change in Control occurs or, if later, the date the participant terminates
employment.
For purposes of this Addendum I,
(a) Basic Awards are deemed to have been deposited in a
phantom account.
5
<PAGE> 6
(b) Any participant or beneficiary receiving benefits
at the time of the Change in Control will receive a cash
lump sum equal to the balance of the phantom account.
(c) Any eligible participant terminated after a Change
in Control will receive a cash lump sum payment under the Plan
equal to the current phantom account balance (15 times the
Basic Awards credited to the account plus the Basic Award
determined in paragraph (1) above).
6
<PAGE> 1
EXHIBIT 10.13
EXECUTIVE INCENTIVE PLAN
EFFECTIVE OCTOBER 27, 1997
OVERVIEW
The Executive Incentive Plan ("Plan") supplements possible annual financial
incentives provided under the Shareholder Value Improvement Plan - A for
eligible members of Detroit Edison Company's ("Company") senior management. It
rewards such employees for the accomplishment of financial and strategic
objectives that improve DTE Energy Company's ("DTE") operating results and
positions DTE for long term profitability. Recipients of Plan awards may, under
specified conditions, defer the payment of awards.
The Plan measures calendar year performance. The current year's targets,
measures and weights will be communicated annually following approval.
ADMINISTRATION
The Organization and Compensation Committee ("Committee") of the Detroit Edison
Board of Directors ("Board of Directors") is Plan Administrator with
responsibility for the administration of the Plan. The Committee has the
authority to interpret the provisions of the Plan and prescribe any regulations
relating to its administration. The decisions of the Committee with respect to
the administration of the Plan made prior to the occurrence of a Change in
Control, as defined herein, shall be conclusive.
The Committee, on an annual basis, will review and, if appropriate, recommend
to the Board of Directors for approval, the specific criteria for eligibility,
the type and timing of awards and the manner of payment of awards (current
and/or deferred), the performance measures and related weights to be used in
computing award amounts and amounts in the Performance Fund, as defined herein,
and the performance levels for each performance measure. The Board of Directors
reserves the right to amend, suspend or terminate the Plan at any time (See
"Awards"); provided, however, that on or after the occurrence of a Change in
Control, as defined herein, no amendment, suspension or termination of the Plan
may be made that adversely affects the rights of any person without his or her
prior written consent.
Current awards calculated under the terms of the Plan are not payable until
such time as the Board of Directors' approval has been granted; provided,
however, that notwithstanding the foregoing or any other provision of the Plan,
after a Change in Control, as defined herein, such approval is not required
with respect to awards thereafter payable in respect of any Plan year ending
prior to the occurrence of the Change in Control. The Board of Directors
reserves the right to reduce or cancel any awards that might otherwise be made
if, in its sole discretion, it determines that the performance achieved is not
indicative of an improvement in DTE's overall performance. If such a
determination is made, the Plan may be canceled or substantially modified with
the result of terminating or decreasing any awards that might otherwise be made
hereunder. Notwithstanding the foregoing or any other provision of the Plan, no
award in respect of a Plan year ending prior to the occurrence of a Change in
Control, as defined herein, may be reduced or canceled, nor may the Plan be so
canceled or substantially modified, following the occurrence of a Change in
Control.
1
<PAGE> 2
The Treasurer will be responsible for making award payments, for establishing
and maintaining the deferred accounts for award recipients, and for maintaining
all necessary records regarding the valuation and payment of awards.
The Vice President-Human Resources will assist the Committee in the
development, administration and communication of the Plan.
ELIGIBILITY
Any person who is elected to the position of Vice President and above at
Detroit Edison (i.e., senior management) and who holds and actively performs in
one or more such eligible positions for a total of at least seven months during
the Plan year will become eligible to participate in the Plan. "Hold and
actively perform" excludes all temporary assignments. Any key employee of
Detroit Edison may be designated by the Committee to become a participant in
the Plan. Participants' performance must be considered at least satisfactory
or equivalent for the applicable calendar year to be eligible to receive an
award under the Plan.
Employees of the Company are not eligible to participate in the Plan if they
are eligible to participate in any other Company incentive program other than
the Long Term Incentive Plan and the Shareholder Value Improvement Plan - A.
Exceptions to the eligibility criteria may be authorized by the Board of
Directors.
Participation in the Plan does not guarantee continued employment with the
Company.
PLAN YEAR
The Plan year will be a calendar year.
AWARD OPPORTUNITY
Awards, if any, will be payable from a fund ("Performance Fund") established by
multiplying the base salary (including applicable amounts deferred under
Company-sponsored benefit plans) of each otherwise eligible participant as of
the last day of the payroll year by a target percent of salary by position and
then by a percent based upon the achievement of specific performance measures
and combining such individual amounts into one collective fund.
PERFORMANCE MEASURES, LEVELS AND WEIGHTS
The target percentages, measures of performance and weights applicable to each
Plan year will be communicated annually to all eligible employees.
AWARDS
Award amounts will be payable from the Performance Fund and will be granted, in
the sole discretion of the Board of Directors, to otherwise eligible
participants, in such amounts, if any, as are determined to be appropriate by
the Board of Directors.
Awards under the Plan are not considered basic compensation for purposes of the
Company's qualified and non-qualified savings plans, the Company's qualified
and non-qualified retirement plans, insurance
2
<PAGE> 3
or any other Company-sponsored qualified or non-qualified employee benefit
programs.
AWARD PAYMENT
No awards will be paid under this Plan if no awards are paid under the
Shareholder Value Improvement Plan - A regardless of whether other terms and
conditions are met.
Annual awards, if any, will be paid as soon as practicable following approval
by the Board of Directors unless deferred as permitted herein.
Eligible participants will be permitted to defer the payment of 50% to 100% of
an approved award that is payable prior to the occurrence of a Change in
Control, as defined herein, for a period of from one to five years ("Deferred
Awards"). A Deferred Award Account will be established for each award recipient
with a timely Deferral Notice on file with the Company. For the calendar year
during which this Plan is adopted, deferrals must be irrevocably submitted
within 30 calendar days of the date of adoption. Thereafter, deferrals must be
irrevocably submitted prior to the commencement of the Plan year during which
the services giving rise to the award will be performed on a form ("Deferral
Notice") to be furnished by the Company. For example, a Deferral Notice for an
award to be based on 1998 performance must be filed with the Company by the end
of 1997. Once filed with the Company, the Deferral Notice may not be changed or
revoked.
DEFERRED AWARD ACCOUNTS
Deferred Award Accounts will be established for each recipient with a timely
Deferral Notice on file as soon as practicable following the Board of
Directors' approval of an award. Amounts in Deferred Award accounts will be
deemed to earn interest at a rate calculated on the last business day of each
month (commencing with the first month following the deferral of an award) with
reference to the Five-Year United States Treasury Bond rate, as reported in a
nationally-recognized financial service.
Deferred Awards, including deemed earnings thereon, will be payable as soon as
practicable in the calendar year selected by an award recipient in the Deferral
Notice. In the event that a participant with a Deferred Account dies, retires
or terminates employment with the Company and its Affiliates prior to the time
established for payment in the Deferral Notice, such participant's Deferred
Account, plus earnings thereon, shall be paid to such participant or
participant's designated beneficiary as soon as possible thereafter. For
purposes of the Plan, the term "Affiliate" shall mean any parent of the Company
or any entity in which the Company or any parent of the Company directly or
indirectly beneficially owns more than 50% of the voting securities.
The Committee may, in its discretion, terminate any Deferral and immediately
pay out such award in cash.
FORFEITURE
Otherwise eligible participants who are discharged or resign from the Company
and its Affiliates prior to the end of the Plan Year (December 31) will forfeit
an annual award unless the termination is the result of disability (where
disability is defined as being eligible to receive a benefit under a long-term
disability plan of the Company or an Affiliate), death or retirement (where
retirement is defined as a resignation at age 55 or older and with at least 10
years of service with the Company and its Affiliates or at age 65 or older).
Deferred Accounts are not subject to forfeiture.
3
<PAGE> 4
FUNDING STATUS
Benefits under the Plan, including any Deferred Accounts, are payable solely
from the general assets of the Company and shall remain unfunded and unsecured
(under federal income tax laws and Title I of the Employee Retirement Income
Security Act of 1974, as amended) during the entire period of the Plan's
existence. The participant, the participant's spouse or beneficiary are merely
general creditors of the Company and the obligations of the Company hereunder
are purely contractual and shall not be funded or secured in any way. Nothing
herein, however, shall preclude the Company from segregating assets which are
intended to be a source of payment of benefits under the Plan.
NON-ALIENABILITY AND NON-TRANSFERABILITY
The right of a participant and participant's spouse or beneficiary to payment
of any benefit or deferred compensation hereunder shall not be alienated,
assigned, transferred, pledged or encumbered and shall not be subject to
execution, attachment or similar process. No participant may borrow against the
deferred account established for his or her benefit hereunder. No account shall
be subject in any manner to alienation, sale, transfer, assignment, pledge,
encumbrance, charge, garnishment, execution or levy of any kind, whether
voluntary or involuntary, including but not limited to any liability which is
for alimony or other payments for the support of a spouse or former spouse, or
for any other relative of any employee. Any attempted assignment, pledge, levy
or similar process shall be null and void and without effect.
BENEFICIARY DESIGNATION
Each eligible participant may name any beneficiary to whom awards under the
Plan are to be paid in case of the eligible participant's death. Each
designation will revoke all prior designations by the eligible participant and
shall be on a form prescribed by the Plan Administrator and will be effective
only when filed by the eligible participant with the Treasurer. In the absence
of any such designation, awards due shall be paid to the participant's (1) life
insurance beneficiary designated by the participant with respect to life
insurance maintained by the Company for the benefit of the participant, or, in
the absence of a designated life insurance beneficiary, (2) to the
participant's estate.
GOVERNING LAW
The Plan shall be governed by the laws of the State of Michigan and, to the
extent that may be applicable, the Federal laws of the United States.
CHANGE IN CONTROL
A change in control ("Change in Control") for purposes of the Plan shall have
occurred if at any time on or after October 1, 1997 any of the following events
shall occur:
(1) DTE is merged, consolidated or reorganized into or with
another corporation or other legal person, and as a result of
such merger, consolidation or reorganization less than 55% of
the combined voting power of the then-outstanding securities
of such corporation or person immediately after such
transaction is held in the aggregate by the holders of the
then-outstanding securities entitled to vote generally in the
election of directors (the "Voting Stock") of DTE immediately
prior to such transaction;
4
<PAGE> 5
(2) DTE sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and
as a result of such sale or transfer, less 55% of the
combined voting power of the then-outstanding Voting Stock of
such corporation or person immediately after such sale or
transfer is held in the aggregate (directly or through
ownership of Voting Stock of DTE or a Subsidiary (as
hereinafter defined)) by the holders of Voting Stock of DTE
immediately prior to such sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding Voting Stock of DTE;
(4) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of DTE cease for any reason to constitute at least
a majority thereof; provided, however, that for purposes of
this paragraph (4) each director who is first elected, or
first nominated for election, by DTE's stockholders, by a
vote of at least two-thirds of the directors of DTE (or a
committee thereof) then still in office who were directors of
DTE at the beginning of any such period will be deemed to
have been a director of DTE at the beginning of such period;
or
(5) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3)
above, unless otherwise determined in a specific case by
majority vote of the Board of Directors of DTE, a "Change in
Control" shall not be deemed to have occurred for purposes of
paragraph (3) solely because (i) DTE, (ii) an entity in which
DTE directly or indirectly beneficially owns 50% or more of
the outstanding Voting Stock (a "Subsidiary"), or (iii) any
DTE-sponsored employee stock ownership plan or any other
employee benefit plan of DTE or any Subsidiary either files
or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of
shares of Voting Stock, whether in excess of 20% or
otherwise.
In the event a Change in Control occurs during a Plan year, then,
notwithstanding anything to the contrary in the foregoing provisions of the
Plan, including but not limited to the Section entitled "Administration", no
payments of Awards shall be made under the foregoing provisions of the Plan for
such Plan year, but instead,
5
<PAGE> 6
(a) each Vice President and above at Detroit Edison during the
Plan year employed by the Company or an Affiliate immediately
prior to the date on which the Change in Control occurs,
(b) and each Vice President and above at Detroit Edison who had
terminated employment with the Company and its Affiliates
during the Plan year by reason of retirement or disability
(as such terms are defined above under "Forfeiture") or death
prior to the occurrence of the Change in Control but after
having held and actively performed in one or more such
positions for a total of at least seven months during the
Plan year,
shall have a right (or, in the case of the person's death, his or her
beneficiary shall have the right) to an immediate cash payment of an amount
determined by multiplying (i) the individual's actual base salary (including
applicable amounts deferred under Company-sponsored benefit plans) earned
during the Plan year while a Vice President and above at Detroit Edison prior
to the occurrence of the Change in Control or earlier termination by
retirement, disability or death, by (ii) the individual's applicable target
percent of salary by position for the Plan year based on the assumption that
established performance targets were met. Such payments shall be made within 30
days after the date on which the Change in Control occurs without the necessity
of approval of the Board of Directors.
6
<PAGE> 1
EXHIBIT 10-14
FIFTH RESTATEMENT OF
THE DETROIT EDISON COMPANY
MANAGEMENT SUPPLEMENTAL BENEFIT PLAN
The Detroit Edison Company Management Supplemental Benefit Plan (the
"Plan"), established by The Detroit Edison Company (the "Company") effective
July 24, 1989, as amended and restated effective January 22, 1990, June 26,
1995, January 1, 1996 and October 28, 1996, is hereby amended and restated as of
October 27, 1997, by this Fifth Restatement.
PURPOSE
The Plan is designed to supplement pension benefits for eligible
management employees. The Plan has the objective of making the Company's
retirement program more competitive within the electric utility industry and
general industry, which will facilitate the attraction and retention of
management employees.
DEFINITION
AVERAGE FINAL COMPENSATION. Equals one-fifth of pay during the 260
weeks of Company service that results in the highest average, calculated without
regard to any limitation imposed by Section 401(a)(17) of the Internal Revenue
Code. In additional to normal pay, lump sum payments in lieu of April base pay
increases and Shareholder Value Improvement Plan awards with no restriction on
the year paid will be included when calculating the 260 weeks of benefit service
which result in the highest average.
AWARDED SERVICE. Years of service that may be imputed to an otherwise
eligible Plan participant by the Organization and Compensation Committee
("Committee") of the Board of Directors, having taken into account the value to
the Company of such participant's prior experience.
COMPANY. The Detroit Edison Company and any Controlled Group Member
which has adopted the Plan with the approval of the Chairman of the Board of
Directors and the Chairman of the board of directors of the Controlled Group
Member. As a condition to participating in the Plan, such Controlled Group
Member shall authorize the Chairman of the Board of Directors to act for it in
all matters arising under the Plan and shall agree to comply with such other
terms and conditions as may be imposed by the Chairman of the Board of
Directors. Where the context requires in respect of the liability for the
payment of any benefit to an eligible participant or beneficiary thereof, the
term "Company" shall mean The Detroit Edison Company or such other Controlled
Group Member employing or who employed such employee. Unless otherwise defined
herein, all defined terms shall have the same meaning as provided under the
Retirement Plan. All corporate officers and other administrative personnel
referred to herein refer to officers and administrative personnel of The Detroit
Edison Company.
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<PAGE> 2
COMPANY SERVICE. All years of service with the Company calculated to
the nearest month.
EXECUTIVE POST-EMPLOYMENT INCOME ARRANGEMENT. Individual arrangements
that were entered into with certain executives upon initial employment with the
Company, specifically excluding, however, any Change-in-Control Severance
Arrangement entered into with DTE Energy Company and any offer of employment
letter agreement as they may be amended from time to time. The arrangements may
provide for additional benefits upon retirement.
KEY EMPLOYE DEFERRED COMPENSATION PLAN. The Key Employe Deferred
Compensation Plan initiated in 1964 which provides a supplemental pension
benefit to certain management employees. The Key Employe Deferred
Compensation Plan is sponsored by Detroit Edison for eligible employees.
CERTAIN MANAGEMENT OR HIGHLY-COMPENSATED EMPLOYEES. An employee of a
Company, other than The Detroit Edison Company, who is specifically designated
by written order of the Committee as a member of management eligible to
participate in the Plan, and who is a member of a select group of management or
highly-compensated employees of the Company within the meaning of ERISA Section
201(2). An employee's designation as a Certain Management or Highly Compensated
Employee shall terminate, however, on the date the Committee by written order
terminates such employee's designation for participation in the Plan.
NORMAL PAY. The employee's salary from the Company for a standard
forty-hour work week calculated without regard to any limitation imposed by
Section 401(a)(17) of the Internal Revenue Code including amounts deferred by
the employee under the Company's qualified and non-qualified savings plans. It
does not include any bonuses, special pay, or premium for overtime work.
RETIREMENT PLAN. The Employes' Retirement Plan of The Detroit Edison
Company ("Detroit Edison"). The Retirement Plan is a defined benefit pension
plan sponsored by Detroit Edison for eligible employees.
RETIREMENT ALLOWANCE FACTOR. The multiplier used in the basic formula
of the Retirement Plan.
ELIGIBILITY
Eligibility to participate in this Plan is determined no later than the
latest to occur of:
(1) 90 days from the date hereof; or
(2) 90 days subsequent to an otherwise eligible participant's 55th
birthday; or
2
<PAGE> 3
(3) In the case of an otherwise eligible participant who does not
have at least 10 years of Company service at age 55, 90 days
subsequent to the otherwise eligible participant's having 10
years of Company service.
Participation in the Plan is limited to those management employees who
(1) Are members of Management Council (pursuant to OR3, Management
Groups, as may be amended from time to time) at the time of
termination from the Company (or death while actively employed
by the Company), or, with respect to management employees of a
Company other than The Detroit Edison Company, are Certain
Management or Highly Compensated Employees at the time of
termination from the Company (or death while actively employed
by the Company); and
(2) Are not personally eligible to receive a benefit from the Key
Employe Deferred Compensation (KEDC) Plan although a court of
competent jurisdiction may have recognized spousal rights; and
(3) Do not have an effective Executive Post-Employment Income
Arrangement; and
(4) At the time of termination from the Company (or death while
actively employed), are at least 55 years of age and have at
least 10 years of Company service.
Employees who are eligible to receive a benefit from KEDC or who have
entered into Post-Employment Income Arrangements with the Company may elect to
participate in this Plan in accordance with the first paragraph of this section
by filing an election to waive any rights to a benefit from KEDC and/or any
rights under a Post-Employment Income Arrangement with the Vice President-Human
Resources, who will provide an election form upon request, or, in the case of
KEDC, will in certain circumstances be deemed to have made such elections as
provided in KEDC.
TARGET PERCENTAGE OF AVERAGE FINAL COMPENSATION
Payments from the Plan are based upon the calculated target percentage
of average final compensation. The target percentage of average final
compensation is determined by years of Company service and awarded service, if
any, and by the management group in which the participant is a member at the
time of termination from the Company (or death while actively employed by the
Company) as specified in Exhibit A.
Participants awarded service under the Plan must certify any retirement
income expected or being received from a previous employer. Payments from the
Plan to participants with awarded service will be reduced by the
non-contributory portion of any retirement income expected or being received
from a previous employer.
3
<PAGE> 4
Payments from the Plan will be reduced by any KEDC spousal payments
required by a court of competent jurisdiction. Payments from the Plan may also
be affected by the employee's age at termination (see Early Retirement) and the
payment option selected by the employee (see Payment Options).
Payments from the Plan are not payable until the participant terminates
employment with the Company and all Controlled Group Members (by death or
otherwise), and references in the following provisions of the Plan to
"terminating employment" or "employment termination" or similar provisions shall
mean termination of employment with the Company and all Controlled Group
Members.
EARLY RETIREMENT
The Plan provides for an unreduced target percentage for those
terminating employment at age 60 or older. A reduced or adjusted target
percentage is provided for those terminating employment (including death)
who are at least age 55 but prior to age 60. The early retirement adjustment
schedule is as follows:
AGE AT EARLY RETIREMENT
TERMINATION ADJUSTMENT PERCENTAGE
55 60%
56 68%
57 76%
58 84%
59 92%
60 or older 100%
Age at termination is calculated to the nearest whole month and the
early retirement adjustment percentage is determined accordingly.
PAYMENT OPTIONS
At the time of employment termination, an eligible employee must elect
one of the following payment options: (a) Guaranteed Term Plus Life, (b)
Actuarial-Adjusted Life with a 100% Joint and Survivor Benefit and (c)
Actuarial-Adjusted Life with a 50% Joint and Survivor Benefit. In the event that
an employee dies during active employment, and at the time of death was eligible
for a benefit as provided herein, the payment option is deemed to be Guaranteed
Term Plus Life.
GUARANTEED TERM PLUS LIFE
If the employee elects the Guaranteed Term Plus Life payment option,
the employee, at the time of employment termination, must also elect a survivor
benefit of either monthly payments or an adjusted lump sum payment. In the event
that such an election is not made by the employee,
4
<PAGE> 5
or in the event that the employee dies during active employment and at the
time of death was eligible for a Plan benefit as provided herein, the survivor
benefit is assumed to be the adjusted lump sum payment.
The Guaranteed Term Plus Life payment option provides for a minimum of
15 years of payments to the employee or, if the employee lives beyond the
15-year period, the payments continue to be made to the employee for the life of
the employee.
If the employee elects the monthly payment survivor benefit and dies
prior to the end of the 15-year period, payments will continue to be made to the
employee's beneficiary or estate for the balance of the 15-year period. At the
end of this 15-year period, all payments cease and liability of the Company
under the Plan is terminated.
If the employee elects the lump sum payment survivor benefit and dies
prior to the end of the 15-year period, an adjusted lump sum payment is made to
the employee's designated beneficiary or estate. The adjusted lump sum payment
is determined by a standard annuity calculation where the adjusted lump sum is
the present worth of the remaining monthly benefits in the 15-year period. The
methodology and other relevant factors for determining the amount of the
adjusted lump sum payment are provided in Exhibit B. Upon payment of the lump
sum payment, all payments cease and liability of the Company under the Plan is
terminated.
ACTUARIAL-ADJUSTED LIFE WITH A 100% JOINT AND SURVIVOR BENEFIT
This option provides for the actuarial equivalent to the benefit
payment under the Guaranteed Term Plus Life option. Upon the death of the
employee and the designated beneficiary, all payments cease and the liability of
the Company under the Plan is terminated. The actuarial equivalent benefit is
provided for the life of the employee and upon the death of the employee, 100%
of the benefit is provided to the employee's designated beneficiary for the
duration of the beneficiary's life. If the employee's designated beneficiary
should die prior to the employee, payments continue from the life of the
employee and upon the death of the employee all payments cease and liability of
the Company under the Plan is terminated. If the employee and designated
beneficiary are the same age, the actuarial equivalent benefit equals 97.94% of
the Guaranteed Term Plus Life benefit.
If the beneficiary is younger than the employee, this percentage is
reduced by 1.2% for each 12 full months of difference in age. If the beneficiary
is older than the employee, this percentage is increased 1.2% for each 12 full
months in difference in age up to a maximum of 100%.
ACTUARIAL-ADJUSTED LIFE WITH A 50% JOINT AND SURVIVOR BENEFIT
This option provides for the actuarial equivalent to the benefit
payable under the Guaranteed Term Plus Life option. Upon the death of the
employee and the designated beneficiary, all payments cease and the liability of
the Company under the Plan is terminated. The actuarial equivalent benefit is
provided for the life of the employee and upon the death of the
5
<PAGE> 6
employee, 50% of the benefit is provided to the employee's designated
beneficiary for the duration of the beneficiary's life. If the employee's
designated beneficiary should die prior to the employee, payments continue for
the life of the employee and upon the death of the employee all payments cease
and liability of the Company under the Plan is terminated. If the employee and
designated beneficiary are the same age, the actuarial equivalent benefit equals
107.72% of the Guaranteed Term Plus Life benefit. If the beneficiary is younger
than the employee, this percentage is reduced by 1% for each 12 full months of
difference in age. If the beneficiary is older than the employee, there is no
adjustment to the percentage. If the employee does not designate a beneficiary,
the actuarial equivalent benefit equals 107.72% of the Guaranteed Term Plus Life
benefit, and upon the death of the employee all payments cease and the liability
of the Company under the Plan is terminated.
PAYMENT CALCULATION
Monthly payments from the Plan are determined as follows:
STEP 1. DETERMINE GROSS TARGET AMOUNT
The gross target amount results from multiplying the target percentage
by Average Final Compensation as defined in this Plan (see Exhibit A to
determine the target percentage).
STEP 2. DETERMINE RETIREMENT PLAN BENEFIT
The Retirement Plan benefit results from multiplying the retirement
allowance factor by average final compensation as defined under the
Retirement Plan, calculated for purposes hereof, without regard to any
limitations imposed by Section 401(a)(17) or Section 415 of the
Internal Revenue Code, by Company service and, if applicable, by the
early retirement adjustment percentage required under the Retirement
Plan.
STEP 3. DETERMINE BASE ANNUAL TARGET BENEFIT AMOUNT
The base annual target benefit amount results from subtracting the
Retirement Plan benefit that would be payable at retirement (without
regard to whether the employee elects to defer receipt of the benefit)
from the gross target amount.
STEP 4. DETERMINE ADJUSTED ANNUAL TARGET BENEFIT AMOUNT
The adjusted annual target benefit amount results from multiplying the
base annual target benefit amount by the early retirement adjustment
percentage (see page 5 to determine the early retirement adjustment
percentage).
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<PAGE> 7
STEP 5. DETERMINE MONTHLY TARGET BENEFIT AMOUNT UNDER THE
GUARANTEED TERM PLUS LIFE PAYMENT OPTION
The monthly target benefit amount under the Guaranteed Term Plus Life
payment option is determined by dividing the adjusted annual target
benefit amount by 12.
STEP 6. ACTUARIAL-ADJUSTED PAYMENT OPTION
If an actuarial-adjusted payment option is selected, the actuarial
adjustment is applied to the monthly target benefit amount under the
Guaranteed Term Plus Life payment option.
STEP 7. ADJUSTMENT TO PAYMENT OPTION
If an employee is not immediately eligible for a benefit under the
Retirement Plan, the gross target amount will not be adjusted in Step 3
above. In those cases, the payment option determined in Step 6 above
will be adjusted by the actuarial adjusted Retirement Plan benefit when
it is paid to the employee.
The payment determined in Step 6 above for employees with awarded
service will be reduced by the non-contributory portion of any
retirement income from a previous employer when it is paid to the
employee.
Exhibit C displays examples of the Plan payment calculation procedure.
In the event an employee receives an assessment of income taxes from
the Internal Revenue Service which treats any amount under this Plan as
includible in such employee's gross income prior to payment of such amount to
such employee, the Company shall pay an amount equal to such income taxes to
such employee within 30 days after receipt of written notice from such employee
about such assessment. The base annual target benefit amount (Step 3) shall be
reduced by an amount equal to such income taxes and Steps 4, 5 and 6 shall be
reduced accordingly.
Each payment under this Plan shall be reduced by any federal, state or
local taxes which The Detroit Edison Company determines should be withheld from
such payment.
SCHEDULE OF PAYMENTS
Plan payments, if any, are made to the employee or to the designated
beneficiary on a monthly basis. The schedule will follow the provisions for
payment under the Retirement Plan. The accompanying examples show the effect of
Retirement Plan benefits at different times.
7
<PAGE> 8
BENEFICIARY DESIGNATION
Each eligible participant may name any beneficiary to whom payments
under the Plan are to be paid in case of the employee's death. Each designation
will revoke all prior designations by the employee and shall be on a form
prescribed by The Detroit Edison Company and will be effective only when filed
by the employee with the Treasurer. In the absence of any such designation,
payments due shall be paid to the employee's estate.
TAXATION
The Company makes no representation as to the tax consequences of
individual payment options. Plan participants are urged to consult tax advisors
of their choice for information and advice.
NON-SECURED PROMISE; AMENDMENTS
Eligible participants have the status of general unsecured creditors of
the Company. This Plan constitutes a promise by the Company to make benefit
payments in the future. The Company intends that this Plan be unfunded for tax
purposes and for purposes of Title I of ERISA. The Company intends that this
Plan be maintained primarily for a select group of management or highly
compensated employees.
Payments as they become due under the Plan to or in respect of a
Company's former employees shall be paid by such Company from its general
assets; provided, however, that no provision of the Plan shall preclude a
Company from segregating assets which are intended to be a source for payment of
benefits under the Plan.
The Detroit Edison Company reserves the right to amend, modify, or
discontinue this Plan at any time; provided, however, that no such amendment,
modification, or termination shall adversely affect the rights of participants
or beneficiaries who are receiving or are immediately eligible to receive
benefits from this Plan at the time of such amendment, modification, or
termination, without such person's prior written consent.
Any Controlled Group Member which has adopted the Plan may as to itself
withdraw from the Plan at any time by action of the Chairman of its board of
directors. In the event of dissolution, merger, consolidation or reorganization
of a Company, the Plan shall terminate as to such Company unless the Plan is
continued by a successor thereto (subject to the consent of the Chairman of the
Board of Directors).
Notwithstanding the foregoing provisions of this section, no amendment,
modification, termination or withdrawal may be made after the occurrence of a
Change in Control, as defined in Addendum I, that shall adversely affect the
rights of any person who is receiving or upon termination would thereupon be
entitled to receive benefits under the Plan, without such person's prior written
consent.
8
<PAGE> 9
ADMINISTRATION; ARBITRATION
The Vice President-Human Resources is responsible for the
administration of the Plan. The Vice President-Human Resources has the authority
to interpret the provisions of the Plan and prescribe any regulations relating
to its administration. The decisions of the Vice President-Human Resources with
respect thereto made prior to the occurrence of a Change in Control shall be
conclusive. The Vice President-Human Resources shall review the Plan from time
to time and as part of such review is hereby directed and authorized to amend
such Plan to the extent necessary for ease of administration and/or to comply
with applicable federal and state laws.
The Treasurer of the Company shall be responsible for the
administration of benefits under the Plan.
Notwithstanding any provision in this Plan to the contrary, in the
event of any dispute, claim or controversy (hereinafter referred to as a
"Grievance") between an employee who is eligible to receive benefits under this
Plan and the Company with respect to the payment of benefits to such employee
under this Plan, the computation of benefits under this Plan, or any of the
terms or conditions of this Plan, such Grievance shall be resolved by
arbitration. Arbitration shall be the sole exclusive remedy to redress any
Grievance. The arbitration decision shall be final and binding, and a judgment
on the arbitration award may be entered in any court of competent jurisdiction
and enforcement may be had according to its terms. The arbitration shall be
conducted by American Arbitration Association in accordance with the Commercial
Arbitration Rules of the American Arbitration Association and expenses of the
arbitrator(s) and the American Arbitration Association shall be borne by the
Company. Neither the Company nor such employee shall be entitled to attorneys'
fees, expert witness fees, or other expenses expended in the course of such
arbitration or the enforcement of any award rendered thereunder. The place of
the arbitration shall be the offices of the American Arbitration Association in
the Detroit Metropolitan area, Michigan. The arbitrator(s) shall not have the
jurisdiction or authority to change any of the provisions of this Plan by
alteration of, addition to, or subtraction from the terms thereof. The
arbitrator(s)' sole authority shall be to apply any terms and conditions of this
Plan. Since arbitration is the exclusive remedy with respect to any Grievance,
no employee eligible to receive benefits under this Plan has the right to resort
to any federal court, state court, local court, or administrative agency
concerning breaches of any terms and provisions hereunder, and the decision of
the arbitrator(s) shall be a complete defense to any suit, action, or proceeding
instituted in any federal court, state court, local court, or administrative
agency by such employee or the Company with respect to any Grievance which is
arbitrable as herein set forth. The arbitration provisions shall, with respect
to any Grievance, survive the termination of this Plan.
NON-ALIENABILITY AND NON-TRANSFERABILITY
The right of a participant, participant's spouse or beneficiary to
payment of any benefit hereunder shall not be alienated, assigned, transferred,
pledged or encumbered and shall not be subject to execution, attachment or
similar process. No account shall be subject in any manner to alienation, sale,
transfer, assignment, pledge, encumbrance, charge, garnishment, execution or
9
<PAGE> 10
levy of any kind, whether voluntary or involuntary, including but not limited to
any liability which is for alimony or other payments for the support of a spouse
or former spouse, or for any other relative of any employee. Any attempted
assignment, pledge, levy or similar process shall be null and void and without
effect.
CHANGE-IN-CONTROL BENEFIT FOR CERTAIN PERSONS
Notwithstanding the foregoing provisions of the Plan, a participant or
other employee of a Company who has entered into a Change-in-Control Severance
Agreement with DTE Energy Company ("Change-in-Control Severance Agreement")
shall receive a benefit as provided in Addendum I to the Plan upon termination
of employment in certain circumstances following a Change in Control, as defined
in Addendum I. In addition, any participant or beneficiary receiving a benefit
under the Plan at the time of the occurrence of a Change in Control, as defined
in Addendum I, shall receive payment as provided in Addendum I. If a benefit is
payable to a participant or other employee or any beneficiary pursuant to
Addendum I, neither the participant nor such employee, or any beneficiary
thereof, shall be entitled to any payments or further payments, as the case may
be, under the foregoing provisions of the Plan.
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<PAGE> 11
EXHIBIT A
TARGET PERCENTAGE
<TABLE>
<CAPTION>
TARGET PERCENTAGE
MANAGEMENT OF AVERAGE FINAL SERVICE
GROUP COMPENSATION INDEX
----- ------------ -----
<S> <C> <C>
1. Chairman of the Board 60% 25
President
Executive Vice President
Participants who are Certain Management
or Highly Compensated Employees designated
as being in Group 1 by the Committee
2. Senior Vice President 60% 30
Vice President
Participants who are Certain Management
or Highly Compensated Employees designated
as being in Group 2 by the Committee
3. Management Council members 55% 35
other than those included
in Groups 1 and 2 above and
Participants who are Certain
Management or Highly Compensated
Employees, other than those included
in Groups 1 and 2 above, designated by
the Committee as eligible to participate in the
Plan
</TABLE>
If the sum of Company service and awarded service is greater than the
corresponding service index, the target percentage is increased by 0.5% for each
year of service above the index. If the sum of Company service and awarded
service is less than the corresponding service index, the target percentage is
reduced by 1% for each year of service below the index for employees in Groups 1
and 2 and by 1.5% for each year of service below the index for employees in
Group 3.
Company service is calculated to the nearest whole month. Awarded
service is determined by the sole discretion of the Committee. The target
percentage is adjusted accordingly if the service index results in fractional
years.
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<PAGE> 12
EXHIBIT B
Table for Determining the Adjusted Lump Sum Payment Under the
Guaranteed Term Plus Life Payment Option (Per $1,000 of Adjusted Annual Target
Benefit Amount)
Remaining
Years Of
Guaranteed
Term
Payment
Interest Rate
<TABLE>
<CAPTION>
6% 7% 8% 9% 10% 11% 12%
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
15 $9,875 $9,271 $8,720 $8,216 $7,755 $7,332 $6,943
14 9,456 8,909 8,406 7,945 7,520 7,128 6,767
13 9,012 8,520 8,067 7,648 7,260 6,901 6,569
12 8,540 8,103 7,699 7,323 6,973 6,648 6,345
11 8,038 7,656 7,300 6,967 6,656 6,365 6,093
10 7,506 7,177 6,868 6,578 6,306 6,050 5,808
9 6,941 6,663 6,401 6,153 5,919 5,698 5,488
8 6,341 6,112 5,895 5,688 5,492 5,305 5,127
7 5,704 5,521 5,347 5,179 5,020 4,867 4,721
6 5,028 4,888 4,753 4,623 4,498 4,378 4,263
5 4,310 4,208 4,110 4,014 3,922 3,833 3,746
4 3,548 3,480 3,413 3,349 3,286 3,224 3,164
3 2,739 2,699 2,659 2,621 2,583 2,545 2,509
2 1,880 1,861 1,843 1,824 1,806 1,788 1,770
1 968 963 958 953 948 943 938
0 0 0 0 0 0 0 0
</TABLE>
NOTES:
(1) Interest rate is determined by the current prime interest
rate of the NBD Bank less 2%.
(2) Apply linear interpolation for partial years remaining in
guaranteed term period and adjustments for fractional interest
rates.
(3) Exhibit B shows the information to perform a standard annuity
due calculation. It is the present worth of a stream of
monthly payments of $1,000/12 per month made at the end of the
month and continuing for the number of months remaining.
12
<PAGE> 13
EXHIBIT B (CONTINUED)
The formula is:
-n
Adjusted Lump Sum = Pmt x (1 -(1 + i) )/i
Where i is the NBD Bank Prime rate less 2% divided by 12 and n is the
number of months remaining. Pmt is $1,000/12 or $83.33.
13
<PAGE> 14
EXHIBIT C
EXAMPLE 1
Assumptions:
Date of Termination: January 31, 1998
Age at Termination: 65 Years, 0 Months
Position: Vice President
MSBP Average Final Compensation: $216,000
Retirement Plan Average Final Compensation: $180,000
Company Service: 25 Years, 0 Months
Retirement Allowance Factor: .014
Payment Option: Guaranteed Term Plus Life
(Survivor benefit - monthly
payments)
(Given the above, the target percentage is 55%)
Step 1: 55% x $216,000 = $118,800
Step 2: .014 x $180,000 x 25 = $63,000
Step 3: $118,800 - $63,000 = $55,800
Step 4: $55,800 x 100% = $55,800
Step 5: $55,800/12 = $4,650
Monthly payments of $4,650 will be made for 15 years, or for the life
of the employee if greater than 15 years.
EXAMPLE 1A
Assumptions listed for Example 1 apply with the exception of the
following:
Payment Option: Guaranteed Term Plus Life
(Survivor benefit - lump sum payment)
NBD Bank 9%
Prime Interest Rate:
Date of Employee's Death: January 31, 2003
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<PAGE> 15
EXHIBIT C (CONTINUED)
Monthly payments of $4,650 are made for the life of the employee (see
Example 1). Upon the death of the employee (January 31, 2003), a lump
sum payment of $400,476.60 is made to the beneficiary (see Exhibit B).
EXAMPLE 2
Assumptions:
Date of Termination: January 31, 1998
Age at Termination: 58 Years, 6 Months
Position: Vice President
MSBP Average Final Compensation: $216,000
Retirement Plan Average Final Compensation: $180,000
Company Service: 25 Years, 6 Months
Retirement Allowance Factor: .014
Payment Option: Guaranteed Term Plus Life
(Survivor benefit-monthly
payments)
(Given the above, the target percentage is 55.5%)
Step 1: .555 x $216,000 = $119,880
Step 2: .014 x $180,000 x 25.5 x .91 = $58,477
Step 3: $119,880 - $58,477 = $61,403
Step 4: $61,403 x .88 = $54,035
Step 5: $54,035/12 = $4,503
Monthly payments of $4,503 will be made for 15 years, or for the life
of the employee if greater than 15 years.
15
<PAGE> 16
EXHIBIT C (CONTINUED)
EXAMPLE 2A
Assumptions listed for Example 2 apply with the exception of the
following:
Payment Option: Actuarial-Adjusted Life with a
100% Joint and Survivor Benefit
Employee/Beneficiary Beneficiary is two years younger
Age Difference: than the employee
Step 1 - Step 5: Same as Example 2. The monthly
benefit under the Guaranteed
Term Plus Life option is $4,503
Step 6: $4,503 x .9554 = $4,302
Monthly payments of $4,302 are made for the life of the employee. Upon
the death of the employee, monthly payments of $4,302 are made for the
life of the designated beneficiary. Upon the death of the designated
beneficiary, all payments cease.
EXAMPLE 2B
Assumptions listed for Example 2A apply with the exception of the
following:
Payment Option: Actuarial-Adjusted Life with a 50%
Joint and Survivor Benefit
Step 1 - Step 5: Same as Example 2. The monthly
benefit under the Guaranteed
Term Plus Life option is $4,503
Step 6: $4,503 x 1.0572 = $4,760
Monthly payments of $4,760 are made for the life of the employee. Upon
the death of the employee, monthly payments of $2,380($4,760 x 50%) are
made for the life of the designated beneficiary. Upon the death of the
designated beneficiary, all payments cease.
16
<PAGE> 17
EXHIBIT C (CONTINUED)
EXAMPLE 3
Assumptions:
Date of Termination: January 31, 1998
Age at Termination: 60 Years, 0 Months
Position: Vice President
MSBP Average Final Compensation: $216,000
Retirement Plan Average Final Compensation: $180,000
Company Service: 14 Years, 0 Months
Awarded Service: 10 Years, 0 Months
Retirement Allowance Factor: .014
Employee/Beneficiary Age Difference: Beneficiary is two years younger
than the employee
Payment Option: Actuarial-Adjusted Life with a
100% Joint and Survivor Benefit
Monthly Pension from Previous Employer
at age 65: $2,000
(Given the above, the target percentage is 54%)
Step 1: 54% x $216,000 = $116,640
Step 2: $0 (Employee is ineligible for an immediate benefit
under the Retirement Plan)
Step 3: $116,640 - $0 = $116,640
Step 4: $116,640 x 100% = $116,640
Step 5: $116,640/12 = $9,720
Step 6: $9,720 x .9554 = $9,286
Monthly payments of $9,286 will be made until a benefit is payable (age
65 in Example 3) under the Retirement Plan and from the previous
employer. At that time the benefit payable under the MSBP will be offset
by an amount equivalent to the benefit paid under the Retirement Plan
(Step 7-Option II assumed) and the benefit paid by the previous employer
17
<PAGE> 18
EXHIBIT C (CONTINUED)
Step 7: Monthly Retirement Plan Benefit:
.014 x $180,000 x 14 x .88 = $31,046/12 = $2,587
Reductions to MSBP Benefit:
Retirement Plan $9,286 - $2,587 = $6,699
Previous Employer $6,699 - $2,000 = $4,699
Monthly payments of $4,699 are made for the life of the employee. Upon
the death of the employee, monthly payments of $4,699 are made for the
life of the designated beneficiary. Upon the death of the designated
beneficiary, all payments cease.
18
<PAGE> 19
ADDENDUM I
CHANGE-IN-CONTROL BENEFITS
A change in control ("Change in Control") for purposes of the
Plan and this Addendum I shall have occurred if at any time on or after October
1, 1997 any of the following events shall occur:
(1) DTE Energy Company ("DTE") is merged, consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 55% of the combined voting power of
the then-outstanding securities of such corporation or person
immediately after such transaction is held in the aggregate by
the holders of the then-outstanding securities entitled to
vote generally in the election of directors (the "Voting
Stock") of DTE immediately prior to such transaction;
(2) DTE sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and
as a result of such sale or transfer, less 55% of the combined
voting power of the then-outstanding Voting Stock of such
corporation or person immediately after such sale or transfer
is held in the aggregate (directly or through ownership of
Voting Stock of DTE or a Subsidiary (as hereinafter defined))
by the holders of Voting Stock of DTE immediately prior to
such sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated
pursuant to the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the term
"beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding Voting Stock of DTE;
(4) DTE files a report or proxy statement with the Securities and
Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in
control of DTE will occur in the future pursuant to a
then-existing contract or transaction which when consummated
would be a Change in Control determined without regard to this
paragraph 4;
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<PAGE> 20
(5) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of DTE cease for any reason to constitute at least a
majority thereof; provided, however, that for purposes of this
paragraph (5) each director who is first elected, or first
nominated for election, by DTE's stockholders, by a vote of at
least two-thirds of the directors of DTE (or a committee
thereof) then still in office who were directors of DTE at the
beginning of any such period will be deemed to have been a
director of DTE at the beginning of such period; or
(6) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3) or
(4) above, unless otherwise determined in a specific case by
majority vote of the Board of Directors of DTE, a "Change in
Control" shall not be deemed to have occurred for purposes of
paragraph (3) or (4) solely because (i) DTE, (ii) an entity in
which DTE directly or indirectly beneficially owns 50% or more
of the outstanding Voting Stock (a "Subsidiary"), or (iii) any
DTE-sponsored employee stock ownership plan or any other
employee benefit plan of DTE or any Subsidiary either files or
becomes obligated to file a report or a proxy statement under
or in response to Schedule 13D, Schedule 14D-1, Form 8-K or
Schedule 14A (or any successor schedule, form or report or
item therein) under the Exchange Act disclosing beneficial
ownership by it of shares of Voting Stock, whether in excess
of 20% or otherwise or because DTE reports that a Change in
Control of DTE has occurred or will occur in the future by
reason of such beneficial ownership.
In the event a Change in Control (as determined without regard
to paragraph (4) above) occurs, any participant or former employee, or
beneficiary thereof, who as of the date of the occurrence of the Change in
Control is receiving benefits under the Plan shall be paid in cash in a lump sum
an amount equal to the actuarial equivalent present value of the remaining
benefits, determined as of the date of payment, that are payable to or in
respect of such person under the Plan (including survivor benefits, if
applicable).
In the event a Change in Control occurs, any participant or
employee of a Company who has entered into a Change-in-Control Severance
Agreement and whose employment is terminated after the occurrence of the Change
in Control in circumstances entitling the individual to severance compensation
under Section 4 of the Change-in-Control Severance Agreement shall be entitled
to a cash lump sum payment under the Plan if (i) the participant or employee is
at least age 47 and 7 months (after the application of the additional age credit
as provided in paragraph (2) below) and (ii) the participant or employee
otherwise meets the requirements for participation in the Plan set forth under
"Eligibility" (except that the participant or employee need not be at least age
55 and have at least 10 years of Company service and for purposes of clause (1)
under the second paragraph under "Eligibility" the participant or employee
20
<PAGE> 21
need only have been a member of Management Council or, if applicable, be a
Certain Management or Highly Compensated Employee immediately prior to the
occurrence of the Change in Control or at any time thereafter). The amount of
such payment shall be equal to the actuarial equivalent present value of the
benefit, if any, that would otherwise be payable to the participant or employee
under the Plan under the Guaranteed Term Plus Life payment option determined as
otherwise provided in the Plan but with the following modifications:
(1) Awarded service and the management group in which the
participant or employee is a member shall be
determined immediately prior to the time of
termination, or the time of the occurrence of the
Change in Control, if greater.
(2) The Plan benefit shall be determined by assuming the
participant has two additional years each of age and
Company service for purposes of the Plan, as provided
in Section 4(a)(ii) of the Change-in-Control
Severance Agreement.
(3) If the participant or employee is not eligible for
immediate payment of a benefit under the Retirement
Plan, the Plan benefit to which the participant or
employee is entitled shall be determined without
regard to Step 2 under "Payment Calculation", but
instead the lump sum payable under this Addendum I
shall be reduced by the actuarial equivalent of the
Retirement Plan benefit as provided in paragraph (6)
below.
(4) If the participant or employee is under age 55 (after
the application of paragraph (2) above), the
applicable early retirement adjustment percentage
shall be determined as follows:
AGE AT EARLY RETIREMENT
TERMINATION ADJUSTMENT PERCENTAGE
55 60%
54 52%
53 44%
52 36%
51 28%
50 20%
49 12%
48 4%
47.5 0%
(5) If the participant or employee has received awarded
service under the Plan, the lump sum payable shall be
reduced by the actuarial
21
<PAGE> 22
equivalent of the non-contributory portion of the
retirement income expected or being received from the
participant's or employee's previous employer.
(6) If a participant or employee is not eligible for
immediate payment of a benefit under the Retirement
Plan, the lump sum payable shall be reduced by the
actuarial equivalent of the benefit to which the
employee is entitled at age 65 under the Retirement
Plan as determined without regard to any limitation
imposed by Section 401(a)(17) or Section 415 of the
Internal Revenue Code.
Upon the foregoing payment, no further benefits shall be
payable under the Plan to such participant or employee or beneficiary thereof.
Payments under this Addendum I shall be made within 30 days after the date on
which the Change in Control occurs or, if later, the date the participant or
employee terminates employment.
For purposes of this Addendum I, the interest/discount rate
and mortality table used to determine actuarial equivalence shall be as follows:
(1) Interest/discount Rate - an annual rate equal to the
Fed's Fund Rate (as of the first business day of the
calendar month in which the Change in Control or
termination, if later, occurs) plus 1%, but in no
event shall the interest/discount rate exceed 8% or
be less than 5%.
(2) Mortality Table - the unisex version of the mortality
table used for funding purposes of the most recent
actuarial valuation for the Plan issued prior to the
date of the Change in Control as defined in the DTE
Change-in-Control Severance Agreements.
22
<PAGE> 1
EXHIBIT 10.15
SHAREHOLDER VALUE IMPROVEMENT PLAN-A
AS AMENDED AND RESTATED EFFECTIVE OCTOBER 27, 1997
OVERVIEW
The Shareholder Value Improvement Plan - A (Plan) is designed to
encourage continued improvement in performance and operating results. The
Plan's ultimate objective is to increase shareholder value. It provides a
method for senior levels of management to share in the added value that they
create by contributing to corporate performance improvement.
The Plan provides for possible financial awards to eligible members of
senior management if specified annual corporate and organizational unit goals
are achieved and is intended to motivate senior levels of management toward
taking actions that have long-term performance outcomes which improve
shareholder value. For Plan years 1991, 1992 and 1993, a portion of approved
awards was deferred for a specified period of time. Commencing with the 1996
Plan Year, recipients of Plan awards will be permitted, under specified
conditions, to defer the payment of awards.
The Plan measures calendar year performance. The current year's
standards and requirements will be communicated annually.
ADMINISTRATION
The Organization and Compensation Committee (Committee) of the Board
of Directors is Plan Administrator with responsibility for the administration
of the Plan. The Committee has the authority to interpret the provisions of the
Plan and prescribe any regulations relating to its administration. The
decisions of the Committee with respect to the administration of the Plan made
prior to the occurrence of a Change in Control, as defined herein, shall be
conclusive.
The Committee, on an annual basis, will review and if appropriate,
recommend to the Board of Directors for approval, the specific criteria for
eligibility, the type and timing of awards and the manner of payment of awards
(current and/or deferred), the performance measures and related weights to be
used in computing award amounts for Plan Years 1991, 1992, 1993 and 1994 and
the Performance Fund for Plan year 1995 and thereafter and the performance
levels for each performance measure. The Board of Directors reserves the right
to amend, suspend or terminate the Plan at any time (See "Awards"); provided,
however, that on or after the occurrence of a Change in Control, as defined
herein, no amendment, suspension or termination of the Plan may be made that
adversely affects the rights of any person without his or her prior written
consent.
Current awards calculated under the terms of the Plan are not payable
until such time as the Board's approval has been granted; provided, however,
that notwithstanding the foregoing or any other provision of the Plan, after a
Change in Control, as defined herein, such approval is not required with
respect to awards thereafter payable in respect of any Plan year ending prior
to the occurrence of the Change in Control. The Board of Directors reserves the
right to reduce or cancel any awards that might otherwise be made if in its
sole discretion it determines that the performance achieved is not indicative
of an improvement in shareholder value. If such a determination is made, the
Plan may be canceled or substantially modified with the result of terminating
or decreasing any awards that might otherwise be made hereunder.
Notwithstanding the foregoing or any other provision of the Plan, no award in
respect of a Plan year ending prior to the occurrence of a Change in Control,
as defined
<PAGE> 2
herein, may be reduced or cancelled, nor may the Plan be so cancelled or
substantially modified, following the occurrence of a Change in Control.
The Treasurer will be responsible for making award payments, for
establishing and maintaining the equity and deferred accounts for award
recipients, and for maintaining all necessary records regarding the valuation
and payment of awards.
The Vice President-Human Resources will assist the Committee in the
development, administration and communication of the Plan.
ELIGIBILITY
Only those individuals that hold and actively perform (where "hold and
actively perform" excludes all temporary assignments, all step-up assignments
and lengthy periods of absences) in positions of Vice President or above who
receive at least a "satisfactory" or "solid" performance appraisal for the
applicable calendar year will be eligible to participate in the Plan. The Board
of Directors may at any time specify additional positions that may be eligible
to participate in the Plan.
Any person who is elected to an eligible position in The Detroit
Edison Company will become eligible to participate in the Plan provided,
however, that any such participant must hold, and actively perform in, one or
more eligible positions for a total of at least seven months during a Plan year
to receive any award under the Plan. Employees are not eligible to participate
in the Plan if they are eligible to participate in any other Company incentive
program (other than the Long Term Incentive Plan submitted to Common
Shareholders for approval in April 1995 and the Executive Incentive Plan).
Exceptions to the eligibility criteria may be authorized by the Board
of Directors.
Participation in the Plan does not guarantee continued employment with
the Company.
AWARD OPPORTUNITY
For Plan years 1991, 1992, 1993 and 1994, awards were calculated as a
percent of pay based on the achievement of specific performance measures. Each
performance measure was assigned performance levels and weights. The amount of
an award was dependent upon the achieved level of performance, the associated
weight and the applicable award opportunity percentage.
For Plan years 1991, 1992, 1993 and 1994, the award opportunity
percentage that applied to participants was determined by the eligible position
that each applicable participant held and actively performed for at least seven
months during the calendar year (Plan year). If during a calendar year
participants held and actively performed in different eligible positions for a
total of at least seven months, their award was calculated at the award level
for the lowest eligible position they held provided that they did not hold and
actively perform in a single eligible position for at least seven months, in
which event the eligible position held for seven months was used for purposes
of the Plan.
Effective with the 1995 Plan year, awards, if any, will be payable
from a fund ("Performance Fund") established by multiplying the base salary
(including applicable amounts deferred under Company-sponsored benefit plans)
of otherwise eligible members of senior management by a percent based upon the
achievement of specific performance measures. (For purposes of the Performance
Fund, base salary is defined as being the sum of the base salary of all
otherwise eligible members of senior management who performed in one or more
senior management positions for a total of at least seven months during the
applicable calendar year which is also a Plan year.)
2
<PAGE> 3
PERFORMANCE MEASURES, LEVELS AND WEIGHTS
The measures of performance and weight applicable to each Plan year
will be communicated annually to all eligible employees.
AWARDS
Award amounts for 1991, 1992, 1993 and 1994 were calculated with
reference to the base salary paid during the applicable calendar year including
certain amounts deferred under Company-sponsored benefit plans. Effective with
the 1995 Plan year, award amounts will be payable from the Performance Fund and
will be granted, in the sole discretion of the Board of Directors, to otherwise
eligible members of senior management, in such amounts, if any, as are
determined to be appropriate by the Board of Directors.
For Plan years 1991, 1992, 1993 and 1994, if an otherwise eligible
participant met the eligibility criteria but terminated employment and the
termination was due to disability (where disability is defined as being
eligible to receive a benefit under the Company's Long Term Disability Plan) or
retirement (where retirement is defined as a resignation at age 55 or older and
with at least 10 years of Company service or at age 65 or older) or died, such
otherwise eligible participant remained eligible for a prorated award for the
applicable Plan year.
Awards under the Plan are not considered compensation for purposes of
the Company's qualified and non-qualified savings plans, the Company's
qualified and non-qualified retirement plans, insurance or any other
Company-sponsored qualified or non-qualified employee benefit programs.
See "Forfeiture" herein.
AWARD CALCULATION
For Plan years 1991, 1992, 1993 and 1994, award amounts were
calculated by multiplying a participant's base salary (as defined previously in
"Awards") by the award percentage approved by the Board of Directors. Effective
with the 1995 Plan year, awards, if any, will be payable from the Performance
Fund in such amounts as deemed appropriate by the Board of Directors.
AWARD PAYMENT
For Plan years 1991, 1992 and 1993, fifty percent (50%) of annual
awards were paid as soon as practicable following approval by the Board of
Directors. Effective with the 1994 Plan year, annual awards, if any, will be
paid as soon as practicable following approval by the Board of Directors unless
deferred as permitted herein.
Effective with the 1996 Plan year, members of senior management will
be permitted to defer the payment of 50% to 100% of an approved award that is
payable prior to the occurrence of a Change in Control, as defined herein, for
a period of from one to five years ("Deferred Awards"). A Deferred Award
Account will be established for each award recipient with a timely Deferral
Notice on file with the Company. Deferrals must be irrevocably submitted prior
to the commencement of the Plan year during which the services giving rise to
the award will be performed on a form ("Deferral Notice") to be furnished by
the Company. For example, a Deferral Notice for an award to be based on 1996
performance must be filed with the Company by the end of 1995. Once filed with
the Company, the Deferral Notice may not be changed or revoked.
3
<PAGE> 4
For Plan years 1991, 1992 and 1993, fifty percent (50%) of the annual
awards were converted to equity units and deferred for a three-year period.
This deferred portion of the approved award was deemed to be invested, prior to
January 1, 1996, in Company Common Stock, and, effective January 1, 1996, in
the common stock of DTE Energy Company (the common stock of the Company and of
DTE Energy Company, as applicable, are referred to herein as "Common Stock"),
by converting the award into equity units equal in value to the average of the
high and low sales prices of Detroit Edison Common Stock as listed in the Wall
Street Journal for the New York Stock Exchange Composite Tape, on the last
business day on which such stock was traded in the Plan year to which the award
related. Equity units were credited to each participant's unfunded equity
account as described in the section entitled "Equity Units".
See "Forfeiture" herein.
EQUITY UNITS
For Plan years 1991, 1992 and 1993, unfunded equity accounts were
created for each participant and fifty percent (50%) of the approved award was
converted into equity units. Subsequently, as dividends were and are paid on
Common Stock, a dividend was and will be deemed to be paid on each equity unit
in an amount equal to the dividend which is declared and paid on the Common
Stock. Deemed dividends have been and will be converted to equity units equal
in value to the average of the high and low sales prices of the Common Stock as
listed in the Wall Street Journal for the New York Stock Exchange Composite
Tape on the dividend payment date, or if such day was not or is not a business
day, on the business day immediately preceding the dividend date. Equity units
created as a result of deemed dividends have been and will be credited to each
participant's unfunded equity account as of the dividend payment date, or if
such day was or is not a business day, on the business day immediately
preceding the dividend date.
The value of equity units is subject to appreciation and depreciation
depending upon the trading price of the Common Stock as listed in the Wall
Street Journal for the New York Stock Exchange Composite tape.
DEFERRED AWARD ACCOUNTS
Effective for Plan Year 1996 and thereafter, Deferred Award Accounts
will be established for each recipient with a timely Deferral Notice on file as
soon as practicable following Board approval of an award. Amounts in Deferred
Award Accounts will be deemed to earn interest at a rate calculated on the last
business day of each month with reference to the Five-Year United States
Treasury Bond rate, as reported in a nationally-recognized financial service.
Deferred Awards, including deemed earnings thereon, will be payable as
soon as practicable in the calendar year selected by an award recipient in the
Deferral Notice. In the event that a participant with a Deferred Account dies,
retires or terminates employment with the Company and its Affiliates prior to
the time established for payment in the Deferral Notice, such participant's
Deferred Account, plus earnings thereon, shall be paid to such participant or
participant's designated beneficiary as soon as possible thereafter. For
purposes of the Plan, the term "Affiliate" shall mean any parent of the Company
or any entity in which the Company or any parent of the Company directly or
indirectly beneficially owns more than 50% of the voting securities.
4
<PAGE> 5
EQUITY ACCOUNT PAYMENTS
The value of the equity units established for Plan Years 1991, 1992
and 1993 will be paid to the eligible participant in a lump sum cash payment
after the end of the third year following the year to which the award relates
provided the participant is actively employed by the Company or an Affiliate at
the end of the third year (December 31) of the three-year award deferral
period. (For example, the value of an equity account that is based on the 1992
Plan year is payable as soon as practicable during 1996.) In the event that the
participant terminates employment prior to the end of the third year following
the year to which the award relates, and the termination is due to disability
(where disability is defined as being eligible to receive a benefit under a
long-term disability plan of the Company or an Affiliate) or retirement (where
retirement is defined as a resignation at age 55 or older and with at least 10
years of service with the Company and its Affiliates or at age 65 or older),
the total value of any or all unfunded equity accounts will be converted to
cash and paid as soon as practicable in a lump sum cash payment to the
participant. In the event that the participant dies, the total value of all
unfunded equity account balances will be paid as soon as practicable in a lump
sum cash payment.
The value of the unfunded equity account will be determined by
multiplying the number of equity units in the account by the average of the
high and low sales prices of Common Stock, as listed in the Wall Street Journal
for the New York Stock Exchange Composite Tape, on (1) the day the three-year
period ends; (2) the day the employee terminates employment due to disability
(last day of employment); (3) the day the employee dies (official date of
death); or (4) the day the employee retires (last day of employment), as
applicable. If the day the three-year period ends or the last day of employment
or date of death is not a business day, the deferred award will be valued on
the preceding business day. If the date of a participant's termination of
employment due to disability or retirement as defined herein or death or the
day after such three-year period ends falls within the record date and the
associated dividend payment date for the Common Stock, then such dividend will
be deemed to be paid on the equity units in the participant's unfunded account.
The value of such deemed dividend will be paid in cash.
FORFEITURE
Eligible participants who are discharged or resign from the Company
and its Affiliates (except for terminations due to disability or retirement as
defined herein or death) prior to the end of the third year following the year
to which an award required to be deferred by the Company relates will forfeit
the value of the equity units.
Unless the termination is the result of disability, death or by normal
or early retirement as defined herein, a participant will forfeit an annual
award, including any portion required to be deferred by the Company, if the
participant is not actively employed by the Company or an Affiliate at the end
of the Plan year (December 31).
Deferred Accounts are not subject to forfeiture.
FUNDING STATUS
Benefits under the Plan including any equity accounts and Deferred
Accounts are payable solely from the general assets of the Company and shall
remain unfunded and unsecured (under federal income tax laws and Title I of the
Employee Retirement Income Security Act of 1974, as amended) during the entire
period of the Plan's existence. The participant, the participant's spouse or
beneficiary are merely general creditors of the Company and the obligations of
the Company hereunder are purely contractual and shall not be funded or secured
in any way. If and to the extent the Company chooses
5
<PAGE> 6
to actually invest in any Common Stock, assets acquired by the Company shall
remain the sole property of the Company, subject to the claims of its general
creditors, and shall not be deemed to form part of the participant's unfunded
equity account. Nothing herein, however, shall preclude the Company from
segregating assets which are intended to be a source of payment of benefits
under the Plan.
NON-ALIENABILITY AND NON-TRANSFERABILITY
The right of a participant, participant's spouse or beneficiary to
payment of any benefit or deferred compensation hereunder shall not be
alienated, assigned, transferred, pledged or encumbered and shall not be
subject to execution, attachment or similar process. No participant may borrow
against the unfunded equity or deferred account established for his or her
benefit hereunder. No account shall be subject in any manner to alienation,
sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution
or levy of any kind, whether voluntary or involuntary, including but not
limited to any liability which is for alimony or other payments for the support
of a spouse or former spouse, or for any other relative of any employee. Any
attempted assignment, pledge, levy or similar process shall be null and void
and without effect.
BENEFICIARY DESIGNATION
Each eligible participant may name any beneficiary to whom awards
under the Plan are to be paid in case of the eligible participant's death
before he/she receives an award hereunder. Each designation will revoke all
prior designations by the eligible participant and shall be on a form
prescribed by the Plan Administrator and will be effective only when filed by
the eligible participant with the Treasurer. In the absence of any such
designation, awards due shall be paid to the participant's (1) life insurance
beneficiary designated by the participant with respect to life insurance
maintained by the Company for the benefit of the participant, or, in the
absence of a designated life insurance beneficiary, (2) to the participant's
estate.
CHANGE IN CONTROL
A change in control ("Change in Control") for purposes of the Plan shall have
occurred if at any time on or after October 1, 1997 any of the following events
shall occur:
(1) DTE Energy Company ("DTE") is merged, consolidated or
reorganized into or with another corporation or other legal
person, and as a result of such merger, consolidation or
reorganization less than 55% of the combined voting power of
the then-outstanding securities of such corporation or person
immediately after such transaction is held in the aggregate
by the holders of the then-outstanding securities entitled to
vote generally in the election of directors (the "Voting
Stock") of DTE immediately prior to such transaction;
(2) DTE sells or otherwise transfers all or substantially all of
its assets to another corporation or other legal person, and
as a result of such sale or transfer, less 55% of the
combined voting power of the then-outstanding Voting Stock of
such corporation or person immediately after such sale or
transfer is held in the aggregate (directly or through
ownership of Voting Stock of DTE or a Subsidiary (as
hereinafter defined)) by the holders of Voting Stock of DTE
immediately prior to such sale or transfer;
(3) There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor
6
<PAGE> 7
schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), disclosing that any person (as the term
"person" is used in Section 13(d)(3) or Section 14(d)(2) of
the Exchange Act) has become the beneficial owner (as the
term "beneficial owner" is defined under Rule 13d-3 or any
successor rule or regulation promulgated under the Exchange
Act) of securities representing 20% or more of the combined
voting power of the then-outstanding Voting Stock of DTE;
(4) If, during any period of two consecutive years, individuals
who at the beginning of any such period constitute the
directors of DTE cease for any reason to constitute at least
a majority thereof; provided, however, that for purposes of
this paragraph (4) each director who is first elected, or
first nominated for election, by DTE's stockholders, by a
vote of at least two-thirds of the directors of DTE (or a
committee thereof) then still in office who were directors of
DTE at the beginning of any such period will be deemed to
have been a director of DTE at the beginning of such period;
or
(5) The approval of the shareholders of DTE of a complete
liquidation or dissolution of DTE.
Notwithstanding the foregoing provisions of paragraph (3)
above, unless otherwise determined in a specific case by
majority vote of the Board of Directors of DTE, a "Change in
Control" shall not be deemed to have occurred for purposes of
paragraph (3) solely because (i) DTE, (ii) an entity in which
DTE directly or indirectly beneficially owns 50% or more of
the outstanding Voting Stock (a "Subsidiary"), or (iii) any
DTE-sponsored employee stock ownership plan or any other
employee benefit plan of DTE or any Subsidiary either files
or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report or item therein) under
the Exchange Act disclosing beneficial ownership by it of
shares of Voting Stock, whether in excess of 20% or
otherwise.
In the event a Change in Control occurs during a Plan year, then,
notwithstanding anything to the contrary in the foregoing provisions of the
Plan, including but not limited to the Section entitled "Administration", no
payments of Awards shall be made under the foregoing provisions of the Plan for
such Plan year, but instead,
(a) each Vice President and above at The Detroit Edison Company
during the Plan year employed by the Company or an Affiliate
immediately prior to the date on which the Change in Control
occurs,
(b) and each Vice President and above at The Detroit Edison
Company who had terminated employment with the Company and
its Affiliates during the Plan year by reason of retirement
or disability (as such terms are defined above under
"Awards") or death prior to the occurrence of the Change in
Control but after having held and actively performed in one
or more such positions for a total of at least seven months
during the Plan year,
shall have a right (or, in the case of the person's death, his or her
beneficiary shall have the right) to an immediate cash payment of an amount
determined by multiplying (i) the individual's actual base salary
7
<PAGE> 8
(including applicable amounts deferred under Company-sponsored benefit plans)
earned during the Plan year while a Vice President and above at The Detroit
Edison Company prior to the occurrence of the Change in Control or earlier
termination by retirement, disability or death, by (ii) the individual's
applicable target percent of salary by position for the Plan year based on the
assumption that established performance targets were met. Such payments shall
be made within 30 days after the date on which the Change in Control occurs
without the necessity of approval of the Board of Directors.
8
<PAGE> 1
EXHIBIT 10.16
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TRUST AGREEMENT
FOR
DTE ENERGY COMPANY
CHANGE-IN-CONTROL SEVERANCE AGREEMENTS
Between
DTE Energy Company
and
Wachovia Bank, N.A.
-------------------
October 1, 1997
-------------------
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
(Not a part of the Agreement)
Page
I. TRUST FUND...........................................................2
II. PAYMENTS TO TRUST BENEFICIARIES.....................................10
III. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO A TRUST
BENEFICIARY WHEN THE COMPANY IS INSOLVENT ...11
IV. PAYMENTS TO COMPANY.................................................13
V. INVESTMENT OF TRUST FUND............................................15
VI. INCOME OF THE TRUST.................................................16
VII. ACCOUNTING BY TRUSTEE...............................................16
VIII. RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE.......................18
IX. AMENDMENTS, ETC., TO PLANS AND EXHIBITS.............................23
X. REPLACEMENT OF TRUSTEE..............................................26
XI. AMENDMENT OR TERMINATION OF AGREEMENT...............................28
XII. SPECIAL DISTRIBUTIONS...............................................29
XIII. GENERAL PROVISIONS..................................................31
XIV. NOTICES.............................................................34
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<PAGE> 3
TABLE OF DEFINITIONS
(Not a part of the Agreement)
Section
"Accounting Firm" 4.2
"Agreement" Introduction
"Board" 1.7
"CEO" 3.1
"Change in Control" 1.7
"Code" 1.6
"Company" Introduction
"ERISA" 1.6
"Exchange Act" 1.4(d)
"Executives" 4.3
"Fully Funded" 4.2
"Insolvent" Recitals
"Participants" Recitals
"Plan(s)" Recitals
"Potential Change in Control" 1.4(d)
"Subsidiary" 1.7
"Successor" 9.2.1
"Supplemental Benefits" Recitals
"Trust Beneficiaries" Recitals
"Trust" Recitals
"Trustee" Introduction
"Voting Stock" 1.7.1
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<PAGE> 4
TRUST AGREEMENT
FOR
DTE ENERGY COMPANY
CHANGE-IN-CONTROL SEVERANCE AGREEMENTS
This trust agreement ("Agreement") made as of the 1st day of October
1997 by and between DTE Energy Company, a Michigan corporation (the "Company"),
and Wachovia Bank, N.A., a national banking association (the "Trustee").
WITNESSETH:
WHEREAS, the employees of the Company or of a Subsidiary (as that term
is defined in Section 1.7) listed on Exhibit A hereto (the "Participants") and
their beneficiaries may become entitled to benefits under the provisions of one
or more of the individual agreements listed on Exhibit B hereto (individually a
"Plan" and collectively the "Plans"), as the same have been or may hereafter be
amended or restated, or any successor thereto, copies of which are appended
hereto;
WHEREAS, the Plans provide for certain severance and/or other benefits,
and the Company wishes specifically to assure the payment to the Participants
and their beneficiaries (the Participants and their respective beneficiaries
being collectively referred to herein as the "Trust Beneficiaries") of amounts
due thereunder (other than for payment or reimbursement of legal fees and
expenses as provided in Section 7 of a Plan, or any successor provision
thereto), (the amounts so payable being collectively referred to herein as the
"Supplemental Benefits");
WHEREAS, the Company wishes to establish a trust (the "Trust") and to
transfer to the Trust assets which shall be held therein subject to the claims
of the creditors of the Company to
<PAGE> 5
the extent set forth in Article III hereof until (i) paid in full to all Trust
Beneficiaries as Supplemental Benefits in such manner and as specified herein
unless the Company is Insolvent (as that term is defined herein) at the time
that such Supplemental Benefits become payable or (ii) otherwise disposed of
pursuant to the terms of this Agreement; and
WHEREAS, the Company shall be considered "Insolvent" for purposes of
this Agreement at such time as the Company (i) is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code, as heretofore or
hereafter amended, or (ii) is unable to pay its debts as they become due;
NOW, THEREFORE, the parties do hereby establish the Trust and agree
that the Trust shall be comprised, held and disposed of as follows:
I. TRUST FUND
I.1 Subject to the claims of creditors to the extent set forth in
Article III hereof, the Company hereby deposits with the Trustee in trust Five
Thousand Dollars ($5,000), which shall become the principal of this Trust, to be
held, administered and disposed of by the Trustee as herein provided.
I.2 The Trust hereby established shall be revocable by the Company at
any time prior to the date on which the first of the following occurs: a Change
in Control (as that term is defined in Section 1.7) or a Potential Change in
Control (as that term is defined in Section 1.4(d)); on or after such date, this
Trust shall be irrevocable. In the event that a Change in Control or a Potential
Change in Control has occurred, the Treasurer of the
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<PAGE> 6
Company or the Corporate Secretary of the Company shall so notify the Trustee
promptly. The Trustee shall be entitled to rely upon such notice or upon a
notice from the Executives (as that term is defined in Section 4.3) as to
whether and when a Change in Control or a Potential Change in Control has
occurred and shall not be required to make any independent verification of the
occurrence of a Change in Control or a Potential Change in Control.
I.3 The principal of the Trust and any earnings thereon shall be held
in trust separate and apart from other funds of the Company and shall be used
exclusively for the uses and purposes herein set forth. No Trust Beneficiary
shall have any preferred claim on, or any beneficial ownership interest in, any
assets of the Trust prior to the time that such assets are paid to a Trust
Beneficiary as Supplemental Benefits as provided herein. Any rights created
under the Plans and this Agreement shall be mere unsecured contractual rights of
Trust Beneficiaries with respect to the Company. The obligation of the Trustee
to pay Supplemental Benefits pursuant to this Agreement constitutes merely an
unfunded and unsecured promise to pay such Supplemental Benefits.
I.4 (a) The Company may at any time or from time to time make
additional deposits of cash or other property in the Trust or make provision for
cash or other property to be transferred to the Trust to augment the principal
to be held, administered and disposed of by the Trustee as herein provided, but
no payment of all or any portion of the principal of the Trust or earnings
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<PAGE> 7
thereon shall be made to the Company or any other person or entity on behalf of
the Company except as herein expressly provided.
(b) Within 30 days following the occurrence of a Potential
Change in Control (as that term is defined in this Section 1.4), the Company
shall make a contribution to the Trust that is sufficient, taking into account
the assets of the Trust prior to such contribution, to provide for the payment
of all Supplemental Benefits and any other amounts that could become payable or
reimbursable pursuant to the terms of this Agreement including, without
limitation, the fees of the Trustee for a period of at least five years.
(c) Within 90 days after the end of any calendar year ending
after the Trust has become irrevocable, the Company shall make a contribution to
the Trust that is sufficient, taking into account the assets of the Trust prior
to such contribution, to provide for the payment of all Supplemental Benefits
and any other amounts that could become payable or reimbursable pursuant to the
terms of this Agreement.
(d) A "Potential Change in Control" means the occurrence of
any of the following events:
(i) The Company enters into a letter of intent,
agreement in principle or other agreement, the consummation of which
would constitute a Change in Control (as that term is defined in
Section 1.7);
(ii) Any person (including the Company) makes a public
announcement (including, without limitation, an
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<PAGE> 8
announcement made by filing a Schedule 13D or Schedule 14D-1 (or any
successor schedule, form or report), each as promulgated pursuant to
the Securities Exchange Act 1934 (the "Exchange Act")) stating a
present intention to take actions that, if consummated, would
constitute a Change in Control; or
(iii) Any person (other than the Company or Subsidiary
or any Company-sponsored or Subsidiary-sponsored employee stock
ownership plan or any other employee benefit plan of the Company or any
Subsidiary) is or becomes the beneficial owner (other than
inadvertently within the meaning of the following sentence), directly
or indirectly, of securities of the Company representing 10% or more of
the combined voting power of the Voting Stock (as that term is defined
in Section 1.7.1) of the Company. A person shall be considered to have
become a beneficial owner inadvertently for purposes of the preceding
sentence if the Board (as that term is defined in Section 1.7)
determines in good faith that the person became such inadvertently, and
such person divests as promptly as practicable a sufficient number of
shares of Voting Stock of the Company so that such person would no
longer is the beneficial owner, directly or indirectly, of securities
of the Company representing 10% or more of the combined voting power of
Voting Stock of the Company.
(e) In the event the Company fails to pay over to the
Trustee within seven days of notice and demand from the Trustee
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<PAGE> 9
any amount Determined to be payable by the Company to the Trustee under Section
1.4(b) or 1.4(c), Section 8.7 or any other provision of the Trust, the Trustee
may commence legal action 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 two
percentage points in excess of the prime lending rate as announced by the
Trustee's banking department from the due date specified in the Trustee's
notice and demand to the date of payment, plus all costs of collection
including reasonable attorneys' fees and expenses of litigation.
I.5 Not later than the date on which the Trust has become irrevocable,
the Company shall (a) specify the nature, amounts and timing of the Supplemental
Benefits to which each Trust Beneficiary may become entitled, subject to Article
IX hereof, in an exhibit ("Exhibit C") which shall become a part of this
Agreement and be incorporated herein by this reference, (b) provide any
corresponding revisions to Exhibits A and B that may be required and (c) provide
the Trustee with copies of the Plans and any amendments thereto.
I.6 The Trust is intended to be a grantor trust, within the meaning of
section 671 of the Internal Revenue Code of 1986, as amended (the "Code"), or
any successor provision thereto, and shall be construed accordingly. The purpose
of the Trust is to
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<PAGE> 10
assure that the Company's obligations to the Participants pursuant to the Plans
are fulfilled. The Trust is neither intended nor designed to qualify under
section 401(a) of the Code or to be subject to the provisions of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"). The Trust
established under this Agreement does not fund and is not intended to fund the
Plans or any other employee benefit plan or program of the Company. Such Trust
is and is intended to be a depository arrangement with the Trustee for the
setting aside of cash and other assets of the Company for the meeting of part or
all of its future obligations with respect to Supplemental Benefits to some or
all of the Trust Beneficiaries under the Plans.
I.7 As used in this Agreement, the term "Change in Control" shall mean
the occurrence of any of the following events:
I.7.1 The Company is merged, consolidated or reorganized into or
with another corporation or other legal person, and as a result of such
merger, consolidation or reorganization less than 55% of the combined
voting power of the then-outstanding Voting Stock (the term "Voting
Stock" for purposes of this Agreement meaning securities entitled to
vote generally in the election of directors) of such corporation or
person immediately after such transaction are held in the aggregate by
the holders of Voting Stock of the Company immediately prior to such
transaction;
I.7.2 The Company sells or otherwise transfers all
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<PAGE> 11
or substantially all of its assets to another corporation or other
legal person, and as a result of such sale or transfer less than 55% of
the combined voting power of the then-outstanding Voting Stock of such
corporation or person immediately after such sale or transfer is held
in the aggregate (directly or through ownership of Voting Stock of the
Company or a Subsidiary) by the holders of Voting Stock of the Company
immediately prior to such sale or transfer;
I.7.3 There is a report filed on Schedule 13D or Schedule 14D-1 (or
any successor schedule, form or report), each as promulgated pursuant
to the Exchange Act, disclosing that any person (as the term "person"
is used in Section 13(d)(3) or Section 14(d)(2) of the Exchange Act)
has become the beneficial owner (as the term "beneficial owner" is
defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of securities representing 20% or
more of the combined voting power of the then-outstanding Voting Stock
of the Company;
I.7.4 The Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act
disclosing in response to Form 8-K or Schedule 14A (or any successor
schedule, form or report or item therein) that a change in control of
the Company will occur in the future pursuant to a then-existing
contract or transaction which when consummated would be a Change in
Control determined without regard to this Section 1.7.4;
I.7.5 If, during any period of two consecutive
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<PAGE> 12
years, individuals who at the beginning of any such period constitute
the Directors of the Company cease for any reason to constitute at
least a majority thereof; provided, however, that for purposes of this
Section 1.7.5 each Director who is first elected, or first nominated
for election by the Company's stockholders, by a vote of at least
two-thirds of the Directors of the Company (or a committee thereof)
then still in office who were Directors of the Company at the beginning
of any such period will be deemed to have been a Director of the
Company at the beginning of such period; or
I.7.6 The approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
Notwithstanding the foregoing provisions of Section 1.7.3 or 1.7.4, unless
otherwise determined in a specific case by majority vote of the Board of
Directors of the Company (the "Board"), a "Change in Control" shall not be
deemed to have occurred for purposes of Section 1.7.3 or 1.7.4 solely because
(A) the Company, (B) an entity in which the Company directly or indirectly
beneficially owns 50% or more of the outstanding Voting Stock (a "Subsidiary"),
or (C) any Company-sponsored employee stock ownership plan or any other employee
benefit plan of the Company or any Subsidiary either files or becomes obligated
to file a report or a proxy statement under or in response to Schedule 13D,
Schedule 14D-1, Form 8-K or Schedule 14A (or any successor schedule, form or
report or item therein)
-9-
<PAGE> 13
under the Exchange Act disclosing beneficial ownership by it of shares of Voting
Stock, whether in excess of 20% or otherwise, or because the Company reports
that a Change in Control of the Company has occurred or will occur in the future
by reason of such beneficial ownership.
II. PAYMENTS TO TRUST BENEFICIARIES
II.1 Provided that the Company is not Insolvent and commencing with the
earlier to occur of (a) appropriate notice to the Trustee by the Company, or (b)
the date on which the Trustee has been notified in accordance with Section 1.2
that a Change in Control has occurred, the Trustee shall make payments of
Supplemental Benefits to each Trust Beneficiary from the assets of the Trust in
compliance and conformity with the terms of the Plans and in accordance with
Exhibit C, and subject to Article IX.
II.2 The Trustee shall continue to pay Supplemental Benefits to the
Trust Beneficiaries until the assets of the Trust are depleted, subject to
Section 11.2 hereof. If any current payment by the Trustee under the terms of
this Agreement would deplete the assets of the Trust below the amount necessary
to provide adequately for Supplemental Benefits known to the Trustee to be due
and payable thereafter, the Trustee shall nevertheless make the current payment
when due.
II.3 The Company may make payments of Supplemental Benefits to each
Trust Beneficiary. The Company shall notify the Trustee of its decision to pay
Supplemental Benefits directly at least 15 days prior to the time amounts are
due to be paid to a Trust
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<PAGE> 14
Beneficiary.
II.4 Nothing in this Agreement shall in any way diminish any rights of
any Trust Beneficiary to pursue such Trust Beneficiary's rights as a general
creditor of the Company with respect to Supplemental Benefits or otherwise, and
the rights of each Trust Beneficiary under the respective Plan shall in no way
be affected or diminished by any provision of this Agreement or action taken
pursuant to this Agreement, except that any payment actually received by any
Trust Beneficiary hereunder shall reduce dollar-per-dollar amounts otherwise due
to such Trust Beneficiary pursuant to such Plan.
III. THE TRUSTEE'S RESPONSIBILITY REGARDING PAYMENTS TO
A TRUST BENEFICIARY WHEN THE COMPANY IS INSOLVENT
III.1 At all times during the continuance of this Trust, the principal
and income of the Trust shall be subject to claims of creditors of the Company
as set forth in this Section 3.1. The Board and the Chief Executive Officer of
the Company (the "CEO") shall have the duty to inform the Trustee in writing if
either the Board or the CEO believes that the Company is Insolvent. If the
Trustee receives a notice in writing from the Board or the CEO stating that the
Company is Insolvent or if a person claiming to be a creditor of the Company
alleges in writing to the Trustee that the Company has become Insolvent, the
Trustee shall independently determine within 30 days after receipt of such
notice whether the Company is Insolvent. Pending such determination, or if the
Trustee has actual knowledge or has determined that the Company is Insolvent,
the Trustee shall discontinue or refrain from making payments to any Trust
-11-
<PAGE> 15
Beneficiary and hold the Trust assets for the benefit of the general creditors
of the Company. The Trustee shall pay any undistributed principal and income in
the Trust to the extent necessary to satisfy the claims of the creditors of the
Company as a court of competent jurisdiction may direct. If the Trustee has
discontinued or refrained from making payments to any Trust Beneficiary pursuant
to this Section 3.1, the Trustee shall pay or resume payments to such Trust
Beneficiary in accordance with this Agreement if the Trustee has determined that
the Company is not Insolvent, or is no longer Insolvent (if the Trustee
initially determined the Company to be Insolvent), or pursuant to the order of a
court of competent jurisdiction. The Trustee shall have no duty to inquire as to
whether the Company is Insolvent and may rely on information concerning the
Insolvency of the Company that has been furnished to the Trustee by any creditor
of the Company or by any person (other than an employee or director of the
Company) acting with apparent or actual authority with respect to the Company.
III.2 If the Trustee is precluded from paying Supplemental Benefits
from the Trust assets pursuant to Section 3.1 hereof and such prohibition is
subsequently removed, the Trustee shall pay the aggregate amount of all
Supplemental Benefits that would have been paid to the Trust Beneficiaries in
accordance with this Agreement during the period of such prohibition, less the
aggregate amount of Supplemental Benefits paid to any Trust Beneficiary directly
by the Company during any such period, together with interest on the net amount
delayed determined at a
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<PAGE> 16
rate equal to the rate actually earned (including, without limitation, market
appreciation or depreciation, plus receipt of interest and dividends) during
such period with respect to the assets of the Trust corresponding to such net
amount delayed.
IV. PAYMENTS TO COMPANY
IV.1 Except to the extent expressly contemplated by Section 1.2 hereof,
this Article IV and Section 11.3, the Company shall have no right or power to
direct the Trustee to return any of the Trust assets to the Company before all
payments of Supplemental Benefits have been made to all Trust Beneficiaries as
herein provided. Upon the written request of the Company made prior to the date
on which the Trust becomes irrevocable, the Trustee shall return to the Company
any Trust assets in excess of Five Thousand Dollars ($5,000) as may be specified
in such request by the Company.
IV.2 From time to time, but in no event before the second anniversary
of the date on which the Trust has become irrevocable, if and when requested by
the Company to do so, the Trustee shall engage the services of nationally
recognized independent accounting or consulting firm as may be mutually
satisfactory to the Company and to the Trustee (the "Accounting Firm") to
determine for purposes of this Section 4.2 the maximum present values of the
future Supplemental Benefits that could become payable under the Plans with
respect to the Trust Beneficiaries. The Trustee shall determine the fair market
value of the Trust assets. The Company shall pay the fees of the Accounting Firm
and of any appraiser engaged by the Trustee to
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<PAGE> 17
value any property held in the Trust. The Accounting Firm shall make its
calculations based upon the assumptions set forth in Exhibit D hereto, or such
other assumptions as are recommended by the Accounting Firm and approved by the
Company and, if the Trust is irrevocable, by the Trustee. Thereafter, upon the
request of the Company, the Trustee shall pay to the Company the excess, if any,
of the balance in the Trust over 125% of the sum of (i) the aggregate of all of
the Fully Funded amounts and (ii) any other amounts, as determined by the
Trustee, that could become payable or reimbursable pursuant to the terms of this
Agreement including, without limitation, the fees of the Trustee. For purposes
of this Agreement the "Fully Funded" amount with respect to Participant shall be
equal to the maximum present value of the future Supplemental Benefits that
could become payable under the respective Plan with respect to the Trust
Beneficiaries of such Participant.
IV.3 For purposes of this Agreement, the term "Executives" shall refer
to the three Participants who, in the sole judgment of the Trustee, have the
greatest aggregate Fully Funded amounts and who have accepted such designation
in writing. The determination of which Participants should be the Executives
shall be made within 30 days after (and as of) each of the date on which the
Trust has become irrevocable and the first day of January of each year
thereafter; provided, however, that an acceptance is not required from a
Participant who is already serving as an Executive. The Trustee shall notify
each Participant who, as a result of such determination, is no longer
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<PAGE> 18
an Executive. A Participant may resign as an Executive after providing not less
than 30 days' notice in writing to the other Executives and to the Trustee;
provided, however, that no such resignation shall become effective until the
successor Executive has accepted such designation in writing. In the event of
the resignation, death or incapacity of an Executive, the Trustee shall
designate a successor Executive, which shall be the Participant (other than an
Executive or a Participant who has declined to accept a designation as an
Executive) who has the greatest aggregate Fully Funded amount and who accepts
such designation in writing. Except as otherwise expressly provided herein, the
Executives shall be considered to have "agreed" or "consented" to, or "approved"
or "requested", a proposed action or decision under the terms of this Agreement
when two or more of the Executives so indicate in writing to the Trustee.
V. INVESTMENT OF TRUST FUND
V.1 Prior to the date on which the Trust becomes irrevocable, the
Trustee shall invest and reinvest the assets of the Trust as the Company or its
designee shall prescribe in writing from time to time.
V.2 On or after the date on which the Trust becomes irrevocable, or in
the absence of the instructions from the Company specified in Section 5.1, the
provisions of this Section 5.2 shall apply to the investment of the Trust
assets. The investment objective of the Trustee shall be to preserve the
principal of the Trust while obtaining a reasonable total rate of return,
measurement of which shall include, without limitation,
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<PAGE> 19
market appreciation or depreciation plus receipt of interest and dividends. The
Trustee shall be mindful, in the course of its management of the Trust, of the
liquidity demands on the Trust.
V.3 The Trustee shall have the sole power to invest the assets of the
Trust, in accordance with the provisions of Sections 5.1 and 5.2. The Trustee
shall not be liable for any failure to maximize income on such portion of the
Trust assets as may be from time to time invested or reinvested as set forth
above, nor for any loss of principal or income due to the liquidation of any
investment that the Trustee, in its sole discretion, believes necessary to make
payments or to reimburse expenses under the terms of this Agreement. The Trustee
shall have the right to invest assets of the Trust for short-term investment
periods, pending distribution or long-term investment of such assets, as the
Trustee may deem proper and suitable in non-interest bearing deposit accounts
(including any such accounts offered or maintained by the Trustee or any
successor or affiliated corporation). Nothing in this Agreement shall preclude
the commingling of Trust assets for investment.
VI. INCOME OF THE TRUST
VI.1 Except as provided in Articles III and IV, during the continuance
of this Trust, all net income of the Trust shall be retained in the Trust.
VII. ACCOUNTING BY TRUSTEE
VII.1 The Trustee shall maintain such books, records and accounts as
may be necessary for the proper administration of the Trust assets, including
such specific records as shall be agreed
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<PAGE> 20
upon in writing by the Company and the Trustee. Within 60 days following the
close of each calendar year that includes or commences after the date of this
Agreement until the termination of this Trust or the removal or resignation of
the Trustee (and within 60 days after the date of such termination, removal or
resignation), the Trustee shall render to the Company and, on or after the date
on which the Trust has become irrevocable, the Executives an accounting with
respect to the Trust assets as of the end of the then most recent calendar year
(and as of the date of such termination, removal or resignation, as the case may
be). The Trustee shall furnish to the Company on an annual basis (or as the
Company shall direct from time to time) and in a timely manner such information
regarding the Trust as the Company shall require for purposes of preparing its
statements of financial condition. Upon the written request of the Company or,
on or after the date on which the Trust has become irrevocable, an Executive,
the Trustee shall deliver to such Executive or the Company, as the case may be,
a written report setting forth the amount held in the Trust and a record of the
deposits made with respect thereto by the Company. Absent compelling
circumstances, the Trustee shall not be required to respond to more than one
such request made within any calendar year. Unless the Company or any Executive
shall have filed with the Trustee written exception or objection to the
statement and account furnished by the Trustee within 90 days after receipt
thereof, the Company and the Trust Beneficiaries shall be deemed to have
approved such statement and account, and in such case the Trustee shall be
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<PAGE> 21
forever released and discharged with respect to all matters and things reported
in such statement and account as though it had been settled by a decree of a
court of competent jurisdiction in an action or proceeding to which the Company
and the Trust Beneficiaries were parties.
VIII. RESPONSIBILITY AND INDEMNIFICATION OF TRUSTEE
VIII.1 The duties and responsibilities of the Trustee shall be limited
to those expressly set forth in this Agreement, and no implied covenants or
obligations shall be read into this Agreement against the Trustee.
VIII.2 In addition to and without limiting any other provision of this
Agreement, on or after the date on which the Trust has become irrevocable, the
Trustee shall, in its sole discretion, based upon the information furnished to
it by the Company and/or the Participants and any additional information that it
may reasonably request, (a) make all decisions regarding whether a Trust
Beneficiary is eligible for the payment of Supplemental Benefits, the nature,
amount and timing of such Supplemental Benefits, and any other decisions
pertinent to the exercise of the Trustee's duties and responsibilities under
this Agreement, and (b) exercise any power or discretion granted pursuant to the
Plans to the Board, any committee of the Board, or to any other committee,
entity or person. In connection with the exercise of such duties,
responsibilities, power and discretion, the Trustee (i) shall be entitled to
rely upon any information furnished to it in accordance with the provisions of
this Agreement, (ii) shall not be required to make any
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<PAGE> 22
independent verification of such information, and (iii) may, in its sole
discretion, waive any requirement to furnish information to it. The Company
hereby agrees that it will not contest, dispute or otherwise challenge any
decision made by the Trustee pursuant to the terms of this Agreement.
VIII.3 If all or any part of the Trust assets are at any time attached,
garnished, or levied upon by any court order, or in case the payment,
assignment, transfer, conveyance or delivery of any such property shall be
stayed or enjoined by any court order, or in case any order, judgment or decree
shall be made or entered by a court affecting such property or any part thereof,
then in any of such events the Trustee shall be authorized, in its sole
discretion, to rely upon and comply with any such order, judgment or decree, and
it shall not be liable to the Company or any Trust Beneficiary by reason of such
compliance even though such order, judgment or decree subsequently may be
reversed, modified, annulled, set aside or vacated.
VIII.4 The Trustee shall act with the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man acting in a
like capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims; provided, however, that the
Trustee shall incur no liability to anyone for any action taken pursuant to a
direction, request, or approval given by the Company or any Executive or Trust
Beneficiary contemplated by and complying with the terms of this Agreement. The
Trustee shall discharge its responsibility for the investment, management and
control of the
-19-
<PAGE> 23
Trust assets solely in the interest of the Trust Beneficiaries and for the
exclusive purpose of assuring that, to the extent of available Trust assets, and
in accordance with the terms of this Agreement, all payments of Supplemental
Benefits are made when due to the Trust Beneficiaries.
VIII.5 The Trustee may consult with legal counsel (who may be counsel
for the Company) to be selected by it, and the Trustee shall not be liable for
any action taken or suffered by it in accordance with the advice of such
counsel.
VIII.6 The Trustee shall be reimbursed by the Company for its
reasonable expenses incurred in connection with the performance of its duties
hereunder (including, but not limited to, the fees and expenses of counsel,
accountants and others incurred pursuant to Section 1.4(e), 8.5, 8.11 or 12.2)
and shall be paid reasonable fees for the performance of such duties in the
manner provided by Section 8.7.
VIII.7 The Company agrees to indemnify and hold harmless the Trustee
from and against any and all damages, losses, claims or expenses as incurred
(including expenses of investigation and fees and disbursements of counsel to
the Trustee and any taxes imposed on the Trust assets or income of the Trust)
arising out of or in connection with the performance by the Trustee of its
duties hereunder, other than such damages, losses, claims or expenses arising
out of the Trustee's gross negligence or willful misconduct. The Trustee shall
not be required to undertake or to defend any litigation arising in connection
with this Agreement unless it be first indemnified by the Company against its
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<PAGE> 24
prospective costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto, and the Company hereby agrees to
indemnify the Trustee and be primarily liable for such costs, expenses, and
liabilities. Any amount payable to the Trustee under Section 1.4(e), Section 8.6
or this Section 8.7 shall be paid by the Company promptly upon demand therefor
by the Trustee or, in the event that the Company fails to make such payment
within 30 days of such demand, from the Trust assets. In the event that payment
is made hereunder to the Trustee from the Trust assets, the Trustee shall
promptly notify the Company in writing of the amount of such payment. The
Company agrees that, upon receipt of such notice, it will deliver to the Trustee
to be held in the Trust an amount in cash equal to any payments made from the
Trust assets to the Trustee pursuant to Section 1.4(e), Section 8.6 or this
Section 8.7. The failure of the Company to transfer any such amount shall not in
any way impair the Trustee's right to indemnification, reimbursement and payment
pursuant to Section 1.4(e), Section 8.6 or this Section 8.7.
VIII.8 The Trustee may vote any stock or other securities and exercise
any right appurtenant to any stock, other securities or other property held
hereunder, either in person or by general or limited proxy, power of attorney or
other instrument.
VIII.9 The Trustee may hold securities in bearer form and may register
securities and other property held in the Trust fund in its own name or in the
name of a nominee, combine
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<PAGE> 25
certificates representing securities with certificates of the same issue held by
the Trustee in other fiduciary capacities, and deposit, or arrange for deposit
of, property with any depository; provided that the books and records of the
Trustee shall at all times show that all such securities are part of the assets
of the Trust.
VIII.10 The Trustee may and shall exercise all rights appurtenant to
any letter of credit made payable to the Trustee of the Trust for the benefit of
the Trust in accordance with the terms of such letter of credit.
VIII.11 The Trustee may hire agents, accountants, actuaries, investment
advisors, financial consultants or other professionals, who may be agents,
accountants, actuaries, investment advisors, financial consultants, or otherwise
act in a professional capacity, as the case may be, for the Company or with
respect to any Plan, to assist the Trustee in performing any of its duties
hereunder.
VIII.12 The Trustee shall have, without exclusion, all powers conferred
on trustees by applicable law unless expressly provided otherwise herein.
VIII.13 Notwithstanding any other provision of this Agreement, in the
event of the termination of the Trust, or the resignation or discharge of the
Trustee, the Trustee shall have the right to a settlement of its accounts in
accordance with the procedures set forth in Section 7.1, which may be made, at
the option of the Trustee, either (a) by a judicial settlement in a court of
competent jurisdiction, or (b) by agreement of
-22-
<PAGE> 26
settlement, release and indemnity from the Company to the Trustee.
IX. AMENDMENTS, ETC., TO PLANS AND EXHIBITS
IX.1 Prior to the date on which the Trust becomes irrevocable and
provided that Exhibit A, Exhibit B or Exhibit C, as the case may be, has
previously been furnished to the Trustee, the provisions of this Section 9.1
shall apply.
IX.1.1 The Company shall furnish the Trustee with any
amendments, restatements, or other changes in the Plans, and the
Company shall prescribe or amend, as the case may be, Exhibit B or
Exhibit C hereto to reflect any such amendment, restatement, or other
change, or any changes in the compensation of the Participants, or
otherwise.
IX.1.2 At such time as may in the judgment of the Company be
appropriate, the Company shall furnish to the Trustee any amendment to
Exhibit A and/or Exhibit B that modifies one or more lists of
Participants and any corresponding amendment to Exhibit C required as a
result of such amendment to Exhibit A and/or Exhibit B.
IX.2 On or after the date on which the Trust becomes irrevocable, the
provisions of this Section 9.2 shall apply.
IX.2.1 Not later than 45 calendar days after the end of each
calendar year and at such other times as may in the judgment of the
Company be appropriate in view of a change in circumstances, the
Company and each Participant (or the personal representative of such
Participant (including the guardian, executor or administrator of such
Participant)
-23-
<PAGE> 27
(hereafter, the "Successor" of such Participant)) shall agree upon and
furnish any amendment to Exhibit C hereto (but only with respect to
such Participant's Supplemental Benefits) as shall be required to
reflect:
(a) any required change in the amounts of Supplemental
Benefits as a result of any change in such Participant's compensation
(or otherwise) during the prior calendar year, or
(b) any amendment, restatement or other change in or to the
Plans affecting such Participant, which agreements to amendments to
such Exhibit C shall be furnished to the Trustee by the Company or the
Participants (or their Successors) and thereafter be deemed to be a
part of, and to amend to the extent thereof, this Agreement; provided,
however, that in the event of the failure of the Company and any
Participant (or Successor) to reach such agreement, the provisions of
Section 9.2.2 shall control.
IX.2.2 The Company shall, and any Trust Beneficiary may,
promptly furnish the Trustee true and correct copies of any amendment,
restatement or successor to any of the Plans. The Company shall, and
any Trust Beneficiary may, also furnish the Trustee, upon the Trustee's
request, such evidence of changes in compensation of the Participants
and such other information as the Trustee shall deem necessary for its
determinations under this Section 9.2.2. Upon written notification to
the Trustee by the Company or any Participant (or Successor) of the
failure of the Company and
-24-
<PAGE> 28
such Participant (or Successor) to agree as provided in Section 9.2.1,
the Trustee shall, to the extent necessary in the sole judgment of the
Trustee, (a) recompute the amount payable hereunder as set forth in
Exhibit C to any Trust Beneficiary, and (b) notify the Company and the
Participant (or Successor) in writing of its computations. Thereafter,
this Agreement and all Exhibits hereto shall be amended to the extent
of such Trustee determinations without further action; provided,
however, that the failure of the Company to furnish any such amendment,
restatement, successor, compensation or other information shall in no
way diminish the rights of any Trust Beneficiary hereunder or
thereunder.
IX.2.3 On or after the date on which the Trust becomes
irrevocable, any amendment to Exhibit A (and any directly corresponding
amendment to Exhibit B) that modifies one or more lists of Participants
must be (a) agreed to by the Executives, and (b) in the case of an
amendment that adds a new Participant as a Trust Beneficiary,
accompanied by the deposit into the Trust by the Company, on or before
the effective date on which the new Participant would become a Trust
Beneficiary, an amount equal to the greater of (i) an amount certified
by the Accounting Firm as sufficient to pay such new Participant's
Supplemental Benefits hereunder (with such sufficiency determined on
the same basis as that used to determine sufficiency with respect to
the Supplemental Benefits as in effect hereunder immediately prior to
the addition of such new Participant) or (ii) an
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<PAGE> 29
amount that is sufficient, taking into account the assets of the Trust
prior to such contribution, equal to the sum of (A) the amount
certified by the Accounting Firm as sufficient to provide for the
payment of all Supplemental Benefits, including such new Participant's
Supplemental Benefits, that could become payable pursuant to this
Agreement (with such sufficiency determined on the same basis as that
used to determine sufficiency with respect to the Supplemental Benefits
as in effect hereunder immediately prior to the addition of such new
Participant) and (B) any other amount, as determined by the Trustee,
that could become payable or reimbursable pursuant to the terms of this
Agreement including, without limitation, the fees of the Trustee;
provided, however, that no new Participant may be added if all of the
Participants added pursuant to this Section 9.2.3, including such new
Participant, would constitute a majority of the Participants.
IX.3 Notwithstanding the foregoing provisions of this Article IX, any
amendment, restatement, successor or other change in a Plan or the addition of a
new Plan that would materially increase the responsibilities or liabilities of
the Trustee or materially change its duties shall also require the consent of
the Trustee, which consent shall not be unreasonably withheld.
X. REPLACEMENT OF TRUSTEE
X.1 The Trustee may resign and be discharged from its duties hereunder
after providing not less than 90 days' notice in writing to the Company. On or
after the date on which the Trust
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<PAGE> 30
becomes irrevocable, the Trustee shall also provide notice of its resignation to
all of the Executives. Prior to the date on which the Trust becomes irrevocable,
the Trustee may be removed at any time upon notice in writing by the Company. On
or after such date, such removal shall also require the agreement of the
Executives. Prior to the date on which the Trust becomes irrevocable, a
replacement or successor trustee shall be appointed by the Company. On or after
such date, such appointment shall also require the agreement of the Executives.
No such removal or resignation shall become effective until the effectiveness of
the acceptance of the trust by a successor trustee designated in accordance with
this Article X. If the Trustee should resign, and within 60 days of the notice
of such resignation the Company and, if required, the Executives shall not have
notified the Trustee of an agreement as to a replacement trustee, the Trustee
shall petition a court of competent jurisdiction to appoint a successor trustee.
Upon the acceptance of the trust by a successor trustee, the Trustee shall
release all of the moneys and other property in the Trust to its successor, who
shall thereafter for all purposes of this Agreement be considered to be the
"Trustee." In the event of its removal or resignation, the Trustee shall duly
file with the Company and, after the Trust becomes irrevocable, all of the
Executives, a written statement or statements of accounts and proceedings as
provided in Section 7.1 for the period since the last previous annual
accounting of the Trust, and if written objection to such account is not filed
as provided in Section
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<PAGE> 31
7.1, the Trustee shall to the maximum 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 account.
XI. AMENDMENT OR TERMINATION OF AGREEMENT
XI.1 This Agreement may be amended at any time and to any extent by a
written instrument executed by the Trustee and the Company and, after the Trust
has become irrevocable, approved by the Executives; provided, however, that no
amendment shall have the effect of (a) making the Trust revocable after it has
become irrevocable in accordance with Section 1.2 or (b) altering Section 11.2.
Notwithstanding the previous sentence, (i) amendments contemplated by Article IX
shall be made as therein provided, and (ii) the approval by the Executives shall
not be required for any amendment necessary in order to obtain a favorable
private letter ruling (if such ruling is sought) from the Internal Revenue
Service regarding the effect of the Trust on the taxation of the Company or the
Trust Beneficiaries.
XI.2 The Trust shall terminate (a) prior to the date on which the Trust
has become irrevocable, upon the written request of the Company, and (b) on or
after such date, upon the earliest to occur of (i) a determination by the
Trustee in its sole judgment made on or after the third anniversary of the date
on which the Trust becomes irrevocable that no Trust Beneficiary is or will be
entitled to any payment or further payment of Supplemental Benefits arising out
of a Change in Control or Potential Change in Control occurring prior to such
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<PAGE> 32
determination; (ii) such time as the Trust no longer contains any assets, or
contains assets that, in the sole judgment of the Trustee, are insubstantial in
relation to the actual and potential liabilities of the Trustee to pay
Supplemental Benefits under the terms of this Agreement and any other amounts to
be paid from the assets of the Trust, including, without limitation, the fees
and expenses of the Trustee, the Accounting Firm, and counsel; or (iii) such
time as the Trustee shall have received consents from all of the Executives to
the termination of this Agreement. Notwithstanding the previous sentence (other
than clause (ii) thereof), if payments under a Plan with respect to a Trust
Beneficiary are the subject of litigation or arbitration, the Trust shall not
terminate and the funds held in the Trust with respect to such Trust Beneficiary
shall continue to be held by the Trustee until the final resolution of such
litigation or arbitration. The Trustee may assume that no Plan is the subject of
such litigation or arbitration unless the Trustee receives written notice from a
Trust Beneficiary or the Company with respect to such litigation or arbitration.
The Trustee may rely upon written notice from a Trust Beneficiary as to the
final resolution of such litigation or arbitration.
XI.3 Upon a termination of the Trust as provided in Section 11.2
hereof, any assets remaining in the Trust, less all payments, expenses, taxes
and other charges under this Agreement as of such date of termination, shall be
returned to the Company.
XII. SPECIAL DISTRIBUTIONS
XII.1 It is intended that (a) the creation of, transfer of
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<PAGE> 33
assets to, and irrevocability of, the Trust will not cause any of the Plans to
be other than "unfunded" for purposes of title I of ERISA; (b) transfers of
assets to the Trust or the Trust becoming irrevocable will not be transfers of
property for purposes of section 83 of the Code, or any successor provision
thereto, nor will such transfers or irrevocability cause a currently taxable
benefit to be realized by a Trust Beneficiary pursuant to the "economic benefit"
doctrine; and (c) pursuant to section 451 of the Code, or any successor
provision thereto, amounts will be includible as compensation in the gross
income of a Trust Beneficiary in the taxable year or years in which such amounts
are actually distributed or made available to such Trust Beneficiary by the
Trustee.
XII.2 Notwithstanding anything to the contrary contained in any Plan,
if the Trustee obtains an opinion of tax counsel selected by the Trustee to the
effect that based upon any of the following occurring after the date of this
Agreement:
(a) a change in the federal tax or revenue laws, (b) a decision
in a controlling case, (c) a published ruling or similar announcement
issued by the Internal Revenue Service, (d) a regulation issued by the
Secretary of the Treasury, (e) a decision by a court of competent
jurisdiction involving a Trust Beneficiary, or (f) a closing
agreement made under section 7121 of the Code, or any successor
provision thereto, that is approved by the Internal Revenue Service
and involves a Trust Beneficiary, it is more likely than not that an
amount is includible in the gross income of
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<PAGE> 34
a Trust Beneficiary in a taxable year that is prior to the taxable year
or years in which such amount would, but for this Section 12.2,
otherwise actually be distributed or made available to such Trust
Beneficiary by the Trustee, then the Trustee shall distribute to each
affected Trust Beneficiary an amount equal to the amount determined to
be includible in gross income in such prior taxable year. The Trustee
shall seek such an opinion of tax counsel if and only if requested to
do so by the Executives.
XII.3 Notwithstanding anything to the contrary contained in any Plan,
if a Trust Beneficiary provides evidence satisfactory to the Trustee
demonstrating that, as a result of an assertion by the Internal Revenue Service,
a final nonappealable binding determination has been made with respect to a
taxable year of such Trust Beneficiary that an amount is includible in the gross
income of such Trust Beneficiary in a taxable year that is prior to the taxable
year in which such amount would, but for this Section 12.3, otherwise actually
be distributed or made available to such Trust Beneficiary by the Trustee, then
the Trustee shall distribute to such Trust Beneficiary an amount equal to such
amount determined by the Internal Revenue Service to be includible in gross
income in such prior taxable year.
XIII. GENERAL PROVISIONS
XIII.1 The Company shall, at any time and from time to time, upon the
reasonable request of the Trustee, provide information, execute and deliver such
further instruments and do such further acts as may be necessary or proper to
effectuate the purposes of
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<PAGE> 35
this Trust.
XIII.2 Each Exhibit referred to in this Agreement shall become a part
hereof and is expressly incorporated herein by reference.
XIII.3 This Agreement sets forth the entire understanding of the
parties with respect to the subject matter hereof and supersedes any and all
prior agreements, arrangements and understandings relating thereto. This
Agreement shall be binding upon and inure to the benefit of the parties and
their respective successors and legal representatives.
XIII.4 This Agreement shall be governed by and construed in accordance
with the laws of the State of Michigan, other than and without reference to any
provisions of such laws regarding choice of laws or conflict of laws.
XIII.5 In the event that any provision of this Agreement or the
application thereof to any person or circumstances shall be determined by a
court of competent jurisdiction to be invalid or unenforceable to any extent,
the remainder of this Agreement, or the application of such provision to persons
or circumstances other than those as to which it is held invalid or
unenforceable, shall not be affected thereby, and each provision of this
Agreement shall be valid and enforced to the maximum extent permitted by law.
XIII.6 (a) The preamble to this Agreement, including the definitions
provided therein, shall be considered a part of the agreement of the parties as
if set forth in a section of this Agreement.
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<PAGE> 36
(b) The headings contained in this Agreement are solely
for the purpose of reference, are not part of the agreement of the
parties and shall not in any way affect the meaning or interpretation
of this Agreement.
XIII.7 The right of any Trust Beneficiary to any benefit or to any
payment hereunder may not be anticipated, assigned (either at law or in equity),
alienated or subject to attachment, garnishment, levy, execution or other legal
or equitable process except as required by law. Any attempt by any Trust
Beneficiary to anticipate, alienate, assign, sell, transfer, pledge, encumber or
charge the same shall be void. The Trust assets shall not in any manner be
subject to the debts, contracts, liabilities, engagement or torts of any Trust
Beneficiary and payments hereunder shall not be considered an asset of the Trust
Beneficiary in the event of the insolvency or bankruptcy of such Trust
Beneficiary.
XIII.8 Any dispute between the Participants and the Company or the
Trustee as to the interpretation or application of the provisions of this
Agreement and amounts payable hereunder may, at the election of any party to
such dispute (or, if more than one Participant is such a party, at the election
of two-thirds of such Participants), be determined by binding arbitration within
the Detroit area in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's award in
any court of competent jurisdiction. All fees and expenses of the Participants
and the Trustee of such arbitration shall be paid by the Trustee and considered
an
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<PAGE> 37
expense of the Trust under Section 8.7.
XIII.9 Each Participant (and, where applicable, each Successor) is an
intended beneficiary under this Trust, and as an intended beneficiary shall be
entitled to enforce all terms and provisions hereof with the same force and
effect as if such person had been a party hereto.
XIII.10 The Trustee shall be permitted to withhold from any payment due
to a Participant hereunder the amount required by law to be so withheld under
federal, state and local withholding requirements or otherwise, and shall pay
over to the appropriate government authority the amounts so withheld. The
Trustee may rely on reasonable instructions from the Company as to any required
withholding and shall be fully protected under Section 8.7 in relying on such
instructions.
XIII.11 Notwithstanding any other provision hereof, the parties'
respective rights and obligations under Section 13.9 shall survive any
termination or expiration of this Agreement.
XIV. NOTICES
XIV.1 For all purposes of this Agreement, any communication, including
without limitation, any notice, consent, report, demand or waiver required or
permitted to be given hereunder shall be in writing and, unless otherwise
provided in this Agreement, shall be deemed to have been duly given when hand
delivered or dispatched by telegram or electronic facsimile transfer (confirmed
in writing by mail simultaneously dispatched), or two business days after having
been mailed by United States registered or certified mail, return receipt
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<PAGE> 38
requested, postage prepaid, or one business day after having been dispatched by
a nationally recognized overnight courier service to the appropriate party at
the addressed specified below:
If to the Company, to: DTE Energy Company
2000 Second Avenue
Detroit, Michigan 48226
Attn: Treasurer
If to the Trustee, to: Wachovia Bank, N.A.
100 Main Street
Winston-Salem, North Carolina 27102
Attn: Executive Services
If to a Participant, to: the address of such Participant as listed
next to such Participant's name on Exhibit
A hereto,
provided, however, that if any party or such party's successors shall have
designated a different address by notice to the other parties, then to the last
address so designated.
IN WITNESS WHEREOF, the Company and the Trustee caused this Agreement
to be executed on its behalf as of the date first above written.
Attested DTE ENERGY COMPANY
By: By:
------------------------------ ---------------------------
Its: Assistant Corporate Its: Vice President and
Secretary Treasurer
Attested WACHOVIA BANK, N.A.
By: By:
------------------------------ ---------------------------
Its: Its:
-------------------------- -----------------------
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<PAGE> 39
Exhibit A
Employee Address Soc. Sec. No.
- -------- ------- -------------
<PAGE> 40
Exhibit B
[List of Change-in-Control Severance Agreements to be covered by the Trust.]
<PAGE> 41
Exhibit C
---------
<PAGE> 42
Exhibit D
Assumptions
The following assumptions are applicable to calculations under Articles
IV and VII and Section 9.2.3 of the Agreement, and may be deleted, revised or
otherwise amended only in accordance with Article IV of the Agreement.
1. Investment return is 3% per year.
2. Salaries increase at 4.5% per year.
3. A target bonus equal to:
% Base Salary Position
------------- --------
40% Chairman
35% President
30% Executive Vice President
30% Senior Vice President
25% Vice President
50% Other
4. The Accounting Firm shall also use such other assumptions as are
recommended by the Accounting Firm and approved by the Company and, if the Trust
is irrevocable, by the Executives.
<PAGE> 1
EXHIBIT 11-10
DTE ENERGY COMPANY
BASIC AND DILUTED EARNINGS PER SHARE
OF COMMON STOCK
<TABLE>
<CAPTION>
Year Ended December 31
-------------------------------------
1997 1996 1995
---- ---- ----
(Thousands, except per share amounts)
<S> <C> <C> <C>
BASIC:
Net Income................................. $417,333 $309,296 $405,914
Weighted average number of common
shares outstanding (a)................... 145,101 145,120 144,940
Earnings per share of Common Stock
based on weighted average number
of shares outstanding.................... $ 2.88 $ 2.13 $ 2.80
DILUTED:
Net Income................................. $417,333 $309,296 $405,914
Convertible Preferred Stock dividends...... - - 205
-------- -------- --------
$417,333 $309,296 $406,119
======== ======== ========
Weighted average number of common
shares outstanding (a)................... 145,101 145,120 144,940
Conversion of convertible Preferred Stock - - 237
Incremental shares from assumed
conversion of options.................... 12 - -
-------- -------- --------
145,113 145,120 145,177
======== ======== ========
Earnings per share of Common Stock
assuming conversion of outstanding
convertible Preferred Stock and options.. $ 2.88 $ 2.13 $ 2.80
</TABLE>
- --------------------
(a) Based on a daily average.
<PAGE> 1
EXHIBIT 12-8
DTE ENERGY COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------
1997 1996 1995
---- ---- ----
(Millions, except for ratio)
<S> <C> <C> <C>
Net income............................................. $ 429 $ 325 $ 434
--------------- ---------------- ---------------
Taxes based on income:
Current income taxes................................ 267 219 221
Deferred taxes - net................................ 5 17 79
Investment tax credit adjustments - net............. (15) (15) (17)
Municipal and state................................. 4 3 3
--------------- ---------------- ---------------
Total taxes based on income....................... 261 224 286
--------------- ---------------- ---------------
Fixed charges:
Interest on long-term debt.......................... 275 275 275
Amortization of debt discount, premium
and expense....................................... 11 12 11
Other interest...................................... 11 4 10
Interest factor of rents............................ 34 34 29
--------------- ---------------- ---------------
Total fixed charges............................... 331 325 325
--------------- ---------------- ---------------
Earnings before taxes based on income
and fixed charges................................... $ 1,021 $ 874 $ 1,045
=============== ================ ===============
Ratio of earnings to fixed charges..................... 3.08 2.69 3.21
</TABLE>
<PAGE> 1
EXHIBIT 12-9
THE DETROIT EDISON COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------
1997 1996 1995
---- ---- ----
(Millions, except for ratio)
<S> <C> <C> <C>
Net income............................................. $ 417 $ 328 $ 434
--------------- ---------------- ---------------
Taxes based on income:
Current income taxes................................ 308 224 221
Deferred taxes - net................................ (6) 16 79
Investment tax credit adjustments - net............. (14) (15) (17)
Municipal and state................................. 4 3 3
--------------- ---------------- ---------------
Total taxes based on income....................... 292 228 286
--------------- ---------------- ---------------
Fixed charges:
Interest on long-term debt.......................... 262 275 275
Amortization of debt discount, premium
and expense....................................... 11 12 11
Other interest...................................... 9 4 10
Interest factor of rents............................ 34 34 29
--------------- ---------------- ---------------
Total fixed charges............................... 316 325 325
--------------- ---------------- ---------------
Earnings before taxes based on income
and fixed charges................................... $ 1,025 $ 881 $ 1,045
=============== ================ ===============
Ratio of earnings to fixed charges..................... 3.24 2.71 3.21
</TABLE>
<PAGE> 1
EXHIBIT 12-10
DTE ENERGY COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------
1997 1996 1995
---- ---- ----
(Millions, except for ratio and percent)
<S> <C> <C> <C>
Net income............................................. $ 429 $ 325 $ 434
-------------- --------------- --------------
Taxes based on income:
Current income taxes................................ 267 219 221
Deferred taxes - net................................ 5 17 79
Investment tax credit adjustments - net............. (15) (15) (17)
Municipal and state................................. 4 3 3
-------------- --------------- --------------
Total taxes based on income..................... 261 224 286
-------------- --------------- --------------
Fixed charges:
Interest on long-term debt.......................... 275 275 275
Amortization of debt discount, premium
and expense....................................... 11 12 11
Other interest...................................... 11 4 10
Interest factor of rents............................ 34 34 29
-------------- --------------- --------------
Total fixed charges............................. 331 325 325
-------------- --------------- --------------
Earnings before taxes based on income
and fixed charges................................... $ 1,021 $ 874 $ 1,045
============== =============== ==============
Preferred stock dividends.............................. $ 12 $ 16 $ 28
Dividends meeting requirement of
IRC Section 247..................................... 4 4 4
Percent deductible for income tax purposes............. 40.00% 40.00% 40.00%
Amount deductible...................................... 2 2 2
Amount not deductible.................................. 10 14 26
Ratio of pretax income to net income................... 1.61 1.69 1.66
Dividend factor for amount not deductible.............. 16 24 43
Amount deductible...................................... 2 2 2
-------------- --------------- --------------
Total preferred stock dividend factor........... 18 26 45
Total fixed charges............................. 331 325 325
-------------- --------------- --------------
Total fixed charges and preferred
stock dividends............................... $ 349 $ 351 $ 370
============== =============== ==============
Ratio of earnings to fixed charges and
preferred stock dividends........................... 2.93 2.49 2.82
</TABLE>
<PAGE> 1
EXHIBIT 12-11
THE DETROIT EDISON COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------------
1997 1996 1995
---- ---- ----
(Thousands, except for ratio and percent)
<S> <C> <C> <C>
Net income............................................. $ 417 $ 328 $ 434
-------------- --------------- --------------
Taxes based on income:
Current income taxes................................ 308 224 221
Deferred taxes - net................................ (6) 16 79
Investment tax credit adjustments - net............. (14) (15) (17)
Municipal and state................................. 4 3 3
-------------- --------------- --------------
Total taxes based on income..................... 292 228 286
-------------- --------------- --------------
Fixed charges:
Interest on long-term debt.......................... 262 275 275
Amortization of debt discount, premium
and expense....................................... 11 12 11
Other interest...................................... 9 4 10
Interest factor of rents............................ 34 34 29
-------------- --------------- --------------
Total fixed charges............................. 316 325 325
-------------- --------------- --------------
Earnings before taxes based on income
and fixed charges................................... $ 1,025 $ 881 $ 1,045
============== =============== ==============
Preferred stock dividends.............................. $ 12 $ 16 $ 28
Dividends meeting requirement of
IRC Section 247..................................... 4 4 4
Percent deductible for income tax purposes............. 40.00% 40.00% 40.00%
Amount deductible...................................... 2 2 2
Amount not deductible.................................. 10 14 26
Ratio of pretax income to net income................... 1.70 1.70 1.66
Dividend factor for amount not deductible.............. 17 24 43
Amount deductible...................................... 2 2 2
-------------- --------------- --------------
Total preferred stock dividend factor........... 19 26 45
Total fixed charges............................. 316 325 325
-------------- --------------- --------------
Total fixed charges and preferred
stock dividends............................... $ 335 $ 351 $ 370
============== =============== ==============
Ratio of earnings to fixed charges and
preferred stock dividends........................... 3.06 2.51 2.82
</TABLE>
<PAGE> 1
EXHIBIT 21-2
SUBSIDIARIES OF DTE ENERGY COMPANY THE DETROIT EDISON
COMPANY
DTE ENERGY COMPANY
THE DETROIT EDISON COMPANY
Midwest Energy Resources Company
St. Clair Energy Corporation
The Edison Illuminating Company of Detroit
DE ENERGY SERVICES, INC.
DTE BIOMASS ENERGY, INC.
Alabama Energy Systems, Inc.
Belleville Gas Producers, Inc.
DTE Arbor Gas Producers, Inc.
Escambia Gas Producers, Inc.
FW Gas Producers, Inc.
Orlando Gas Producers, Inc.
Plainville Gas Producers, Inc.
RES Power, Inc.
Riverview Gas Producers, Inc.
Sonoma Energy Systems, Inc.
Winston Gas Producers, Inc.
Fayetteville Gas Producers, Inc.
Lycoming Gas Producers, Inc.
Roxana Gas Producers, Inc.
Adrain Gas Producers, L.L.C.
Wichita Gas Producers, L.L.C.
Sacramento Gas Producers, L.L.C.
Salem Energy Systems, L.L.C.
Winston Gas Producers, L.L.C.
DTE ENERGY SERVICES, INC.
PCI Enterprises Company
EES Coke Battery Company, Inc.
DTE ES Holdings, Inc.
DTE Indiana Harbor Coke, L.C.C. (Delaware)
<PAGE> 2
DTE COAL SERVICES, INC.
DTE CS Rail Services, Inc.
EDISON DEVELOPMENT CORPORATION
EdVenture Capital Corp.
Plug Power L.L.C. (Delaware)
DTE ENERGY TRADING, INC.
GREAT LAKES ENERGY PRODUCTS, INC.
DTE CoEnergy, L.L.C.
SYNDECO REALTY CORPORATION
DTE ENGINEERING SERVICE, INC.
DTE EDISON AMERICA, INC.
DTE CAPITAL CORPORATION
ALL SUBSIDIARIES ARE INCORPORATED IN MICHIGAN, UNLESS OTHERWISE NOTED.
<PAGE> 1
EXHIBIT 23-11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated January 26,
1998 appearing in this Annual Report on Form 10-K of DTE Energy Company and The
Detroit Edison Company for the year ended December 31, 1997 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
Detroit, Michigan
February 23, 1998
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
The Schedule contains summary financial information extracted from DTE Energy
Company's Consolidated Statement of Income, Balance Sheet, Statement of Cash
Flows, Statements of Changes in Shareholders' Equity and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000936340
<NAME> DTE ENERGY CO.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8,350
<OTHER-PROPERTY-AND-INVEST> 880
<TOTAL-CURRENT-ASSETS> 935
<TOTAL-DEFERRED-CHARGES> 1,058
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 11,223
<COMMON> 1,951
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 1,611
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,562
0
144
<LONG-TERM-DEBT-NET> 3,777
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 205
0
<CAPITAL-LEASE-OBLIGATIONS> 137
<LEASES-CURRENT> 110
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,288
<TOT-CAPITALIZATION-AND-LIAB> 11,223
<GROSS-OPERATING-REVENUE> 3,764
<INCOME-TAX-EXPENSE> 257
<OTHER-OPERATING-EXPENSES> 22
<TOTAL-OPERATING-EXPENSES> 2,763
<OPERATING-INCOME-LOSS> 1,001
<OTHER-INCOME-NET> 30
<INCOME-BEFORE-INTEREST-EXPEN> 971
<TOTAL-INTEREST-EXPENSE> 297
<NET-INCOME> 417
12
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 299
<TOTAL-INTEREST-ON-BONDS> 275
<CASH-FLOW-OPERATIONS> 1,006
<EPS-PRIMARY> 2.88
<EPS-DILUTED> 2.88
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DETROIT
EDISON COMPANY'S CONSOLIDATED STATEMENT OF INCOME, BALANCE SHEET, STATEMENT OF
CASH FLOWS AND STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY AND IS QUALIFIED
IN IT ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000028385
<NAME> DETROIT EDISON COMPANY
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 8,350
<OTHER-PROPERTY-AND-INVEST> 575
<TOTAL-CURRENT-ASSETS> 806
<TOTAL-DEFERRED-CHARGES> 1,014
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 10,745
<COMMON> 1,451
<CAPITAL-SURPLUS-PAID-IN> 500
<RETAINED-EARNINGS> 1,478
<TOTAL-COMMON-STOCKHOLDERS-EQ> 3,429
0
144
<LONG-TERM-DEBT-NET> 3,531
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 169
0
<CAPITAL-LEASE-OBLIGATIONS> 137
<LEASES-CURRENT> 110
<OTHER-ITEMS-CAPITAL-AND-LIAB> 3,225
<TOT-CAPITALIZATION-AND-LIAB> 10,745
<GROSS-OPERATING-REVENUE> 3,657
<INCOME-TAX-EXPENSE> 288
<OTHER-OPERATING-EXPENSES> 22
<TOTAL-OPERATING-EXPENSES> 2,654
<OPERATING-INCOME-LOSS> 1,003
<OTHER-INCOME-NET> 16
<INCOME-BEFORE-INTEREST-EXPEN> 987
<TOTAL-INTEREST-EXPENSE> 282
<NET-INCOME> 417
12
<EARNINGS-AVAILABLE-FOR-COMM> 405
<COMMON-STOCK-DIVIDENDS> 319
<TOTAL-INTEREST-ON-BONDS> 275
<CASH-FLOW-OPERATIONS> 1,051
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99.27
EXECUTION COPY
U.S. $400,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of January 21, 1998
Among
DTE CAPITAL CORPORATION,
as Borrower
and
THE INITIAL LENDERS NAMED HEREIN,
as Initial Lenders
and
CITIBANK, N.A.,
as Agent
and
BARCLAYS BANK PLC, NEW YORK BRANCH
and
THE FIRST NATIONAL BANK OF CHICAGO,
as Co-Agents,
CITICORP SECURITIES, INC.,
as Arranger
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms 1
SECTION 1.02. Computation of Time Periods 13
SECTION 1.03. Accounting Terms 13
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances 13
SECTION 2.02. Making the Revolving Credit Advances 14
SECTION 2.03. The Competitive Bid Advances 15
SECTION 2.04. Fees 18
SECTION 2.05. Termination or Reduction of the Commitments 18
SECTION 2.06. Repayment of Revolving Credit Advances; Term Loan Election 18
SECTION 2.07. Interest on Revolving Credit Advances 19
SECTION 2.08. Interest Rate Determination 19
SECTION 2.09. Optional Conversion of Revolving Credit Advances 20
SECTION 2.10. Prepayments of Revolving Credit Advances 20
SECTION 2.11. Increased Costs 21
SECTION 2.12. Illegality 21
SECTION 2.13. Payments and Computations 22
SECTION 2.14. Taxes 23
SECTION 2.15. Sharing of Payments, Etc 24
SECTION 2.16. Extensions of Revolver Termination Date 24
SECTION 2.17. Use of Proceeds 25
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Sections 2.01 and 2.03 25
SECTION 3.02. Conditions Precedent to Each Revolving Credit Borrowing 27
SECTION 3.03. Conditions Precedent to Each Competitive Bid Borrowing 27
SECTION 3.04. Determinations Under Section 3.01 28
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower 28
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants 30
SECTION 5.02. Negative Covenants 32
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default 33
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action 35
SECTION 7.02. Agent's Reliance, Etc 36
SECTION 7.03. Citibank and Affiliates 36
SECTION 7.04. Lender Credit Decision 36
SECTION 7.05. Indemnification 36
SECTION 7.06. Successor Agent 37
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc 37
SECTION 8.02. Notices, Etc 37
SECTION 8.03. No Waiver; Remedies 38
SECTION 8.04. Costs and Expenses 38
SECTION 8.05. Right of Set-off 39
SECTION 8.06. Binding Effect 39
SECTION 8.07. Assignments, Designations and Participations 39
SECTION 8.08. Confidentiality 42
SECTION 8.09. Governing Law 42
SECTION 8.10. Execution in Counterparts 42
SECTION 8.11. Jurisdiction, Etc 42
SECTION 8.12. Effective Date Assignments; Etc 43
SECTION 8.13. Waiver of Jury Trial 45
</TABLE>
<PAGE> 4
Schedules
Schedule I - List of Applicable Lending Offices
Schedule II - Existing Commitments and Advances
Schedule 5.02(a) - Existing Liens
Exhibits
Exhibit A-1 - Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Revolving Credit Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E - Form of Certificate by DTE Energy Company
Exhibit F - Form of Support Agreement
Exhibit G - Form of Collateral Assignment Agreement
Exhibit H - Form of Opinion of Counsel to the Parent
<PAGE> 5
AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 21,
1998 among DTE CAPITAL CORPORATION, a Michigan corporation (the "Borrower")
which is wholly owned by DTE Energy Company, a Michigan corporation (the
"Parent"), the banks, financial institutions and other institutional lenders
(the "Initial Lenders") listed on the signature pages hereof, and CITIBANK, N.A.
("Citibank"), as agent (the "Agent") and Barclays Bank PLC, New York Branch and
The First National Bank of Chicago, as co-agents, for the Lenders (as
hereinafter defined).
PRELIMINARY STATEMENTS.
(1) The Borrower has entered into a Credit Agreement dated as
of March 1, 1996 (the "Original Credit Agreement") with the Agents and certain
lenders, financial institutions and other institutional lenders named therein or
made a party thereto (collectively, the "Existing Lenders").
(2) The Borrower has requested that the Existing Lenders and
others enter into this Agreement to amend and restate the Original Credit
Agreement in order to increase the Commitments (as defined below) from an
aggregate amount of $200,000,000 to an aggregate amount of $400,000,000 and to
make certain other amendments as agreed among the Borrower, the Existing Lenders
and the Agent. The Existing Lenders have indicated their willingness to amend
and restate the Original Credit Agreement upon the terms and conditions stated
herein.
(3) The Borrower has requested that the Initial Lenders and
others enter into this Agreement to amend and restate the Original Credit
Agreement as set forth herein. The Existing Lenders party hereto have indicated
their willingness to amend and restate the Original Credit Agreement upon the
terms and conditions stated herein.
(4) Simultaneously with the execution hereof, the Existing
Lenders that are not Initial Lenders have entered into an assignment agreement
(as amended, supplemented or otherwise modified from time to time, the
"Assignment Agreement") with the Borrower and the Agent pursuant to which such
Existing Lenders have agreed to sell and assign to the Initial Lenders all of
their Existing Commitments (as hereinafter defined) and the Initial Lenders have
agreed to purchase and assume, as of the Effective Date, all of such Existing
Lenders' rights and obligations under the Original Credit Agreement on the terms
set forth in the Assignment Agreement. After giving effect to such sale and
assignment as of the Effective Date, the Commitments (as hereinafter defined) of
each of the Initial Lenders will be as set forth opposite such Initial Lender's
name on the signature pages hereof.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements contained herein, the parties hereto hereby
agree that, subject to the satisfaction of the conditions set forth in Article
III, the Original Credit Agreement is amended and restated in its entirety to
read as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined):
"Advance" means a Revolving Credit Advance or a Competitive
Bid Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
<PAGE> 6
vote 5% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Agent's Account" means the account of the Agent maintained by
the Agent at Citibank with its office at One Court Square, Long Island
City, NY 11120, Account No. 36852248, Attention: Shawn Bernard.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance and, in the case of a Competitive Bid
Advance, the office of such Lender notified by such Lender to the Agent
as its Applicable Lending Office with respect to such Competitive Bid
Advance.
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the Public Debt Rating in effect on
such date as set forth below:
<TABLE>
<CAPTION>
Public Debt Rating Applicable Margin for Applicable Margin for
S&P/Moody's Base Rate Advances Eurodollar Rate Advances
---------------------------------- ------------------------ ------------------------------
<S> <C> <C>
Level 1
A- / A3 or above 0% .225%
Level 2
Lower than Level 1, but at least BBB+ 0% .250%
/ Baa1 or above
Lower than Level 2, but at least BBB / 0% .250%
Baa2 or above
Level 4
Lower than Level 3, but at least BBB- 0% .300%
/ Baa3 or above
Level 5
Lower than Level 4, or 0% .700%
no Public Debt Rating in Effect
</TABLE>
<PAGE> 7
"Applicable Percentage" means, as of any date, a percentage
per annum determined by reference to the Public Debt Rating in effect
on such date as set forth below:
<TABLE>
<CAPTION>
Public Debt Rating Applicable
S&P/Moody's Percentage
------------------------ ----------------
<S> <C>
Level 1
A- / A3 or above .125%
Level 2
Lower than Level 1, but at least BBB+ .150%
/ Baa1 or above
Level 3
Lower than Level 2, but at least BBB .200%
/ Baa2 or above
Level 4
Lower than Level 3, but at least BBB- .250%
/ Baa3 or above
Level 5
Lower than Level 4, or .300%
no Public Debt Rating in Effect
</TABLE>
"Assigned Rights" means the rights of the Borrower under
Sections 1, 2, 3 and 4 of the Support Agreement and all other rights
that are intended to secure the obligations of the Borrower under this
Agreement.
"Assignment Agreement" has the meaning specified in the
Preliminary Statements hereto.
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Agent, in substantially the form of Exhibit C hereto.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest announced publicly
by Citibank in New York, New York, from time to time, as
Citibank's base rate;
(b) the sum (adjusted to the nearest 1/16 of
1% or, if there is no nearest 1/16 of 1%, to the next higher
1/16 of 1%) of (i) 1/2 of 1% per annum, plus (ii) the rate
obtained by dividing (A) the latest three-week moving average
of secondary market morning offering rates in the United
States for three-month certificates of deposit of major United
States money market banks, such three-week moving average
(adjusted to the basis of a year of 360 days) being determined
weekly on each Monday (or, if such day is not a Business Day,
on the next succeeding Business Day) for the three-week period
ending on the previous Friday by Citibank on the basis of such
rates reported by certificate of deposit dealers to and
published by the Federal Reserve Bank of New York or, if such
publication shall be suspended or terminated, on the basis of
quotations for such rates received by Citibank from three New
York certificate of deposit dealers of recognized standing
selected by Citibank, by (B) a percentage equal to 100% minus
the average of the daily percentages specified during such
three-week period by the Board of Governors of the Federal
Reserve System (or any successor) for determining the maximum
<PAGE> 8
reserve requirement (including, but not limited to, any
emergency, supplemental or other marginal reserve requirement)
for Citibank with respect to liabilities consisting of or
including (among other liabilities) three-month U.S. dollar
non-personal time deposits in the United States, plus (iii)
the average during such three-week period of the annual
assessment rates estimated by Citibank for determining the
then current annual assessment payable by Citibank to the
Federal Deposit Insurance Corporation (or any successor) for
insuring U.S. dollar deposits of Citibank in the United
States; and
(c) 1/2 of one percent per annum above the Federal
Funds Rate.
"Base Rate Advance" means a Revolving Credit Advance that
bears interest as provided in Section 2.07(a)(i).
"Borrower" has the meaning specified in the recital of parties
to this Agreement.
"Borrowing" means a Revolving Credit Borrowing or a
Competitive Bid Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to any Eurodollar Rate Advances, on
which dealings are carried on in the London interbank market.
"Capitalization" means the sum of tangible net worth plus
Consolidated Debt.
"Collateral Assignment Agreement" has the meaning specified in
Section 3.01(h)(vi).
"Commitment" has the meaning specified in Section 2.01.
"Competitive Bid Advance" means an advance by a Lender to the
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.03 and refers to a
Fixed Rate Advance or a LIBO Rate Advance.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.03.
"Competitive Bid Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such
Lender resulting from a Competitive Bid Advance made by such Lender.
"Competitive Bid Reduction" has the meaning specified in
Section 2.01.
"Confidential Information" means information that a Loan Party
furnishes to the Agent or any Lender in a writing designated as
confidential, but does not include any such information that is or
becomes generally available to the public or that is or becomes
available to the Agent or such Lender from a source other than a Loan
Party.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Revolving Credit Advances of one Type into Revolving
Credit Advances of the other Type pursuant to Section 2.08 or 2.09.
"Debt" of any Person means, without duplication, (a) all
indebtedness of such Person for borrowed money, (b) all obligations of
such Person for the deferred purchase price of property or services
(other than trade payables not overdue by more than 60 days incurred in
the ordinary course of
<PAGE> 9
such Person's business), (c) all obligations of such Person
evidenced by notes, bonds, debentures or other similar instruments, (d)
all obligations of such Person created or arising under any conditional
sale or other title retention agreement with respect to property
acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are
limited to repossession or sale of such property), (e) all obligations
of such Person as lessee under leases that have been or should be, in
accordance with GAAP, recorded as capital leases, (f) all obligations,
contingent or otherwise, of such Person in respect of acceptances,
letters of credit or similar extensions of credit, (g) all obligations
of such Person in respect of Hedge Agreements, (h) all Debt of others
referred to in clauses (a) through (g) above or clause (i) below
guaranteed directly or indirectly in any manner by such Person, or in
effect guaranteed directly or indirectly by such Person through an
agreement (1) to pay or purchase such Debt or to advance or supply
funds for the payment or purchase of such Debt, (2) to purchase, sell
or lease (as lessee or lessor) property, or to purchase or sell
services, primarily for the purpose of enabling the debtor to make
payment of such Debt or to assure the holder of such Debt against loss,
(3) to supply funds to or in any other manner invest in the debtor
(including any agreement to pay for property or services irrespective
of whether such property is received or such services are rendered) or
(4) otherwise to assure a creditor against loss, and (i) all Debt
referred to in clauses (a) through (h) above secured by (or for which
the holder of such Debt has an existing right, contingent or otherwise,
to be secured by) any Lien on property (including, without limitation,
accounts and contract rights) owned by such Person, even though such
Person has not assumed or become liable for the payment of such Debt.
See the definition of "Nonrecourse Debt" below.
"Declining Lender" has the meaning specified in Section 2.16.
"DECO" means The Detroit Edison Company, a Michigan
corporation wholly owned by the Parent.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Designated Bidder" means (a) an Eligible Assignee or (b) a
special purpose corporation that is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its
business and that issues (or the parent of which issues) commercial
paper rated at least "Prime-1" (or the then equivalent grade) by
Moody's or "A-1" (or the then equivalent grade) by S&P that, in the
case of either clause (a) or (b), (i) is organized under the laws of
the United States or any State thereof, (ii) shall have become a party
hereto pursuant to Section 8.07(d), (e) and (f) and (iii) is not
otherwise a Lender.
"Designation Agreement" means a designation agreement entered
into by a Lender (other than a Designated Bidder) and a Designated
Bidder, and accepted by the Agent, in substantially the form of Exhibit
D hereto.
"Disclosed Litigation" has the meaning specified in Section
3.01(b).
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender, or such other office
of such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"EBITDA" means, for any period, net income (or net loss) plus
the sum of (a) interest expense, (b) income tax expense, (c)
depreciation expense and (d) amortization expense, in each case
determined in accordance with GAAP for such period.
"Effective Date" has the meaning specified in Section 3.01.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; (iii) a commercial bank organized under the laws of the United
States, or any State thereof, and having a combined capital and
<PAGE> 10
surplus of at least $250,000,000; (iv) a savings and loan
association or savings bank organized under the laws of the United
States, or any State thereof, and having a combined capital and surplus
of at least $250,000,000; (v) a commercial bank organized under the
laws of any other country that is a member of the Organization for
Economic Cooperation and Development or has concluded special lending
arrangements with the International Monetary Fund associated with its
General Arrangements to Borrow, or a political subdivision of any such
country, and having a combined capital and surplus of at least
$250,000,000, so long as such bank is acting through a branch or agency
located in the United States; (vi) the central bank of any country that
is a member of the Organization for Economic Cooperation and
Development; (vii) a finance company, insurance company or other
financial institution or fund (whether a corporation, partnership,
trust or other entity) that is engaged in making, purchasing or
otherwise investing in commercial loans in the ordinary course of its
business and having a combined capital and surplus of at least
$250,000,000; and (viii) any other Person approved by the Agent and the
Borrower, such approval not to be unreasonably withheld or delayed by
either party; provided, however, that neither the Borrower nor an
Affiliate of the Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any action, suit, demand, demand
letter, claim, notice of non-compliance or violation, notice of
liability or potential liability, investigation, proceeding, consent
order or consent agreement relating in any way to any Environmental
Law, Environmental Permit or Hazardous Materials or arising from
alleged injury or threat of injury to health, safety or the
environment, including, without limitation, (a) by any governmental or
regulatory authority for enforcement, cleanup, removal, response,
remedial or other actions or damages and (b) by any governmental or
regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment,
decree or judicial or agency interpretation, policy or guidance
relating to pollution or protection of the environment, health, safety
or natural resources, including, without limitation, those relating to
the use, handling, transportation, treatment, storage, disposal,
release or discharge of Hazardous Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with a contributing sponsor, as defined in Section
4001(a)(13) of ERISA, of a Plan, and an event described in paragraph
(9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is reasonably
expected to occur with respect to such Plan within the following 30
days; (b) the application for a minimum funding waiver with respect to
a Plan; (c) the provision by the administrator of any Plan of a notice
of intent to terminate such Plan pursuant to Section 4041(a)(2) of
ERISA (including any such notice with respect to a plan amendment
referred to in Section 4041(e) of ERISA); (d) the cessation of
operations at a facility of the Borrower or any ERISA Affiliate in the
circumstances described in Section 4062(e) of ERISA; (e) the withdrawal
by the Borrower or any ERISA Affiliate from a Multiple Employer Plan
during a plan year for which it was a substantial employer, as defined
in Section 4001(a)(2) of ERISA; (f) the conditions for the imposition
of a lien under Section 302(f) of ERISA shall have been met with
respect to any Plan; (g) the adoption of an amendment to a Plan
requiring the provision of security to such Plan pursuant to Section
307 of ERISA;
<PAGE> 11
or (h) the institution by the PBGC of proceedings to terminate
a Plan pursuant to Section 4042 of ERISA, or the occurrence of any
event or condition described in Section 4042 of ERISA that constitutes
grounds for the termination of, or the appointment of a trustee to
administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto or in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office), or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Agent.
"Eurodollar Rate" means, for any Interest Period for each
Eurodollar Rate Advance comprising part of the same Revolving Credit
Borrowing, an interest rate per annum equal to the rate per annum
obtained by dividing (a) the average (rounded upward to the nearest
whole multiple of 1/16 of 1% per annum, if such average is not such a
multiple) of the rate per annum at which deposits in U.S. dollars are
offered by the principal office of each of the Reference Banks in
London, England to prime banks in the London interbank market at 11:00
A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to such Reference
Bank's Eurodollar Rate Advance comprising part of such Revolving Credit
Borrowing to be outstanding during such Interest Period and for a
period equal to such Interest Period by (b) a percentage equal to 100%
minus the Eurodollar Rate Reserve Percentage for such Interest Period.
The Eurodollar Rate for any Interest Period for each Eurodollar Rate
Advance comprising part of the same Revolving Credit Borrowing shall be
determined by the Agent on the basis of applicable rates furnished to
and received by the Agent from the Reference Banks two Business Days
before the first day of such Interest Period, subject, however, to the
provisions of Section 2.08.
"Eurodollar Rate Advance" means a Revolving Credit Advance
that bears interest as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances or LIBO Rate Advances comprising part
of the same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on Eurodollar
Rate Advances or LIBO Rate Advances is determined) having a term equal
to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Existing Advance" means, for each Existing Lender, all of
such Existing Lender's rights in and to, and all of its obligations
under, the Advances (as defined in the Original Credit Agreement)
evidenced by the Existing Notes and owing to it under the Original
Credit Agreement as of the Effective Date, the aggregate amount of
which is set forth opposite such Existing Lender's name on Schedule II
hereto.
"Existing Commitment" means, for each Existing Lender, all of
such Existing Lender's rights in and to, and all of its obligations
under, the Commitment (as defined in the Original Credit Agreement)
held by it under the Original Credit Agreement as of the Effective
Date, the aggregate amount of which is set forth opposite such Existing
Lender's name on Schedule II hereto.
"Existing Lenders" has the meaning specified in the
Preliminary Statements hereto.
<PAGE> 12
"Existing Notes" means the Notes as defined in, and issued
pursuant to, the Original Credit Agreement.
"Extending Lenders" has the meaning specified in Section 2.16.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight federal funds transactions
with members of the Federal Reserve System arranged by federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
"Financial Officer" of any Person means the chief executive
officer, president, chief financial officer, controller, treasurer or
any assistant treasurer of such Person.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
"GAAP" has the meaning specified in Section 1.03.
"Hazardous Materials" means (a) petroleum and petroleum
products, by-products or breakdown products, radioactive materials,
asbestos-containing materials, polychlorinated biphenyls and radon gas
and (b) any other chemicals, materials or substances designated,
classified or regulated as hazardous or toxic or as a pollutant or
contaminant under any Environmental Law.
"Hedge Agreements" means interest rate swap, cap or collar
agreements, interest rate future or option contracts, currency swap
agreements, currency future or option contracts and other similar
agreements.
"Information Memorandum" means the information memorandum
dated December 1997 used by the Agent in connection with the
syndication of the Commitments.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing and each LIBO
Rate Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurodollar Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance
into such Eurodollar Rate Advance and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, with respect to Eurodollar Rate Advances, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three or six months, as the Borrower
may, upon notice received by the Agent not later than 11:00 A.M. (New
York City time) on the third Business Day prior to the first day of
such Interest Period, select; provided, however, that:
(i) the Borrower may not select any Interest
Period that ends after the Revolver Termination Date then in
effect or, if the Advances have been converted to a term loan
pursuant to Section 2.06 prior to such selection, which ends
after the Maturity Date;
(ii) Interest Periods commencing on the same
date for Eurodollar Rate Advances comprising part of the same
Revolving Credit Borrowing or for LIBO Rate Advances
comprising part of the same Competitive Bid Borrowing shall be
of the same duration;
<PAGE> 13
(iii) whenever the last day of any Interest
Period would otherwise occur on a day other than a Business
Day, the last day of such Interest Period shall be extended to
occur on the next succeeding Business Day, provided, however,
that, if such extension would cause the last day of such
Interest Period to occur in the next following calendar month,
the last day of such Interest Period shall occur on the next
preceding Business Day; and
(iv) whenever the first day of any Interest
Period occurs on a day of an initial calendar month for which
there is no numerically corresponding day in the calendar
month that succeeds such initial calendar month by the number
of months equal to the number of months in such Interest
Period, such Interest Period shall end on the last Business
Day of such succeeding calendar month.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Junior Subordinated Debentures" means subordinated junior
deferrable interest debentures issued by DECO from time to time.
"Lenders" means the Initial Lenders and each Person that shall
become a party hereto pursuant to Section 8.07(a), (b) and (c) and,
except when used in reference to a Revolving Credit Advance, a
Revolving Credit Borrowing, a Revolving Credit Note, a Commitment or a
related term, each Designated Bidder.
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the average (rounded upward to the nearest whole multiple
of 1/16 of 1% per annum, if such average is not such a multiple) of the
rate per annum at which deposits in U.S. dollars are offered by the
principal office of each of the Reference Banks in London, England to
prime banks in the London interbank market at 11:00 A.M. (London time)
two Business Days before the first day of such Interest Period in an
amount substantially equal to the amount that would be the Reference
Banks' respective ratable shares of such Borrowing if such Borrowing
were to be a Revolving Credit Borrowing to be outstanding during such
Interest Period and for a period equal to such Interest Period by (b) a
percentage equal to 100% minus the Eurodollar Rate Reserve Percentage
for such Interest Period. The LIBO Rate for any Interest Period for
each LIBO Rate Advance comprising part of the same Competitive Bid
Borrowing shall be determined by the Agent on the basis of applicable
rates furnished to and received by the Agent from the Reference Banks
two Business Days before the first day of such Interest Period,
subject, however, to the provisions of Section 2.08.
"LIBO Rate Advances" has the meaning specified in Section
2.03(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance
on title to real property.
"Loan Documents" means this Agreement, the Notes, the Support
Agreement and the Collateral Assignment Agreement.
"Loan Parties" means the Borrower and the Parent.
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations,
performance, properties or prospects of either Loan Party and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of either Loan Party or either
<PAGE> 14
Loan Party and its Subsidiaries taken as a whole, (b) the rights and
remedies of the Agent or any Lender under any Loan Document or (c) the
ability of either Loan Party to perform its obligations under any Loan
Document to which it is a party.
"Maturity Date" means the earlier of (a) the one year
anniversary of the Term Loan Conversion Date and (b) the date of the
termination in whole of the aggregate Commitments pursuant to Section
2.05 or 6.01.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any ERISA
Affiliate is making or accruing an obligation to make contributions, or
has within any of the preceding five plan years made or accrued an
obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any ERISA Affiliate and at least one
Person other than the Borrower and the ERISA Affiliates or (b) was so
maintained and in respect of which the Borrower or any ERISA Affiliate
could have liability under Section 4064 or 4069 of ERISA in the event
such plan has been or were to be terminated.
"Nonrecourse Debt" means Debt of either Loan Party or any of
their Subsidiaries in respect of which no recourse may be had by the
creditors under such Debt against such Loan Party or such Subsidiary in
its individual capacity or against the assets of such Loan Party or
such Subsidiary, other than assets which were purchased by such Loan
Party or such Subsidiary with the proceeds of such Debt.
"Note" means a Revolving Credit Note or a Competitive Bid
Note.
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.03(a)(i).
"Notice of Revolving Credit Borrowing" has the meaning
specified in Section 2.02(a).
"Original Credit Agreement" has the meaning specified in the
Preliminary Statement hereto.
"Parent" has the meaning specified in the recital by the
parties to this Agreement.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Liens" means such of the following as to which no
enforcement, collection, execution, levy or foreclosure proceeding
shall have been commenced: (a) Liens for taxes, assessments and
governmental charges or levies to the extent not required to be paid
under Section 5.01(b) hereof; (b) Liens imposed by law, such as
materialmen's, mechanics', carriers', workmen's and repairmen's Liens
and other similar Liens arising in the ordinary course of business
securing obligations that are not overdue for a period of more than 30
days; (c) pledges or deposits to secure obligations under workers'
compensation laws or similar legislation or to secure public or
statutory obligations; and (d) easements, rights of way and other
encumbrances on title to real property that do not render title to the
property encumbered thereby unmarketable or materially adversely affect
the use of such property for its present purposes.
"Person" means an individual, partnership, corporation
(including a business trust), joint stock company, trust,
unincorporated association, joint venture, limited liability company or
other entity, or a government or any political subdivision or agency
thereof.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
<PAGE> 15
"Public Debt Rating" means, as of any date, the lowest rating
that has been most recently announced by either S&P or Moody's, as the
case may be, for any class of non-credit enhanced long-term First
Mortgage Bonds issued by DECO. For purposes of the foregoing, (a) if
only one of S&P and Moody's shall have in effect a Public Debt Rating,
the Applicable Margin and the Applicable Percentage shall be determined
by reference to the available rating; (b) if neither S&P nor Moody's
shall have in effect a Public Debt Rating, the Applicable Margin and
the Applicable Percentage will be set in accordance with Level 5 under
the definition of "Applicable Margin" or "Applicable Percentage", as
the case may be; (c) if the ratings established by S&P and Moody's
shall fall within different levels, the Applicable Margin and the
Applicable Percentage shall be based upon the lower rating; (d) if any
rating established by S&P or Moody's shall be changed, such change
shall be effective as of the date on which such change is first
announced publicly by the rating agency making such change; and (e) if
S&P or Moody's shall change the basis on which ratings are established,
each reference to the Public Debt Rating announced by S&P or Moody's,
as the case may be, shall refer to the then equivalent rating by S&P or
Moody's, as the case may be.
"Reference Banks" means Citibank, N.A., Barclays Bank PLC and
The First National Bank of Chicago.
"Register" has the meaning specified in Section 8.07(g).
"Required Lenders" means at any time Lenders owed at least
66-2/3% of the then aggregate unpaid principal amount of the Revolving
Credit Advances owing to Lenders, or, if no such principal amount is
then outstanding, Lenders having at least 66-2/3% of the Commitments.
"Revolver Termination Date" means the earlier of (a) January
20, 1999 or, if extended pursuant to Section 2.16, the date that is 364
days after the Revolver Termination Date then in effect, and (b) the
date of termination in whole of the Commitments pursuant to Section
2.05 or 6.01; provided, however, that the Revolver Termination Date of
any Lender that is a Declining Lender to any requested extension
pursuant to Section 2.16 shall be the Revolver Termination Date in
effect immediately prior to the date on which such extension was
granted, for all purposes of this Agreement.
"Revolving Credit Advance" means an advance by a Lender to the
Borrower as part of a Revolving Credit Borrowing and, if the Borrower
has made the Term Loan Election in accordance with Section 2.06,
includes each such advance that remains outstanding after the Term Loan
Conversion Date, and refers to a Base Rate Advance or a Eurodollar Rate
Advance (each of which shall be a "Type" of Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by each of
the Lenders pursuant to Section 2.01.
"Revolving Credit Note" means a promissory note of the
Borrower payable to the order of any Lender, in substantially the form
of Exhibit A-1 hereto, evidencing the aggregate indebtedness of the
Borrower to such Lender resulting from the Revolving Credit Advances
made by such Lender.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"SEC Reports" means the following reports filed with or sent
to the Securities and Exchange Commission by the Parent or DECO, as the
case may be:
(a) the Form 10K of DECO for the year ended
December 31, 1996,
(b) the Forms 10Q of DECO for the quarters
ended March 31, 1997, June 30, 1997 and September 30, 1997,
<PAGE> 16
(c) the Forms 8K of the Parent dated March 13, 1997,
June 11, 1997, and September 22, 1997, and
(d) the Audited Consolidated Financial Statements of
the Parent for the year ended December 31, 1996, together with
the notes thereto, as contained in the Parent's 1996 annual
report to Shareholders.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any ERISA Affiliate and no Person other
than the Borrower and the ERISA Affiliates or (b) was so maintained and
in respect of which the Borrower or any ERISA Affiliate could have
liability under Section 4069 of ERISA in the event such plan has been
or were to be terminated.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other class or classes of such corporation shall
or might have voting power upon the occurrence of any contingency), (b)
the interest in the capital or profits of such limited liability
company, partnership or joint venture or (c) the beneficial interest in
such trust or estate is at the time directly owned or controlled by
such Person, by such Person and one or more of its other Subsidiaries
or by one or more of such Person's other Subsidiaries.
"Support Agreement" has the meaning specified in
Section 3.01(h)(v).
"Term Loan Conversion Date" has the meaning specified in
Section 2.06.
"Term Loan Election" has the meaning specified in Section
2.06.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
"Withdrawal Liability" has the meaning specified in Part I of
Subtitle E of Title IV of ERISA.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(e) ("GAAP").
<PAGE> 17
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. (a) Effective as
of the Effective Date, each Existing Lender hereby sells and assigns all of its
rights in and to, and all of its obligations under, each Existing Advance owing
to it and the Existing Commitment held by it to the Initial Lenders and each
Initial Lender hereby purchases and assumes, pro rata based on such Initial
Lender's Commitment, all of the Existing Lenders' rights in and to, and all of
their obligations under, the Existing Advances and the Existing Commitments, the
aggregate amount of which is set forth opposite such Existing Lender's name on
Schedule II hereto. In furtherance of the foregoing, each Initial Lender hereby
authorizes and directs the Administrative Agent to accept the Assignment
Agreement on behalf of such Initial Lender.
(b) Each Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Revolving Credit Advances to the Borrower from
time to time on any Business Day during the period from the Effective Date until
the earlier of the Revolver Termination Date and the Term Loan Conversion Date
in an aggregate amount not to exceed at any time outstanding the amount set
forth opposite such Lender's name on the signature pages hereof or, if such
Lender has entered into any Assignment and Acceptance, set forth for such Lender
in the Register maintained by the Agent pursuant to Section 8.07(g), as such
amount may be reduced pursuant to Section 2.05 (such Lender's "Commitment"),
provided that the aggregate amount of the Commitments of the Lenders shall be
deemed used from time to time to the extent of the aggregate amount of the
Competitive Bid Advances then outstanding and such deemed use of the aggregate
amount of the Commitments shall be allocated among the Lenders ratably according
to their respective Commitments (such deemed use of the aggregate amount of the
Commitments being a "Competitive Bid Reduction"). Each Revolving Credit
Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof (or, if less, an aggregate amount equal to the
amount by which the aggregate amount of a proposed Competitive Bid Borrowing
requested by the Borrower exceeds the aggregate amount of Competitive Bid
Advances offered to be made by the Lenders and accepted by the Borrower in
respect of such Competitive Bid Borrowing, if such Competitive Bid Borrowing is
made on the same date as such Revolving Credit Borrowing) and shall consist of
Revolving Credit Advances of the same Type made on the same day by the Lenders
ratably according to their respective Commitments. Within the limits of each
Lender's Commitment, the Borrower may borrow under this Section 2.01, prepay
pursuant to Section 2.10 and reborrow under this Section 2.01.
SECTION 2.02. Making the Revolving Credit Advances. (a) Each
Revolving Credit Borrowing shall be made on notice, given not later than 11:00
A.M. (New York City time) on the third Business Day prior to the date of the
proposed Revolving Credit Borrowing in the case of a Revolving Credit Borrowing
consisting of Eurodollar Rate Advances, or 9:00 A.M. (New York City time) the
Business Day of the proposed Revolving Credit Borrowing in the case of a
Revolving Credit Borrowing consisting of Base Rate Advances, by the Borrower to
the Agent, which shall give to each Lender prompt notice thereof by telecopier
or telex. Each such notice of a Revolving Credit Borrowing (a "Notice of
Revolving Credit Borrowing") shall be by telephone, confirmed immediately in
writing, or telecopier or telex in substantially the form of Exhibit B-1 hereto,
specifying therein the requested (i) date of such Revolving Credit Borrowing,
(ii) Type of Advances comprising such Revolving Credit Borrowing, (iii)
aggregate amount of such Revolving Credit Borrowing, and (iv) in the case of a
Revolving Credit Borrowing consisting of Eurodollar Rate Advances, initial
Interest Period for each such Revolving Credit Advance. Each Lender shall,
before 11:00 A.M. (New York City time) on the date of such Revolving Credit
Borrowing, make available for the account of its Applicable Lending Office to
the Agent at the Agent's Account, in same day funds, such Lender's ratable
portion of such Revolving Credit Borrowing. After the Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article
III, the Agent will make such funds available to the Borrower at the Agent's
address referred to in Section 8.02.
(b) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for any Revolving
Credit Borrowing if the aggregate amount of such Revolving Credit Borrowing is
less than $5,000,000 or if the obligation of the Lenders to make Eurodollar Rate
Advances shall then be suspended pursuant to Section 2.08 or 2.12 and (ii) the
Eurodollar Rate Advances may not be outstanding as part of more than ten
separate Revolving Credit Borrowings.
<PAGE> 18
(c) Each Notice of Revolving Credit Borrowing shall be irrevocable and
binding on the Borrower. In the case of any Revolving Credit Borrowing that the
related Notice of Revolving Credit Borrowing specifies is to be comprised of
Eurodollar Rate Advances, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill on or before the date specified in such Notice of Revolving Credit
Borrowing for such Revolving Credit Borrowing the applicable conditions set
forth in Article III, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund the
Revolving Credit Advance to be made by such Lender as part of such Revolving
Credit Borrowing when such Revolving Credit Advance, as a result of such
failure, is not made on such date.
(d) Unless the Agent shall have received notice from a Lender prior to
the date of any Revolving Credit Borrowing that such Lender will not make
available to the Agent such Lender's ratable portion of such Revolving Credit
Borrowing, the Agent may assume that such Lender has made such portion available
to the Agent on the date of such Revolving Credit Borrowing in accordance with
subsection (a) of this Section 2.02 and the Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such ratable
portion available to the Agent, such Lender and the Borrower severally agree to
repay to the Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Agent, at (i) in the
case of the Borrower, the interest rate applicable at the time to Revolving
Credit Advances comprising such Revolving Credit Borrowing and (ii) in the case
of such Lender, the Federal Funds Rate. If such Lender shall repay to the Agent
such corresponding amount, such amount so repaid shall constitute such Lender's
Revolving Credit Advance as part of such Revolving Credit Borrowing for purposes
of this Agreement.
(e) The failure of any Lender to make the Revolving Credit Advance to
be made by it as part of any Revolving Credit Borrowing shall not relieve any
other Lender of its obligation, if any, hereunder to make its Revolving Credit
Advance on the date of such Revolving Credit Borrowing, but no Lender shall be
responsible for the failure of any other Lender to make the Revolving Credit
Advance to be made by such other Lender on the date of any Revolving Credit
Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the date hereof until the date occurring 30 days prior to the earlier of the
Revolver Termination Date and the Term Loan Conversion Date in the manner set
forth below; provided that, following the making of each Competitive Bid
Borrowing, the aggregate amount of the Advances then outstanding shall not
exceed the aggregate amount of the Commitments of the Lenders (computed without
regard to any Competitive Bid Reduction).
(i) The Borrower may request a Competitive Bid Borrowing under
this Section 2.03 by delivering to the Agent, by telecopier or telex, a
notice of a Competitive Bid Borrowing (a "Notice of Competitive Bid
Borrowing"), in substantially the form of Exhibit B-2 hereto,
specifying therein the requested (v) date of such proposed Competitive
Bid Borrowing, (w) aggregate amount of such proposed Competitive Bid
Borrowing, (x) in the case of a Competitive Bid Borrowing consisting of
LIBO Rate Advances, Interest Period, or in the case of a Competitive
Bid Borrowing consisting of Fixed Rate Advances, maturity date for
repayment of each Fixed Rate Advance to be made as part of such
Competitive Bid Borrowing (which maturity date may not be earlier than
the date occurring 7 days after the date of such Competitive Bid
Borrowing or later than the earlier of (I) 180 days after the date of
such Competitive Bid Borrowing and (II) the earlier of the Revolver
Termination Date and the Term Loan Conversion Date), (y) interest
payment date or dates relating thereto, and (z) other terms (if any) to
be applicable to such Competitive Bid Borrowing, not later than 10:00
A.M. (New York City time) (A) at least one Business Day prior to the
date of the proposed Competitive Bid Borrowing, if the Borrower shall
specify in the Notice of Competitive Bid Borrowing that the rates of
interest to be offered by the Lenders shall be fixed rates per annum
(the Advances comprising any such Competitive Bid Borrowing being
referred to herein as "Fixed Rate Advances") and (B) at least five
Business Days prior to the date of the proposed Competitive Bid
Borrowing, if the Borrower shall instead specify in the Notice of
<PAGE> 19
Competitive Bid Borrowing that the rates of interest be offered by the
Lenders are to be based on the LIBO Rate (the Advances comprising such
Competitive Bid Borrowing being referred to herein as "LIBO Rate
Advances"). Each Notice of Competitive Bid Borrowing shall be
irrevocable and binding on the Borrower. The Agent shall in turn
promptly notify each Lender of each request for a Competitive Bid
Borrowing received by it from the Borrower by sending such Lender a
copy of the related Notice of Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances
to the Borrower as part of such proposed Competitive Bid Borrowing at a
rate or rates of interest specified by such Lender in its sole
discretion, by notifying the Agent (which shall give prompt notice
thereof to the Borrower), before 9:30 A.M. (New York City time) on the
date of such proposed Competitive Bid Borrowing, in the case of a
Competitive Bid Borrowing consisting of Fixed Rate Advances and before
10:00 A.M. (New York City time) three Business Days before the date of
such proposed Competitive Bid Borrowing, in the case of a Competitive
Bid Borrowing consisting of LIBO Rate Advances, of the minimum amount
and maximum amount of each Competitive Bid Advance which such Lender
would be willing to make as part of such proposed Competitive Bid
Borrowing (which amounts may, subject to the proviso to the first
sentence of this Section 2.03(a), exceed such Lender's Commitment, if
any), the rate or rates of interest therefor and such Lender's
Applicable Lending Office with respect to such Competitive Bid Advance;
provided that if the Agent in its capacity as a Lender shall, in its
sole discretion, elect to make any such offer, it shall notify the
Borrower of such offer at least 30 minutes before the time and on the
date on which notice of such election is to be given to the Agent by
the other Lenders. If any Lender shall elect not to make such an offer,
such Lender shall so notify the Agent, before 10:00 A.M. (New York City
time) on the date on which notice of such election is to be given to
the Agent by the other Lenders, and such Lender shall not be obligated
to, and shall not, make any Competitive Bid Advance as part of such
Competitive Bid Borrowing; provided that the failure by any Lender to
give such notice shall not cause such Lender to be obligated to make
any Competitive Bid Advance as part of such proposed Competitive Bid
Borrowing.
(iii) The Borrower shall, in turn, before 10:30 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing, in
the case of a Competitive Bid Borrowing consisting of Fixed Rate
Advances and before 11:00 A.M. (New York City time) three Business Days
before the date of such proposed Competitive Bid Borrowing, in the case
of a Competitive Bid Borrowing consisting of LIBO Rate Advances,
either:
(x) cancel such Competitive Bid Borrowing by giving the
Agent notice to that effect, or
(y) accept one or more of the offers made by any Lender
or Lenders pursuant to paragraph (ii) above, in its sole
discretion, by giving notice to the Agent of the amount of
each Competitive Bid Advance (which amount shall be equal to
or greater than the minimum amount, and equal to or less than
the maximum amount, notified to the Borrower by the Agent on
behalf of such Lender for such Competitive Bid Advance
pursuant to paragraph (ii) above) to be made by each Lender
as part of such Competitive Bid Borrowing, and reject any
remaining offers made by Lenders pursuant to paragraph (ii)
above by giving the Agent notice to that effect. The Borrower
shall accept the offers made by any Lender or Lenders to make
Competitive Bid Advances in order of the lowest to the
highest rates of interest offered by such Lenders. If two or
more Lenders have offered the same interest rate, the amount
to be borrowed at such interest rate will be allocated among
such Lenders in proportion to the amount that each such
Lender offered at such interest rate.
(iv) If the Borrower notifies the Agent that such Competitive
Bid Borrowing is cancelled pursuant to paragraph (iii)(x) above, the
Agent shall give prompt notice thereof to the Lenders and such
Competitive Bid Borrowing shall not be made.
<PAGE> 20
(v) If the Borrower accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the Agent
shall in turn promptly notify (A) each Lender that has made an offer as
described in paragraph (ii) above, of the date and aggregate amount of
such Competitive Bid Borrowing and whether or not any offer or offers
made by such Lender pursuant to paragraph (ii) above have been accepted
by the Borrower, (B) each Lender that is to make a Competitive Bid
Advance as part of such Competitive Bid Borrowing, of the amount of
each Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing, and (C) each Lender that is to make a
Competitive Bid Advance as part of such Competitive Bid Borrowing, upon
receipt, that the Agent has received forms of documents appearing to
fulfill the applicable conditions set forth in Article III. Each Lender
that is to make a Competitive Bid Advance as part of such Competitive
Bid Borrowing shall, before 12:00 noon (New York City time) on the date
of such Competitive Bid Borrowing specified in the notice received from
the Agent pursuant to clause (A) of the preceding sentence or any later
time when such Lender shall have received notice from the Agent
pursuant to clause (C) of the preceding sentence, make available for
the account of its Applicable Lending Office to the Agent at the
Agent's Account, in same day funds, such Lender's portion of such
Competitive Bid Borrowing. Upon fulfillment of the applicable
conditions set forth in Article III and after receipt by the Agent of
such funds, the Agent will make such funds available to the Borrower at
the Agent's address referred to in Section 8.02. Promptly after each
Competitive Bid Borrowing the Agent will notify each Lender of the
amount of the Competitive Bid Borrowing, the consequent Competitive Bid
Reduction and the dates upon which such Competitive Bid Reduction
commenced and will terminate.
(vi) If the Borrower notifies the Agent that it accepts one or
more of the offers made by any Lender or Lenders pursuant to paragraph
(iii)(y) above, such notice of acceptance shall be irrevocable and
binding on the Borrower. The Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result
of any failure to fulfill on or before the date specified in the
related Notice of Competitive Bid Borrowing for such Competitive Bid
Borrowing the applicable conditions set forth in Article III,
including, without limitation, any loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by such Lender to fund
the Competitive Bid Advance to be made by such Lender as part of such
Competitive Bid Borrowing when such Competitive Bid Advance, as a
result of such failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each Competitive Bid Borrowing, the Borrower and each
Lender shall be in compliance with the limitations set forth in the proviso to
the first sentence of subsection (a) above.
(c) Within the limits and on the conditions set forth in this Section
2.03, the Borrower may from time to time borrow under this Section 2.03, repay
or prepay pursuant to subsection (d) below, and reborrow under this Section
2.03, provided that a Competitive Bid Borrowing shall not be made within three
Business Days of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Agent for the account of each
Lender that has made a Competitive Bid Advance, on the maturity date of each
Competitive Bid Advance (such maturity date being that specified by the Borrower
for repayment of such Competitive Bid Advance in the related Notice of
Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
provided in the Competitive Bid Note evidencing such Competitive Bid Advance),
the then unpaid principal amount of such Competitive Bid Advance. The Borrower
shall have no right to prepay any principal amount of any Competitive Bid
Advance unless, and then only on the terms, specified by the Borrower for such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above and set forth in the Competitive
Bid Note evidencing such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid principal amount of
each Competitive Bid Advance from the date of such Competitive Bid Advance to
the date the principal amount of such Competitive Bid Advance is repaid in full,
at the rate of interest for such Competitive Bid Advance specified by the Lender
making
<PAGE> 21
such Competitive Bid Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date or
dates specified by the Borrower for such Competitive Bid Advance in the related
Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i)
above, as provided in the Competitive Bid Note evidencing such Competitive Bid
Advance. Upon the occurrence and during the continuance of an Event of Default,
the Borrower shall pay interest on the amount of unpaid principal of and
interest on each Competitive Bid Advance owing to a Lender, payable in arrears
on the date or dates interest is payable thereon, at a rate per annum equal at
all times to 2% per annum above the rate per annum required to be paid on such
Competitive Bid Advance under the terms of the Competitive Bid Note evidencing
such Competitive Bid Advance unless otherwise agreed in such Competitive Bid
Note.
(f) The indebtedness of the Borrower resulting from each Competitive
Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be
evidenced by a separate Competitive Bid Note of the Borrower payable to the
order of the Lender making such Competitive Bid Advance.
(g) Upon delivery of each Notice of Competitive Bid Borrowing, the
Borrower shall pay a non-refundable fee of $3,000 to the Agent for its own
account.
SECTION 2.04. Fees. (a) Facility Fee. The Borrower agrees to pay to
the Agent for the account of each Lender (other than the Designated Bidders) a
facility fee on the aggregate amount of such Lender's Commitment from the
Effective Date in the case of each Initial Lender and from effective date
specified in the Assignment and Acceptance pursuant to which it became a Lender
in the case of each other Lender until the Maturity Date at a rate per annum
equal to the Applicable Percentage in effect from time to time, payable in
arrears quarterly on the last day of each March, June, September and December,
commencing March 1998, and on the Maturity Date.
(b) Agent's Fees. The Borrower shall pay to the Agent for its own
account such fees as may from time to time be agreed between the Borrower and
the Agent.
SECTION 2.05. Termination or Reduction of the Commitments. (a) If
the Borrower has not made the Term Loan Election at least 15 days prior to the
Revolver Termination Date, the Commitments shall be automatically terminated on
the Revolver Termination Date. If the Borrower has made the Term Loan Election
in accordance with Section 2.06, from time to time after the Term Loan
Conversion Date upon each prepayment of the Revolving Credit Advances, the
aggregate Commitments of the Lenders under this Agreement shall be automatically
and permanently reduced on a pro rata basis by an amount equal to the amount by
which the aggregate Commitments of the Lenders under this Agreement immediately
prior to such reduction exceeds the aggregate unpaid principal amount of the
Revolving Credit Advances outstanding at such time.
(b) The Borrower shall have the right, upon at least three Business
Days' notice to the Agent, to terminate in whole or reduce ratably in part the
unused portions of the respective Commitments of the Lenders, provided that each
partial reduction shall be in the aggregate amount of $5,000,000 or an integral
multiple of $1,000,000 in excess thereof and provided further that the aggregate
amount of the Commitments of the Lenders shall not be reduced to an amount that
is less than the aggregate principal amount of the Competitive Bid Advances then
outstanding.
SECTION 2.06. Repayment of Revolving Credit Advances; Term Loan
Election. (a) The Borrower shall, subject to the next succeeding sentence, repay
to the Agent for the ratable account of the Lenders on the Revolver Termination
Date the aggregate principal amount of the Revolving Credit Advances then
outstanding.
(b) The Borrower may, at any time prior to the Revolver Termination
Date and upon not less than 15 days' notice to the Agent, elect (the "Term Loan
Election") to convert all of the Revolving Credit Advances outstanding on the
date specified in such notice (the "Term Loan Conversion Date") into a term loan
which the Borrower shall repay in full to the Agent for the ratable account of
the Lenders on the Maturity Date; provided that no Default has occurred and is
continuing on the date of notice of the Term Loan Election or on the Term Loan
Conversion Date.
<PAGE> 22
SECTION 2.07. Interest on Revolving Credit Advances. (a)
Scheduled Interest. The Borrower shall pay interest on the unpaid principal
amount of each Revolving Credit Advance owing to each Lender from the date of
such Revolving Credit Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Revolving
Credit Advance is a Base Rate Advance, a rate per annum equal at all
times to the sum of (x) the Base Rate in effect from time to time plus
(y) the Applicable Margin in effect from time to time, payable in
arrears quarterly on the last day of each March, June, September and
December during such periods and on the date such Base Rate Advance
shall be Converted or paid in full.
(ii) Eurodollar Rate Advances. During such periods as such
Revolving Credit Advance is a Eurodollar Rate Advance, a rate per annum
equal at all times during each Interest Period for such Revolving
Credit Advance to the sum of (x) the Eurodollar Rate for such Interest
Period for such Revolving Credit Advance plus (y) the Applicable Margin
in effect from time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more
than three months, on each day that occurs during such Interest Period
every three months from the first day of such Interest Period and on
the date such Eurodollar Rate Advance shall be Converted or paid in
full.
(b) Default Interest. Upon the occurrence and during the continuance of
an Event of Default, the Borrower shall pay interest on (i) the unpaid principal
amount of each Revolving Credit Advance owing to each Lender, payable in arrears
on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate per annum
equal at all times to 2% per annum above the rate per annum required to be paid
on such Revolving Credit Advance pursuant to clause (a)(i) or (a)(ii) above and
(ii) to the fullest extent permitted by law, the amount of any interest, fee or
other amount payable hereunder that is not paid when due, from the date such
amount shall be due until such amount shall be paid in full, payable in arrears
on the date such amount shall be paid in full and on demand, at a rate per annum
equal at all times to 2% per annum above the rate per annum required to be paid
on Base Rate Advances pursuant to clause (a)(i) above.
SECTION 2.08. Interest Rate Determination. (a) Each Reference
Bank agrees to furnish to the Agent timely information for the purpose of
determining each Eurodollar Rate and each LIBO Rate. If any one or more of the
Reference Banks shall not furnish such timely information to the Agent for the
purpose of determining any such interest rate, the Agent shall determine such
interest rate on the basis of timely information furnished by the remaining
Reference Banks. The Agent shall give prompt notice to the Borrower and the
Lenders of the applicable interest rate determined by the Agent for purposes of
Section 2.07(a)(i) or (ii), and the rate, if any, furnished by each Reference
Bank for the purpose of determining the interest rate under Section 2.07(a)(ii).
(b) If, with respect to any Eurodollar Rate Advances, the Required
Lenders notify the Agent that the Eurodollar Rate for any Interest Period for
such Advances will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurodollar Rate Advances for
such Interest Period, the Agent shall forthwith so notify the Borrower and the
Lenders, whereupon (i) each Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance, and (ii) the obligation of the Lenders to make, or to Convert Revolving
Credit Advances into, Eurodollar Rate Advances shall be suspended until the
Agent shall notify the Borrower and the Lenders that the circumstances causing
such suspension no longer exist.
(c) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the Agent will
forthwith so notify the Borrower and the Lenders and such Advances will
automatically, on the last day of the then existing Interest Period therefor,
Convert into Base Rate Advances.
<PAGE> 23
(d) On the date on which the aggregate unpaid principal amount of
Eurodollar Rate Advances comprising any Borrowing shall be reduced, by payment
or prepayment or otherwise, to less than $5,000,000, such Advances shall
automatically Convert into Base Rate Advances.
(e) Upon the occurrence and during the continuance of any Event of
Default, (i) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(ii) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
(f) If fewer than two Reference Banks furnish timely information to the
Agent for determining the Eurodollar Rate or LIBO Rate for any Eurodollar Rate
Advances or LIBO Rate Advances, as the case may be,
(i) the Agent shall forthwith notify the Borrower and the Lenders
that the interest rate cannot be determined for such Eurodollar Rate
Advances or LIBO Rate Advances, as the case may be,
(ii) with respect to Eurodollar Rate Advances, each such Advance
will automatically, on the last day of the then existing Interest
Period therefor, Convert into a Base Rate Advance (or if such Advance
is then a Base Rate Advance, will continue as a Base Rate Advance), and
(iii) the obligation of the Lenders to make Eurodollar Rate
Advances or LIBO Rate Advances or to Convert Revolving Credit Advances
into Eurodollar Rate Advances shall be suspended until the Agent shall
notify the Borrower and the Lenders that the circumstances causing such
suspension no longer exist.
SECTION 2.09. Optional Conversion of Revolving Credit Advances. The
Borrower may on any Business Day, upon notice given to the Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the date of
the proposed Conversion and subject to the provisions of Sections 2.08 and 2.12,
Convert all Revolving Credit Advances of one Type comprising the same Borrowing
into Revolving Credit Advances of the other Type; provided, however, that any
Conversion of Eurodollar Rate Advances into Base Rate Advances shall be made
only on the last day of an Interest Period for such Eurodollar Rate Advances,
any Conversion of Base Rate Advances into Eurodollar Rate Advances shall be in
an amount not less than the minimum amount specified in Section 2.02(b) and no
Conversion of any Revolving Credit Advances shall result in more separate
Revolving Credit Borrowings than permitted under Section 2.02(b). Each such
notice of a Conversion shall, within the restrictions specified above, specify
(i) the date of such Conversion, (ii) the Revolving Credit Advances to be
Converted, and (iii) if such Conversion is into Eurodollar Rate Advances, the
duration of the initial Interest Period for each such Advance. Each notice of
Conversion shall be irrevocable and binding on the Borrower.
SECTION 2.10. Prepayments of Revolving Credit Advances. (a)
Optional Prepayment. The Borrower may on any Business Day, upon notice given to
the Agent not later than 11:00 A.M., (i) on the same day for Base Rate Advances
and (ii) on the second Business Day prior to the prepayment in the case of
Eurodollar Rate Advances stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding principal amount of the Revolving Credit Advances comprising
part of the same Revolving Credit Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (x) each partial prepayment shall be in
an aggregate principal amount of $5,000,000 or an integral multiple of
$1,000,000 in excess thereof and (y) in the event of any such prepayment of a
Eurodollar Rate Advance, the Borrower shall be obligated to reimburse the
Lenders in respect thereof pursuant to Section 8.04(c).
(b) Mandatory Prepayment. The Borrower shall, upon five Business
Days notice from the Agent given at the request or with the consent of the
Required Lenders, prepay the aggregate principal amount outstanding plus all
interest thereon and all other amounts payable hereunder or under the Notes, in
the event that (i) any Person or two or more Persons acting in concert shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of the
Securities and Exchange Commission under the Securities Exchange Act of 1934),
directly or indirectly, of Voting Stock of the Parent (or other securities
convertible into such Voting Stock)
<PAGE> 24
representing 20% or more of the combined voting power of all Voting Stock of the
Parent; or (ii) any Person or two or more Persons acting in concert shall have
acquired by contract or otherwise, or shall have entered into a contract or
arrangement that, upon consummation, will result in its or their acquisition of
the power to exercise, directly or indirectly, a controlling influence over the
management or policies of the Parent.
SECTION 2.11. Increased Costs. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law),
there shall be any increase in the cost to any Lender of agreeing to make or
making, funding or maintaining Eurodollar Rate Advances or LIBO Rate Advances
(excluding for purposes of this Section 2.11 any such increased costs resulting
from (i) Taxes or Other Taxes (as to which Section 2.14 shall govern) and (ii)
changes in the basis of taxation of overall net income or overall gross income
by the United States or by the foreign jurisdiction or state under the laws of
which such Lender is organized or has its Applicable Lending Office or any
political subdivision thereof), then the Borrower shall from time to time, upon
demand by such Lender (with a copy of such demand to the Agent), pay to the
Agent for the account of such Lender additional amounts sufficient to compensate
such Lender for such increased cost. A certificate as to the amount of such
increased cost, submitted to the Borrower and the Agent by such Lender, shall be
conclusive and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or regulation
or any guideline or request from any central bank or other governmental
authority (whether or not having the force of law) affects or would affect the
amount of capital required or expected to be maintained by such Lender or any
corporation controlling such Lender and that the amount of such capital is
increased by or based upon the existence of such Lender's commitment to lend
hereunder and other commitments of this type, then, upon demand by such Lender
(with a copy of such demand to the Agent), the Borrower shall pay to the Agent
for the account of such Lender, from time to time as specified by such Lender,
additional amounts sufficient to compensate such Lender or such corporation in
the light of such circumstances, to the extent that such Lender reasonably
determines such increase in capital to be allocable to the existence of such
Lender's commitment to lend hereunder. A certificate as to such amounts
submitted to the Borrower and the Agent by such Lender shall be conclusive and
binding for all purposes, absent manifest error.
(c) In the event that a Lender demands payment from the Borrower for
amounts owing pursuant to subsection (a) or (b) of this Section 2.11, the
Borrower may, upon payment of such amounts and subject to the requirements of
Sections 8.04 and 8.07, substitute for such Lender another financial
institution, which financial institution shall be an Eligible Assignee and shall
assume the Commitments of such Lender and purchase the Notes held by such Lender
in accordance with Section 8.07, provided, however, that (i) no Default shall
have occurred and be continuing, (ii) the Borrower shall have satisfied all of
its obligations in connection with the Loan Documents with respect to such
Lender, and (iii) if such assignee is not a Lender, (A) such assignee is
acceptable to the Agent and (B) the Borrower shall have paid the Agent a $3,000
administrative fee.
SECTION 2.12. Illegality. Notwithstanding any other provision
of this Agreement, if any Lender shall notify the Agent that the introduction of
or any change in or in the interpretation of any law or regulation makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for any Lender or its Eurodollar Lending Office to perform its
obligations hereunder to make Eurodollar Rate Advances or LIBO Rate Advances or
to fund or maintain Eurodollar Rate Advances or LIBO Rate Advances hereunder,
(i) each Eurodollar Rate Advance or LIBO Rate Advance, as the case may be, will
automatically, upon such demand, Convert into a Base Rate Advance or an Advance
that bears interest at the rate set forth in Section 2.07(a)(i), as the case may
be, and (ii) the obligation of the Lenders to make Eurodollar Rate Advances or
LIBO Rate Advances or to Convert Revolving Credit Advances into Eurodollar Rate
Advances shall be suspended until the Agent shall notify the Borrower and the
Lenders that the circumstances causing such suspension no longer exist.
SECTION 2.13. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes not later than 11:00 A.M.
(New York City time) on the day when due in U.S. dollars to the Agent at the
Agent's Account in same day funds. The Agent will promptly thereafter cause to
be distributed like funds relating to the payment of principal or interest or
facility fees ratably (other than amounts
<PAGE> 25
payable pursuant to Section 2.03, 2.11, 2.14 or 8.04(c)) to the Lenders for the
account of their respective Applicable Lending Offices, and like funds relating
to the payment of any other amount payable to any Lender to such Lender for the
account of its Applicable Lending Office, in each case to be applied in
accordance with the terms of this Agreement. Upon its acceptance of an
Assignment and Acceptance and recording of the information contained therein in
the Register pursuant to Section 8.07(c), from and after the effective date
specified in such Assignment and Acceptance, the Agent shall make all payments
hereunder and under the Notes in respect of the interest assigned thereby to the
Lender assignee thereunder, and the parties to such Assignment and Acceptance
shall make all appropriate adjustments in such payments for periods prior to
such effective date directly between themselves.
(b) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under the Note
held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(c) All computations of interest based on the Base Rate shall be made
by the Agent on the basis of a year of 365 or 366 days, as the case may be, and
all computations of interest based on the Eurodollar Rate or the Federal Funds
Rate and of facility fees shall be made by the Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest or
facility fees are payable. Each determination by the Agent of an interest rate
hereunder shall be conclusive and binding for all purposes, absent manifest
error.
(d) Whenever any payment hereunder or under the Notes shall be stated
to be due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day, and such extension of time shall in such case be
included in the computation of payment of interest or facility fee, as the case
may be; provided, however, that, if such extension would cause payment of
interest on or principal of Eurodollar Rate Advances or LIBO Rate Advances to be
made in the next following calendar month, such payment shall be made on the
next preceding Business Day.
(e) Unless the Agent shall have received notice from the Borrower prior
to the date on which any payment is due to the Lenders hereunder that the
Borrower will not make such payment in full, the Agent may assume that the
Borrower has made such payment in full to the Agent on such date and the Agent
may, in reliance upon such assumption, cause to be distributed to each Lender on
such due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the Agent,
each Lender shall repay to the Agent forthwith on demand such amount distributed
to such Lender together with interest thereon, for each day from the date such
amount is distributed to such Lender until the date such Lender repays such
amount to the Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
hereunder or under the Notes shall be made, in accordance with Section 2.13,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent, taxes
imposed on its overall net income, and franchise taxes imposed on it in lieu of
net income taxes, by the jurisdiction under the laws of which such Lender or the
Agent (as the case may be) is organized or any political subdivision thereof
and, in the case of each Lender, taxes imposed on its overall net income, and
franchise taxes imposed on it in lieu of net income taxes, by the jurisdiction
of such Lender's Applicable Lending Office or any political subdivision thereof
(all such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities in respect of payments hereunder or under the Notes being
hereinafter referred to as "Taxes"). If the Borrower shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder or under any
Note to any Lender or the Agent, (i) the sum payable shall be increased as may
be necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 2.14) such Lender or
the Agent (as the case may be) receives an amount equal to the sum it would have
received had no such deductions been made, (ii) the Borrower shall make such
deductions and (iii) the Borrower shall pay the full amount deducted to the
relevant taxation authority or other authority in accordance with applicable
law.
<PAGE> 26
(b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under the Notes or from the
execution, delivery or registration of, performing under, or otherwise with
respect to, this Agreement or the Notes (hereinafter referred to as "Other
Taxes").
(c) The Borrower shall indemnify each Lender and the Agent for the full
amount of Taxes or Other Taxes (including, without limitation, any taxes imposed
by any jurisdiction on amounts payable under this Section 2.14) imposed on or
paid by such Lender or the Agent (as the case may be) and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto. This indemnification shall be made within 30 days from the date such
Lender or the Agent (as the case may be) makes written demand therefor.
(d) Within 30 days after the date of any payment of Taxes, the Borrower
shall furnish to the Agent, at its address referred to in Section 8.02, the
original or a certified copy of a receipt evidencing payment thereof. In the
case of any payment hereunder or under the Notes by or on behalf of the Borrower
through an account or branch outside the United States or by or on behalf of the
Borrower by a payor that is not a United States person, if the Borrower
determines that no Taxes are payable in respect thereof, the Borrower shall
furnish, or shall cause such payor to furnish, to the Agent, at such address, an
opinion of counsel acceptable to the Agent stating that such payment is exempt
from Taxes. For purposes of this subsection (d) and subsection (e), the terms
"United States" and "United States person" shall have the meanings specified in
Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction outside the
United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Initial Lender and on the date of the Assignment
and Acceptance pursuant to which it becomes a Lender in the case of each other
Lender, and from time to time thereafter as requested in writing by the Borrower
(but only so long as such Lender remains lawfully able to do so), shall provide
each of the Agent and the Borrower with two original Internal Revenue Service
forms 1001 or 4224, as appropriate, or any successor or other form prescribed by
the Internal Revenue Service, certifying that such Lender is exempt from or
entitled to a reduced rate of United States withholding tax on payments pursuant
to this Agreement or the Notes. If the forms provided by a Lender at the time
such Lender first becomes a party to this Agreement indicates a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Lender provides
the appropriate forms certifying that a lesser rate applies, whereupon
withholding tax at such lesser rate only shall be considered excluded from Taxes
for periods governed by such form; provided, however, that, if at the date of
the Assignment and Acceptance pursuant to which a Lender assignee becomes a
party to this Agreement, the Lender assignor was entitled to payments under
subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender assignee on such date. If any form or
document referred to in this subsection (e) requires the disclosure of
information, other than information necessary to compute the tax payable and
information required on the date hereof by Internal Revenue Service form 1001 or
4224, that the Lender reasonably considers to be confidential, the Lender shall
give notice thereof to the Borrower and shall not be obligated to include in
such form or document such confidential information.
(f) For any period with respect to which a Lender has failed to provide
the Borrower with the appropriate form described in Section 2.14(e) (other than
if such failure is due to a change in law occurring subsequent to the date on
which a form originally was required to be provided, or if such form otherwise
is not required under the first sentence of subsection (e) above), such Lender
shall not be entitled to indemnification under Section 2.14(a) or (c) with
respect to Taxes imposed by the United States by reason of such failure;
provided, however, that should a Lender become subject to Taxes because of its
failure to deliver a form required hereunder, the Borrower shall take such steps
as the Lender shall reasonably request to assist the Lender to recover such
Taxes.
(g) In the event that a Lender demands payment from the Borrower for
amounts owing pursuant to subsection (a) or (b) of this Section 2.14, the
Borrower may, upon payment of such amounts and subject to the requirements of
Sections 8.04 and 8.07, substitute for such Lender another financial
institution, which financial
<PAGE> 27
institution shall be an Eligible Assignee and shall assume the Commitments of
such Lender and purchase the Notes held by such Lender in accordance with
Section 8.07, provided, however, that (i) no Default shall have occurred and be
continuing, (ii) the Borrower shall have satisfied all of its obligations in
connection with the Loan Documents with respect to such Lender, and (iii) if
such assignee is not a Lender, (A) such assignee is acceptable to the Agent and
(B) the Borrower shall have paid the Agent a $3,000 administrative fee.
SECTION 2.15. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of the Revolving Credit Advances
owing to it (other than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of
its ratable share of payments on account of the Revolving Credit Advances
obtained by all the Lenders, such Lender shall forthwith purchase from the other
Lenders such participations in the Revolving Credit Advances owing to them as
shall be necessary to cause such purchasing Lender to share the excess payment
ratably with each of them; provided, however, that if all or any portion of such
excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 2.15 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.16. Extensions of Revolver Termination Date. No
earlier than 45 days and no later than 30 days prior to the Revolver Termination
Date in effect at any time, the Borrower may, by written notice to the Agent,
request that such Revolver Termination Date be extended for a period of 364
days. Such request shall be irrevocable and binding upon the Borrower. The Agent
shall promptly notify each Lender of such request. If a Lender agrees, in its
individual and sole discretion, to so extend its Commitment (an "Extending
Lender"), it shall deliver to the Agent a written notice of its agreement to do
so no earlier than 30 days and no later than 20 days prior to such Revolver
Termination Date and the Agent shall notify the Borrower of such Extending
Lender's agreement to extend its Commitment no later than 15 days prior to such
Revolver Termination Date. The Commitment of any Lender that fails to accept or
respond to the Borrower's request for extension of the Revolver Termination Date
(a "Declining Lender") shall be terminated on the Revolver Termination Date
originally in effect (without regard to any extension by other Lenders) and on
such Revolver Termination Date the Borrower shall pay in full the principal
amount of all Advances owing to such Declining Lender, together with accrued
interest thereon to the date of such payment of principal and all other amounts
payable to such Declining Lender under this Agreement. The Agent shall promptly
notify each Extending Lender of the aggregate Commitments of the Declining
Lenders. The Extending Lenders, or any of them, may offer to increase their
respective Commitments by an aggregate amount up to the aggregate amount of the
Declining Lenders' Commitments and any such Extending Lender shall deliver to
the Agent a notice of its offer to so increase its Commitment no later than 15
days prior to such Revolver Termination Date. To the extent of any shortfall in
the aggregate amount of extended Commitments, the Borrower shall have the right
to require any Declining Lender to assign in full its rights and obligations
under this Agreement to an Eligible Assignee designated by the Borrower and
acceptable to the Agent, that agrees to accept all of such rights and
obligations (a "Replacement Lender"), provided that (i) such increase and/or
such assignment is otherwise in compliance with Section 8.07, (ii) such
Declining Lender receives payment in full of the principal amount of all
Advances owing to such Declining Lender, together with accrued interest thereon
to the date of such payment of principal and all other amounts payable to such
Declining Lender under this Agreement, and (iii) any such increase shall be
effective on the Revolver Termination Date in effect at the time the Borrower
requests such extension and any such assignment shall be effective on the date
specified by the Borrower and agreed to by the Replacement Lender and the Agent.
If Extending Lenders and Replacement Lenders provide Commitments in an aggregate
amount at least equal to 51% of the aggregate amount of the Commitments
outstanding 30 days prior to the Revolver Termination Date in effect at the time
the Borrower requests such extension, the Revolver Termination Date shall be
extended by 364 days for such Extending Lenders.
<PAGE> 28
SECTION 2.17. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds)
solely for general corporate purposes of the Borrower and its Subsidiaries.
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of
Sections 2.01 and 2.03. Sections 2.01 and 2.03 of this Agreement shall become
effective on and as of the first date (the "Effective Date") on which the
following conditions precedent have been satisfied:
(a) There shall have occurred no Material Adverse Change, in
the case of the Parent and its Subsidiaries since December 31, 1996,
and in the case of the Borrower, since the date of its formation.
(b) There shall exist no action, suit, investigation,
litigation or proceeding affecting either Loan Party or any of its
Subsidiaries pending or threatened before any court, governmental
agency or arbitrator that (i) could be reasonably likely to have a
Material Adverse Effect other than the matters described in the SEC
Reports (the "Disclosed Litigation") or (ii) purports to affect the
legality, validity or enforceability of any Loan Document or the
consummation of the transactions contemplated hereby and there shall
have been no adverse change in the status, or financial effect on any
Loan Party or any of its Subsidiaries of the Disclosed Litigation from
that described in the SEC Reports.
(c) Nothing shall have come to the attention of the Lenders
during the course of their due diligence investigation to lead them to
believe that the Information Memorandum was or has become misleading,
incorrect or incomplete in any material respect; without limiting the
generality of the foregoing, the Lenders shall have been given such
access, as such Lenders have reasonably requested, to the management,
records, books of account, contracts and properties of each Loan Party
and its Subsidiaries as they shall have requested.
(d) All governmental and third party consents and approvals
necessary in connection with the transactions contemplated hereby shall
have been obtained (without the imposition of any conditions that are
not acceptable to the Lenders) and shall remain in effect, and no law
or regulation shall be applicable in the reasonable judgment of the
Lenders that restrains, prevents or imposes materially adverse
conditions upon the transactions contemplated by the Loan Documents.
(e) The Borrower shall have notified each Lender and the Agent
in writing as to the proposed Effective Date.
(f) The Borrower shall have paid all accrued fees and expenses
of the Agent and the Lenders.
(g) On the Effective Date, the following statements shall be
true and the Agent shall have received for the account of each Lender a
certificate signed by a duly authorized officer of the Borrower, dated
the Effective Date, stating that:
(i) The representations and warranties contained in
Section 4.01 are correct on and as of the Effective Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(iii) The Parent shall have delivered a certificate,
substantially in form of Exhibit E hereto, signed on behalf of
the Parent by a Financial Officer of the Parent.
<PAGE> 29
(h) The Agent shall have received on or before the Effective
Date the following, each dated such day, in form and substance
satisfactory to the Agent and (except for the Revolving Credit Notes)
in sufficient copies for each Lender:
(i) The Revolving Credit Notes to the order of the
Lenders, respectively.
(ii) Certified copies of the resolutions of the Board of
Directors of each Loan Party approving each Loan Document to
which it is a party, and of all documents evidencing other
-necessary corporate action and governmental approvals, if
any, with respect to each Loan Document to which it is a
party.
(iii) A certificate of the Secretary or an Assistant
Secretary of each Loan Party certifying the names and true
signatures of the officers of each Loan Party authorized to
sign each Loan Document to which it is a party and the other
documents to be delivered hereunder or thereunder.
(iv) An unaudited Consolidated balance sheet of the
Borrower and its Subsidiaries and the related statements of
income and cash flows of the Borrower and its Subsidiaries, as
of December 31, 1996 and as filed by the Parent with the
Securities and Exchange Commission on Form U-3A-2.
(v) A support agreement in substantially the form of
Exhibit F (as amended, supplemented or otherwise modified from
time to time in accordance with its terms, the "Support
Agreement"), duly executed by each Loan Party.
(vi) A collateral assignment agreement in substantially
the form of Exhibit G (as amended, supplemented or otherwise
modified from time to time in accordance with its terms, the
"Collateral Assignment Agreement"), duly executed by the
Borrower, together with:
(A) acknowledgment copies or stamped receipt copies
of proper financing statements, duly filed on or before
the Effective Date under the Uniform Commercial Code of
all jurisdictions that the Agent may deem necessary or
desirable in order to perfect and protect the first
priority liens and security interests created under the
Support Agreement and the Collateral Assignment
Agreement, covering the Assigned Rights described in the
Support Agreement and the Collateral Assignment
Agreement, and
(B) completed requests for information, dated on or
before the Effective Date, listing the financing
statements referred to in clause (A) above and all other
effective financing statements filed in the jurisdictions
referred to in clause (A) above that name the Borrower as
debtor, together with copies of such other financing
statements.
(vii) A favorable opinion of C.C. Nern, General Counsel
of the Parent and the Borrower, substantially in the form of
Exhibit H hereto and as to such other matters as any Lender
through the Agent may reasonably request.
(viii) A favorable opinion of Shearman & Sterling,
counsel for the Agent, in form and substance satisfactory to
the Agent.
(ix) The Agent shall have received on or before the
Effective Date an executed copy of the Assignment Agreement,
in form and substance satisfactory to the Agent.
SECTION 3.02. Conditions Precedent to Each Revolving Credit
Borrowing. The obligation of each Lender to make a Revolving Credit Advance on
the occasion of each Revolving Credit Borrowing shall be
<PAGE> 30
subject to the conditions precedent that the Effective Date shall have occurred
and on the date of such Revolving Credit Borrowing (a) the following statements
shall be true (and each of the giving of the applicable Notice of Revolving
Credit Borrowing and the acceptance by the Borrower of the proceeds of such
Revolving Credit Borrowing shall constitute a representation and warranty by the
Borrower that on the date of such Borrowing such statements are true):
(i) the representations and warranties contained in Section
4.01 are correct on and as of the date of such Revolving Credit
Borrowing, before and after giving effect to such Revolving Credit
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date, and
(ii) no event has occurred and is continuing, or would result
from such Revolving Credit Borrowing or from the application of the
proceeds therefrom, that constitutes a Default;
and (b) the Agent shall have received such other approvals, opinions or
documents as any Lender through the Agent may reasonably request.
SECTION 3.03. Conditions Precedent to Each Competitive Bid
Borrowing. The obligation of each Lender that is to make a Competitive Bid
Advance on the occasion of a Competitive Bid Borrowing to make such Competitive
Bid Advance as part of such Competitive Bid Borrowing is subject to the
conditions precedent that (i) the Agent shall have received the written
confirmatory Notice of Competitive Bid Borrowing with respect thereto, (ii) on
or before the date of such Competitive Bid Borrowing, but prior to such
Competitive Bid Borrowing, the Agent shall have received a Competitive Bid Note
payable to the order of such Lender for each of the one or more Competitive Bid
Advances to be made by such Lender as part of such Competitive Bid Borrowing, in
a principal amount equal to the principal amount of the Competitive Bid Advance
to be evidenced thereby and otherwise on such terms as were agreed to for such
Competitive Bid Advance in accordance with Section 2.03, and (iii) on the date
of such Competitive Bid Borrowing the following statements shall be true (and
each of the giving of the applicable Notice of Competitive Bid Borrowing and the
acceptance by the Borrower of the proceeds of such Competitive Bid Borrowing
shall constitute a representation and warranty by the Borrower that on the date
of such Competitive Bid Borrowing such statements are true):
(a) the representations and warranties contained in Section
4.01 are correct on and as of the date of such Competitive Bid
Borrowing, before and after giving effect to such Competitive Bid
Borrowing and to the application of the proceeds therefrom, as though
made on and as of such date,
(b) no event has occurred and is continuing, or would result
from such Competitive Bid Borrowing or from the application of the
proceeds therefrom, that constitutes a Default, and
(c) no event has occurred and no circumstance exists as a
result of which the information concerning either Loan Party that has
been provided to the Agent and each Lender by either Loan Party in
connection herewith would include an untrue statement of a material
fact or omit to state any material fact or any fact necessary to make
the statements contained therein, in the light of the circumstances
under which they were made, not misleading.
SECTION 3.04. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Agent responsible for the transactions contemplated by this Agreement
shall have received notice from such Lender prior to the date that the Borrower,
by notice to the Lenders, designates as the proposed Effective Date, specifying
its objection thereto. The Agent shall promptly notify the Lenders of the
occurrence of the Effective Date.
<PAGE> 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
The Borrower represents and warrants as follows:
(a) The Borrower is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan.
(b) The execution, delivery and performance by the Borrower of
the Loan Documents to which it is a party, and the consummation of the
transactions contemplated hereby and thereby, are within such Loan
Party's corporate powers, have been duly authorized by all necessary
corporate action, and do not contravene (i) the Borrower's charter or
by-laws or (ii) law or any contractual restriction binding on or
affecting the Borrower.
(c) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery
and performance by the Borrower of this Agreement, the Notes or any
other Loan Document to which it is a party.
(d) This Agreement has been, and each of the Notes and each of
the other Loan Documents to which it is a party when delivered
hereunder will have been, duly executed and delivered by the Borrower.
This Agreement is, and each of the Notes and each of the other Loan
Documents to which it is a party when delivered hereunder will be, the
legal, valid and binding obligation of the Borrower enforceable against
the Borrower in accordance with their respective terms, subject to the
effect of any applicable bankruptcy, insolvency, reorganization,
moratorium or similar law affecting creditors rights generally.
(e) The Consolidated balance sheet of the Parent and its
Subsidiaries as at December 31, 1996, and the related Consolidated
statements of income and cash flows of the Parent and its Subsidiaries
for the fiscal year then ended, accompanied by an opinion of Deloitte &
Touche LLP, independent public accountants, and the Consolidated
balance sheet of the Parent and its Subsidiaries as at September 30,
1997, and the related Consolidated statements of income and cash flows
of the Parent and its Subsidiaries for the nine months then ended, duly
certified by a Financial Officer of the Parent, copies of which have
been furnished to each Lender, and the unaudited Consolidated balance
sheet of the Borrower and its Subsidiaries as of December 31, 1996 and
as filed by the Parent with the Securities and Exchange Commission on
Form U-3A-2 fairly present, subject in the case of said balance sheet
as at September 30, 1997, and said statements of income and cash flows
for the nine months then ended, to year-end audit adjustments, the
Consolidated financial condition of the Parent and its Subsidiaries as
at such dates all in accordance with generally accepted accounting
principles consistently applied. Since December 31, 1996, in the case
of the Parent and its Subsidiaries, and since the dates of its
formation, in the case of the Borrower, there has been no Material
Adverse Change, except as shall have been disclosed in the SEC Reports.
(f) There is no pending or threatened action, suit,
investigation, litigation or proceeding, including, without limitation,
any Environmental Action, affecting the Borrower or any of its
Subsidiaries before any court, governmental agency or arbitrator that
(i) could be reasonably likely to have a Material Adverse Effect (other
than the Disclosed Litigation) or (ii) purports to affect the legality,
validity or enforceability of this Agreement, any Note or any other
Loan Document or the consummation of the transactions contemplated
hereby and there has been no adverse change in the status of any
Disclosed Litigation, or its financial effect on any Loan Party or any
of its Subsidiaries from that described in the SEC Reports.
<PAGE> 32
(g) The operations and properties of the Borrower and each of
its Subsidiaries comply in all material respects with all applicable
Environmental Laws and Environmental Permits, all past non-compliance
with such Environmental Laws and Environmental Permits has been
resolved without ongoing obligations or costs, and no circumstances
exist that could be reasonably likely to (i) form the basis of an
Environmental Action against the Borrower or any of its Subsidiaries or
any of their properties that could have a Material Adverse Effect or
(ii) cause any such property to be subject to any restrictions on
ownership, occupancy, use or transferability under any Environmental
Law that could have a Material Adverse Effect.
(h) No ERISA Event has occurred or is reasonably expected to
occur with respect to any Plan.
(i) Schedule B (Actuarial Information) to the most recent
annual report (Form 5500 Series) for each Plan, copies of which have
been filed with the Internal Revenue Service, is complete and accurate
and fairly presents the funding status of such Plan, and since the date
of such Schedule B there has been no material adverse change in such
funding status.
(j) Neither the Borrower nor any ERISA Affiliate has incurred
or is reasonably expected to incur any Withdrawal Liability to any
Multiemployer Plan.
(k) Neither the Borrower nor any ERISA Affiliate has been
notified by the sponsor of a Multiemployer Plan that such Multiemployer
Plan is in reorganization or has been terminated, within the meaning of
Title IV of ERISA, and no such Multiemployer Plan is reasonably
expected to be in reorganization or to be terminated, within the
meaning of Title IV of ERISA.
(l) Except as set forth in the financial statements referred
to in this Section 4.01, the Borrower and its Subsidiaries have no
material liability with respect to "expected post retirement benefit
obligations" within the meaning of Statement of Financial Accounting
Standards No. 106.
(m) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within
the meaning of Regulation U issued by the Board of Governors of the
Federal Reserve System), and no proceeds of any Advance will be used to
purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying any margin stock.
(n) Neither the Borrower nor any of its Subsidiaries is, or
after the making of any Advance or the application of the proceeds or
repayment thereof, or the consummation of any of the other transactions
contemplated hereby, will be, an "investment company", or an
"affiliated person" of, or "promoter" or "principal underwriter" for,
an "investment company" (within the meaning of the Investment Company
Act of 1940, as amended).
(o) The Borrower is a "subsidiary company" of a "holding
company" (within the meaning of the Public Utility Holding Company Act
of 1935, as amended) which holding company is exempt from being
required to seek approval to perform its obligations under the Loan
Documents pursuant to Rule 2 of the Rules and Regulations promulgated
pursuant to the Public Utility Holding Company Act of 1935, as amended.
(p) The Support Agreement (as it may be amended, supplemented,
terminated or otherwise modified in accordance with its terms) is in
full force and effect in accordance with its terms.
<PAGE> 33
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, the
Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and Environmental Laws.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, might by law become a Lien upon its property;
provided, however, that neither the Borrower nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors.
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which the
Borrower or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain its corporate existence, rights (charter and statutory) and
franchises; provided, however, that the Borrower may consummate any
merger or consolidation permitted under Section 5.02(b) and provided
further that the Borrower shall not be required to preserve any right
or franchise if the Board of Directors of the Borrower or such
Subsidiary shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Borrower and that the
loss thereof is not disadvantageous in any material respect to the
Borrower or the Lenders.
(e) Visitation Rights. At any reasonable time and from time to
time, permit the Agent or any of the Lenders or any agents or
representatives thereof, to examine and make copies of and abstracts
from the records and books of account of, and visit the properties of,
the Borrower and any of its Subsidiaries, and to discuss the affairs,
finances and accounts of the Borrower and any of its Subsidiaries with
any of their officers or directors and with their independent certified
public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Subject to clause (d)
above, maintain and preserve, all of its properties that are used or
useful in the conduct of its business in good working order and
condition, ordinary wear and tear excepted.
(h) Reporting Requirements. Furnish to the Lenders:
(i) as soon as available and in any event
within 45 days after the end of each of the first three
quarters of each fiscal year of the Parent, Consolidated
balance sheet of the Parent and its Consolidated Subsidiaries
as of the end of such quarter and Consolidated statements of
income and cash flows of the Parent and its Subsidiaries for
the period commencing at the end of the previous fiscal year
and ending with the end of such quarter;
<PAGE> 34
(ii) as soon as available and in any event within 90
days after the end of each fiscal year of the Parent, a copy
of the annual report to Shareholders for such year for the
Parent and its Consolidated Subsidiaries, containing the
Consolidated balance sheet of the Parent and its Consolidated
Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the Parent
and its Subsidiaries for such fiscal year, in each case
accompanied by (A) an opinion by Deloitte & Touche LLP or
other independent public accountants acceptable to the
Required Lenders and (B) the report by the Parent filed with
the Securities and Exchange Commission on Form U-3A-2 for such
fiscal year, containing the Consolidating balance sheet of the
Borrower and its Subsidiaries as of the end of such fiscal
year and Consolidating statements of income and Consolidating
statements of retained earnings of the Borrower and its
Subsidiaries for such fiscal year, in each case, having been
prepared in accordance with generally accepted accounting
principles consistent with those applied in the preparation of
the financial statements referred to in Section 4.01;
(iii) as soon as available and in any event within 45
days after the end of each of the first three quarters of each
fiscal year of the Borrower, unaudited Consolidated balance
sheets of the Borrower and its Subsidiaries as of the end of
such quarter and unaudited Consolidated statements of income
and cash flows of the Borrower and its Subsidiaries for the
period commencing at the end of the previous fiscal year and
ending with the end of such quarter, duly certified (subject
to year-end audit adjustments) by a Financial Officer of the
Borrower as having been prepared in accordance with generally
accepted accounting principles in each case, having been
prepared in accordance with generally accepted accounting
principles consistent with those applied in the preparation of
the financial statements referred to in Section 4.01;
(iv) as soon as possible and in any event within five
days after the occurrence of each Default continuing on the
date of such statement, a statement of a Financial Officer of
the Borrower setting forth details of such Default and the
action that the Borrower has taken and proposes to take with
respect thereto;
(v) promptly after the sending or filing thereof
copies of all reports and registration statements that the
Borrower or any Subsidiary files with the Securities and
Exchange Commission or any national securities exchange;
(vi) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(f); and
(vii) such other information respecting the Borrower
or any of its Subsidiaries as any Lender through the Agent may
from time to time reasonably request.
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, the Borrower
will not:
(a) Liens, Etc. Create or suffer to exist, or permit any of
its Subsidiaries to create or suffer to exist, any Lien on or with
respect to any of its properties, whether now owned or hereafter
acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, other than:
(i) Permitted Liens,
(ii) purchase money Liens upon or in any real
property or equipment acquired or held by the Borrower or any
Subsidiary in the ordinary course of business to secure the
purchase price of such property or equipment or to secure Debt
incurred solely for the purpose of financing the acquisition
of such property or equipment, or Liens existing on such
property or
<PAGE> 35
equipment at the time of its acquisition (other
than any such Liens created in contemplation of such
acquisition that were not incurred to finance the acquisition
of such property) or extensions, renewals or replacements of
any of the foregoing for the same or a lesser amount,
provided, however, that no such Lien shall extend to or cover
any properties of any character other than the real property
or equipment being acquired, and no such extension, renewal or
replacement shall extend to or cover any properties not
theretofore subject to the Lien being extended, renewed or
replaced, provided further that the aggregate principal amount
of the indebtedness secured by the Liens referred to in this
clause (ii) shall not exceed $20,000,000 at any time
outstanding,
(iii) the Liens existing on the Effective Date and
described on Schedule 5.02(a) hereto,
(iv) Liens on property of a Person existing at the
time such Person is merged into or consolidated with the
Borrower or any Subsidiary of the Borrower or becomes a
Subsidiary of the Borrower; provided that such Liens were not
created in contemplation of such merger, consolidation or
acquisition and do not extend to any assets other than those
of the Person so merged into or consolidated with the Borrower
or such Subsidiary or acquired by the Borrower or such
Subsidiary,
(v) other Liens securing Debt in an aggregate
principal amount not to exceed $20,000,000 at any time
outstanding, and
(vi) the replacement, extension or renewal of any
Lien permitted by clause (iii) or (iv) above upon or in the
same property theretofore subject thereto or the replacement,
extension or renewal (without increase in the amount or change
in any direct or contingent obligor) of the Debt secured
thereby.
(b) Mergers, Etc. Merge or consolidate with or into, or
convey, transfer, lease or otherwise dispose of (whether in one
transaction or in a series of transactions) all or substantially all of
its assets (whether now owned or hereafter acquired) to, any Person, or
permit any of its Subsidiaries to do so, except that any Subsidiary of
the Borrower may merge or consolidate with or into any other Subsidiary
of the Borrower, and except that any Subsidiary of the Borrower may
merge into or dispose of assets to the Borrower, provided, in each
case, that no Default shall have occurred and be continuing at the time
of such proposed transaction or would result therefrom.
(c) Change in Nature of Business. Make any material change in
the nature of its business as carried on at the date hereof.
(d) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies or
reporting practices, except as required or permitted by generally
accepted accounting principles.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Advance when the same becomes due and payable; or the Borrower shall
fail to pay any interest on any Advance or make any other payment of
fees or other amounts payable under this Agreement or any Note within
three Business Days after the same becomes due and payable; or
<PAGE> 36
(b) Any representation or warranty made by the Borrower herein
or by the Borrower (or any of its officers) in connection with this
Agreement shall prove to have been incorrect in any material respect
when made; or
(c) (i) The Borrower shall fail to perform or observe any
term, covenant or agreement contained in Section 2.10(b), 5.01(d), (e)
or (h) or 5.02 or in the Collateral Assignment Agreement, (ii) the
Parent shall fail to perform or observe any term, covenant or agreement
contained in the Support Agreement, or (iii) the Borrower shall fail to
perform or observe any other term, covenant or agreement contained in
any Loan Document on its part to be performed or observed if such
failure shall remain unremedied for 10 days after written notice
thereof shall have been given to the Borrower by the Agent or any
Lender; or
(d) Either Loan Party or any of its Subsidiaries shall fail to
pay any principal of or premium or interest on any Debt that is
outstanding in a principal or notional amount of at least $10,000,000
in the aggregate (but excluding Debt outstanding hereunder and
Nonrecourse Debt) of such Loan Party or such Subsidiary (as the case
may be), when the same becomes due and payable (whether by scheduled
maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any,
specified in the agreement or instrument relating to such Debt; or any
other event shall occur or condition shall exist under any agreement or
instrument relating to any such Debt and shall continue after the
applicable grace period, if any, specified in such agreement or
instrument, if the effect of such event or condition is to accelerate,
or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be
prepaid or redeemed (other than by a regularly scheduled required
prepayment or redemption), purchased or defeased, or an offer to
prepay, redeem, purchase or defease such Debt shall be required to be
made, in each case prior to the stated maturity thereof; or
(e) Either Loan Party or DECO shall generally not pay its
debts as such debts become due, or shall admit in writing its inability
to pay its debts generally, or shall make a general assignment for the
benefit of creditors; or any proceeding shall be instituted by or
against either Loan Party or any of its Subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry
of an order for relief or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part
of its property and, in the case of any such proceeding instituted
against it (but not instituted by it), either such proceeding shall
remain undismissed or unstayed for a period of 30 days, or any of the
actions sought in such proceeding (including, without limitation, the
entry of an order for relief against, or the appointment of a receiver,
trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or either Loan Party or
any of its Subsidiaries shall take any corporate action to authorize
any of the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $10,000,000 shall be rendered against either Loan Party or any of
its Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect; or
(g) Any non-monetary judgment or order shall be rendered
against either Loan Party or any of its Subsidiaries that could be
reasonably expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(h) The Parent shall at any time cease to hold 100% of the
Voting Stock of the Borrower or DECO; or
<PAGE> 37
(i) The Borrower or any of its ERISA Affiliates shall incur,
or, in the reasonable opinion of the Required Lenders, shall be
reasonably likely to incur liability in excess of $10,000,000 in the
aggregate as a result of one or more of the following: (i) the
occurrence of any ERISA Event; (ii) the partial or complete withdrawal
of the Borrower or any of its ERISA Affiliates from a Multiemployer
Plan; or (iii) the reorganization or termination of a Multiemployer
Plan; or
(j) The Parent and its Subsidiaries, on a Consolidated basis,
shall at any time cease to:
(i) Maintain a ratio of Consolidated EBITDA to cash
interest payable on all Debt (excluding, (A) such Nonrecourse
Debt of their own and of their Subsidiaries and Affiliates as
would be listed as such in the financial statements of the
Parent of the kind delivered pursuant to Section 5.01(h)(ii)
and (iii) and (B) the Junior Subordinated Debentures) of not
less than 2:1 for each period of four consecutive fiscal
quarters ending on the last day of September, December, March
and June of each year, or
(ii) Maintain a ratio of Consolidated Debt
(excluding, (A) such Nonrecourse Debt of their own and of
their Subsidiaries as would be listed in the financial
statements of the Parent and (B) the Junior Subordinated
Debentures) to Capitalization of not greater than .65:1; or
(k) any provision of any of the Loan Documents after delivery
thereof pursuant to Section 3.01 shall for any reason cease to be valid
and binding on or enforceable against any Loan Party to it, or any such
Loan Party shall so state in writing;
then, and in any such event, the Agent (i) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the
obligation of each Lender to make Advances to be terminated, whereupon the same
shall forthwith terminate, and (ii) shall at the request, or may with the
consent, of the Required Lenders, by notice to the Borrower, declare the Notes,
all interest thereon and all other amounts payable under this Agreement to be
forthwith due and payable, whereupon the Notes, all such interest and all such
amounts shall become and be forthwith due and payable, without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly
waived by the Borrower; provided, however, that in the event of an actual or
deemed entry of an order for relief with respect to the Borrower under the
Federal Bankruptcy Code, (A) the obligation of each Lender to make Advances
shall automatically be terminated and (B) the Notes, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower.
ARTICLE VII
THE AGENT
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under this Agreement as are delegated to
the Agent by the terms hereof, together with such powers and discretion as are
reasonably incidental thereto. As to any matters not expressly provided for by
this Agreement (including, without limitation, enforcement or collection of the
Notes), the Agent shall not be required to exercise any discretion or take any
action, but shall be required to act or to refrain from acting (and shall be
fully protected in so acting or refraining from acting) upon the instructions of
the Required Lenders, and such instructions shall be binding upon all Lenders
and all holders of Notes; provided, however, that the Agent shall not be
required to take any action that exposes the Agent to personal liability or that
is contrary to this Agreement or applicable law. The Agent agrees to give to
each Lender prompt notice of each notice given to it by the Borrower pursuant to
the terms of this Agreement.
SECTION 7.02. Agent's Reliance, Etc. Neither the Agent nor any
of its directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement, except for its or their own gross negligence or willful misconduct.
Without
<PAGE> 38
limitation of the generality of the foregoing, the Agent: (i) may treat
the payee of any Note as the holder thereof until the Agent receives and accepts
an Assignment and Acceptance entered into by the Lender that is the payee of
such Note, as assignor, and an Eligible Assignee, as assignee, as provided in
Section 8.07; (ii) may consult with legal counsel (including counsel for the
Borrower), independent public accountants and other experts selected by it and
shall not be liable for any action taken or omitted to be taken in good faith by
it in accordance with the advice of such counsel, accountants or experts; (iii)
makes no warranty or representation to any Lender and shall not be responsible
to any Lender for any statements, warranties or representations (whether written
or oral) made in or in connection with this Agreement; (iv) shall not have any
duty to ascertain or to inquire as to the performance or observance of any of
the terms, covenants or conditions of this Agreement on the part of the Borrower
or to inspect the property (including the books and records) of the Borrower;
(v) shall not be responsible to any Lender for the due execution, legality,
validity, enforceability, genuineness, sufficiency or value of, or the
perfection or priority of any lien or security interest created or purported to
be created under or in connection with, any Loan Document or any other
instrument or document furnished pursuant hereto; and (vi) shall incur no
liability under or in respect of this Agreement by acting upon any notice,
consent, certificate or other instrument or writing (which may be by telecopier,
telegram or telex) believed by it to be genuine and signed or sent by the proper
party or parties.
SECTION 7.03. Citibank and Affiliates. With respect to its
Commitment, the Advances made by it and the Note issued to it, Citibank shall
have the same rights and powers under this Agreement as any other Lender and may
exercise the same as though it were not the Agent; and the term "Lender" or
"Lenders" shall, unless otherwise expressly indicated, include Citibank in its
individual capacity. Citibank and its Affiliates may accept deposits from, lend
money to, act as trustee under indentures of, accept investment banking
engagements from and generally engage in any kind of business with, the
Borrower, any of its Subsidiaries and any Person who may do business with or own
securities of the Borrower or any such Subsidiary, all as if Citibank were not
the Agent and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon the Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon the Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. The Lenders (other than the
Designated Bidders) agree to indemnify the Agent (to the extent not reimbursed
by the Borrower), ratably according to the respective principal amounts of the
Revolving Credit Notes then held by each of them (or if no Revolving Credit
Notes are at the time outstanding or if any Revolving Credit Notes are held by
Persons that are not Lenders, ratably according to the respective amounts of
their Commitments), from and against any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever that may be imposed on, incurred
by, or asserted against the Agent in any way relating to or arising out of any
Loan Document or any action taken or omitted by the Agent under any Loan
Document, provided that no Lender shall be liable for any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting from the Agent's gross negligence or
willful misconduct. Without limitation of the foregoing, each Lender (other than
the Designated Bidders) agrees to reimburse the Agent promptly upon demand for
its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Agent in connection with the preparation, execution, delivery,
administration, modification, amendment or enforcement (whether through
negotiations, legal proceedings or otherwise) of, or legal advice in respect of
rights or responsibilities under, any Loan Document, to the extent that the
Agent is not reimbursed for such expenses by the Borrower.
SECTION 7.06. Successor Agent. The Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent. If no successor Agent shall have been so appointed by the
Required Lenders, and shall have accepted such
<PAGE> 39
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $50,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation or
removal hereunder as Agent, the provisions of this Article VII shall inure to
its benefit as to any actions taken or omitted to be taken by it while it was
Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement or the Revolving Credit Notes, nor consent to any
departure by the Borrower therefrom, shall in any event be effective unless the
same shall be in writing and signed by the Required Lenders, and then such
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no amendment, waiver
or consent shall, unless in writing and signed by all the Lenders (other than
the Designated Bidders), do any of the following: (a) waive any of the
conditions specified in Section 3.01, (b) increase the Commitments of the
Lenders or subject the Lenders to any additional obligations, (c) reduce the
principal of, or interest on, the Revolving Credit Notes or any fees or other
amounts payable hereunder, (d) postpone any date fixed for any payment of
principal of, or interest on, the Revolving Credit Notes or any fees or other
amounts payable hereunder, (e) change the percentage of the Commitments or of
the aggregate unpaid principal amount of the Revolving Credit Notes, or the
number of Lenders, that shall be required for the Lenders or any of them to take
any action hereunder or (f) amend this Section 8.01; and provided further that
no amendment, waiver or consent shall, unless in writing and signed by the Agent
in addition to the Lenders required above to take such action, affect the rights
or duties of the Agent under this Agreement or any Note.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic or telex communication) and mailed, telecopied, telegraphed, telexed
or delivered, if to the Borrower, at its address at 200 Second Avenue, Detroit,
MI 48226, Attention: Christopher C. Arvani; if to any Initial Lender, at its
Domestic Lending Office specified opposite its name on Schedule I hereto; if to
any other Lender, at its Domestic Lending Office specified in the Assignment and
Acceptance pursuant to which it became a Lender; and if to the Agent, at its
address at One Court Square, Long Island City, NY 11120, Attention: Shawn
Bernard; or, as to the Borrower or the Agent, at such other address as shall be
designated by such party in a written notice to the other parties and, as to
each other party, at such other address as shall be designated by such party in
a written notice to the Borrower and the Agent. All such notices and
communications shall, when mailed, telecopied, telegraphed or telexed, be
effective when deposited in the mails, telecopied, delivered to the telegraph
company or confirmed by telex answerback, respectively, except that notices and
communications to the Agent pursuant to Article II, III or VII shall not be
effective until received by the Agent. Delivery by telecopier of an executed
counterpart of any amendment or waiver of any provision of this Agreement or the
Notes or of any Exhibit hereto to be executed and delivered hereunder shall be
effective as delivery of a manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender or the Agent to exercise, and no delay in exercising, any right
hereunder or under any Note shall operate as a waiver thereof; nor shall any
single or partial exercise of any such right preclude any other or further
exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) The Borrower agrees to
pay on demand all reasonable costs and reasonable expenses of the Agent in
connection with the preparation, execution, delivery, administration,
modification and amendment of this Agreement, the Notes, each other Loan
Document and the
<PAGE> 40
other documents to be delivered hereunder and thereunder, including, without
limitation, (A) all due diligence, syndication (including printing, distribution
and bank meetings), transportation, computer, duplication, appraisal,
consultant, and audit expenses and (B) the reasonable fees and reasonable
expenses of counsel for the Agent with respect thereto and with respect to
advising the Agent as to its rights and responsibilities under the Loan
Documents. The Borrower further agrees to pay on demand all reasonable costs and
reasonable expenses of the Agent and the Lenders, if any (including, without
limitation, reasonable internal and external counsel fees and expenses, provided
such fees and expenses are not duplicative), in connection with the enforcement
(whether through negotiations, legal proceedings or otherwise) of this
Agreement, the Notes and the other documents to be delivered hereunder,
including, without limitation, reasonable fees and expenses of counsel for the
Agent and each Lender in connection with the enforcement of rights under this
Section 8.04(a).
(b) The Borrower agrees to indemnify, to the extent legally
permissible, and hold harmless the Agent and each Lender and each of their
Affiliates and their officers, directors, employees, agents and advisors (each,
an "Indemnified Party") from and against any and all claims, damages, losses,
liabilities and expenses (including, without limitation, reasonable fees and
expenses of counsel) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) the Notes, this Agreement, the other Loan Documents any of
the transactions contemplated herein or therein or the actual or proposed use of
the proceeds of the Advances or (ii) the actual or alleged presence of Hazardous
Materials on any property of the Borrower or any of its Subsidiaries or any
Environmental Action relating in any way to the Borrower or any of its
Subsidiaries, in each case whether or not such investigation, litigation or
proceeding is brought by the Borrower, its directors, shareholders or creditors
or an Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby are consummated, except to the extent such claim, damage, loss, liability
or expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. The Borrower also agrees not to assert any claim against the
Agent, any Lender, any of their Affiliates, or any of their respective
directors, officers, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to the Notes, this Agreement, the other Loan Documents
any of the transactions contemplated herein or therein or the actual or proposed
use of the proceeds of the Advances.
(c) If any payment of principal of, or Conversion of, any Eurodollar
Rate Advance or LIBO Rate Advance is made by the Borrower to or for the account
of a Lender other than on the last day of the Interest Period for such Advance,
as a result of a payment or Conversion pursuant to Section 2.08(d) or (e), 2.10
or 2.12, acceleration of the maturity of the Notes pursuant to Section 6.01 or
for any other reason, the Borrower shall, upon demand by such Lender (with a
copy of such demand to the Agent), pay to the Agent for the account of such
Lender any amounts required to compensate such Lender for any additional losses,
costs or expenses that it may reasonably incur as a result of such payment or
Conversion, including, without limitation, any loss (including loss of
anticipated profits), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Advance.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of each Loan Party contained
in Sections 2.11, 2.14 and 8.04 shall survive the payment in full of principal,
interest and all other amounts payable hereunder and under the Notes.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Agent to declare the Notes due and payable pursuant to the provisions of
Section 6.01, each Lender and each of its Affiliates is hereby authorized at any
time and from time to time, to the fullest extent permitted by law, to set off
and apply any and all deposits (general or special, time or demand, provisional
or final) at any time held and other indebtedness at any time owing by such
Lender or such Affiliate to or for the credit or the account of either Loan
Party against any and all of the obligations of either Loan Party now or
hereafter existing under the Loan Documents Agreement and the Note held by such
Lender, whether or not such Lender shall have made any demand under this
Agreement or such Note and although such obligations may be unmatured. Each
Lender agrees promptly to notify such Loan Party after any such set-off and
application, provided that the failure to give
<PAGE> 41
such notice shall not affect the validity of such set-off and application. The
rights of each Lender and its Affiliates under this Section are in addition to
other rights and remedies (including, without limitation, other rights of
set-off) that such Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower and the Agent and when the Agent shall
have been notified by each Initial Lender that such Initial Lender has executed
it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agent and each Lender and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lenders.
SECTION 8.07. Assignments, Designations and Participations.
(a) Each Lender (other than the Designated Bidders) may assign to one or more
Persons all or a portion of its rights and obligations under this Agreement
(including, without limitation, all or a portion of its Commitment, the
Revolving Credit Advances owing to it and the Revolving Credit Note or Notes
held by it); provided, however, that (i) each such assignment shall be of a
constant, and not a varying, percentage of all rights and obligations under this
Agreement (other than any right to make Competitive Bid Advances, Competitive
Bid Advances owing to it and Competitive Bid Notes), (ii) except in the case of
an assignment to a Person that, immediately prior to such assignment, was a
Lender or an assignment of all of a Lender's rights and obligations under this
Agreement, the amount of the Commitment of the assigning Lender being assigned
pursuant to each such assignment (determined as of the date of the Assignment
and Acceptance with respect to such assignment) shall in no event be less than
$10,000,000 or an integral multiple of $1,000,000 in excess thereof, (iii) each
such assignment shall be to an Eligible Assignee, and (iv) the parties to each
such assignment shall execute and deliver to the Agent, for its acceptance and
recording in the Register, an Assignment and Acceptance, together with any
Revolving Credit Note subject to such assignment and a processing and
recordation fee of $3,000. Upon such execution, delivery, acceptance and
recording, from and after the effective date specified in each Assignment and
Acceptance, (x) the assignee thereunder shall be a party hereto and, to the
extent that rights and obligations hereunder have been assigned to it pursuant
to such Assignment and Acceptance, have the rights and obligations of a Lender
hereunder and (y) the Lender assignor thereunder shall, to the extent that
rights and obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all or the remaining portion of an assigning Lender's rights
and obligations under this Agreement, such Lender shall cease to be a party
hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender assignor thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows: (i) other than as provided
in such Assignment and Acceptance, such assigning Lender makes no representation
or warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of, or the perfection or priority of any lien or security interest created
or purported to be created under or in connection with, this Agreement or any
other instrument or document furnished pursuant hereto; (ii) such assigning
Lender makes no representation or warranty and assumes no responsibility with
respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such assignee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Assignment and Acceptance; (iv) such assignee will,
independently and without reliance upon the Agent, such assigning Lender or any
other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers and discretion as are reasonably incidental thereto; and (vii)
such assignee agrees that it will perform in accordance with their terms all of
the obligations that by the terms of this Agreement are required to be performed
by it as a Lender.
<PAGE> 42
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an assignee representing that it is an Eligible Assignee,
together with any Revolving Credit Note or Notes subject to such assignment, the
Agent shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit C hereto, (i) accept such Assignment and
Acceptance, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower. Within five Business Days
after its receipt of such notice, the Borrower, at its own expense, shall
execute and deliver to the Agent in exchange for the surrendered Revolving
Credit Note a new Note to the order of such Eligible Assignee in an amount equal
to the Commitment assumed by it pursuant to such Assignment and Acceptance and,
if the assigning Lender has retained a Commitment hereunder, a new Revolving
Credit Note to the order of the assigning Lender in an amount equal to the
Commitment retained by it hereunder. Such new Revolving Credit Note or Notes
shall be in an aggregate principal amount equal to the aggregate principal
amount of such surrendered Revolving Credit Note or Notes, shall be dated the
effective date of such Assignment and Acceptance and shall otherwise be in
substantially the form of Exhibit A-1 hereto.
(d) Each Lender (other than the Designated Bidders) may designate one
or more banks or other entities to have a right to make Competitive Bid Advances
as a Lender pursuant to Section 2.03; provided, however, that (i) no such Lender
shall be entitled to make more than two such designations, (ii) each such Lender
making one or more of such designations shall retain the right to make
Competitive Bid Advances as a Lender pursuant to Section 2.03, (iii) each such
designation shall be to a Designated Bidder and (iv) the parties to each such
designation shall execute and deliver to the Agent, for its acceptance and
recording in the Register, a Designation Agreement. Upon such execution,
delivery, acceptance and recording, from and after the effective date specified
in each Designation Agreement, the designee thereunder shall be a party hereto
with a right to make Competitive Bid Advances as a Lender pursuant to Section
2.03 and the obligations related thereto.
(e) By executing and delivering a Designation Agreement, the Lender
making the designation thereunder and its designee thereunder confirm and agree
with each other and the other parties hereto as follows: (i) such Lender makes
no representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of, or the perfection or priority of any lien or security
interest created or purported to be created under or in connection with, this
Agreement or any other instrument or document furnished pursuant hereto; (ii)
such Lender makes no representation or warranty and assumes no responsibility
with respect to the financial condition of the Borrower or the performance or
observance by the Borrower of any of its obligations under this Agreement or any
other instrument or document furnished pursuant hereto; (iii) such designee
confirms that it has received a copy of this Agreement, together with copies of
the financial statements referred to in Section 4.01 and such other documents
and information as it has deemed appropriate to make its own credit analysis and
decision to enter into such Designation Agreement; (iv) such designee will,
independently and without reliance upon the Agent, such designating Lender or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such designee confirms that it is a
Designated Bidder; (vi) such designee appoints and authorizes the Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the Agent by the terms hereof, together
with such powers and discretion as are reasonably incidental thereto; and (vii)
such designee agrees that it will perform in accordance with their terms all of
the obligations which by the terms of this Agreement are required to be
performed by it as a Lender.
(f) Upon its receipt of a Designation Agreement executed by a
designating Lender and a designee representing that it is a Designated Bidder,
the Agent shall, if such Designation Agreement has been completed and is
substantially in the form of Exhibit D hereto, (i) accept such Designation
Agreement, (ii) record the information contained therein in the Register and
(iii) give prompt notice thereof to the Borrower.
(g) The Agent shall maintain at its address referred to in Section 8.02
a copy of each Assignment and Acceptance and each Designation Agreement
delivered to and accepted by it and a register for the recordation of the names
and addresses of the Lenders and, with respect to Lenders other than Designated
Bidders, the Commitment of, and principal amount of the Advances owing to, each
Lender from time to time (the "Register"). The entries in the Register shall be
conclusive and binding for all purposes, absent manifest error, and the
<PAGE> 43
Borrower, the Agent and the Lenders may treat each Person whose name is recorded
in the Register as a Lender hereunder for all purposes of this Agreement. The
Register shall be available for inspection by the Borrower or any Lender at any
reasonable time and from time to time upon reasonable prior notice.
(h) Each Lender may sell participations to one or more banks or other
entities (other than the Borrower or any of its Affiliates) in or to all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment, the Advances owing to it and the
Note or Notes held by it); provided, however, that (i) such Lender's obligations
under this Agreement (including, without limitation, its Commitment to the
Borrower hereunder) shall remain unchanged, (ii) such Lender shall remain solely
responsible to the other parties hereto for the performance of such obligations,
(iii) such Lender shall remain the holder of any such Note for all purposes of
this Agreement, (iv) the Borrower, the Agent and the other Lenders shall
continue to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and (v) no participant
under any such participation shall have any right to approve any amendment or
waiver of any provision of this Agreement or any Note, or any consent to any
departure by the Borrower therefrom, except to the extent that such amendment,
waiver or consent would reduce the principal of, or interest on, the Notes or
any fees or other amounts payable hereunder, in each case to the extent subject
to such participation, or postpone any date fixed for any payment of principal
of, or interest on, the Notes or any fees or other amounts payable hereunder, in
each case to the extent subject to such participation.
(i) Any Lender may, in connection with any assignment, designation or
participation or proposed assignment, designation or participation pursuant to
this Section 8.07, disclose to the assignee, designee or participant or proposed
assignee, designee or participant, any information relating to the Borrower
furnished to such Lender by or on behalf of the Borrower; provided that, prior
to any such disclosure, the assignee, designee or participant or proposed
assignee, designee or participant shall agree to preserve the confidentiality of
any Confidential Information relating to the Borrower received by it from such
Lender.
(j) Notwithstanding any other provision set forth in this Agreement,
any Lender may at any time create a security interest in all or any portion of
its rights under this Agreement (including, without limitation, the Advances
owing to it and the Note or Notes held by it) in favor of any Federal Reserve
Bank in accordance with Regulation A of the Board of Governors of the Federal
Reserve System.
SECTION 8.08. Confidentiality. Neither the Agent nor any Lender
shall disclose any Confidential Information to any other Person without the
consent of the Borrower, other than (a) to the Agent's or such Lender's
Affiliates and their officers, directors, employees, agents and advisors and, as
contemplated by Section 8.07(i), to actual or prospective assignees and
participants, and then only on a confidential basis, (b) as required by any law,
rule or regulation or judicial process, (c) to any rating agency when required
by it, provided that, prior to any such disclosure, such rating agency shall
undertake to preserve the confidentiality of any Confidential Information
relating to either Loan Party received by it from such Lender and (d) as
requested or required by any state, federal or foreign authority or examiner
regulating banks or banking.
SECTION 8.09. Governing Law. This Agreement and the Notes shall be
governed by, and construed in accordance with, the laws of the State of New
York.
SECTION 8.10. Execution in Counterparts. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties hereto
hereby irrevocably and unconditionally submits, for itself and its property, to
the nonexclusive jurisdiction of any New York State court or federal court of
the United States of America sitting in New York City, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement or the Notes, or for recognition or enforcement of any judgment, and
each of the parties hereto hereby irrevocably and unconditionally agrees that
all claims in respect of any such action or proceeding may be heard and
determined in any such New York State
<PAGE> 44
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement shall
affect any right that any party may otherwise have to bring any action or
proceeding relating to this Agreement or the Notes in the courts of any
jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement or the Notes in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
SECTION 8.12. Effective Date Assignments; Etc. (a) As of the
Effective Date, prior to giving effect to any assignment under this Agreement as
of such date, each Existing Lender party hereto represents and warrants, as to
the assignment effected by such Existing Lender by this Agreement that as of the
Effective Date (i) its Existing Commitment is in the dollar amount specified as
its Existing Commitment on Schedule II hereto and the aggregate outstanding
principal amount of Existing Advances owing to it is in the dollar amount
specified as the aggregate outstanding principal amount of Existing Advances
owing to such Existing Lender on Schedule II hereto; and (ii) that such Existing
Lender is the legal and beneficial owner of such interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim created
by such Existing Lender.
(b) Each Existing Lender party hereto and Initial Lender
confirms to, and agrees with, each of the other Initial Lenders as to the
assignment effected by this Agreement by such Existing Lender or Initial Lender,
as the case may be, as follows: (i) except as set forth in subsection (a) above,
each such Existing Lender makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Original Credit Agreement or this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency or
value of the Original Credit Agreement or this Agreement or any other instrument
or document furnished pursuant thereto or hereto; (ii) each such Existing Lender
makes no representation or warranty and assumes no responsibility with respect
to the financial condition of any Loan Party or any of its Subsidiaries or the
performance or observance by any Loan Party or any of its Subsidiaries of any of
its obligations under the Original Credit Agreement or this Agreement or any
other instrument or document furnished pursuant thereto or hereto; (iii) each
Initial Lender confirms that it has received such documents and information as
it has deemed appropriate to make its own credit analysis and decision to
execute and deliver this Agreement and agrees that it shall have no recourse
against the Agent, any Existing Lender or any other Lender with respect to any
matters relating to the Original Credit Agreement or this Agreement; and (iv)
each Initial Lender will, independently and without reliance upon the Agent, any
Existing Lender or any other Lender and based on such documents and information
as it shall deem appropriate at the time, continue to make its own credit
decisions in taking or not taking action under this Agreement, the Note or Notes
held by it and the other documents executed in connection herewith.
(c) As of the Effective Date, (i) each Initial Lender shall be
a party to this Agreement and, to the extent provided herein, have the rights
and obligations of a Lender hereunder and (ii) each Existing Lender party hereto
shall, to the extent provided herein, relinquish its rights and be released from
its obligations under this Agreement as to any assignment effected herein.
(d) From and after the Effective Date, the Agent shall make
all payments under this Agreement in respect of the interest assigned hereby
(including, without limitation, all payments of principal, interest and
commitment fees with respect thereto) to the Initial Lenders and other Lenders
hereunder.
(e) On or before the Effective Date, the Borrower shall have
paid all accrued interest, fees and other amounts payable and owing to the
Existing Lenders and the Agent as of the Effective Date in connection with the
Original Credit Agreement. Without prejudice to the survival of any other
agreement of the Borrower under the Original Credit Agreement, all amounts that
would be payable under Sections 2.11, 2.14 and
<PAGE> 45
8.04 of the Original Credit Agreement shall be payable under this Agreement to
the extent that such amounts have not been paid as of the Effective Date.
(f) As of the Effective Date, (i) the Original Credit
Agreement is amended and restated in full as set forth in this Agreement, (ii)
the Existing Commitments are held by the Initial Lenders under this Agreement,
(iii) the Existing Notes are cancelled and replaced by the Notes, and (iv) all
obligations which, by the terms of the Original Credit Agreement, are evidenced
by the Existing Notes are evidenced by the Notes.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 46
SECTION 8.13. Waiver of Jury Trial. Each of the Borrower, the
Agent and the Lenders hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the Notes or the
actions of the Agent or any Lender in the negotiation, administration,
performance or enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
DTE CAPITAL CORPORATION
By
Name:
Title:
CITIBANK, N.A.,
as Agent
By
Name:
Title:
<PAGE> 47
Initial Lenders
Commitment
$30,000,000 CITIBANK, N.A.
By
Name:
Title:
$17,000,000 THE BANK OF NEW YORK
By
Name:
Title:
$15,000,000 THE BANK OF NOVA SCOTIA
By
Name:
Title:
$15,000,000 BANQUE PARIBAS
By
Name:
Title:
$27,500,000 BARCLAYS BANK PLC
By
Name:
Title:
$15,000,000 BAYERISCHE LANDESBANK GIROZENTRALE
By
Name:
Title:
$17,000,000 THE CHASE MANHATTAN BANK
<PAGE> 48
By
Name:
Title:
$20,000,000 COMERICA BANK
By
Name:
Title:
$10,000,000 THE DAI-ICHI KANGYO BANK, LTD.,
CHICAGO BRANCH
By
Name:
Title:
$17,000,000 DEN DANSKE BANK
By
Name:
Title:
$27,500,000 THE FIRST NATIONAL BANK OF CHICAGO
By
Title:
Name:
$17,000,000 FIRST UNION NATIONAL BANK
By
Name:
Title:
$20,000,000 THE FUJI BANK LIMITED
By
Name:
Title:
$17,000,000 THE INDUSTRIAL BANK OF JAPAN,
LIMITED
By
<PAGE> 49
Name:
Title:
$15,000,000 THE LONG-TERM CREDIT BANK
OF JAPAN, LTD.
By
Name:
Title:
$15,000,000 MELLON BANK, N.A.
By
Name:
Title:
$15,000,000 MICHIGAN NATIONAL BANK
By
Name:
Title:
$10,000,000 THE SAKURA BANK, LTD.
By
Name:
Title:
$8,000,000 THE SANWA BANK, LIMITED, CHICAGO
BRANCH
By
Name:
Title:
$15,000,000 SOCIETE GENERALE
By
Name:
Title:
$15,000,000 THE SUMITOMO BANK, LTD.,
CHICAGO BRANCH
By
<PAGE> 50
Name:
Title:
$10,000,000 TORONTO DOMINION (TEXAS), INC.
By
Name:
Title:
$15,000,000 UNION BANK
By
Name:
Title:
$17,000,000 WESTDEUTCHE LANDESBANK
GIROZENTRALE,
NEW YORK BRANCH
By
Name:
Title:
By
Name:
Title:
$400,000,000 Total of the Commitments
<PAGE> 51
<TABLE>
<CAPTION>
SCHEDULE I
DTE CAPITAL CORPORATION
APPLICABLE LENDING OFFICES
- --------------------------------------------------------------------------------------------------------------------
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Citibank, N.A. One Court Square One Court Square
Long Island City, NY 11120 Long Island City, NY 11120
Attention: Attention:
Telecopier: (718) 248-4844 Telecopier: (718) 248-4844
- --------------------------------------------------------------------------------------------------------------------
The Bank of New York One Wall Street One Wall Street
New York, NY 10286 New York, NY 10286
Attention: JoAnn Evans/Rita Pelosi Attention: JoAnn Evans/Rita Pelosi
Telecopier: (212) 635-7923 Telecopier: (212) 635-7923
- --------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia 600 Peachtree St. N.E., Suite 2700 600 Peachtree St. N.E., Suite 2700
Atlanta, GA 30308 Atlanta, GA 30308
Attention: Shannon Dancila Attention: Shannon Dancila
Telecopier: (404) 888-8998 Telecopier: (404) 888-8998
- --------------------------------------------------------------------------------------------------------------------
Banque Paribas 787 Seventh Avenue 787 Seventh Avenue
New York, NY 10019 New York, NY 10019
Attention: Robyn Gewanter Attention: John Anderson
Telecopier: (212) 841-2217 Telecopier: (212) 841-2217
- --------------------------------------------------------------------------------------------------------------------
Barclays Bank PLC 75 Wall Street 222 Broadway
New York, NY 10265 New York, NY 10038
Attention: Christine Francese Attention: Dawn Matthews
Telecopier: (212) 412-5307 Telecopier: (212) 412-1098
- --------------------------------------------------------------------------------------------------------------------
Bayerische Landesbank 560 Lexington Avenue 560 Lexington Avenue
Girozentrale New York, NY 10022 New York, NY 10022
Attention: Sean O'Sullivan Attention: Sean O'Sullivan
Telecopier: (212) 310-9868 Telecopier: (212)
- --------------------------------------------------------------------------------------------------------------------
Chase Manhattan Bank One Chase Manhattan Plaza One Chase Manhattan Plaza
Third Floor Third Floor
New York, NY 10081 New York, NY 10081
Attention: Lynett Lang Attention: Lynett Lang
Telecopier: (212) 552-5777 Telecopier: (212) 552-5777
- --------------------------------------------------------------------------------------------------------------------
Comerica Bank 500 Woodward Avenue, MC 3268 500 Woodward Avenue, MC 3268
Detroit, MI 48226 Detroit, MI 48226
Attention: Donna Pierzynowski Attention: Donna Pierzynowski
Telecopier: (313) 222-9514 Telecopier: (313) 222-9514
- --------------------------------------------------------------------------------------------------------------------
The Dai-Ichi Kangyo Bank, Ltd., 10 S. Wacker Drive, Suite 2600 10 S. Wacker Drive, Suite 2600
Chicago Branch Chicago, IL 60606 Chicago, IL 60606
Attention: Bonita Conley Attention: R. Howard
Telecopier: (312) 876-2011 Telecopier: (312) 876-2011
- --------------------------------------------------------------------------------------------------------------------
Den Danske Bank 280 Park Avenue, 4th Floor 280 Park Avenue, 4th Floor
New York, NY 10017 New York, NY 10017
Attention: Mogens Sondgaard Attention: Mogens Sondgaard
Telecopier: (212) 559-2493 Telecopier: (212)
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 52
<TABLE>
<S> <C> <C>
The First National Bank of One First National Plaza One First National Plaza
Chicago Chicago, IL 60670 Chicago, IL 60670
Attention: Richard Waldman Attention: Lyn Pozsgay
Telecopier: (312) 732-3055 Telecopier: (312) 732-4840
- --------------------------------------------------------------------------------------------------------------------
First Union Bank 301 South College St., TW-5 301 South College St., TW-5
Charlotte, NC 28288-0735 Charlotte, NC 28288-0735
Attention: Dana Maloney Attention: Dana Maloney
Telecopier: (704) 383-6670 Telecopier: (704) 383-6670
- --------------------------------------------------------------------------------------------------------------------
The Fuji Bank Limited 225 West Wacker Drive, Suite 2000 225 West Wacker Drive, Suite 2000
Chicago, IL 60606 Chicago, IL 60606
Attention: Phil Langheim Attention: Phil Langheim
Telecopier: (312) 621-0539 Telecopier: (312) 621-0539
- --------------------------------------------------------------------------------------------------------------------
The Industrial Bank of Japan, 227 West Monroe Street, Suite 2600 227 West Monroe Street, Suite 2600
Limited Chicago, IL 60606 Chicago, IL 60606
Attention: Margie Smith Attention: Margie Smith
Telecopier: (312) 855-8200 Telecopier: (312) 855-8200
- --------------------------------------------------------------------------------------------------------------------
The Long-Term Credit Bank 165 Broadway, 48th Floor 165 Broadway, 48th Floor
of Japan, Ltd. New York, NY 10006 New York, NY 10006
Attention: Claire Kowalski Attention: Claire Kowalski
Telecopier: (212) 335-4441 Telecopier: (212) 335-4441
- --------------------------------------------------------------------------------------------------------------------
Mellon Bank, N.A. Three Mellon Bank Center, Rm 2332 Three Mellon Bank Center, Rm 2332
Pittsburgh, PA 15259 Pittsburgh, PA 15259
Attention: Kathy Capp Attention: Kathy Capp
Telecopier: (412) 234-4644 Telecopier: (412) 234-4644
- --------------------------------------------------------------------------------------------------------------------
Michigan National Bank 24101 Novi Rd. Suite 101 24101 Novi Rd. Suite 101
Novi, MI 48375 Novi, MI 48375
Attention: James Tesen Attention: James Tesen
Telecopier: (820) 479-8927 Telecopier: (820) 479-8927
- --------------------------------------------------------------------------------------------------------------------
The Sakura Bank 227 W. Monroe Street, Suite 4700 227 W. Monroe Street, Suite 4700
Chicago, IL 60606 Chicago, IL 60606
Attention: Kristin Hays Attention: Kristin Hays
Telecopier: (312) 332-5345 Telecopier: (312) 332-5345
- --------------------------------------------------------------------------------------------------------------------
The Sanwa Bank 10 South Wacker Drive 10 South Wacker Drive
Chicago, IL 60606 Chicago, IL 60606
Attention: Richard Ault Attention: Richard Ault
Telecopier: (312) 346-6677 Telecopier: (312) 346-6677
- --------------------------------------------------------------------------------------------------------------------
Societe Generale 181 West Madison, Suite 3400 181 West Madison, Suite 3400
Chicago, IL 60602 Chicago, IL 60602
Attention: R. Boyd Harman Attention: Albert Tune
Telecopier: (312) 578-5099 Telecopier: (312) 578-5099
- --------------------------------------------------------------------------------------------------------------------
The Sumitomo Bank, Ltd., 233 South Wacker Drive, Suite 4800 233 South Wacker Drive, Suite 4800
Chicago Branch Chicago, IL 60606-6448 Chicago, IL 60606-6448
Attention: Kwang Park Attention: Kwang Park
Telecopier: (312) 876-1490 Telecopier: (312) 876-1490
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 53
<TABLE>
<S> <C> <C>
The Toronto Dominion (Texas), 909 Fanin, Suite 1700 909 Fanin, Suite 1700
Inc. Houston, TX 77010 Houston, TX 77010
Attention: David Parker, Manager, Attention: David Parker, Manager,
Credit Administration Credit Administration
Telecopier: (713) 951-9921 Telecopier: (713) 951-9921
- --------------------------------------------------------------------------------------------------------------------
Union Bank Energy Capital Services Energy Capital Services
445 S. Figueroa Street, 15th Floor 445 S. Figueroa Street, 15th Floor
Los Angeles, CA 90071 Los Angeles, CA 90071
Attention: Patricia Gonzalez Attention: Patricia Gonzalez
Telecopier: (213) 236-4096 Telecopier: (213) 236-4096
- --------------------------------------------------------------------------------------------------------------------
Westdeutche Landesbank 1211 Avenue of the Americas 1211 Avenue of the Americas
Grozentrale, New York Branch New York, NY 10036 New York, NY 10036
Attention: Cheryl Wilson Attention: Cheryl Wilson
Telecopier: (212) 302-7946 Telecopier: (212) 302-7946
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 54
<TABLE>
<CAPTION>
SCHEDULE II
EXISTING COMMITMENTS
AND ADVANCES
--------------------------------------- ---------------------------------- ---------------------------------
Name of Existing Lender Existing Commitments Existing Advances
--------------------------------------- ---------------------------------- ---------------------------------
<S> <C> <C>
Citibank, N.A. 12,000,000.00 3,120,000.00
--------------------------------------- ---------------------------------- ---------------------------------
ABN-AMRO Bank 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Bank of America 10,000,000.00 2,600,000.00
--------------------------------------- ---------------------------------- ---------------------------------
The Bank of New York 10,000,000.00 2,600,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Banque Paribas 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Barclays Bank PLC 11,000,000.00 2,860,000.00
--------------------------------------- ---------------------------------- ---------------------------------
BHF-Bank Aktiengesellschaft 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Chase Manhattan Bank 10,000,000.00 2,600,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Comerica Bank 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
The Dai-Ichi Kangyo Bank, Ltd. 8,000,000.00 2,080,000.00
Chicago Branch
--------------------------------------- ---------------------------------- ---------------------------------
The First National Bank of Chicago 11,000,000.00 2,860,000.00
--------------------------------------- ---------------------------------- ---------------------------------
The Fuji Bank Limited 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
The Industrial Bank of Japan, 8,000,000.00 2,080,000.00
Limited
--------------------------------------- ---------------------------------- ---------------------------------
J.P. Morgan Delaware 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
The Long-Term Credit Bank 8,000,000.00 2,080,000.00
of Japan, Ltd.
--------------------------------------- ---------------------------------- ---------------------------------
Mellon Bank, N.A. 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Michigan National Bank 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
The Sanwa Bank 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Societe Generale 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
The Sumitomo Bank, Ltd., 8,000,000.00 2,080,000.00
Chicago Branch
--------------------------------------- ---------------------------------- ---------------------------------
The Toronto Dominion Bank 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Union Bank 8,000,000.00 2,080,000.00
--------------------------------------- ---------------------------------- ---------------------------------
Westdeutche Landesbank Grozentrale, 8,000,000.00 2,080,000.00
New York Branch
--------------------------------------- ---------------------------------- ---------------------------------
</TABLE>
<PAGE> 55
Schedule 5.02(a)
Existing Liens
<PAGE> 56
EXHIBIT A-1 - FORM OF
REVOLVING CREDIT
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199
FOR VALUE RECEIVED, the undersigned, DTE CAPITAL CORPORATION,
a Michigan corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_________________________ (the "Lender") for the account of its Applicable
Lending Office on the Revolver Termination Date (each as defined in the Credit
Agreement referred to below) or, if the Borrower makes a Term Loan Election, on
the Maturity Date (each as defined in the Credit Agreement referred to below),
the principal sum of U.S.$[amount of the Lender's Commitment in figures] or, if
less, the aggregate principal amount of the Revolving Credit Advances made by
the Lender to the Borrower pursuant to the Amended and Restated Credit Agreement
dated as of January 21, 1998 (as amended or modified from time to time, the
"Credit Agreement"; the terms defined therein being used herein as therein
defined) among the Borrower, the Lender and certain other lenders parties
thereto, and Citibank, N.A., as Agent for the Lender and such other lenders
outstanding on the Revolver Termination Date or Maturity Date, as applicable.
The Borrower promises to pay interest on the unpaid principal
amount of each Revolving Credit Advance from the date of such Revolving Credit
Advance until such principal amount is paid in full, at such interest rates, and
payable at such times, as are specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Citibank, N.A., as Agent, at One Court Square, Long
Island City, NY 11120, in same day funds. Each Revolving Credit Advance owing to
the Lender by the Borrower pursuant to the Credit Agreement, and all payments
made on account of principal thereof, shall be recorded by the Lender and, prior
to any transfer hereof, endorsed on the grid attached hereto which is part of
this Promissory Note.
This Promissory Note is one of the Revolving Credit Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, (i) provides for the making of Revolving
Credit Advances by the Lender to the Borrower from time to time in an aggregate
amount not to exceed at any time outstanding the U.S. dollar amount first above
mentioned, the indebtedness of the Borrower resulting from each such Revolving
Credit Advance being evidenced by this Promissory Note, and (ii) contains
provisions for acceleration of the maturity hereof upon the happening of certain
stated events and also for prepayments on account of principal hereof prior to
the maturity hereof upon the terms and conditions therein specified.
DTE CAPITAL CORPORATION
By
Title:
<PAGE> 57
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
Amount of Amount of Principal Paid or Unpaid Principal Notation
Date Advance Prepaid Balance Made By
<S> <C> <C> <C> <C>
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
- ----------------- --------------------------- ------------------------------ ---------------------- --------------------------
</TABLE>
<PAGE> 58
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________ Dated: _______________, 199_
FOR VALUE RECEIVED, the undersigned, DTE CAPITAL CORPORATION,
a Michigan corporation (the "Borrower"), HEREBY PROMISES TO PAY to the order of
_________________________ (the "Lender") for the account of its Applicable
Lending Office (as defined in the Amended and Restated Credit Agreement dated as
of January 21, 1998 (as amended or modified from time to time, the "Credit
Agreement"; the terms defined therein being used herein as therein defined))
among the Borrower, the Lender and certain other lenders parties thereto, and
Citibank, N.A., as Agent for the Lender and such other lenders), on
_______________, 199_ the principal amount of $U.S. ______________.
The Borrower promises to pay interest on the unpaid principal
amount hereof from the date hereof until such principal amount is paid in full,
at the interest rate and payable on the interest payment date or dates provided
below:
Interest Rate: _____% per annum (calculated on the basis of a year
of _____ days for the actual number of days elapsed).
Both principal and interest are payable in lawful money of the
United States of America to _________________________ for the account of the
Lender at the office of _________________________, at _________________________
in same day funds.
This Promissory Note is one of the Competitive Bid Notes
referred to in, and is entitled to the benefits of, the Credit Agreement. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity hereof upon the happening of certain stated events.
The Borrower hereby waives presentment, demand, protest and
notice of any kind. No failure to exercise, and no delay in exercising, any
rights hereunder on the part of the holder hereof shall operate as a waiver of
such rights.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
DTE CAPITAL CORPORATION
By
Title:
<PAGE> 59
EXHIBIT B-1 - FORM OF NOTICE OF
REVOLVING CREDIT BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, NY 10043 [Date]
Attention: _______________
Ladies and Gentlemen:
The undersigned, DTE Capital Corporation, refers to the
Amended and Restated Credit Agreement, dated as of January 21, 1998 (as amended
or modified from time to time, the "Credit Agreement"; the terms defined therein
being used herein as therein defined), among the undersigned, certain Lenders
parties thereto and ____________________, as Agent for said Lenders, and hereby
gives you notice, irrevocably, pursuant to Section 2.02 of the Credit Agreement
that the undersigned hereby requests a Revolving Credit Borrowing under the
Credit Agreement, and in that connection sets forth below the information
relating to such Revolving Credit Borrowing (the "Proposed Revolving Credit
Borrowing") as required by Section 2.02(a) of the Credit Agreement:
(i) The Business Day of the Proposed Revolving Credit
Borrowing is _______________, 199_.
(ii) The Type of Advances comprising the Proposed Revolving
Credit Borrowing is [Base Rate Advances] [Eurodollar Rate Advances].
(iii) The aggregate amount of the Proposed Revolving Credit
Borrowing is $_______________.
[(iv) The initial Interest Period for each Eurodollar Rate
Advance made as part of the Proposed Revolving Credit Borrowing is
_____ month[s].]
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Revolving Credit Borrowing:
(A) the representations and warranties contained in Section
4.01 of the Credit Agreement are correct, before and after giving
effect to the Proposed Revolving Credit Borrowing and to the
application of the proceeds therefrom, as though made on and as of such
date; and
(B) no event has occurred and is continuing, or would result
from such Proposed Revolving Credit Borrowing or from the application
of the proceeds therefrom, that constitutes a Default.
Very truly yours,
DTE CAPITAL CORPORATION
By
Title:
<PAGE> 60
EXHIBIT B-2 - FORM OF NOTICE OF
COMPETITIVE BID BORROWING
Citibank, N.A., as Agent
for the Lenders parties
to the Credit Agreement
referred to below
399 Park Avenue
New York, NY 10043 [Date]
Attention: _______________
Ladies and Gentlemen:
The undersigned, DTE Capital Corporation, refers to the
Amended and Restated Credit Agreement, dated as of January 21, 1998 (as amended
or modified from time to time, the "Credit Agreement"; the terms defined therein
being used herein as therein defined), among the undersigned, certain Lenders
parties thereto and Citibank, N.A., as Agent for said Lenders, and hereby gives
you notice, irrevocably, pursuant to Section 2.03 of the Credit Agreement that
the undersigned hereby requests a Competitive Bid Borrowing under the Credit
Agreement, and in that connection sets forth the terms on which such Competitive
Bid Borrowing (the "Proposed Competitive Bid Borrowing") is requested to be
made:
(A) Date of Competitive Bid Borrowing ________________________
(B) Amount of Competitive Bid Borrowing ________________________
(C) [Maturity Date] [Interest Period] ________________________
(D) Interest Rate Basis ________________________
(E) Interest Payment Date(s) ________________________
(F) ___________________ ________________________
(G) ___________________ ________________________
(H) ___________________ ________________________
The undersigned hereby certifies that the following statements
are true on the date hereof, and will be true on the date of the Proposed
Competitive Bid Borrowing:
(a) the representations and warranties contained in Section
4.01 of the Credit Agreement are correct, before and after giving
effect to the Proposed Competitive Bid Borrowing and to the application
of the proceeds therefrom, as though made on and as of such date;
(b) no event has occurred and is continuing, or would result
from the Proposed Competitive Bid Borrowing or from the application of
the proceeds therefrom, that constitutes a Default;
(c) no event has occurred and no circumstance exists as a
result of which the information concerning the undersigned that has
been provided to the Agent and each Lender as of the date hereof by the
undersigned in connection with the Credit Agreement would include an
untrue statement of a material fact or omit to state any material fact
or any fact necessary to make the statements contained therein, in the
light of the circumstances under which they were made, not misleading;
and
(d) the aggregate amount of the Proposed Competitive Bid
Borrowing and all other Borrowings to be made on the same day under the
Credit Agreement is within the aggregate amount of the unused
Commitments of the Lenders.
<PAGE> 61
The undersigned hereby confirms that the Proposed Competitive
Bid Borrowing is to be made available to it in accordance with Section
2.03(a)(v) of the Credit Agreement.
Very truly yours,
DTE CAPITAL CORPORATION
By
Title:
<PAGE> 62
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Amended and Restated Credit Agreement
dated as of January 21, 1998 (as amended or modified from time to time, the
"Credit Agreement") among DTE Capital Corporation, a Michigan corporation (the
"Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank,
N.A., as agent for the Lenders (the "Agent"). Terms defined in the Credit
Agreement are used herein with the same meaning.
The "Assignor" and the "Assignee" referred to on Schedule I
hereto agree as follows:
1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement as of the
date hereof (other than in respect of Competitive Bid Advances and Competitive
Bid Notes) equal to the percentage interest specified on Schedule 1 hereto of
all outstanding rights and obligations under the Credit Agreement (other than in
respect of Competitive Bid Advances and Competitive Bid Notes). After giving
effect to such sale and assignment, the Assignee's Commitment and the amount of
the Revolving Credit Advances owing to the Assignee will be as set forth on
Schedule 1 hereto.
2. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto; and (iv) attaches the Revolving Credit Note
held by the Assignor and requests that the Agent exchange such Revolving Credit
Note for a new Revolving Credit Note payable to the order of the Assignee in an
amount equal to the Commitment assumed by the Assignee pursuant hereto or new
Revolving Credit Notes payable to the order of the Assignee in an amount equal
to the Commitment assumed by the Assignee pursuant hereto and the Assignor in an
amount equal to the Commitment retained by the Assignor under the Credit
Agreement, respectively, as specified on Schedule 1 hereto.
3. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (ii) agrees that it will, independently and
without reliance upon the Agent, the Assignor or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Credit Agreement; (iii) confirms that it is an Eligible Assignee; (iv)
appoints and authorizes the Agent to take such action as agent on its behalf and
to exercise such powers and discretion under the Credit Agreement as are
delegated to the Agent by the terms thereof, together with such powers and
discretion as are reasonably incidental thereto; (v) agrees that it will perform
in accordance with their terms all of the obligations that by the terms of the
Credit Agreement are required to be performed by it as a Lender; and (vi)
attaches any U.S. Internal Revenue Service forms required under Section 2.14 of
the Credit Agreement.
4. Following the execution of this Assignment and Acceptance,
it will be delivered to the Agent for acceptance and recording by the Agent. The
effective date for this Assignment and Acceptance (the "Effective Date") shall
be the date of acceptance hereof by the Agent, unless otherwise specified on
Schedule 1 hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, (i) the Assignee shall be a party to the Credit Agreement and,
to the extent provided in this Assignment and Acceptance,
<PAGE> 63
have the rights and obligations of a Lender thereunder and (ii) the Assignor
shall, to the extent provided in this Assignment and Acceptance, relinquish its
rights and be released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and
after the Effective Date, the Agent shall make all payments under the Credit
Agreement and the Revolving Credit Notes in respect of the interest assigned
hereby (including, without limitation, all payments of principal, interest and
facility fees with respect thereto) to the Assignee. The Assignor and Assignee
shall make all appropriate adjustments in payments under the Credit Agreement
and the Revolving Credit Notes for periods prior to the Effective Date directly
between themselves.
7. This Assignment and Acceptance shall be governed by, and
construed in accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement. Delivery of an
executed counterpart of Schedule 1 to this Assignment and Acceptance by
telecopier shall be effective as delivery of a manually executed counterpart of
this Assignment and Acceptance.
IN WITNESS WHEREOF, the Assignor and the Assignee have caused
Schedule 1 to this Assignment and Acceptance to be executed by their officers
thereunto duly authorized as of the date specified thereon.
<PAGE> 64
Schedule 1
to
Assignment and Acceptance
<TABLE>
<S><C>
Percentage interest assigned: _____%
Assignee's Commitment: $____________
Aggregate outstanding principal amount of Revolving Credit Advances assigned: $____________
Principal amount of Revolving Credit Note payable to Assignee: $____________
Principal amount of Revolving Credit Note payable to Assignor: $____________
Effective Date (1): _______________, 199_
[NAME OF ASSIGNOR], as Assignor
By
Title:
Dated: _______________, 199_
[NAME OF ASSIGNEE], as Assignee
By
Title:
Dated: _______________, 199_
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
Accepted [and Approved] (2) this
__________ day of _______________, 199_
_________________________, as Agent
By
Title:
[Approved this __________ day of _______________, 199_.]
[NAME OF BORROWER]
By ]**
Title:
</TABLE>
_________________________________
(1) This date should be no earlier than five Business Days after delivery of
this Assignment and Acceptance to the Agent.
(2) Required if the Assignee is an Eligible Assignee solely by reason of clause
(viii) of the definition of "Eligible Assignee".
<PAGE> 65
EXHIBIT D - FORM OF
DESIGNATION AGREEMENT
Dated _______________, 199_
Reference is made to the Amended and Restated Credit Agreement
dated as of January 21, 1998 (as amended or modified from time to time, the
"Credit Agreement") among DTE Capital Corporation, a Michigan corporation (the
"Borrower"), the Lenders (as defined in the Credit Agreement) and Citibank,
N.A., as agent for the Lenders (the "Agent").
Terms defined in the Credit Agreement are used herein with the same meaning.
_________________________ (the "Designor") and _______________
(the "Designee") agree as follows:
1. The Designor hereby designates the Designee, and the
Designee hereby accepts such designation, to have a right to make Competitive
Bid Advances pursuant to Section 2.03 of the Credit Agreement.
2. The Designor makes no representation or warranty and
assumes no responsibility with respect to (i) any statements, warranties or
representations made in or in connection with the Credit Agreement or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of, or the perfection or priority of any lien or security interest created or
purported to be created under or in connection with, any Loan Document or any
other instrument or document furnished pursuant thereto and (ii) the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto.
3. The Designee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 4.01 thereof and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Designation Agreement; (ii) agrees that it will, independently and without
reliance upon the Agent, the Designor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is a Designated Bidder; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement as are delegated to the
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; and (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender.
4. Following the execution of this Designation Agreement by
the Designor and its Designee, it will be delivered to the Agent for acceptance
and recording by the Agent. The effective date for this Designation Agreement
(the "Effective Date") shall be the date of acceptance hereof by the Agent,
unless otherwise specified on the signature page hereto.
5. Upon such acceptance and recording by the Agent, as of the
Effective Date, the Designee shall be a party to the Credit Agreement with a
right to make Competitive Bid Advances as a Lender pursuant to Section 2.03 of
the Credit Agreement and the rights and obligations of a Lender related thereto.
6. This Designation Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
7. This Designation Agreement may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of a signature page to this Designation Agreement by telecopier
shall be effective as delivery of a manually executed counterpart of this
Designation Agreement.
<PAGE> 66
IN WITNESS WHEREOF, the Designor and the Designee have caused
this Designation Agreement to be executed by their officers thereunto duly
authorized as of the date first above written.
Effective Date (3): _______________, 199__
[NAME OF DESIGNOR],
as Designor
By
Title:
[NAME OF DESIGNEE],
as Designee
By
Title:
Applicable Lending Office
(and address for notices):
[Address]
Accepted this ____ day
of _______________, 199_
_________________________, as Agent
By
Title:
__________________
(3) This date should be no earlier than five Business Days after the
delivery of this Designation Agreement to the Agent.
<PAGE> 67
EXHIBIT E - FORM OF CERTIFICATE
BY DTE ENERGY COMPANY
DTE ENERGY COMPANY
OFFICER'S CERTIFICATE
I, _________________________, [Insert title of Financial
Officer (as defined in the Credit Agreement)] of DTE ENERGY COMPANY, a Michigan
corporation (the "Parent"), DO HEREBY CERTIFY, in connection with a Borrowing on
this date under the Amended and Restated Credit Agreement dated as of January
21, 1998 among DTE Capital Corporation, the Banks parties thereto, Citibank,
N.A., as agent for said Banks (the "Credit Agreement", the terms defined therein
being used herein as therein defined), that:
1. The Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan.
2. The execution, delivery and performance by the Parent of
the Support Agreement, and the consummation of the transactions
contemplated hereby and thereby, are within the Parent's corporate
powers, have been duly authorized by all necessary corporate action,
and do not contravene (i) the Parent's charter or by-laws or (ii) law
or any contractual restriction binding on or affecting the Parent.
3. All governmental and third party consents and approvals
necessary in connection with the transactions contemplated by the
Support Agreement and the other Loan Documents to which the Parent is a
party shall have been obtained (without the imposition of any
conditions that are not acceptable to the Lenders) and shall remain in
effect, and no law or regulation shall be applicable that restrains,
prevents or imposes materially adverse conditions upon the Parent with
respect to the transactions contemplated by the Loan Documents to which
it is a party.
4. The Support Agreement has been, and each of the other Loan
Documents to which the Parent is a party when delivered pursuant to the
Credit Agreement will have been, duly executed and delivered by the
Parent. The Support Agreement is, and each of the other Loan Documents
to which it is a party when delivered hereunder will be, the legal,
valid and binding obligation of the Parent enforceable against the
Parent in accordance with their respective terms, subject to the effect
of any applicable bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditors rights generally.
5. The Consolidated balance sheet of the Parent and its
Subsidiaries as at December 31, 1996, and the related Consolidated
statements of income and cash flows of the Parent and its Subsidiaries
for the fiscal year then ended, accompanied by an opinion of Deloitte &
Touche LLP, independent public accountants, and the Consolidated
balance sheet of the Parent and its Subsidiaries as at September 30,
1997 and the related Consolidated statements of income and cash flows
of the Parent and its Subsidiaries for the nine months then ended,
copies of which have been furnished to each Lender, attached hereto as
Annex A are hereby duly certified by [Insert title of Financial
Officer], as fairly presenting, subject in the case of said balance
sheet as at September 30, 1997, and said statements of income and cash
flows for the nine months then ended, to year-end audit adjustments,
the Consolidated financial condition of the Parent and its Subsidiaries
as at such dates and the Consolidated results of the operations of the
Parent and its Subsidiaries for the periods ended on such dates, all in
accordance with generally accepted accounting principles consistently
applied. Since December 31, 1996 there has been no Material Adverse
Change with respect to the Parent.
IN WITNESS WHEREOF, I have signed this certificate this 21st
day of January, 1998.
[Title:]
