<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, 1998
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:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
DTE ENERGY COMPANY
- ------------------
New York and Chicago Stock Exchanges
Common Stock, without par value, with contingent preferred stock purchase
rights
THE DETROIT EDISON COMPANY
- --------------------------
Quarterly Income Debt Securities (QUIDS)
(Junior Subordinated Deferrable Interest Debentures New York Stock Exchange
- 7.625%, 7.54% and 7.375% Series)
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
-------------------
(TITLE OF CLASS)
Indicate by check mark whether the registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrants were required to file such reports), and (2) have been subject to
such filing requirements for the past 90 days. YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
At January 31, 1999, 145,060,367 shares of DTE Energy's Common Stock,
substantially all held by non-affiliates, were outstanding, with an aggregate
market value of approximately $5,884,011,136 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
1999 Annual Meeting of Common Shareholders to be held April 28, 1999, 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.
- --------------------------------------------------------------------------------
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<PAGE> 2
DTE ENERGY COMPANY
AND
THE DETROIT EDISON COMPANY
FORM 10-K
YEAR ENDED DECEMBER 31, 1998
This document contains the Annual Reports on Form 10-K for the fiscal year
ended December 31, 1998 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................................................................... 13
Item 3 - Legal Proceedings............................................................ 14
Item 4 - Submission of Matters to a Vote of Security Holders.......................... 15
Part II - Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters..................................................... 15
Item 6 - Selected Financial Data...................................................... 16
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 17
Item 7A- Quantitative and Qualitative
Disclosure About Market Risk (Included in Item 7)....................... 17
Item 8 - Financial Statements and Supplementary Data.................................. 32
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................... 72
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)............... 72
ANNUAL REPORT ON FORM 10-K FOR THE DETROIT EDISON COMPANY:
Part I - Item 1 - Business..................................................................... 73
Item 2 - Properties................................................................... 74
Item 3 - Legal Proceedings............................................................ 74
Item 4 - Submission of Matters to a Vote of Security Holders.......................... 74
</TABLE>
2
<PAGE> 3
<TABLE>
<S> <C>
Part II - Item 5 - Market for Registrant's Common Equity and Related
Stockholder Matters..................................................... 74
Item 6 - Selected Financial Data...................................................... 75
Item 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations..................................... 75
Item 8 - Financial Statements and Supplementary Data.................................. 75
Item 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..................................... 78
Part III - Item 10 - Directors and Executive Officers of the Registrant.......................... 78
Item 11 - Executive Compensation...................................................... 78
Item 12 - Security Ownership of Certain Beneficial Owners and
Management.............................................................. 78
Item 13 - Certain Relationships and Related Transactions.............................. 78
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............................................................. 79
Signature Page to DTE Energy Company Annual Report on Form 10-K......................................... 92
Signature Page to The Detroit Edison Company Annual Report on Form 10-K................................. 93
</TABLE>
3
<PAGE> 4
DEFINITIONS
<TABLE>
<S> <C>
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
Direct Access.................... Gives all retail customers equal opportunity to utilize the transmission
system which results in access to competitive generation resources
EPA.............................. United States Environmental Protection Agency
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
</TABLE>
4
<PAGE> 5
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 operations of its own, holding instead directly or
indirectly, the stock of Detroit Edison and other subsidiaries engaged in
energy-related businesses. Detroit Edison is the Company's principal operating
subsidiary, representing approximately 91% and 94% of the Company's assets and
revenues, respectively, at December 31, 1998. The Company has no employees.
Detroit Edison has 8,482 employees and other Company affiliates have 299
employees.
NON-REGULATED OPERATIONS
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 coke oven batteries,
coal sourcing, blending and transportation, 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. Another affiliate, DTE
Capital Corporation, provides financial services to the Company's non-regulated
affiliates.
Non-regulated operating revenues of $319 million for 1998 were earned
primarily from projects related to the steel industry.
UTILITY OPERATIONS
Detroit Edison, incorporated in Michigan since 1967, is a public utility
subject to regulation by the MPSC and FERC and is engaged in the generation,
purchase, transmission, distribution and sale of electric energy in a 7,600
square mile area in Southeastern Michigan. Detroit Edison's service area
includes about 13% of Michigan's total land area and about half of its
population (approximately five million people). Detroit Edison's residential
customers reside in urban and rural areas, including an extensive shoreline
along the Great Lakes and connecting waters. 3,733 of Detroit Edison's 8,482
employees are represented by unions under two collective bargaining agreements.
One agreement expires in June 1999 for 3,174 employees and the other agreement
expires in August 2000 for 559 employees.
5
<PAGE> 6
Operating revenues, sales and customer data by rate class are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------
Operating Revenues (Millions)
<S> <C> <C> <C>
Electric
Residential $ 1,253 $ 1,179 $ 1,198
Commercial 1,553 1,501 1,506
Industrial 753 726 731
Other 343 251 207
---------------------------------------------------
Total $ 3,902 $ 3,657 $ 3,642
===================================================
<CAPTION>
Sales (Millions of kWh)
Electric
Residential 13,752 12,898 12,949
Commercial 18,897 17,997 17,706
Industrial 14,700 14,345 14,062
Other 2,357 1,855 1,690
---------------------------------------------------
Total System 49,706 47,095 46,407
Interconnection 5,207 3,547 2,046
---------------------------------------------------
Total 54,913 50,642 48,453
===================================================
<CAPTION>
Electric Customers at Year-End (Thousands)
Electric
Residential 1,884 1,870 1,847
Commercial 181 178 175
Industrial 1 1 1
Other 2 2 2
---------------------------------------------------
Total 2,068 2,051 2,025
===================================================
- ----------------------------------------------------------------------------------------------------------
</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 1998, sales to automotive and automotive-related customers accounted
for approximately 9% of total Detroit Edison operating revenues. Detroit
Edison's 30 largest industrial customers accounted for approximately 17% of
total operating revenues in 1998, 1997 and 1996, 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 54 million tons of low-sulfur western coal to be delivered
during the period from 1999 through 2005. It also has several contracts for the
purchase of approximately 1 million tons of Appalachian coal with varying
contract expiration dates through 1999. These existing long-term coal
6
<PAGE> 7
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 changing as the transition to competition
occurs. MPSC orders issued in 1997 and 1998 form the beginning of the
restructuring of the Michigan electric public utility industry. The
implementation of restructuring creates uncertainty as direct access and the
unbundling of utility products and services are introduced.
Restructuring legislation has not been adopted in Michigan although
restructuring is proceeding based upon guidelines set forth in various MPSC
orders. The MPSC, as a policy matter, has ruled that public utilities should
recover stranded costs, arising as a result of the transition to competition,
but many details concerning the orderly recovery of such costs, including the
operation of a true-up mechanism, are yet to be decided.
Restructuring presents other serious issues, such as planning for peak
sales and defining the scope of the public utility obligation. The introduction
of direct access has created uncertainty regarding the timing and level of
customer load that may move to other suppliers and the extent of back-up
capacity that Detroit Edison could be obligated to provide.
Companion FERC rulings are necessary for orderly transition in the
competitive bulk power supply markets, and procedures, as well as new equipment,
are necessary for the development of open access to transmission lines.
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, and recovery of environmental
costs through traditional ratemaking is the subject of considerable uncertainty.
REGULATION AND RATES
MICHIGAN PUBLIC SERVICE COMMISSION. Detroit Edison is subject to the
general regulatory jurisdiction of the MPSC, which, from time to time, issues
its orders pertaining to Detroit Edison's conditions of service, rates and
recovery of certain costs, accounting and various other matters.
As discussed in Notes 1 and 2, MPSC orders issued in 1997 and 1998 have provided
the beginning of the restructuring of the Michigan electric utility industry.
Other restructuring and regulatory matters are discussed below.
7
<PAGE> 8
In March 1998, Detroit Edison filed its 1997 PSCR Reconciliation Case with the
MPSC. PSCR costs were underrecovered by $2.7 million and when combined with
Fermi 2 performance standards, would result in a refund to customers of
approximately $21 million. An order is expected in the first quarter of 1999.
In September 1998, Detroit Edison filed its 1999 PSCR case. Fuel and purchased
power costs for 1999 are projected to increase by up to 25 percent, on average,
over the corresponding forecast for 1998. An order is expected by the third
quarter of 1999. Detroit Edison plans to file its 1998 PSCR Reconciliation Case
with the MPSC in March 1999.
In an order issued December 28, 1998 related to the 1988 Settlement Agreement
regarding Fermi 2, the MPSC requested parties to file briefs discussing whether
the past MPSC orders surrounding Fermi 2 (including the June 1995 order
regarding the retail wheeling experiment,the November 1997 order that reflected
the net effect of the $53 million reduction associated with the Fermi 2 phase in
for 1998 and a two-year amortization of incremental storm damage costs, and the
December 1998 order regarding the accelerated amortization of Fermi 2) have
fully accounted for the reductions in the Fermi 2 cost of service and, if not,
what additional actions should be taken, as well as what actions are needed to
revert to non-phase-in ratemaking in 2000. Detroit Edison indicated that the
MPSC does not need to take any further actions on this matter. Other parties
argue, among other things, that the MPSC should order that a general rate case
be filed by Detroit Edison.
In July 1998, Detroit Edison filed a required review of its current depreciation
expense with the MPSC. The application requested an effective increase in annual
depreciation expenses of $66 million; an adjustment in rates was not requested.
An order may be issued by the MPSC in the first quarter of 1999.
Detroit Edison filed an application with the MPSC in June 1998 requesting
approval of its direct access plan and accounting authority to defer costs that
would be incurred to implement direct access. In its filing, Detroit Edison
estimated that the cost to implement direct access would be approximately $168
million. Detroit Edison awaits further rulings by the MPSC.
Detroit Edison is under an obligation to solicit capacity from external
suppliers, whenever it determines that additional capacity is required. Detroit
Edison has issued two Requests for Proposal (RFP) in response to that
requirement. The first RFP was issued in May 1998 for capacity during 1998 and
1999, and the second RFP was issued in January 1999 for capacity from June 1999
through May 2002. There was minimal response to the May 1998 request, and
although there have been several responses to the January 1999 request, no
offers to provide Michigan generation by June 1999 have been received.
In February 1999, Detroit Edison filed a capacity plan with the MPSC outlining
its assessment and needs for capacity for the summer of 1999. Detroit Edison
indicated it will need to purchase approximately 2,000 MW of capacity to
supplement internal
8
<PAGE> 9
generation to reliably meet projected peak loads in 1999, and plans to add
approximately 550 MW of additional internal capacity.
Detroit Edison has contested the statutory authority of the MPSC to order a
direct access experiment. In October 1998 the Michigan Supreme court granted
Detroit Edison and other parties to the proceeding leave to appeal from a
January 1998 order of the Michigan Court of Appeals finding that the MPSC did
have statutory authority to authorize experimental direct access. Although
Detroit Edison expects to drop its appeal when a satisfactory clarifying order
is issued on the December 1998 order regarding the accelerated amortization of
Fermi 2, other parties may continue their appeals, and neither the Company nor
Detroit Edison is able to predict the final outcome or timing of these
proceedings. Oral arguments are scheduled for March 1999.
NUCLEAR REGULATORY COMMISSION. The NRC has regulatory jurisdiction over all
phases of the operation, construction (including plant modifications), licensing
and decommissioning of Fermi 2.
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 and 1998, 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 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.
9
<PAGE> 10
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.
CONNERS CREEK. The Conners Creek Power Plant was in reserve status from
1988 to 1998. In April, 1998 the MPSC issued an order granting Detroit Edison's
request to waive competitive bidding for Conners Creek and restart the plant.
Although Detroit Edison believed that the plant complied with all applicable
environmental requirements, the Michigan Department of Natural Resources and the
Wayne County Air Quality Management Division issued notices of violation
contending that Detroit Edison was required to obtain a series of new permits
prior to plant operation. Subsequently the EPA issued a similar notice of
violation.
Detroit Edison conducted tests on the Conners Creek boilers and turbine during
June and July 1998. Following testing of the igniters, the boilers and turbine
were run for varying periods during the last week in June and the first week in
July to conduct a series of tests, including tests on the upgraded controls
systems and the turbine generator maximum load test. The only generation from
the plant was to allow the plant to complete these tests. The plant was never
dispatched by the Michigan Electric Coordinating System (MECS) in Ann Arbor to
meet power demands. In addition, the gas igniters were fired during the first
three days of September to dry out the boilers following draining of all water
from the equipment.
On August 5, 1998, Detroit Edison filed suit seeking a review of
determinations asserted by the state and local agencies that Detroit Edison's
activities in reactivating the Conners Creek power plant were in violation of
certain environmental regulations.
On January 11, 1999, the Department of Justice (DOJ) on behalf of the EPA sent
Detroit Edison a Demand Letter requiring the payment of $2.3 million in civil
penalties and an unconditional commitment to abandon the use of the facility as
a coal plant. Detroit Edison has rejected the DOJ/EPA demand and on January 15,
1999 the DOJ/EPA filed suit. Detroit Edison is presently trying to resolve the
issue through settlement discussions. It is impossible to predict what impact,
if any, the outcome of this will have upon Detroit Edison.
NON-REGULATED
The Company's non-regulated affiliates are subject to a number of
environmental laws and regulations dealing with the protection of the
environment from various pollutants. These non-regulated affiliates are in
substantial compliance with all environmental requirements.
10
<PAGE> 11
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
PRESENT
POSITION
NAME AGE(a) PRESENT POSITION HELD SINCE (b)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Anthony F. Earley, Jr. 49 Chairman of the Board, Chief Executive Officer, 8-1-98
President, Chief Operating Officer, and
Member of the Office of the President
Larry G. Garberding 60 Executive Vice President, Chief Financial Officer, 1-26-95
Member of the Office of the President
since December 1998
Gerard M. Anderson 40 President and Chief Operating Officer - DTE Energy 8-1-98
Resources, and Member of the Office of
the President
Robert J. Buckler 49 President and Chief Operating Officer - DTE Energy 8-1-98
Distribution, and Member of the Office of
the President
Michael E. Champley 50 Senior Vice President 4-1-97
Susan M. Beale 50 Vice President and Corporate Secretary 12-11-95
Leslie L. Loomans 55 Vice President and Treasurer 1-26-95
David E. Meador 41 Vice President and Controller 3-29-97
Christopher C. Nern 54 Vice President and General Counsel 1-26-95
</TABLE>
(a) As of December 31, 1998
(b) The Company was incorporated in January 1995, and, at that time,
certain officers of Detroit Edison were appointed officers of the
Company.
- --------------------------------------------------------------------------------
Under the Company's By-Laws, the officers of the Company are elected
annually by the Board of Directors at a meeting held for such purpose, each to
serve until the next annual meeting of 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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<PAGE> 12
The Company and its directors and officers in their capacities as such are
insured against liability for alleged wrongful acts (to the extent defined)
under three insurance policies providing aggregate coverage in the amount of
$100 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.
12
<PAGE> 13
ITEM 2 - PROPERTIES.
DETROIT EDISON
The summer net rated capability of Detroit Edison's generating units is as
follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Location By
Michigan Summer Net Year
Plant Name County Rated Capability (1) (2) (3) in Service
- -------------------------------------------------------------------------------------------------------------------
(MW)
<S> <C> <C> <C> <C>
Fossil-fueled Steam-Electric
Belle River (4) St. Clair 1,026 10.0% 1984 and 1985
Greenwood St. Clair 785 7.6 1979
Harbor Beach Huron 103 1.0 1968
Marysville St. Clair 167 1.6 1930, 1943 and 1947
Monroe (5) Monroe 3,000 29.2 1971, 1973 and 1974
River Rouge Wayne 510 5.0 1957 and 1958
St. Clair St. Clair 1,406 13.7 1953, 1954, 1961 and 1969
Trenton Channel Wayne 725 7.1 1949, 1950 and 1968
---------------------
7,722 75.2%
Oil or Gas-fueled Peaking
Units (6) Various 525 5.1 1966-1971 and 1981
Nuclear-fueled Steam-Electric
Fermi 2 (7) Monroe 1,098 10.7 1988
Hydroelectric Pumped Storage
Ludington (8) Mason 917 9.0 1973
-----------------------
10,262 100.0%
=======================
</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), in economy reserve status.
(3) Excludes Conners Creek (236 MW) which is the subject of litigation
discussed herein in "Environmental Matters, Conners Creek."
(4) The Belle River capability represents Detroit Edison's entitlement to
81.39% of the capacity and energy of the plant. See Note 4.
(5) The Monroe Power Plant provided approximately 35% of Detroit Edison's total
1998 power plant generation.
(6) Detroit Edison has made arrangements for the purchase of gas-fueled peakers
which are expected to contribute 550 MW of generation by the summer of
1999.
(7) Fermi 2 has a design electrical rating (net) of 1,150 MW.
(8) Represents Detroit Edison's 49% interest in Ludington with a total
capability of 1,872 MW. Detroit Edison is leasing 306 MW to First Energy
for the six-year period June 1, 1996 through May 31, 2002.
- --------------------------------------------------------------------------------
13
<PAGE> 14
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 First Energy,
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 million, $31.3 million and $28.3 million for
1998, 1997 and 1996, respectively, and is currently estimated at $34.5 million
for 1999.
Detroit Edison's electric generating plants are interconnected by a
transmission system operating at up to 345 kilovolts through 35 transmission
stations. As of December 31, 1998, electric energy was being distributed in
Detroit Edison's service area through 610 substations over 3,658 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, and a coke oven
battery facility in Burns Harbor, Indiana, along with 22 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, 1998, Detroit Edison was named as defendant in 148
lawsuits involving claims for personal injuries and property damage and had been
advised of 34 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" and "Environmental Matters,
Detroit Edison, Conners Creek" herein for additional information.
14
<PAGE> 15
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None during the fourth quarter of 1998.
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>
- ---------------------------------------------------------------------------------------------------------------
DIVIDENDS
PRICE RANGE PAID
CALENDAR QUARTER HIGH LOW PER SHARE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 First 32-7/8 26-1/4 $0.515
Second 28-3/8 26-1/8 0.515
Third 32-7/8 27-1/2 0.515
Fourth 34-3/4 28-1/16 0.515
1998 First 39-5/8 33-1/2 $0.515
Second 42 37-11/16 0.515
Third 45-5/16 39-3/16 0.515
Fourth 49-1/4 41-7/16 0.515
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1998, there were 145,071,317 shares of the Company's Common
Stock outstanding. These shares were held by a total of 111,610 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, including information concerning the Rights Agreement, dated as of
September 23, 1997.
The amount of future dividends will depend on the Company's earnings,
financial condition and other factors, including the effects of utility
restructuring and the transition to competition, each of which is periodically
reviewed by the Company's Board of Directors.
Pursuant to Article I, Section 8. (c) and Article II, Section 3.(c) of the
Company's By-laws, as amended through May 1, 1998, notice is given that the 2000
Annual Meeting of the Company's Common Shareholders will be held on Wednesday,
April 26, 2000.
15
<PAGE> 16
ITEM 6 - SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Year Ended December 31
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
(Millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 4,221 $ 3,764 $ 3,645 $ 3,636 $ 3,519
Net Income $ 443 $ 417 $ 309 $ 406 $ 390
Earnings Per Common Share - Basic
and Diluted $ 3.05 $ 2.88 $ 2.13 $ 2.80 $ 2.67
Dividends Declared Per
Share of Common Stock $ 2.06 $ 2.06 $ 2.06 $ 2.06 $ 2.06
At year end:
Total Assets $12,088 $11,223 $11,015 $11,131 $10,993
Long-Term Debt Obligations
(including capital leases) and
Redeemable Preferred and
Preference Stock Outstanding $ 4,323 $ 4,058 $ 4,038 $ 4,004 $ 3,980
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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.
GROWTH
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 Company has no
operations of its own, holding instead, directly or indirectly, the stock of
Detroit Edison, its principal operating subsidiary, and other subsidiaries
engaged in energy-related businesses. The holding company structure was adopted
to position the Company for changes in the energy markets, and the electric
utility industry in particular, by providing financial flexibility and
additional resources for the development of new energy-related businesses.
In order to sustain earnings growth, with an objective of 6% growth annually,
the Company and Detroit Edison have developed a business strategy focused on
core competencies, consisting of expertise in developing, managing and operating
energy assets, including coal sourcing, blending and transportation skills. In
addition, Detroit Edison has a program for developing work force training and
planning for the future.
Detroit Edison is preparing for the transition to competition in the electric
energy markets. Although Detroit Edison's electric power sales and system demand
have grown at compounded annual rates of about 3% for the last five years, the
transition to competition is expected to reduce Detroit Edison's system growth
in the long-term. Detroit Edison projects that its electric power sales will
increase at a compounded annual rate of approximately 2% over the next five
years, but the impact of the transition to competition on earnings and operating
conditions is uncertain.
The Company is building a portfolio of growth businesses that leverage its
skills and build upon key customer relationships. These growth businesses
include on-site energy projects and services, coal transportation and
processing, and energy marketing and trading. During the five-year period ending
2002, these businesses could contribute up to $150 million in earnings annually.
The Company's long-term growth strategy recognizes the fact that competition,
new technologies and environmental concerns will have a significant impact on
reshaping the electric utility industry. Therefore, the Company is investing in
new energy-related technologies such as fuel cells, distributed generation and
renewable sources of energy.
17
<PAGE> 18
The Company believes that its financial and technological resources, experience
in the energy field and strategic growth plan position it well to compete in the
changing energy markets, as competition is introduced in Michigan and across the
United States. While there can be no assurances that future performance will
equal or exceed past performance, for 1998, the Company's common stock provided
a total return of 29%, closing at $43.06 on December 31, 1998.
ELECTRIC INDUSTRY RESTRUCTURING
Detroit Edison is subject to regulation by the Michigan Public Service
Commission (MPSC) and the Federal Energy Regulatory Commission (FERC). In 1998,
Michigan legislators and regulators focused on competition and direct access in
the Michigan electric public utility industry. Direct access would give all
retail customers equal opportunity to utilize the transmission system which
results in access to competitive generation resources. The MPSC is committed to
opening the electric generation market in Michigan to competition and as a
result issued several Orders relating to restructuring and competition in 1998.
Although attempts to pass legislation in Michigan relating to restructuring were
unsuccessful in 1998, the MPSC Orders will enable Detroit Edison to begin
implementation of direct access in 1999. Issues remain to be resolved and
additional Orders are anticipated as Detroit Edison phases in the option for
customers to choose direct access service in 1999 and throughout the transition
to full competition, which is scheduled in 2002.
MICHIGAN PUBLIC SERVICE COMMISSION
Background
Details on restructuring the electric generation market began to emerge in 1996
with the issuance of a MPSC Staff Report on Electric Industry Restructuring.
MPSC Orders issued in 1997 and 1998 stated that Michigan utilities should
recover stranded costs and established December 31, 2007 as the last day for
recovery of such costs.
1997 Restructuring Orders
MPSC Orders issued in 1997 facilitated restructuring, but left several issues
unresolved. Due to the uncertainty regarding the future price of electricity,
the MPSC indicated a true-up mechanism should be established to ensure that
Detroit Edison did not over-recover its stranded costs. The MPSC also
established that during the transition period, affiliates of out-of-state
utilities could not be alternative suppliers without reciprocal arrangements,
but unaffiliated marketers could be an alternative supplier without providing
reciprocal service in another service territory.
1998 Restructuring Orders
MPSC Orders issued in 1998 identified a phased-in approach to restructuring,
whereby Detroit Edison would implement direct access in 225 megawatt (MW) blocks
of power through the transition period, with 1125 MW, or approximately 12.5% of
total load made
18
<PAGE> 19
available at the end of the transition period, with all remaining load available
for direct access on January 1, 2002. Detroit Edison requested approval of
accelerated amortization of the Fermi 2 nuclear plant. As discussed in Note 2,
the December 28, 1998 MPSC Order, while granting Detroit Edison's request,
imposed several conditions for the recovery of Fermi 2 costs. Detroit Edison has
requested a clarifying Order from the MPSC, and other parties have requested
rehearing on aspects of the MPSC Order.
Neither the Company nor Detroit Edison is able to predict the final outcome or
timing of these proceedings.
Direct Access Experiment
Detroit Edison has been involved in legal proceedings contesting the statutory
authority of the MPSC to order a direct access experiment. In October 1998 the
Michigan Supreme Court granted Detroit Edison and other parties to the
proceeding leave to appeal from a Michigan Court of Appeals finding that the
MPSC did have statutory authority to authorize experimental direct access. The
December 1998 MPSC Order provided that a 90 MW direct access experiment should
be immediately commenced, and was in addition to the 1125 MW previously
scheduled.
Market Conditions
Wholesale power prices rose significantly in 1998. Dramatic price increases
during the summer led to an investigation and report by the FERC Staff. The
report concluded that a combination of factors caused the price increase, and
although the increase was dramatic, it was narrow and short-lived. The report
concluded that the particular combination of events that led to the magnitude of
the price increases is not likely to recur, but indicated that wholesale power
prices can be expected to rise and fall as a result of the dynamics of supply
and demand.
Detroit Edison's planning and preparation limited its exposure during the summer
in the wholesale power markets. Detroit Edison made substantial use of options
and contracts with liquidated damages provisions, while spreading its purchases
over many buyers in different regions. Detroit Edison also continues to recover
approximately 80% of the charges for purchased power and generation through the
use of the Power Supply Cost Recovery (PSCR) clause.
Because Detroit Edison must currently import power to meet peak loads in the
summer, transmission capacity is a necessary requirement to serve customers
reliably during peak load periods. As a result of certain new transmission
procedures, there is uncertainty surrounding the ability of Detroit Edison to
import power reliably into Michigan. To relieve this uncertainty, additional
efforts to secure firm transmission rights will be necessary, as well as
additional in-state generating capability.
Detroit Edison has acquired significant additional commitments from other
utilities, and modified operating practices to provide flexibility to respond to
increasing uncertainties of load and market conditions. Detroit Edison has also
purchased new gas-fired
19
<PAGE> 20
combustion turbine peakers, which are expected to generate approximately 550 MW
of capacity for the summer of 1999.
Direct Access Implementation Issues
Several technical issues remain to be resolved before direct access can be
implemented. Detroit Edison formed a team, which is responsible for coordinating
activities surrounding direct access. Direct access will require new processes
and equipment. Some of these processes may be subject to modification by the
MPSC during the transition period. Detroit Edison estimates that expenditures of
up to $168 million may be required through 2001.
Detroit Edison believes that it may have an obligation to render service when a
direct access supplier cannot. The terms and conditions surrounding standby
service, whereby Detroit Edison may be required to supply generation services
for direct access customers when their suppliers cannot supply the necessary
generation, awaits further rulings by the MPSC.
The operation and parameters of the true-up mechanism needs further
clarification. It still is unknown how the MPSC will determine the actual price
of power to use in truing-up Detroit Edison's stranded cost recovery. The actual
methodology was deferred to future proceedings. Uncertainties exist regarding
the ultimate amount of stranded assets to be recovered including potential
disallowances for the recovery of recorded regulatory assets, recovery of costs
to be incurred to implement direct access, and other stranded costs.
Recoverability of these costs will be evaluated annually through the true-up
mechanism.
The FERC requires functional separation between the transmission
reliability/operation function of the utility and the wholesale merchant
function. The MPSC requires arm's-length transactions between Detroit Edison and
non-regulated affiliates. Efforts are ongoing to ensure that proper procedures
are developed and adhered to.
As a result of the December 28, 1998 MPSC Order, Detroit Edison discontinued the
application of Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation" for its generation
business. See Notes 1 and 2. While Detroit Edison is reviewing applicable
accounting guidance, uncertainty exists as to whether additional changes in
accounting policies will be required as a result of the discontinuation of SFAS
No. 71 for its generation business.
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 and pumping stations and
other matters. The FERC as a policy matter, believes that transmission should be
made available on a non-discriminatory basis. A number of proceedings, as
discussed below, are in furtherance of this policy.
20
<PAGE> 21
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. In addition, Order 889 requires
public utilities to separate transmission operations from wholesale marketing
functions.
In July 1996, Detroit Edison filed its Pro Forma Open Access Transmission Tariff
in compliance with FERC Order 888. During 1997, Detroit Edison negotiated a
partial settlement regarding the price and terms and conditions of certain
services provided as part of the tariff. Several issues were litigated and
Detroit Edison awaits a decision. Rates currently being utilized for
transmission are consistent with the settlement and are subject to refund upon
the FERC's final decision.
Detroit Edison has a power pooling agreement with Consumers Energy Company
(Consumers Energy). In March 1997, a joint transmission tariff, filed by Detroit
Edison and Consumers Energy, 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.
As part of a broad look into its policies on Independent System Operators and
other Regional Transmission Organizations (RTO's), the FERC on November 24, 1998
announced plans to solicit the views of state commissions on the establishment
of regional electric transmission districts. At conferences to be held beginning
in the first quarter of 1999, the FERC will hear the state commissions' views on
the criteria that should be used to establish boundaries for RTO's and the role
of states in the formation and governance of RTO's. Additional consultations
with the states, industry representatives and others will follow to discuss
specific district boundaries. The FERC also plans to initiate a rulemaking or
other generic proceeding on RTO's to solicit further comment.
LIQUIDITY AND CAPITAL RESOURCES
CASH FROM OPERATING ACTIVITIES
Net cash from operating activities, which is the Company's primary source of
liquidity, was $868 million in 1998, $952 million in 1997 and $1,079 million in
1996. Net cash from operating activities decreased in 1998 due primarily to
increased accounts receivable and other non-cash items. Net cash from operating
activities decreased in 1997 compared to 1996 due primarily to changes in
inventory levels.
21
<PAGE> 22
Cash flow from operations 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 and dividends.
CASH USED FOR INVESTING ACTIVITIES
Net cash used for investing activities was higher in 1998 due to increased plant
and equipment expenditures and non-regulated investments in coke oven batteries.
Net cash used for investing activities was higher for the Company in 1997 due to
the acquisition of a coke oven battery, a non-regulated expenditure. For Detroit
Edison, net cash used for investing activities was lower in 1997 due primarily
to lower plant and equipment expenditures.
Cash requirements for 1998 Detroit Edison capital expenditures were $514
million. Detroit Edison's cash requirements for capital expenditures are
expected to be approximately $2.l billion for the period 1999 through 2003.
Cash requirements for 1998 non-regulated investments and capital expenditures
were $442 million. Cash requirements for non-regulated investments and capital
expenditures are expected to be approximately $1.4 billion for the period 1999
through 2003. Significant non-regulated investments are expected to be
externally financed.
CASH FROM (USED FOR) FINANCING ACTIVITIES
Net cash from Company financing activities was higher in 1998 due to increases
in long- and short-term borrowings, partially offset by redemptions of preferred
stock and long-term debt.
Net cash used for Company financing activities decreased in 1997 compared to
1996 due primarily to the redemption of preferred stock in 1996, partially
offset by higher redemptions of long-term debt.
22
<PAGE> 23
The following securities were issued and redeemed in 1998:
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITIES ISSUED (Millions)
<S> <C>
Quarterly Income Debt Securities
7.5%-7.4% issued in May and November $ 200
Remarketed Notes
6.2%-7.1% issued in June and November 400
Non-Recourse Debt
6.6% issued in July 163
----------
TOTAL ISSUED $ 763
==========
SECURITIES REDEEMED
Mandatory Redemptions
1990 Series A, B, C Mortgage Bonds
7.9%-8.4% redeemed in March $ 19
Non-Recourse Debt
6.9%-7.8% redeemed in April, June, October and December 36
Early Redemptions
Series S Mortgage Bonds
6.4% redeemed in February 150
Cumulative Preferred Stock
7.75%-7.74% redeemed in May and December 150
Quarterly Income Debt Securities
8.5% redeemed in December 50
----------
TOTAL REDEEMED $ 405
==========
</TABLE>
- --------------------------------------------------------------------------------
The preceding totals do not include Detroit Edison's Series 1999 A, $118.36
Million, 5.55%, which was sold on a forward basis in 1998 and will be issued in
September 1999. The proceeds will be used to refund two tax-exempt securities of
the same principal amount.
23
<PAGE> 24
YEAR 2000
The Company and Detroit Edison have been involved in an enterprise-wide program
to address Year 2000 issues. A program office was established in mid-1997 to
implement a rigorous plan to address the impact of Year 2000 on hardware and
software systems, embedded systems (which include microprocessors used in the
production and control of electric power), and critical service providers. The
emphasis has been on mission critical systems that support core business
activities or processes. Core business activities/processes include safety,
environmental and regulatory compliance, product production and delivery,
revenue collection, employee and supplier payment and financial asset
management.
The plan for addressing Year 2000 is divided into several phases including
raising general awareness of Year 2000 throughout the Company and Detroit
Edison; maintaining an inventory of systems and devices; performing an
assessment of inventoried systems and devices; performing compliance testing of
suspect systems and devices; remediation of non-compliant systems and devices
through replacement, repair, retirement, or identifying an acceptable work
around; testing and remediation of systems and devices in an integrated
environment and preparing business continuity plans.
Inventory, assessment and compliance testing phases have been completed for
known systems and devices. The remediation phase is approximately 80% complete
and is expected to be fully complete by August 1999 for mission critical assets
and supporting assets. Integration planning, including the mapping of critical
business processes, is near completion for Detroit Edison. Integration testing
and remediation is expected to be complete by October 1999.
To support the program phases, the program office has been working with major
utility industry associations and organizations, customers and vendors to gather
and share information on Year 2000 issues. The program office has contacted
vendors critical to Company operations to determine their progress on Year 2000.
To further assist in identifying potential problems, tests of generating
facilities have been conducted by advancing control systems dates to the Year
2000. Results of these tests have shown that the generating facilities operated
successfully in this induced "millennium mode." Exercises were conducted on
December 31, 1998 and January 1, 1999 to assess the ability to reach employees
and the regional security centers of the East Central Area Reliability Group
through various communication channels. The exercised communication channels
operated properly. The business continuity program will provide opportunities to
conduct similar exercises on other systems in advance of the Year 2000. Similar
analysis has not been completed for other affiliates.
In the event that an unknown Year 2000 condition adversely affects service to
customers or an internal business process, contingency and business continuity
plans and procedures are being developed to provide rapid restoration to normal
conditions.
24
<PAGE> 25
The Company and Detroit Edison have always maintained a comprehensive
operational emergency response plan. The business continuity function of the
Year 2000 program will supplement the existing emergency plan to include Year
2000 specific events. A Year 2000 emergency response office will be fully
operational by November 1999 to manage and coordinate operations, including
mobilization of all employees as necessary, during the transition to the new
millennium.
The Company and Detroit Edison believe that with all Year 2000 modifications,
business continuity and emergency management plans in place, the Year 2000 will
not have a material effect on their financial position, liquidity and results of
operations. Despite all efforts, there can be no assurances that Year 2000
issues can be totally eliminated. Results of modifications and testing done
during the fourth quarter of 1998 have demonstrated that Detroit Edison should
be able to maintain normal operating conditions into the Year 2000, although
there may be isolated electric service interruptions. Detroit Edison's internal
business systems may be affected by a Year 2000 related failure that could
temporarily interrupt the ability to communicate with customers, collect
revenue, or complete cash transactions. In addition, no assurances can be given
that the systems of vendors, interconnected utilities and customers will not
result in Year 2000 problems.
The Company estimates that Year 2000 costs will approximate $80 million with $39
million expended between January 1, 1998 and December 31, 1998. Operating cash
flow is expected to be sufficient to pay Year 2000 modification costs with no
material impact on operating results or cash flows.
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 U.S. 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 and 1998 the EPA issued ozone transport regulations and final new
air quality standards relating to ozone and particulate air pollution. In
September 1998, the EPA issued a State Implementation Plan (SIP) call, giving
states a year to develop new regulations to limit nitrogen oxide emissions
because of their contribution to ozone formation. The EPA draft proposal
suggests most emission reductions should come from utilities. If Michigan
follows the EPA's recommendations, it is estimated that it will cost Detroit
Edison more than $400 million to comply. Until the state issues its regulations,
it is impossible to predict the full impact of the SIP call. Detroit Edison is
unable to predict what effect, if any, restructuring of the electric utility
industry would have on recoverability of such environmental costs.
25
<PAGE> 26
MARKET RISK
Detroit Edison had investments valued at market of $309 million and $239 million
in three nuclear decommissioning trust funds at December 31, 1998 and 1997,
respectively. At December 31, 1998, these investments consisted of approximately
33% in fixed debt instruments, 63% in publicly traded equity securities and 4%
in cash equivalents. At December 31, 1997, these investments consisted of
approximately 40% in fixed debt instruments and 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 a $9 million and $8
million reduction in the fair value of debt and a $20 million and $ 10 million
reduction in the fair value of equity securities held by the trusts at December
31, 1998 and 1997, respectively. Adjustments to market value would result in a
corresponding adjustment to other liabilities based on current regulatory
treatment.
A hypothetical 10% decrease in interest rates would increase the fair value of
long-term debt from $4.8 billion to $5.3 billion at December 31, 1998 and from
$4.2 billion to $4.6 billion at December 31, 1997.
DTE Energy Trading, Inc. (DTE ET), an indirect wholly owned subsidiary of the
Company, which provides price risk management services utilizing energy
commodity derivative instruments began operations in 1998. The Company measures
the risk inherent in DTE ET's portfolio utilizing Value at Risk (VaR) analysis
and other methodologies, which simulate forward price curves in electric power
markets to quantify estimates of the magnitude and probability of potential
future losses related to open contract positions. DTE ET's VaR expresses the
potential loss in fair value of its forward contract and option position over a
particular period of time, with a specified likelihood of occurrence, due to an
adverse market movement. The Company reports VaR as a percentage of its
earnings, based on a 95% confidence interval, utilizing 10 day holding periods.
At December 31, 1998, DTE ET's VaR from its power marketing and trading
activities was less than 1% of the Company's consolidated "Income Before Income
Taxes" for the year ending December 31, 1998. The VaR model uses the
variance-covariance statistical modeling technique, and implied and historical
volatilities and correlations over the past 20 day period. The estimated market
prices used to value these transactions for VaR purposes reflect the use of
established pricing models and various factors including quotations from
exchanges and over-the-counter markets, price volatility factors, the time value
of money, and location differentials. For further information, see Notes 1 and
10.
RESULTS OF OPERATIONS
Net income for 1998 was $443 million, or $3.05 per share, up $26 million over
1997 earnings. The increase in earnings was due to tax credits generated by
non-regulated businesses.
26
<PAGE> 27
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
charges, 1997 earnings reflect a 2.7% increase over the prior year.
Net income for 1996 included 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.
OPERATING REVENUES
Operating revenue was $4.2 billion, up 12.1% from 1997 operating revenue of $3.8
billion. Operating revenues increased (decreased) due to the following:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------
(Millions)
Detroit Edison
<S> <C> <C>
Rate change $ (8) $ (62)
System sales volume and mix 220 27
Sales between utilities 51 48
Fermi 2 performance disallowances (11) (3)
Other - net (7) 5
----------------------------
Total Detroit Edison 245 15
----------------------------
Non-regulated
DTE Energy Services 124 89
DTE Coal Services 39 14
DTE Energy Trading 43 -
Other - net 6 1
----------------------------
Total Non-regulated 212 104
----------------------------
Total $ 457 $ 119
============================
- -------------------------------------------------------------------------------------
</TABLE>
27
<PAGE> 28
Detroit Edison kilowatthour (kWh) sales for 1998 and the percentage change by
year were as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1998 1998 1997
- -------------------------------------------------------------------------------------------------------------------
(Billions of kWh)
SALES
-------
<S> <C> <C> <C>
Residential 13.7 6.6% (0.4)%
Commercial 18.9 5.0 1.6
Industrial 14.7 2.5 2.0
Other (primarily sales for resale) 2.4 27.1 9.7
--------
Total System 49.7 5.5 1.5
Sales between utilities 5.2 46.8 73.4
--------
Total 54.9 8.4 4.5
========
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
In 1998, residential sales increased due to more cooling demand and growth in
the customer base. Commercial sales increased due to more cooling demand and
favorable economic conditions. Industrial sales increased due to higher usage.
Sales between utilities increased due to greater demand for energy and increased
availability of energy for sale.
In 1997, 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.
OPERATING EXPENSES
Fuel and Purchased Power
Net system output and average fuel and purchased power unit costs per
megawatthour (MWh) for Detroit Edison were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------
(Thousands of MWh)
Power plant generation
<S> <C> <C> <C>
Fossil 44,091 42,162 41,829
Nuclear 7,130 5,523 4,750
Purchased power 7,216 6,146 5,149
----------------------------------------------
Net system output 58,437 53,831 51,728
==============================================
Average unit cost ($/MWh) $ 16.40 $ 14.54 $ 15.03
==============================================
- --------------------------------------------------------------------------------------
</TABLE>
28
<PAGE> 29
In 1998, fuel and purchased power expense increased for Detroit Edison due to
higher purchased power unit costs as a result of price volatility during periods
of unseasonably warm summer weather and an 8.6% increase in system output. These
increases were partially offset by lower unit costs as a result of increased
usage of low-cost nuclear fuel and higher third party revenues credited to
inventory.
In 1998, non-regulated purchased power expense increased due to the operations
of DTE ET.
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.
Operation and Maintenance
In 1998, Company operation and maintenance expenses increased $287 million.
Higher non-regulated subsidiary expenses of $184 million were due to the
increased level of non-regulated operations and the addition of new businesses.
Higher Detroit Edison expenses of $103 million were due to higher Year 2000
expenses ($32.4 million), the 1997 storm expense deferral ($29.8 million), 1998
emergency restoration and storm expense ($20.7 million), a 1997 insurance
receivable recovery ($15.3 million), 1997 storm amortization ($14.2 million),
the Conners Creek restart ($13.3 million), partially offset by cost reductions
of ($22.7 million).
In 1997, Company operation and maintenance expenses increased $67 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 post-retirement 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 the receipt of additional insurance proceeds related to the 1993 Fermi 2
turbine replacement ($9.8 million), partially offset by higher compensation
expense related to a shareholder value improvement plan ($25.7 million).
Depreciation and Amortization
In 1998, Company depreciation and amortization expense increased due primarily
to increases in property, plant and equipment. These increases were almost
entirely offset by lower Detroit Edison amortization of regulatory assets.
Depreciation and amortization expense increased in 1997 due primarily to
increases in property, plant and equipment.
29
<PAGE> 30
INTEREST EXPENSE AND OTHER
Interest Expense
Interest expense increased in 1998 due primarily to the issuance of debt to
finance asset acquisitions of non-regulated subsidiaries and the issuance of
debt to redeem Detroit Edison's preferred stock.
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.
Other - Net
Other-net expense decreased for the Company in 1998 due primarily to lower net
write downs of equity investments ($3 million).
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).
INCOME TAXES
The effective income tax rate for the Company was lower in 1998 and 1997 due
primarily to increased utilization of alternate fuels credits generated from
non-regulated businesses. Alternate fuels credits phase out beginning in 2003
through 2007.
NEW ACCOUNTING STANDARD
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This Statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. The Company has
not yet determined the impact of this Statement on the consolidated financial
statements. This Statement is effective for fiscal years beginning after June
15, 1999, with earlier adoption encouraged. The Company will adopt this
accounting standard as required by January 1, 2000.
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.
30
<PAGE> 31
Actual results for the Company and Detroit Edison may differ from those expected
due to a number of variables including, but not limited to, weather, actual
sales, the effects of competition and the phased-in implementation of direct
access, the implementation of utility restructuring in Michigan (which involves
pending regulatory proceedings, possible legislative activity, and the recovery
of stranded costs), environmental (including proposed regulations to limit
nitrogen oxide emissions) and nuclear requirements, the impact of FERC
proceedings and regulations, the success of non-regulated lines of business and
the timely completion of Year 2000 modifications. 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. This discussion contains a Year 2000 readiness disclosure.
31
<PAGE> 32
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and schedules are included
herein.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................33
DTE Energy Company:
Consolidated Statement of Income.......................................34
Consolidated Statement of Cash Flows...................................35
Consolidated Balance Sheet ............................................36
Consolidated Statement of Changes in Shareholders' Equity..............38
The Detroit Edison Company:
Consolidated Statement of Income.......................................39
Consolidated Statement of Cash Flows...................................40
Consolidated Balance Sheet ............................................41
Consolidated Statement of Changes in Shareholders' Equity..............43
Notes to Consolidated Financial Statements...............................44
Schedule II - Valuation and Qualifying Accounts..........................91
</TABLE>
Note: Detroit Edison's financial statements are presented here for ease of
reference and are not considered to be part of Part II - Item 8 of the
Company's report.
32
<PAGE> 33
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, 1998 and 1997, and the related consolidated
statements of income, cash flows, and changes in shareholders' equity for each
of the three years in the period ended December 31, 1998. 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, 1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998 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 27, 1999
33
<PAGE> 34
DTE ENERGY COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Millions, Except Per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31
- -----------------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 4,221 $ 3,764 $ 3,645
- -----------------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and purchased power 1,063 837 846
Operation and maintenance 1,288 1,001 934
Depreciation and amortization 661 660 625
Steam heating special charge - - 149
Taxes other than income 272 265 259
- -----------------------------------------------------------------------------------------
Total Operating Expenses 3,284 2,763 2,813
- -----------------------------------------------------------------------------------------
OPERATING INCOME 937 1,001 832
- -----------------------------------------------------------------------------------------
INTEREST EXPENSE AND OTHER
Interest expense 319 297 288
Preferred stock dividends of subsidiary 6 12 16
Other - net 15 18 (2)
- -----------------------------------------------------------------------------------------
Total Interest Expense and Other 340 327 302
- -----------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 597 674 530
INCOME TAXES 154 257 221
- -----------------------------------------------------------------------------------------
NET INCOME $ 443 $ 417 $ 309
=========================================================================================
AVERAGE COMMON SHARES OUTSTANDING 145 145 145
- -----------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE - BASIC AND DILUTED $ 3.05 $ 2.88 $ 2.13
=========================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements.)
34
<PAGE> 35
DTE ENERGY COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
<TABLE>
<CAPTION>
Year Ended December 31
- --------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Income $ 443 $ 417 $ 309
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 661 660 625
Steam heating special charge - - 149
Other (125) (29) (30)
Changes in current assets and liabilities:
Restricted cash (67) (54) -
Accounts receivable (84) (36) (32)
Inventories (40) (36) 42
Payables 15 16 2
Other 65 14 14
- --------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 868 952 1,079
- --------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (555) (456) (531)
Investment in coke oven battery businesses (401) (211) -
Nuclear decommissioning trust funds (70) (68) (52)
Other (11) (6) (34)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (1,037) (741) (617)
- --------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt 763 250 224
Increase (Decrease) in short-term borrowings 189 32 (27)
Redemption of long-term debt (255) (196) (176)
Redemption of preferred stock (150) - (185)
Dividends on common stock (299) (299) (299)
Other 6 (6) (11)
- --------------------------------------------------------------------------------------------------------------------------------
Net cash from (used for) financing activities 254 (219) (474)
- --------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 85 (8) (12)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 45 53 65
- --------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR $ 130 $ 45 $ 53
================================================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 309 $ 290 $ 277
Income taxes paid 160 243 207
New capital lease obligations 52 34 35
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Consolidated Financial Statements.)
35
<PAGE> 36
DTE ENERGY COMPANY
CONSOLIDATED BALANCE SHEET
(Millions, Except Per Share Amounts and Shares)
<TABLE>
<CAPTION>
December 31
- --------------------------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 130 $ 45
Restricted cash 121 54
Accounts receivable
Customer (less allowance for doubtful
accounts of $20 for 1998 and 1997) 316 305
Accrued unbilled revenues 153 137
Other 135 78
Inventories (at average cost)
Fuel 171 130
Materials and supplies 167 173
Other 39 13
- --------------------------------------------------------------------------------------------------
1,232 935
- --------------------------------------------------------------------------------------------------
INVESTMENTS
Nuclear decommissioning trust funds 309 239
Other 261 57
- --------------------------------------------------------------------------------------------------
570 296
- --------------------------------------------------------------------------------------------------
PROPERTY
Property, plant and equipment 11,121 14,495
Property under capital leases 242 256
Nuclear fuel under capital lease 659 607
Construction work in progress 156 16
- --------------------------------------------------------------------------------------------------
12,178 15,374
- --------------------------------------------------------------------------------------------------
Less accumulated depreciation and amortization 5,235 6,440
- --------------------------------------------------------------------------------------------------
6,943 8,934
- --------------------------------------------------------------------------------------------------
REGULATORY ASSETS 3,091 856
- --------------------------------------------------------------------------------------------------
OTHER ASSETS 252 202
- --------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 12,088 $ 11,223
==================================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements.)
36
<PAGE> 37
<TABLE>
<CAPTION>
December 31
- ---------------------------------------------------------------------------------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 239 $ 161
Accrued interest 57 57
Dividends payable 75 78
Accrued payroll 101 81
Short-term borrowings 231 42
Deferred income taxes 60 64
Current portion long-term debt 294 205
Current portion capital leases 118 110
Other 217 219
- ---------------------------------------------------------------------------------------------------------
1,392 1,017
- ---------------------------------------------------------------------------------------------------------
OTHER LIABILITIES
Deferred income taxes 1,888 1,983
Capital leases 126 137
Regulatory liabilities 294 400
Other 493 203
- ---------------------------------------------------------------------------------------------------------
2,801 2,723
- ---------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 4,197 3,777
- ---------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Detroit Edison Cumulative Preferred Stock, $100
par value, 6,747,484 shares authorized,
5,207,657 issued, 1,501,223 shares
outstanding in 1997 - 144
Common stock, without par value, 400,000,000 shares
authorized, 145,071,317 and 145,097,829 issued
and outstanding, respectively 1,951 1,951
Retained earnings 1,747 1,611
- ---------------------------------------------------------------------------------------------------------
3,698 3,706
- ---------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 1, 2, 3, 9, 10, 11 AND 12)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 12,088 $ 11,223
=========================================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements.)
37
<PAGE> 38
DTE ENERGY COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Millions, Except Per Share Amounts; Shares in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
DETROIT EDISON CUMULATIVE PREFERRED STOCK
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year 1,501 $ 144 1,501 $ 144 3,351 $ 327
Redemption of Cumulative Preferred Stock (1,501) (150) - - (1,850) (185)
Preferred stock expense - 6 - - - 2
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year - $ - 1,501 $ 144 1,501 $ 144
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
Balance at beginning of year 145,098 $ 1,951 145,120 $ 1,951 145,120 $ 1,951
Repurchase and retirement of common stock (27) - (22) - - -
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year 145,071 $ 1,951 145,098 $ 1,951 145,120 $ 1,951
- -----------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year $ 1,611 $ 1,493 $ 1,485
Net income 443 417 309
Dividends declared on common stock ($2.06
per share) (299) (299) (299)
Preferred stock expense (6) - (2)
Other (2) - -
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 1,747 $ 1,611 $ 1,493
- -----------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 3,698 $ 3,706 $ 3,588
=============================================================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements.)
38
<PAGE> 39
THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF INCOME
(Millions)
<TABLE>
<CAPTION>
Year Ended December 31
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES $ 3,902 $ 3,657 $ 3,642
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and purchased power 1,021 837 846
Operation and maintenance 998 895 923
Depreciation and amortization 643 658 624
Steam heating special charge - - 149
Taxes other than income 270 264 259
- -------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 2,932 2,654 2,801
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 970 1,003 841
- -------------------------------------------------------------------------------------------------------------------
INTEREST EXPENSE AND OTHER
Interest expense 277 282 288
Other - net 15 16 -
- -------------------------------------------------------------------------------------------------------------------
Total Interest Expense and Other 292 298 288
- -------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 678 705 553
INCOME TAXES 260 288 225
- -------------------------------------------------------------------------------------------------------------------
NET INCOME 418 417 328
PREFERRED STOCK DIVIDENDS 6 12 16
- -------------------------------------------------------------------------------------------------------------------
NET INCOME AVAILABLE FOR COMMON STOCK $ 412 $ 405 $ 312
===================================================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements.)
39
<PAGE> 40
THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Millions)
<TABLE>
<CAPTION>
Year Ended December 31
- ----------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Income $ 418 $ 417 $ 328
Adjustments to reconcile net income to net cash from operating activities:
Depreciation and amortization 643 658 624
Steam heating special charge - - 149
Other (154) (3) (30)
Changes in current assets and liabilities:
Accounts receivable (51) (18) (30)
Inventories (31) (14) 42
Payables (12) 12 1
Other 60 (1) 2
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 873 1,051 1,086
- ----------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Plant and equipment expenditures (514) (439) (479)
Nuclear decommissioning trust funds (70) (68) (52)
Other (29) (5) (18)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (613) (512) (549)
- ----------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of long-term debt 200 - 185
Increase (decrease) in short-term borrowings 231 (10) (27)
Redemption of long-term debt (219) (185) (176)
Redemption of preferred stock (150) - (185)
Dividends on common stock and preferred stock (326) (331) (332)
Cash portion of restructuring dividend to parent - - (56)
Other (6) - (9)
- ----------------------------------------------------------------------------------------------------------------------------------
Net cash used for financing activities (270) (526) (600)
- ----------------------------------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (10) 13 (63)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 15 2 65
- ----------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 5 $ 15 $ 2
==================================================================================================================================
SUPPLEMENTARY CASH FLOW INFORMATION
Interest paid (excluding interest capitalized) $ 269 $ 277 $ 277
Income taxes paid 292 277 209
New capital lease obligations 52 34 35
Non-cash portion of restructuring dividend to parent - - 27
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(See Notes to Consolidated Financial Statements.)
40
<PAGE> 41
THE DETROIT EDISON COMPANY
CONSOLIDATED BALANCE SHEET
(Millions, Except Per Share Amounts and Shares)
<TABLE>
<CAPTION>
December 31
- ---------------------------------------------------------------------------------------------
1998 1997
- ---------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5 $ 15
Accounts receivable
Customer (less allowance for doubtful
accounts of $20 for 1998 and 1997) 307 300
Accrued unbilled revenues 153 137
Other 90 63
Inventories (at average cost)
Fuel 171 130
Materials and supplies 138 150
Other 21 11
- ---------------------------------------------------------------------------------------------
885 806
- ---------------------------------------------------------------------------------------------
INVESTMENTS
Nuclear decommissioning trust funds 309 239
Other 74 38
- ---------------------------------------------------------------------------------------------
383 277
- ---------------------------------------------------------------------------------------------
PROPERTY
Property, plant and equipment 10,610 14,204
Property under capital leases 242 256
Nuclear fuel under capital lease 659 607
Construction work in progress 118 12
- ---------------------------------------------------------------------------------------------
11,629 15,079
- ---------------------------------------------------------------------------------------------
Less accumulated depreciation and amortization 5,201 6,431
- ---------------------------------------------------------------------------------------------
6,428 8,648
- ---------------------------------------------------------------------------------------------
REGULATORY ASSETS 3,091 856
- ---------------------------------------------------------------------------------------------
OTHER ASSETS 200 158
- ---------------------------------------------------------------------------------------------
TOTAL ASSETS $ 10,987 $ 10,745
=============================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements.)
41
<PAGE> 42
<TABLE>
<CAPTION>
December 31
- ------------------------------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
<S> <C> <C>
Accounts payable $ 211 $ 150
Accrued interest 54 56
Dividends payable 80 83
Accrued payroll 86 80
Short-term borrowings 231 -
Deferred income taxes 60 64
Current portion long-term debt 219 169
Current portion capital leases 118 110
Other 203 218
- ------------------------------------------------------------------------------------------------------
1,262 930
- ------------------------------------------------------------------------------------------------------
OTHER LIABILITIES
Deferred income taxes 1,846 1,973
Capital leases 126 137
Regulatory liabilities 294 400
Other 484 201
- ------------------------------------------------------------------------------------------------------
2,750 2,711
- ------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 3,462 3,531
- ------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Cumulative Preferred Stock, $100 par value,
6,747,484 shares authorized, 5,207,657 issued,
1,501,223 shares outstanding in 1997 - 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 1,562 1,478
- ------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 3,513 3,573
- ------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (NOTES 1, 2, 3, 9, 10, 11 AND 12)
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,987 $ 10,745
======================================================================================================
</TABLE>
(See Notes to Consolidated Financial Statements.)
42
<PAGE> 43
THE DETROIT EDISON COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Millions, Except Per Share Amounts; Shares in Thousands)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
- -----------------------------------------------------------------------------------------------------------------------------
CUMULATIVE PREFERRED STOCK
<S> <C> <C> <C> <C> <C> <C>
Balance at beginning of year 1,501 $ 144 1,501 $ 144 3,351 $ 327
Redemption of Cumulative Preferred Stock (1,501) (150) - - (1,850) (185)
Preferred stock expense - 6 - - - 2
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year - $ - 1,501 $ 144 1,501 $ 144
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK 145,120 $ 1,451 145,120 $ 1,451 145,120 $ 1,451
- -----------------------------------------------------------------------------------------------------------------------------
PREMIUM ON COMMON STOCK $ 548 $ 548 $ 548
- -----------------------------------------------------------------------------------------------------------------------------
COMMON STOCK EXPENSE $ (48) $ (48) $ (48)
- -----------------------------------------------------------------------------------------------------------------------------
RETAINED EARNINGS
Balance at beginning of year $ 1,478 $ 1,392 $ 1,485
Net income 418 417 328
Dividends declared
Common stock ($2.20 per share) (319) (319) (319)
Cumulative Preferred Stock* (6) (12) (16)
Preferred stock expense (6) - (2)
Restructuring dividend to parent - - (84)
Other (3) - -
- -----------------------------------------------------------------------------------------------------------------------------
Balance at end of year $ 1,562 $ 1,478 $ 1,392
- -----------------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity $ 3,513 $ 3,573 $ 3,487
=============================================================================================================================
</TABLE>
* At established rate for each series.
(See Notes to Consolidated Financial Statements.)
43
<PAGE> 44
DTE ENERGY COMPANY AND THE DETROIT EDISON 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 public utility regulated by
the Michigan Public Service Commission (MPSC) and the Federal Energy Regulatory
Commission (FERC), 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.
The Company and Detroit Edison consolidate all majority owned subsidiaries.
Investments in limited liability companies, partnerships and joint ventures are
accounted for using the equity method. All significant inter-company balances
and transactions have been eliminated.
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's transmission and distribution business 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 requires the recording of regulatory assets and
liabilities for transactions that would have been treated as revenue and expense
in non-regulated businesses. Detroit Edison's regulatory assets and liabilities
are being amortized to revenue and expense as they are included in rates.
Continued applicability of SFAS No. 71 requires that rates be designed to
recover specific costs of providing regulated services and products 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.
44
<PAGE> 45
MPSC Orders issued in 1997 and 1998 have altered the regulatory process in
Michigan and provide a plan for transition to competition for the generation
business of Detroit Edison. 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. Since
MPSC Orders issued through December 31, 1998 contain sufficient detail on a
transition plan, effective December 31, 1998 Detroit Edison's generation
business no longer met the criteria of SFAS No. 71. Detroit Edison did not write
off any regulatory assets as a result of the discontinuation of SFAS No. 71 for
its generation business, because EITF No. 97-4, "Deregulation of the Pricing of
Electricity - Issues Related to the Application of FASB Statement No. 71,
Accounting for the Effects of Certain Types of Regulation, and No. 101,
Regulated Enterprises - Accounting for the Discontinuation of Application of
FASB Statement No. 71," permits the recording of regulatory assets which are
expected to be recovered through regulated rates. A December 1998 MPSC Order
authorized the recovery of an additional regulatory asset equal to the net book
value of Fermi 2 at December 31, 1998. See the following table of regulatory
assets and liabilities and Note 2 for further details.
Detroit Edison has recorded the following regulatory assets and liabilities at
December 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------
(Millions)
ASSETS
<S> <C> <C>
Unamortized nuclear costs $ 2,808 $ -
Unamortized loss on reacquired debt 94 101
Recoverable income taxes 107 562
Power supply cost recovery 49 -
Fermi 2 phase-in plan - 84
Fermi 2 deferred amortization - 66
1997 storm damage costs 15 30
Other 18 13
----------------------------
Total Assets $ 3,091 $ 856
============================
LIABILITIES
Unamortized deferred investment tax
credits $ 188 $ 301
Fermi 2 capacity factor performance
standard 86 74
Other 20 25
----------------------------
Total Liabilities $ 294 $ 400
============================
- ----------------------------------------------------------------------------------
</TABLE>
45
<PAGE> 46
UNAMORTIZED NUCLEAR COSTS - See Note 2.
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 or if related to the generation business
amortized through 2007. Discount, premium and expense on future early
redemptions of debt will be charged to earnings if they relate to the generation
business of Detroit Edison or the non-regulated businesses of the Company.
RECOVERABLE INCOME TAXES
Recoverable income taxes, a regulatory asset, represent future revenue recovery
from customers for deferred income taxes recorded upon the adoption of SFAS No.
109, "Accounting for Income Taxes," in 1993. At that time, an increase in
accumulated deferred income tax liabilities was recorded 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.
POWER SUPPLY COST RECOVERY (PSCR)
State legislation provides Detroit Edison a mechanism, subject to MPSC approval,
for recovery of changes in power supply costs for purchased power and generation
based on a reconciliation of actual costs and usage.
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 ending in
1998, these amounts were amortized to operating expense as they were included in
rates. Amortization of these amounts totaled $84 million, $112 million, and $102
million in, 1998, 1997 and 1996, respectively.
FERMI 2 DEFERRED AMORTIZATION
Effective December 31, 1998 deferred amounts are included in unamortized nuclear
costs.
1997 STORM DAMAGE COSTS
The costs of major storms in 1997, as authorized by the MPSC, were deferred and
are amortized into expense in 1998 and 1999 as they are recovered through rates.
46
<PAGE> 47
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 is 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.
RESTRICTED CASH
Cash maintained for debt service requirements and other contractual obligations
is classified as restricted cash.
REVENUES
Detroit Edison records unbilled revenues for electric and steam heating services
provided after cycle billings through month-end.
47
<PAGE> 48
PROPERTY, RETIREMENT AND MAINTENANCE, DEPRECIATION AND AMORTIZATION
A summary of property by classification at December 31 is as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------
(Millions)
Transmission and distribution
<S> <C> <C>
Property $ 5,354 $ 5,074
Construction work in progress 3 1
Property under capital leases 5 6
Less accumulated depreciation (2,063) (1,912)
----------------------------
3,299 3,169
----------------------------
Generation
Property 5,256 9,130
Construction work in progress 115 11
Property under capital leases 237 250
Less accumulated depreciation (2,587) (4,011)
----------------------------
3,021 5,380
----------------------------
Nuclear fuel under capital lease 659 607
Less accumulated amortization (551) (508)
----------------------------
108 99
----------------------------
Non-utility
Property 511 291
Construction work in progress 38 4
Less accumulated depreciation (34) (9)
-----------------------------
515 286
----------------------------
Total property $ 6,943 $ 8,934
============================
- -------------------------------------------------------------------------------
</TABLE>
Utility properties are stated at original cost less regulatory disallowances and
impairment losses. In general, the cost of properties retired in the normal
course of business is charged to accumulated depreciation. Expenditures for
maintenance and repairs are charged to expense, and the cost of new property
installed, which replaces property retired, is charged to property accounts. The
annual provision for utility property depreciation is calculated on the
straight-line remaining life method by applying annual rates approved by the
MPSC to the average of year-beginning and year-ending balances of depreciable
property by primary plant accounts. Provision for depreciation of Fermi 2,
excluding decommissioning expense, was 3.25% of average depreciable property for
1998, 1997 and 1996. Provision for depreciation of all other utility plant, as a
percent of average depreciable property, was 3.29% for 1998, 1997 and 1996.
48
<PAGE> 49
Non-utility property is stated at original cost. Depreciation is computed over
the estimated useful lives using straight-line and declining-balance methods.
LONG-LIVED ASSETS
Long-lived assets held and used by the Company are reviewed based on market
factors and operational considerations for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.
SOFTWARE COSTS
The Company 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 the project's completion.
CAPITALIZATION - DISCOUNT AND COST
The discount and cost related to the issuance of long-term debt are amortized
over the life of each issue.
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, a provision is
recorded for incremental costs anticipated to be incurred during the next
scheduled Fermi 2 refueling outage.
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.
ACCOUNTING FOR RISK MANAGEMENT ACTIVITIES
Trading activities of DTE Energy Trading, Inc. (DTE ET), an indirect wholly
owned subsidiary of the Company, are accounted for using the mark-to-market
method of accounting. Under such method, DTE ET's energy trading contracts,
including both transactions for physical delivery and financial instruments, are
recorded at market value. The resulting unrealized gains and losses from changes
in market value of open positions are recorded as assets or liabilities on the
Consolidated Balance Sheet. Current period changes in the assets or liabilities
are recognized as net gains or losses in "Operating Revenues" on the
Consolidated Statement of Income. Realized gains and losses are also recognized
in "Operating Revenues." The market prices used to value these transactions
reflect management's best estimate considering various
49
<PAGE> 50
factors, including closing exchange and over-the-counter quotations, time value
and volatility factors underlying the commitments.
Detroit Edison continues to account for its forward purchase and sale
commitments and over-the-counter options on a settlement basis.
RECLASSIFICATIONS
Certain prior year balances have been reclassified to conform to the 1998
presentation.
NOTE 2 - 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 December 1988, January 1994,
November 1997 and December 1998 are currently in effect with respect to Detroit
Edison's rates and certain other revenue, accounting, and operating-related
matters.
ELECTRIC INDUSTRY RESTRUCTURING
There are ongoing proceedings for the restructuring of the Michigan electric
public utility industry and the implementation of a direct access program. In
1997 and 1998, the MPSC issued several Orders relating to direct access and
competition.
In July 1998, Detroit Edison filed an application with the MPSC, indicating that
accelerated amortization of Detroit Edison's Fermi 2 assets was necessary to
provide a reasonable opportunity for Detroit Edison to recover its investment in
those assets. In a December 28, 1998 Order, the MPSC authorized the accelerated
amortization of the remaining net book balances (as of December 31, 1998) of
Fermi 2 and its associated regulatory assets in a manner that will provide an
opportunity for full recovery under current base rates, taking into account the
related tax consequences, of those assets by December 31, 2007.
The December 28, 1998 Order imposed six conditions for the recovery by Detroit
Edison of accelerated amortization of Fermi 2 and required a signed acceptance.
In a January 15, 1999 response, Detroit Edison requested a clarifying Order from
the MPSC. Subject to receipt of the requested clarifying Order, Detroit Edison
has;
- - reduced its rates by application of a credit equal to 2.787% ($93.8
million annually) of base rates, effective January 1, 1999;
- - indicated it will reduce its jurisdictional retail rates by removing the
Fermi 2 regulatory asset, referred to in Note 1 as unamortized nuclear
costs, from rate base on a pro rata jurisdictional rate basis when such
asset reaches zero, which is currently anticipated to occur January 1,
2008;
- - indicated that while it has no plans to sell Fermi 2, should such a sale
occur, it will return to customers the difference between Fermi 2's net
book value at the time of
50
<PAGE> 51
sale and the actual sale price; and the MPSC will
be advised of a purchase of Detroit Edison during the accelerated
amortization period so that the MPSC may determine whether the proposed
transaction is in the public interest and properly balances the interests
of investors and customers;
- - agreed that should Detroit Edison seek to abandon Fermi 2 (which Detroit
Edison has no plans to do) during the accelerated amortization period, and
only if electric generation has not been deregulated by either Michigan
state or federal action, Detroit Edison will initiate a contested case
proceeding before the MPSC seeking approval of the abandonment;
- - agreed to fully abide by the direct access program (and schedule)
established by the MPSC in previous restructuring orders; and
- - indicated that if its earned rate of return exceeds its authorized rate of
return during the period of time that amortization of Fermi 2 is being
accelerated, it will apply 50% of the excess earnings to reduce its
stranded investment.
Petitions for rehearing on the December 28, 1998 MPSC Order have been filed by
several parties.
ACCOUNTING IMPLICATIONS
Detroit Edison accounts for its transmission and distribution business in
accordance with SFAS No. 71 which requires recognition of the effects of rate
regulation in the financial statements. Continued application of SFAS No. 71 by
Detroit Edison requires: 1) third party regulation of rates, 2) cost-based
rates and 3) a reasonable assumption that all costs will be recoverable from
customers through rates.
In 1997, the FASB issued EITF No. 97-4. The EITF indicated that: 1) an entity
should cease to apply SFAS No. 71 no later than the date the specific
deregulation plan is ordered by legislation or by a regulatory authority and the
details of the plan are known, and 2) both stranded costs and regulated assets
and liabilities should continue to be recognized to the extent that the
transition plan provides for their recovery through a separate regulated
business.
Detroit Edison believes that the restructuring orders provide sufficient details
regarding the transition to competition for its electric generation business and
therefore SFAS No. 71 should no longer be applied to that business. Accordingly,
effective December 31, 1998, Detroit Edison adopted the provisions of SFAS No.
101, "Regulated Enterprises-Accounting for the Discontinuation of Application of
FASB Statement No. 71," for its electric generation business. SFAS No. 101
requires an evaluation to be performed to determine whether or not indications
of impairment exist for plant assets under SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
and the elimination of certain effects of rate regulation that have been
recognized as assets or liabilities pursuant to SFAS No. 71.
At December 31, 1998 Detroit Edison performed an impairment test of its Fermi 2
nuclear generation plant and related regulatory assets pursuant to SFAS No. 121.
The impairment test for Fermi 2 indicated that it was fully impaired. Therefore,
the Fermi 2
51
<PAGE> 52
plant asset and its related regulatory assets were written off. At December 31,
1998, the accumulation of future regulatory recovery for Fermi 2 assets from
bundled customers and transition surcharges from unbundled customers was
calculated. Since the December 28, 1998 MPSC Order provides for full recovery of
Fermi 2, a regulatory asset was established which will be amortized through
December 31, 2007. There was no impact on income from the write off of the Fermi
2 plant assets and subsequent recording of the regulatory asset for unamortized
nuclear costs.
A summary of the regulatory asset established at December 31, 1998 is shown in
the following table:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Net book value of Fermi 2 before write down $ 2,508
Fermi 2 future income tax regulatory asset 331
Fermi 2 deferred amortization 66
Deferred investment tax credit (97)
-----------
Unamortized nuclear costs $ 2,808
===========
- -------------------------------------------------------------------------------------
</TABLE>
1988 SETTLEMENT AGREEMENT
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 $72 million (in 1998
dollars) at December 31, 1998. Under the cap on Fermi 2 non-fuel operation and
maintenance expenses, the cumulative amount available totals $105 million (in
1998 dollars) at December 31, 1998.
Under the December 1988 Order, if nuclear operations at Fermi 2 permanently
cease, amortization in rates of a $513 million investment 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. The December 1988 and January
1994 Orders do not address the costs of decommissioning if the operations at
Fermi 2 prematurely cease.
In accordance with a November 1997 MPSC Order, Detroit Edison reduced revenues
by $53 million to reflect the scheduled reduction in the revenue requirement for
Fermi 2, in accordance with the 1988 settlement agreement. The $53 million
decrease is included in the $93.8 million decrease effective January 1, 1999. In
addition, the November 1997 MPSC Order authorized the deferral of $30 million of
1997 storm
52
<PAGE> 53
damage costs and amortization and recovery of the costs over a 24-month
period commencing January 1998. In December 1997, the Association of Businesses
Advocating Tariff Equity in Michigan and the Residential Ratepayer Consortium
filed a lawsuit in Ingham County Circuit Court contending that Detroit Edison
and the MPSC breached the December 1988 MPSC Order by offsetting the stipulated
revenue reduction with the amortization of the storm costs. The Michigan
Attorney General has filed an appeal of the November 1997 Order in the Michigan
Court of Appeals.
NOTE 3 - FERMI 2
- --------------------------------------------------------------------------------
GENERAL
Fermi 2, a nuclear generating unit, began commercial operation in January 1988.
The Nuclear Regulatory Commission (NRC) maintains jurisdiction over the
licensing and operation of Fermi 2. Fermi 2 has a design electrical rating (net)
of 1,150 megawatts (MW). This unit represents approximately 12% of total
operation and maintenance expenses and 11% of summer net rated capability. The
net book balance of the Fermi 2 plant was written off at December 31, 1998 and
an equivalent regulatory asset was established.
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. See Note 2.
INSURANCE
Detroit Edison insures Fermi 2 with property damage insurance provided by
Nuclear Electric Insurance Limited (NEIL). The NEIL insurance policies provide
$500 million of composite primary coverage (with a $1 million deductible) and
$2.25 billion of excess coverage, respectively, for stabilization,
decontamination and debris removal costs, repair and/or replacement of property
and decommissioning. Accordingly, the combined limits provide total property
damage insurance of $2.75 billion.
Detroit Edison maintains insurance policies with NEIL providing for extra
expenses, including certain replacement power costs necessitated by Fermi 2's
unavailability due to an insured event. These policies have a 17-week waiting
period and provide for three years of coverage.
Under the NEIL policies, Detroit Edison could be liable for maximum
retrospective assessments of up to approximately $20 million per loss if any one
loss should exceed the accumulated funds available to 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 $83.9 million could be
levied against each licensed nuclear facility, but not more than $10 million per
year per facility. On December 31,
53
<PAGE> 54
1998, there were 109 licensed nuclear facilities in the United States. Thus,
deferred premium charges in the aggregate amount of approximately $9.1 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. Base rates approved by the MPSC provide for the decommissioning costs of
Fermi 2. Detroit Edison is continuing to fund FERC jurisdictional amounts 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.
Detroit Edison has established external trust funds to hold decommissioning and
low-level radioactive waste disposal funds collected from customers. During
1998, 1997 and 1996 Detroit Edison collected $36.2 million, $35.5 million and
$37.7 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 in other liabilities in the Consolidated Balance Sheet at December 31, 1998
and in accumulated depreciation and amortization at December 31, 1997. Net
unrealized gains of $36.8 million and $31.5 million in 1998 and 1997,
respectively, were recorded as increases to the nuclear decommissioning trust
funds and other liabilities in the Consolidated Balance Sheet at December 31,
1998 and in accumulated depreciation and amortization at December 31, 1997.
At December 31, 1998, Detroit Edison had a reserve of $265.6 million for the
future decommissioning of Fermi 2 and $11.1 million for low-level radioactive
waste disposal costs. These reserves are included in other liabilities in the
Consolidated Balance Sheet at December 31, 1998 and in accumulated depreciation
and amortization at December 31, 1997, 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 $649 million in 1998 dollars and $3
billion in 2025 dollars using a 6% inflation rate.
Detroit Edison also had a reserve of $32.1 million at December 31, 1998 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
liabilities 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 between $29 million and $32 million in 1998 dollars
and between $146 million and $161 million in 2025 dollars using a 6% inflation
rate.
The FASB is reviewing the accounting for obligations associated with the
retirement of long-lived assets, including decommissioning of nuclear power
plants.
54
<PAGE> 55
CAPACITY FACTOR PERFORMANCE STANDARD
The capacity factor disallowance for 1997 has not yet been determined by the
MPSC. At December 31, 1998 and 1997, Detroit Edison had accruals of $85.6
million and $74 million, respectively, for the Fermi 2 capacity factor
performance standard disallowances that are expected to be imposed by the MPSC
during the period 1997-2003.
NUCLEAR FUEL DISPOSAL COSTS
In accordance with the Federal Nuclear Waste Policy Act of 1982, Detroit Edison
has a contract with the United States 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 2015 with expansion of such storage
capacity.
NOTE 4 - JOINTLY-OWNED UTILITY PLANT
- ------------------------------------
Detroit Edison's portion of jointly-owned utility plant is as follows:
- --------------------------------------------------------------------------------
Belle River Ludington Pumped Storage
- --------------------------------------------------------------------------------
In-service date 1984-1985 1973
Ownership interest * 49%
Investment (millions) $ 1,031 $ 192
Accumulated depreciation (millions) $ 393 $ 88
* 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, 1998, 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
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.
55
<PAGE> 56
LUDINGTON PUMPED STORAGE
Operation, maintenance and other expenses of the Ludington Pumped Storage Plant
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 varied from the
statutory federal income tax rate for the following reasons:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory income tax rate 35.0% 35.0% 35.0%
Deferred Fermi 2 depreciation
and return 3.9 4.6 5.3
Investment tax credit (2.5) (2.1) (2.8)
Depreciation 5.1 4.6 6.0
Removal costs (1.9) (1.5) (2.2)
Alternate fuels credit (13.1) (3.5) (0.4)
Other-net (1.0) 0.4 (0.4)
------------------------------------
Effective income tax rate 25.5% 37.5% 40.5%
====================================
- --------------------------------------------------------------------------
</TABLE>
Components of income tax expense were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Current federal income tax expense $ 143 $ 267 $ 219
Deferred federal income tax expense - net 26 5 17
Investment tax credit (15) (15) (15)
----------------------------
Total $ 154 $ 257 $ 221
============================
- --------------------------------------------------------------------------
</TABLE>
Internal Revenue Code Section 29 provides a tax credit (alternate fuels credit)
for qualified fuels produced and sold by a taxpayer to an unrelated person
during the taxable year. The alternate fuels credit reduced current federal
income tax expense $79 million, $24.2 million and $1.9 million for 1998, 1997
and 1996 respectively.
56
<PAGE> 57
Deferred income tax assets (liabilities) were comprised of the following at
December 31:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Property $ (1,139) $ (2,233)
Unamortized nuclear costs (983) -
Property taxes (66) (62)
Investment tax credit 154 162
Reacquired debt losses (32) (35)
Contributions in aid of construction 63 55
Other 55 66
-------------------------------
$ (1,948) $ (2,047)
===============================
Deferred income tax liabilities $ (2,447) $ (2,572)
Deferred income tax assets 499 525
-------------------------------
$ (1,948) $ (2,047)
===============================
- ---------------------------------------------------------------------------------
</TABLE>
The federal income tax returns of the Company are settled through the year 1991.
The Company believes that adequate provisions for federal income taxes have been
made through December 31, 1998.
NOTE 6 - SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
At December 31, 1998, the Company had Cumulative Preferred Stock, without par
value, 5 million shares authorized with no shares issued. At December 31, 1998,
1.5 million shares of preferred stock are reserved for issuance in accordance
with the Shareholders Rights Agreement.
At December 31, 1998, Detroit Edison had Cumulative Preference Stock of $1 par
value, 30 million shares authorized with no shares issued.
Detroit Edison's 7.75% Series of Cumulative Preferred Stock was redeemed in May
1998, while its 7.74% Series was redeemed in December 1998. There was no
Cumulative Preferred Stock outstanding at December 31, 1998. Detroit Edison had
the following Cumulative Preferred Stock outstanding at December 31, 1997:
<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>
57
<PAGE> 58
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 acquirer) 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.
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, 1998, approximately $3.8 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 6.25% on any such
additional Mortgage Bonds. An additional $1.6 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
58
<PAGE> 59
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, 1998, $113 million of tax exempt revenue bonds were subject to
periodic remarketings within one year. Remarketing agents remarket the bonds at
the lowest interest rate necessary to produce a par bid. In the event that a tax
exempt revenue bond remarketing fails, Standby Note Purchase Agreements and/or
Letters of Credit provide that banks will purchase the bonds and, after the
conclusion of all necessary proceedings, remarket the bonds. In the event the
banks' obligations under the Standby Note Purchase Agreements and/or Letters of
Credit are not honored, then, Detroit Edison would be required to purchase any
bonds subject to a failed remarketing.
The Company's long-term debt outstanding at December 31 was:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------
1998 1997
- ----------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
MORTGAGE BONDS
6.5% to 8.4% due 1999 to 2023 $ 1,742 $ 1,911
REMARKETED NOTES
5.4% to 6.4% due 2028 to 2034 (a) 410 410
6.2% and 7.1% due 2038 400 -
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
UNSECURED
Installment Sales Contracts
7.5% due 2004 to 2019 (b) 142 142
Loan Agreements
3.2% due 2024 to 2030 (a) 113 113
QUIDS
7.4% to 7.6% due 2026 to 2028 385 235
NON-RECOURSE DEBT
7.3% due 1999 to 2009 (b) 410 282
Less amount due within one year (294) (205)
----------------------------
TOTAL LONG-TERM DEBT $ 4,197 $ 3,777
============================
</TABLE>
(a) Variable rate at December 31, 1998.
(b) Weighted average interest rate at December 31, 1998.
- --------------------------------------------------------------------------------
59
<PAGE> 60
In the years 1999 - 2003, the Company's long-term debt maturities are $294,
$270, $194, $275 and $238 million, respectively.
NOTE 8 - SHORT-TERM CREDIT ARRANGEMENTS AND BORROWINGS
- --------------------------------------------------------------------------------
At December 31, 1998, Detroit Edison had total short-term credit arrangements of
approximately $685 million, under which $231 million was outstanding. At
December 31, 1997 there were no amounts outstanding. The weighted average
interest rates for short-term borrowings during 1998, 1997 and 1996 were 5.7%,
5.7% and 5.6%, respectively.
Detroit Edison had bank lines of credit of $201 million, all of which had
commitment fees in lieu of compensating balances. Detroit Edison uses bank lines
of credit and other credit facilities to support the issuance of commercial
paper and bank loans. Detroit Edison had $231 million of commercial paper
outstanding at December 31, 1998. Detroit Edison had no commercial paper
outstanding at December 31, 1997.
Detroit Edison had 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, 1998,
approximately $284 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.
Detroit Edison had a $200 million short-term financing agreement secured by its
customer accounts receivable and unbilled revenues portfolio. Borrowings are at
prevailing money market rates. At December 31, 1998 and December 31, 1997 there
were no amounts outstanding.
At December 31, 1998, DTE Capital Corporation (DTE Capital), a Company
subsidiary, had short-term credit arrangements of $400 million backed by a
Support Agreement from the Company. The credit agreement provides support for
DTE Capital's commercial paper. At December 31, 1998 there was no commercial
paper outstanding. At December 31, 1997 DTE Capital had short-term credit
arrangements of $200 million, backed by a Support Agreement from the Company
under which $42 million was outstanding. 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 Energy affiliates.
NOTE 9 - LEASES
- --------------------------------------------------------------------------------
Future minimum lease payments under long-term non-cancelable leases, consisting
of nuclear fuel ($120 million computed on a projected units of production
basis), lake
60
<PAGE> 61
vessels ($25 million), locomotives and coal cars ($172 million), office space
($12 million), and computers, vehicles and other equipment ($1 million) at
December 31, 1998 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
(Millions)
Remaining
1999 2000 2001 2002 2003 Years Total
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 69 $ 52 $ 44 $ 35 $ 20 $ 110 $ 330
======
- ---------------------------------------------------------------------------------------
</TABLE>
Rental expenses for both capital and operating leases were $96 million
(including $49 million for nuclear fuel), $72 million (including $42 million for
nuclear fuel) and $78 million (including $53 million for nuclear fuel) for 1998,
1997 and 1996, 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 was not affected by capitalization of leases. Due to the discontinuation
of the application of SFAS No. 71 for the generation business effective December
31, 1998, prospectively, the costs of these assets will be amortized based on
their economic useful lives.
NOTE 10 - FINANCIAL INSTRUMENTS
- --------------------------------------------------------------------------------
TRADING ACTIVITIES
DTE ET markets and trades electricity and natural gas physical products and
financial instruments, and provides risk management services utilizing energy
commodity derivative instruments which include futures, exchange traded and
over-the-counter options, and forward purchase and sale commitments. The
notional amounts and terms of DTE ET's outstanding energy trading financial
instruments and the fair values of DTE ET's energy commodity derivative
instruments were not material at December 31, 1998.
MARKET RISK
DTE ET manages, on a portfolio basis, the market risks inherent in its
activities subject to parameters established by the Company's Risk Management
Committee (RMC), which is authorized by its Board of Directors. Market risks are
monitored by the RMC to
61
<PAGE> 62
ensure compliance with the Company's stated risk management policies. DTE ET
marks its portfolio to market and measures its risk on a daily basis in
accordance with Value at Risk (VaR) and other risk methodologies. The
quantification of market risk using VaR provides a consistent measure of risk
across diverse energy markets and products.
CREDIT RISK
DTE ET is exposed to credit risk in the event of nonperformance by customers or
counterparties of its contractual obligations. The concentration of customers
and/or counterparties may impact overall exposure to credit risk, either
positively or negatively, in that the counterparties may be similarly affected
by changes in economic, regulatory or other conditions. However, DTE ET
maintains credit policies with regard to its customers and counterparties that
management believes significantly minimize overall credit risk. These policies
include an evaluation of potential customers' and counterparties' financial
condition and credit rating, collateral requirements or other credit
enhancements such as letters of credit or guarantees, and the use of
standardized agreements which allow for the netting or offsetting of positive
and negative exposures associated with a single counterparty. Based on these
policies, the Company does not anticipate a materially adverse effect on
financial position or results of operations as a result of customer or
counterparty nonperformance. Those futures and option contracts which are traded
on the New York Mercantile Exchange are financially guaranteed by the Exchange
and have nominal credit risk.
NON-TRADING ACTIVITIES
INTEREST RATE SWAPS
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 1998 and 1997 the average rate
received was 5.68% and 5.7% and the average rate paid was 5.02% and 5.36%,
respectively. 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, 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, 1998 and 1997, was $27 million and $29.2 million, respectively 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 1998, and 1997, the
62
<PAGE> 63
average rate received was 5.65% and 5.69%, respectively. 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.
FAIR VALUE OF 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, 1998 and 1997
was $4.8 billion and $4.2 billion, respectively, compared to the carrying amount
of $4.5 billion and $4 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 $1.1
billion at December 31, 1998, which includes, among other things, line
construction and clearance costs and other equipment purchases. The Company and
Detroit Edison have also entered into long-term fuel supply commitments of
approximately $1.1 billion.
Detroit Edison has an Energy Purchase Agreement (Agreement) for the purchase of
steam and electricity from the Detroit Resource Recovery Facility. Under the
Agreement, Detroit Edison will purchase steam through the year 2008 and
electricity through June 30, 2024. Purchases of steam and electricity were $31.1
million, $34.3 million and $30.2 million for 1998, 1997 and 1996, respectively.
Annual purchase commitments are approximately $37 million, $39 million, $40
million, $41 million and $43 million for 1999, 2000, 2001, 2002 and 2003,
respectively. See Note 14 relating to steam heating special charge.
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 First Energy for the same time
period. The net economic effect of 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.
CONTINGENCIES
LEGAL PROCEEDINGS
Detroit Edison and 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
63
<PAGE> 64
Court for Wayne County, Michigan; and Frazier v. Detroit Edison, United States
District Court, Eastern District of Michigan), are preparing for binding
arbitration to settle these matters. A July 1998 Consent Judgement has received
preliminary Court approval. A Fairness Hearing with respect to the terms of the
settlement was held in August 1998, and no objections to the settlement were
raised. A second Fairness Hearing is contemplated following the results of the
arbitration. The settlement agreement provides that Detroit Edison's monetary
liability is to be no less than $17.5 million and no greater than $65 million
after the conclusion of all related proceedings. Detroit Edison has accrued an
amount considered to be probable.
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.
See Notes 2 and 3 for a discussion of contingencies related to Regulatory
Matters and Fermi 2.
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. Net pension cost included the following
components:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Service cost - benefits earned during period $ 31 $ 27 $ 25
Interest cost on projected benefit obligation 88 86 82
Expected return on Plan assets (118) (104) (101)
Amortization of unrecognized prior service cost 5 5 4
Amortization of unrecognized net asset resulting
from initial application (4) (4) (4)
------------------------------------------
Net pension cost $ 2 $ 10 $ 6
==========================================
- -------------------------------------------------------------------------------------------------
</TABLE>
64
<PAGE> 65
The following reconciles the funded status of the Plan to the amount recorded in
the Consolidated Balance Sheet at December 31:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
1998 1997
- ------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Projected benefit obligation at beginning of year $ 1,294 $ 1,176
Service cost - benefits earned during period 31 27
Interest cost on projected benefit obligation 88 86
Net loss 61 77
Benefits paid to participants (74) (72)
------------------------
Projected benefit obligation at end of year 1,400 1,294
------------------------
Fair value of Plan assets (primarily equity and
debt securities) at beginning of year 1,347 1,232
Actual return on Plan assets 143 187
Benefits paid to participants (74) (72)
------------------------
Fair value of Plan assets at end of year 1,416 1,347
------------------------
Plan assets in excess of projected benefit
obligation 16 53
Unrecognized net (asset) resulting from initial
application (15) (20)
Unrecognized net loss (gain) 31 (4)
Unrecognized prior service cost 47 52
------------------------
Asset recorded in the Consolidated Balance Sheet $ 79 $ 81
========================
- -------------------------------------------------------------------------------
</TABLE>
Assumptions used in determining the projected benefit obligation at December 31
were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Discount rate 6.5 % 7.0%
Annual increase in future compensation levels 4.0 4.5
Expected long-term rate of return on Plan assets 9.0 9.0
- --------------------------------------------------------------------------------
</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.
65
<PAGE> 66
SAVINGS AND INVESTMENT PLANS
Detroit Edison has voluntary defined contribution plans qualified under Section
401 (a) and (k) of the Internal Revenue Code for all eligible employees. Detroit
Edison contributes up to 6% of base compensation for non-represented employees
and up to 4% for represented employees. Matching contributions were $21 million,
$20 million and $17 million for 1998, 1997 and 1996, 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.
Net other postretirement benefits cost included the following components:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Service cost - benefits earned during period $ 19 $ 19 $ 20
Interest cost on accumulated
benefit obligation 38 39 40
Expected return on assets (30) (20) (14)
Amortization of unrecognized transition obligation 21 21 21
--------------------------------
Net other postretirement benefits cost $ 48 $ 59 $ 67
================================
- --------------------------------------------------------------------------------------------
</TABLE>
The following reconciles the funded status to the amount recorded in the
Consolidated Balance Sheet at December 31:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Postretirement benefit obligation at beginning of year $ 580 $ 583
Service cost - benefits earned during period 19 19
Interest cost on accumulated benefit obligation 38 39
Benefit payments (27) (27)
Net loss (gain) 15 (34)
-------------------------------
Postretirement benefit obligation at end of year 625 580
-------------------------------
</TABLE>
66
<PAGE> 67
<TABLE>
<CAPTION>
<S> <C> <C>
Fair value of assets (primarily equity and debt
securities) at beginning of year 309 213
Detroit Edison contributions 57 57
Actual return on assets 56 39
-------------------------------
Fair value of assets at end of year 422 309
-------------------------------
Postretirement benefit obligation in (excess) of assets (203) (271)
Unrecognized transition obligation 287 308
Unrecognized net (gain) (28) (16)
-------------------------------
Asset recorded in the Consolidated
Balance Sheet $ 56 $ 21
===============================
- ----------------------------------------------------------------------------------------------
</TABLE>
Assumptions used in determining the postretirement benefit obligation at
December 31 were as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------
<S> <C> <C>
Discount rate 6.5 % 7.0 %
Annual increase in future compensation levels 4.0 4.5
Expected long-term rate of return on assets 8.5 8.5
- --------------------------------------------------------------------------
</TABLE>
Benefit costs were calculated assuming health care cost trend rates beginning at
8.5% for 1999 and decreasing to 5% in 2008 and thereafter for persons under age
65 and decreasing from 5.9% to 5% 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
$10 million for 1998 and increase the accumulated benefit obligation by $85
million at December 31, 1998. A one-percentage point decrease in the health care
cost trend rates would decrease the aggregate of the service cost and interest
cost components of benefit costs by $8 million for 1998 and decrease the
accumulated benefit obligation by $70 million at December 31, 1998.
NOTE 13 - STOCK-BASED COMPENSATION
- --------------------------------------------------------------------------------
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 a face amount of $1) granted under the LTIP may not exceed 25
million in the aggregate. As of December 31, 1998, 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 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
67
<PAGE> 68
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
activity for the year ended December 31 was:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Restricted common shares awarded 74,000 68,500 56,000
Weighted average market price of
shares awarded $ 38.77 $ 28.38 $ 34.28
Compensation cost charged against
income (thousands) $ 976 $ 222 $ 1,165
- -----------------------------------------------------------------------------
</TABLE>
Stock options were also issued under the LTIP. Options are exercisable at a rate
of 25% per year during the four years following the date of grant. 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. Stock option activity was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Weighted
Number Average
of Options Exercise Price
- --------------------------------------------------------------------------------
<S> <C> <C>
Outstanding at January 1, 1997 - -
Granted 310,500 $ 28.38
-------
Outstanding at December 31, 1997
(none exercisable) 310,500 28.38
Granted 319,500 38.38
Exercised (22,625) 28.50
-------
Outstanding at December 31, 1998
(58,750 exercisable) 607,375 33.70
=======
- ---------------------------------------------------------------------------
</TABLE>
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 had
accounted for
68
<PAGE> 69
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 and the following weighted average assumptions:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------
1998 1997
- -------------------------------------------------------------------------
<S> <C> <C>
Risk-free interest rate 5.84% 6.83%
Dividend yield 5.39% 7.26%
Expected volatility 17.48% 18.31%
Expected life 10 years 10 years
Fair value per option $6.43 $4.15
- -------------------------------------------------------------------------
</TABLE>
The pro forma effect of these options would be to reduce net income by $695,000
and $244,000, for the years ending December 31, 1998 and 1997, respectively.
There was no pro forma effect on earnings per share (EPS).
NOTE 14 - STEAM HEATING SPECIAL CHARGE
- --------------------------------------------------------------------------------
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 heating purchases recorded in fuel and purchased power expense.
NOTE 15 - SEGMENT AND RELATED INFORMATION
- --------------------------------------------------------------------------------
Effective December 31, 1998, the Company adopted SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." The Company's reportable
business segment is its regulated electric utility, Detroit Edison, which is
engaged in the generation, purchase, transmission, distribution and sale of
electric energy in a 7,600 square mile area in Southeastern Michigan. All other
includes non-regulated energy-related businesses and services, which develop and
manage electricity and other
69
<PAGE> 70
energy-related projects, and engage in domestic energy trading and marketing.
Inter-segment revenues are not material. Financial data for business segments
are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Regulated Reconciliations
Electric All and
Utility Other Eliminations Consolidated
- ---------------------------------------------------------------------------------------------------------
1998 (Millions)
<S> <C> <C> <C> <C>
Operating revenues $ 3,902 $ 319 $ - $ 4,221
Depreciation and amortization 643 18 - 661
Interest expense net 277 34 8 319
Income tax expense (benefit) 260 (100) (6) 154
Net income 412 42 (11) 443
Total assets 10,987 937 164 12,088
Capital expenditures 514 251 - 765
- ---------------------------------------------------------------------------------------------------------
1997 (Millions)
Operating revenues $ 3,657 $ 107 $ - $ 3,764
Depreciation and amortization 658 2 - 660
Interest expense net 282 16 (1) 297
Income tax expense (benefit) 288 (30) (1) 257
Net income 405 14 (2) 417
Total assets 10,745 448 30 11,223
Capital expenditures 439 228 - 667
- ---------------------------------------------------------------------------------------------------------
1996 (Millions)
Operating revenues $ 3,642 $ 3 $ - 3,645
Depreciation and amortization 624 1 - 625
Interest expense net 288 - - 288
Income tax expense (benefit) 225 (4) - 221
Net income 312 (2) (1) 309
Total assets 10,874 106 35 11,015
Capital expenditures 479 52 - 531
- ---------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 16 - SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
1998 Quarter Ended
Mar. 31 June 30 Sept. 30 Dec. 31
- ------------------------------------------------------------------------------------------------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $ 945 $ 1,064 $ 1,199 $ 1,013
Operating Income 233 248 266 190
Net Income 104 101 132 106
Earnings Per Common Share 0.72 0.69 0.91 0.73
- ------------------------------------------------------------------------------------------------
</TABLE>
70
<PAGE> 71
<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>
71
<PAGE> 72
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 1999 Annual Meeting of Common Shareholders to be held April
28, 1999, 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.
72
<PAGE> 73
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>
Anthony F. Earley, Jr. 49 Chairman of the Board, Chief Executive Officer, 8-1-98
President, Chief Operating Officer, and Member
of the Office of the President
Larry G. Garberding 60 Executive Vice President, Chief Financial Officer, 8-1-90
Member of the Office of the President since
December 1998
Gerard M. Anderson 40 President and Chief Operating Officer - DTE Energy 8-1-98
Resources, and Member of the Office of the
President
Robert J. Buckler 49 President and Chief Operating Officer - DTE Energy 8-1-98
Distribution, and Member of the Office of the
President
Michael E. Champley 50 Senior Vice President 4-1-97
Douglas R. Gipson 51 Senior Vice President 4-1-93
Susan M. Beale 50 Vice President and Corporate Secretary 3-27-95
Lynne E. Halpin 47 Vice President and Chief Information Officer 5-25-98
Leslie L. Loomans 55 Vice President and Treasurer 10-1-89
Ron A. May 47 Vice President 8-1-98
David E. Meador 41 Vice President and Controller 3-29-97
Sandra J. Miller 55 Vice President 3-30-98
Christopher C. Nern 54 Vice President and General Counsel 6-1-93
Michael C. Porter 45 Vice President 9-22-97
William R. Roller 53 Vice President 4-22-96
S. Martin Taylor 58 Vice President 11-28-94
(a) As of December 31, 1998
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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. Earley,
Meador and Porter, and Ms. Halpin, all of the above officers have been employed
by Detroit Edison in one or more management capacities during the past five
years.
Anthony F. Earley, Jr., was President and Chief Operating Officer of Long
Island Lighting Company, formerly an electric and gas utility company serving
Long Island, New York, from 1989 to 1994. Effective March 1, 1994, he was
elected President and
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<PAGE> 74
Chief Operating Officer and a member of the Board of Directors of Detroit
Edison, and effective August 1, 1998, he was elected to the additional position
of Chairman and Chief Executive Officer and Member of the Office of the
President.
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.
Lynne E. Halpin was Vice President of Business Applications for Netscape
Communications Corp. from July 1996 to May 1998 and Acting Vice President of
Global Systems Development and Director of Business Systems Development for
Xerox Corporation from November 1993 to June 1996. Effective May 25, 1998, she
was elected Vice President and Chief Information Officer of Detroit Edison.
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.
74
<PAGE> 75
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 and a transition to competition,
each of which is periodically reviewed by Detroit Edison's Board of Directors.
ITEM 6 - SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Year Ended December 31
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 3,902 $ 3,657 $ 3,642 $ 3,636 $ 3,519
Net Income $ 418 $ 417 $ 328 $ 434 $ 420
Net Income Available
for Common Stock $ 412 $ 405 $ 312 $ 406 $ 390
At year end:
Total Assets $ 10,987 $ 10,745 $ 10,874 $ 11,131 $ 10,993
Long-Term Debt
Obligations (including capital
leases) and Redeemable
Preferred and Preference
Stock Outstanding $ 3,588 $ 3,812 $ 4,000 $ 4,004 $ 3,980
- -------------------------------------------------------------------------------------------------------------------
</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 32 through 72 (except for Notes 5, 7 and 16 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>
- -------------------------------------------------------------------------------------------------------
1998 1997 1996
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory income tax rate 35.0 % 35.0 % 35.0 %
Deferred Fermi 2 depreciation and return 3.5 4.5 5.2
Investment tax credit (2.1) (2.0) (2.7)
Depreciation 4.5 4.5 5.9
Removal costs (1.7) (1.5) (2.2)
Other-net (0.9) 0.4 (0.5)
---------------------------------------------------
Effective income tax rate 38.3 % 40.9 % 40.7 %
===================================================
- -------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE> 76
Components of income tax expense are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------
(Millions)
<S> <C> <C> <C>
Current federal tax expense $ 280 $ 308 $ 224
Deferred federal tax expense - net (5) (6) 16
Investment tax credits (15) (14) (15)
-----------------------------------
Total $ 260 $ 288 $ 225
===================================
- -----------------------------------------------------------------------------------
</TABLE>
Deferred income tax assets (liabilities) are comprised of the following at
December 31:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1998 1997
- --------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
Property $ (1,139) $ (2,233)
Unamortized nuclear costs (983) -
Property taxes (65) (62)
Investment tax credit 154 162
Reacquired debt losses (32) (35)
Contributions in aid of construction 63 55
Other 96 77
--------------------------------
$ (1,906) $ (2,036)
================================
Deferred income tax liabilities $ (2,403) $ (2,560)
Deferred income tax assets 497 524
--------------------------------
$ (1,906) $ (2,036)
================================
- --------------------------------------------------------------------------------
</TABLE>
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, 1998, approximately $3.8 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 6.25% on any such
additional Mortgage Bonds. An additional $1.6 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,
76
<PAGE> 77
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, 1998, $113 million of tax exempt revenue bonds were subject to
periodic remarketings within one year. Remarketing agents remarket the bonds at
the lowest interest rate necessary to produce a par bid. In the event that a tax
exempt revenue bond remarketing fails, Standby Note Purchase Agreements and/or
Letters of Credit provide that banks will purchase the bonds and, after the
conclusion of all necessary proceedings, remarket the bonds. In the event the
banks' obligations under the Standby Note Purchase Agreements and/or Letters of
Credit are not honored, then, Detroit Edison would be required to purchase any
bonds subject to a failed remarketing.
Long-term debt outstanding at December 31 was:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------
1998 1997
- -----------------------------------------------------------------------------------
(Millions)
<S> <C> <C>
MORTGAGE BONDS
6.5% to 8.4% due 1999 to 2023 $ 1,742 $ 1,911
REMARKETED NOTES
5.4% 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
UNSECURED
Installment Sales Contracts
7.5% due 2004 to 2019 (b) 142 142
Loan Agreements
3.2% due 2024 to 2030 (a) 113 113
QUIDS
7.4% to 7.6% due 2026 to 2028 385 235
Less amount due within one year (219) (169)
---------------------------
TOTAL LONG-TERM DEBT $ 3,462 $ 3,531
===========================
</TABLE>
(a) Variable rate at December 31, 1998.
(c) Weighted average interest rate at December 31, 1998.
- --------------------------------------------------------------------------------
77
<PAGE> 78
In the years 1999 - 2003, Detroit Edison's long-term debt maturities are $219,
$194, $119, $198 and $199 million, respectively.
NOTE 16 - SUPPLEMENTARY QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
1998 Quarter Ended
Mar. 31 June 30 Sept. 30 Dec. 31
- -------------------------------------------------------------------------------------------------------------------
(Millions, except per share amounts)
<S> <C> <C> <C> <C>
Operating Revenues $ 901 $ 992 $ 1,105 $ 904
Operating Income 237 248 284 201
Net Income 98 95 125 100
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<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>
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.
78
<PAGE> 79
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 32.
(2) Financial statement schedules. See "Item 8 - Financial Statements
and Supplementary Data" on page 32.
(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
------
4-198 Seventh Supplemental Note Indenture, dated as of
October 15, 1998, between Detroit Edison and
Bankers Trust Company, as Trustee, creating the
7.375% QUIDS, including form of QUIDS.
4-199 $300,000,000 Support Agreement, dated as of
November 18, 1998, between DTE Energy and DTE
Capital Corporation.
4-200 Second Supplemental Indenture, dated as of
November 1, 1998, between DTE Capital Corporation
and The Bank of New York, as Trustee, creating the
$300,000,000 Remarketed Notes, 1998 Series B,
including form of Note.
4-201 $400,000,000 Support Agreement, dated as of
January 19, 1999, between DTE Energy Company and
DTE Capital Corporation.
10-27* Sixth Restatement of The Detroit Edison Company
Management Supplemental Benefit Plan (1998).
10-28* Amendment No. 1 to The Detroit Edison Company
Long-Term Incentive Plan, effective December 31,
1998.
10-29* DTE Energy Company Plan for Deferring the Payment
of Directors' Fees (As Amended and Restated
Effective As Of January 1, 1999).
79
<PAGE> 80
10-30* - DTE Energy Company Deferred stock Compensation
Plan for Non-Employee Directors, effective as of
January 1, 1999.
10-31* - DTE Energy Company Retirement Plan for
Non-Employee Directors (As Amended and Restated
Effective As Of December 31, 1998).
11-14 - DTE Energy Company Basic and Diluted Earnings Per
Share of Common Stock.
12-14 - DTE Energy Company Computation of Ratio of
Earnings to Fixed Charges.
12-15 - The Detroit Edison Company Computation of Ratio of
Earnings to Fixed Charges.
12-16 - The Detroit Edison Company Computation of Ratio of
Earnings to Fixed Charges and Preferred Stock
Dividends.
21-3 - Subsidiaries of the Company and Detroit Edison.
23-12 - Consent of Deloitte & Touche LLP.
27-25 - Financial Data Schedule for the period ended
December 31, 1998 for DTE Energy Company.
27-26 - Financial Data Schedule for the period ended
December 31, 1998 for The Detroit Edison Company.
99-28- Second Amended and Restated Credit Agreement,
Dated as of January 19, 1999 among DTE Capital
Corporation, the Initial Lenders, Citibank, N.A.,
as Agent, and ABN AMRO Bank N.V., Barclays Bank
PLC, Bayerische Landesbank Giruzertrale, Cayman
Islands Branch, Comerica Bank, Den Daske Bank
Aktieselskab and The First National Bank of
Chicago, as Co-Agents, and Salomon Smith Barney
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.)
80
<PAGE> 81
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 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 23, 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).
3(h) - Bylaws of DTE Energy Company, as amended through May 1, 1998.
(Exhibit 3-10 to Registration No. 333-65765).
3(i) - Bylaws of The Detroit Edison Company, as amended through May
1, 1998. (Exhibit 3-9 to Registration No. 333-65765.)
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
81
<PAGE> 82
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
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 4-187 to Form 10-Q for quarter ended
March 31, 1998
April 15, 1992 Exhibit 4-188 to Form 10-Q for quarter ended
March 31, 1998
July 15, 1992 Exhibit 4-189 to Form 10-Q for quarter ended
March 31, 1998
July 31, 1992 Exhibit 4-190 to Form 10-Q for quarter ended
March 31, 1998
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 4-191 to Form 10-Q for quarter ended
March 31, 1998
March 15, 1993 Exhibit 4-192 to Form 10-Q for quarter ended
March 31, 1998
April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter ended
March 31, 1993
April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter ended
March 31, 1993
May 31, 1993 Exhibit 4-148 to Registration No. 33-64296
June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter ended
June 30, 1993 (1993 Series AP)
June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter ended
June 30, 1993 (1993 Series H)
September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter ended
September 30, 1993
March 1, 1994 Exhibit 4-163 to Registration No. 33-53207
June 15, 1994 Exhibit 4-166 to Form 10-Q for quarter ended
June 30, 1994
August 15, 1994 Exhibit 4-168 to Form 10-Q for quarter ended
September 30, 1994
December 1, 1994 Exhibit 4-169 to Form 10-K for
year ended December 31, 1994
August 1, 1995 Exhibit 4-174 to Form 10-Q for quarter ended
September 30, 1995
82
<PAGE> 83
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) - Sixth Supplemental Note Indenture, dated as of May 1, 1998,
between Detroit Edison and Bankers Trust Company, as Trustee,
creating the 7.54% Quarterly Income Debt Securities ("QUIDS"),
including form of QUIDS. (Exhibit 4-193 to form 10-Q for quarter
ended June 30, 1998.)
4(k) - 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).
4-(l) - $60,000,000 Support Agreement dated as of January 21, 1998
between DTE Energy Company and DTE Capital Corporation. (Exhibit
4-183 to Form 10-K for year ended December 31, 1997.)
4-(m) - $100,000,000 Support Agreement, dated as of June 16, 1998,
between DTE Energy Company and DTE Capital Corporation. (Exhibit
4-194 to Form 10-Q for quarter ended June 30, 1998.)
83
<PAGE> 84
4-(n)- Indenture, dated as of June 15, 1998, between DTE Capital
Corporation and The Bank of New York, as Trustee. (Exhibit 4-196
to Form 10-Q for quarter ended June 30, 1998.)
4-(o)- First Supplemental Indenture, dated as of June 15, 1998,
between DTE Capital Corporation and The Bank of New York, as
Trustee, creating the $100,000,000 Remarketed Notes, Series A due
2038, including form of Note. (Exhibit 4-197 to Form 10-Q for
quarter ended June 30, 1998.)
*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.)
*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 10-22*) to Form 10-K for quarter ended March 31,
1998).
*10(f)- Amended and Restated Post-Employment Income Agreement, dated
March 23, 1998, between Detroit Edison and Anthony F. Earley,
Jr. (Exhibit 10-20* to Form 10-Q for quarter ended March 31,
1998).
*10(g) Restricted Stock Agreement, dated March 23, 1998, between
Detroit Edison and Anthony F. Earley, Jr. (Exhibit 10-20* to Form
10-Q for quarter ended March 31, 1998)
*10(h) Amended and Restated Detroit Edison Savings Reparation Plan
(February 23, 1998) (Exhibit 10-19* to Form 10-Q for quarter
ended March 31, 1998).
*10(i) Certain arrangements pertaining to the employment of Larry G.
Garberding (Exhibit 10-23* to Form 10-Q for quarter ended March
31, 1998).
84
<PAGE> 85
*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 10-24* to Form 10-Q for quarter ended March
31, 1998).
*10(k)- Employment Agreement, dated April 16, 1998, between Detroit
Edison and Lynn Halpin. (Exhibit 10-26* to Form 10-Q, for quarter
ended June 30, 1998.)
*10(l)- Form of Indemnification Agreement between Detroit Edison and
its directors (Exhibit 10-25* to Form 10-Q for quarter ended
March 31, 1998).
*10(m)- Executive Vehicle Program, dated October 1, 1993 (Exhibit
10-47 to Detroit Edison's Form 10-Q for quarter ended September
30, 1993).
*10(n)- 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(o)- 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(p)- Long-Term Incentive Plan (Exhibit 10-3 to Form 10-K for year
ended December 31, 1996).
*10(q)- 1997 Executive Incentive Plan Measures (Exhibit *10-7 to
Form 10 Q for quarter ended March 31, 1997).
*10(r)- 1998 Executive Incentive Plan Measures (Exhibit 10-18* to Form
10-Q for quarter ended March 31, 1998.)
*10(s)- 1998 Shareholder Value Improvement Plan Measures (Exhibit
11-17* to Form 10-Q for quarter ended March 31, 1998.)
*10(t)- Fourth Restatement of The Benefit Equalization Plan for
Certain Employees of The Detroit Edison Company (October 1997).
(Exhibit 10-11* to Form 10-K for year ended December 31, 1997.)
*10(u)- The Detroit Edison Company Key Employee Deferred Compensation
Plan (October 1997). (Exhibit 10-12* to Form 10-K for year ended
December 31, 1997.)
*10(v)- The Detroit Edison Company Executive Incentive Plan (October
1997). (Exhibit 10-13* to Form 10-K for the year ended December
31, 1997.)
*10(w)- Detroit Edison Company Shareholder Value Improvement Plan
(October 1997). (Exhibit 10 15* to Form 10-K for year ended
December 31, 1997.)
85
<PAGE> 86
*10(x)- Trust Agreement for DTE Energy Company Change-In-Control
Severance Agreements between DTE Energy Company and Wachovia
Bank, N.A. (Exhibit 10-16* to Form 10-K for year ended
December 31, 1997.)
*10(y)- Certain arrangements pertaining to the employment of David E.
Meador (Exhibit 10-5 to Form 10-K for year ended December 31,
1997.)
*10(z)- 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.)
*10(aa)-Fourth Restatement of The Retirement Reparation Plan for
Certain Employees of The Detroit Edison Company (October 1997).
(Exhibit *10-10 to Form 10-K for year ended December 31, 1997.)
99(a)- Belle River Participation Agreement between Detroit Edison
and Michigan Public Power Agency, dated as of December 1, 1982
(Exhibit 28-5 to Registration No. 2-81501).
99(b)- Belle River Transmission Ownership and Operating Agreement
between Detroit Edison and Michigan Public Power Agency, dated as
of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501).
99(c)- 1988 Amended and Restated Loan Agreement, dated as of October 4,
1988, between Renaissance Energy Company (an unaffiliated
company) ("Renaissance") and Detroit Edison (Exhibit 99-6 to
Registration No. 33-50325).
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
86
<PAGE> 87
Edison Company, Renaissance Energy Company, the Banks party
thereto and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-19 to Form 10-Q for quarter ended September 30,
1994).
99(i)- 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).
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
The Detroit Edison Company, Renaissance Energy Company, the Banks
party thereto and Barclays Bank, PLC, New York Branch, as Agent
(Exhibit 99-20 to Form 10-Q for quarter ended September 30,
1994).
99(n)- 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).
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
87
<PAGE> 88
and Barclays Bank PLC, New York Branch, as Agent. (Exhibit 99-25
to Form 10-Q for quarter ended September 30, 1997.)
99(q)- Sixth Amendment, dated as of August 27, 1998, 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 99-32 to Registration No. 333-65765.)
99(r)- 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(s)- 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(t)- 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(u)- Third Amendment, dated as of August 31, 1994, to 1988 Amended and
Restated Nuclear Fuel Heat Purchase Contract, dated October 4,
1988, between The Detroit Edison Company and Renaissance Energy
Company (Exhibit 99-21 to Form 10-Q for quarter ended September
30, 1994).
99(v)- 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(w)- 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.)
99(x)- Standby Note Purchase Credit Facility, dated as of September 12,
1997, among The Detroit Edison Company 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(y)- 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(z)- First Amendment, effective as of February 1, 1995, to Master
88
<PAGE> 89
Trust (Exhibit 4-10 to Registration No. 333-00023).
99(aa)- Second Amendment, effective as of February 1, 1995 to Master
Trust (Exhibit 4-11 to Registration No. 333-00023).
99(bb)- Third Amendment, effective January 1, 1996, to Master Trust
(Exhibit 4-12 to Registration No. 333-00023).
99(cc)- Fourth Amendment to Trust Agreement Between Fidelity Management
Trust Company and The Detroit Edison Company (July 1996).
(Exhibit 4-186 to Form 10-K for year ended December 31, 1997.)
99(dd)- Fifth Amendment to Trust Agreement Between Fidelity Management
Trust Company and The Detroit Edison Company (December 1997).
(Exhibit 4-186 to Form 10-K for the year ended December 31,
1997.)
99(ee)- 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(ff)- 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(gg)- 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(hh)- 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).
99(ii)- 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(jj)- The Detroit Edison Company Irrevocable Grantor Trust for The
DTE Energy Company Retirement Plan for Non-Employee Directors
(Exhibit 99-6 to Form 10-K for year ended December 31, 1996).
99(kk)- DTE Energy Company Irrevocable Grantor Trust for The 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(ll)- DTE Energy Company Irrevocable Grantor Trust for The DTE
Energy Company Retirement Plan for Non-Employee Directors
(Exhibit 99-8 to Form 10-K for year ended December 31, 1996).
89
<PAGE> 90
(b) Registrants filed a report on Form 8-K, dated January 22, 1999,
discussing a series of MPSC Orders issued December 28, 1998.
(c) *Denotes management contract or compensatory plan or arrangement
required to be entered as an exhibit to this report.
90
<PAGE> 91
DTE ENERGY COMPANY AND
THE DETROIT EDISON COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance --------------------------- Balance
at Beginning Charged to Charged to at End
of Costs and Other of
Description Period Expenses Accounts(a) Deductions(b) Period
- --------------------------------------------- ------------- ---------- ----------- ------------- -------
(Thousands)
<S> <C> <C> <C> <C> <C>
YEAR 1998
Allowance for
uncollectible accounts
(shown as deduction
from accounts receivable
in balance sheet)........................ $ 20,000 $ 23,216 $ 2,789 $ (26,005) $ 20,000
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
</TABLE>
- -------------------------------------------
(a) Collection of accounts previously written off.
(b) Uncollectible accounts written off.
91
<PAGE> 92
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>
<CAPTION>
<S><C>
DTE ENERGY COMPANY
-------------------------------------
(Registrant)
By /s/ ANTHONY F. EARLEY, JR. By /s/ LARRY G. GARBERDING
------------------------------------ -------------------------------------
Anthony F. Earley, Jr. Larry G. Garberding
Chairman of the Board, Executive Vice President,
Chief Executive Officer, President Chief Financial Officer and Director
and Chief Operating Officer
By /s/ DAVID E. MEADOR By /s/ TERENCE E. ADDERLEY
------------------------------------ -------------------------------------
David E. Meador Terence E. Adderley, Director
Vice President and Controller
By /s/ LILLIAN BAUDER By /s/ DAVID BING
------------------------------------ -------------------------------------
Lillian Bauder, Director David Bing, Director
By /s/ WILLIAM C. BROOKS By /s/ ALLAN D. GILMOUR
------------------------------------ -------------------------------------
William C. Brooks, Director Allan D. Gilmour, Director
By /s/ THEODORE S. LEIPPRANDT By
------------------------------------ -------------------------------------
Theodore S. Leipprandt, Director John E. Lobbia, Director
By /s/ EUGENE A. MILLER By /s/ DEAN E. RICHARDSON
------------------------------------ -------------------------------------
Eugene A. Miller, Director Dean E. Richardson, Director
By /s/ ALAN E. SCHWARTZ By /s/ WILLIAM WEGNER
------------------------------------ -------------------------------------
Alan E. Schwartz, Director William Wegner, Director
</TABLE>
Date: February 24, 1999
92
<PAGE> 93
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>
<CAPTION>
<S><C>
THE DETROIT EDISON COMPANY
-------------------------------------
(Registrant)
By /s/ ANTHONY F. EARLEY, JR. By /s/ LARRY G. GARBERDING
------------------------------------ -------------------------------------
Anthony F. Earley, Jr. Larry G. Garberding
Chairman of the Board, Executive Vice President,
Chief Executive Officer, President Chief Financial Officer and Director
and Chief Operating Officer
By /s/ DAVID E. MEADOR By /s/ TERENCE E. ADDERLEY
------------------------------------ -------------------------------------
David E. Meador Terence E. Adderley, Director
Vice President and Controller
By /s/ LILLIAN BAUDER By /s/ DAVID BING
------------------------------------ -------------------------------------
Lillian Bauder, Director David Bing, Director
By /s/ WILLIAM C. BROOKS By /s/ ALLAN D. GILMOUR
------------------------------------ -------------------------------------
William C. Brooks, Director Allan D. Gilmour, Director
By /s/ THEODORE S. LEIPPRANDT By
------------------------------------ -------------------------------------
Theodore S. Leipprandt, Director John E. Lobbia, Director
By /s/ EUGENE A. MILLER By /s/ DEAN E. RICHARDSON
------------------------------------ -------------------------------------
Eugene A. Miller, Director Dean E. Richardson, Director
By /s/ ALAN E. SCHWARTZ By /s/ WILLIAM WEGNER
------------------------------------ -------------------------------------
Alan E. Schwartz, Director William Wegner, Director
</TABLE>
Date: February 24, 1999
93
<PAGE> 94
ANNUAL REPORTS ON FORM
10-K FOR THE YEAR
ENDED DECEMBER 31, 1998
DTE ENERGY COMPANY FILE NO. 1-11607
DETROIT EDISON COMPANY FILE NO. 1-2198
EXHIBIT INDEX
Exhibits filed herewith.
Exhibit
Number
------
4-198 Seventh Supplemental Note Indenture, dated as of October 15,
1998, between Detroit Edison and Bankers Trust Company, as
Trustee, creating the 7.375% QUIDS, including form of QUIDS.
4-199 $300,000,000 Support Agreement, dated as of November 18,
1998, between DTE Energy and DTE Capital Corporation.
4-200 Second Supplemental Indenture, dated as of November 1, 1998,
between DTE Capital Corporation and The Bank of New York, as
Trustee, creating the $300,000,000 Remarketed Notes, 1998
Series B, including form of Note.
4-201 $400,000,000 Support Agreement, dated as of January 19,
1999, between DTE Energy Company and DTE Capital
Corporation.
10-27* Sixth Restatement of The Detroit Edison Company Management
Supplemental Benefit Plan (1998).
10-28* Amendment No. 1 to The Detroit Edison Company Long-Term
Incentive Plan, effective December 31, 1998.
10-29* DTE Energy Company Plan for Deferring the Payment of
Directors' Fees (As Amended and Restated Effective As Of
January 1, 1999).
10-30* DTE Energy Company Deferred Stock Compensation Plan for
Non-Employee Directors, effective as of January 1, 1999.
10-31* DTE Energy Company Retirement Plan for Non-Employee
Directors (As Amended and Restated Effective As Of December
31, 1998).
<PAGE> 95
11-14- DTE Energy Company Basic and Diluted Earnings Per Share of
Common Stock.
12-14- DTE Energy Company Computation of Ratio of Earnings to Fixed
Charges.
12-15- The Detroit Edison Company Computation of Ratio of Earnings
to Fixed Charges.
- - 12-16- The Detroit Edison Company Computation of Ratio of Earnings
to Fixed Charges and Preferred Stock Dividends.
21-3- Subsidiaries of the Company and Detroit Edison.
23-12- Consent of Deloitte & Touche LLP.
27-25- Financial Data Schedule for the period ended December 31,
1998 for DTE Energy Company.
27-26- Financial Data Schedule for the period ended December 31,
1998 for The Detroit Edison Company.
99-28- Second Amended and Restated Credit Agreement, Dated as of
January 19, 1999 among DTE Capital Corporation, the Initial
Lenders, Citibank, N.A., as Agent, and ABN AMRO Bank N.V.,
Barclays Bank PLC, Bayerische Landesbank Giruzertrale,
Cayman Islands Branch, Comerica Bank, Den Daske Bank
Aktieselskab and The First National Bank of Chicago, as
Co-Agents, and Salomon Smith Barney Inc., as Arranger.
(ii) Exhibits incorporated herein by reference. See Page Nos. __ through
___ for location of exhibits
incorporated by reference
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 as filed February 22, 1993 with the State of
Michigan, Department of Commerce - Corporation and
Securities Bureau
<PAGE> 96
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 May 1,
1998.
3(i)- Bylaws of The Detroit Edison Company, as amended through May
1, 1998.
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, and filed as exhibits to the filings as set
forth below:
September 1, 1947
October 1, 1968
November 15, 1971
January 15, 1973
June 1, 1978
June 30, 1982
August 15, 1982
October 15, 1985
November 30, 1987
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
<PAGE> 97
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(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)- Sixth Supplemental Note Indenture, dated as of May 1, 1998,
between Detroit Edison and Bankers Trust Company, as
Trustee, creating the 7.54% Quarterly Income Debt Securities
("QUIDS"), including form of QUIDS.
4(k)- 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.
4-(l)- $60,000,000 Support Agreement dated as of January 21, 1998
between DTE Energy Company and DTE Capital Corporation.
4-(m)- $100,000,000 Support Agreement, dated as of June 16, 1998,
between DTE Energy Company and DTE Capital Corporation.
4-(n)- Indenture, dated as of June 15, 1998, between DTE Capital
Corporation and The Bank of New York, as Trustee.
<PAGE> 98
4-(o)- First Supplemental Indenture, dated as of June 15, 1998,
between DTE Capital Corporation and The Bank of New York, as
Trustee, creating the $100,000,000 Remarketed Notes, Series
A due 2038, including form of Note.
*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)- Amended and Restated Post-Employment Income Agreement, dated
March 23, 1998, between Detroit Edison and Anthony F.
Earley, Jr.
*10(g) Restricted Stock Agreement, dated March 23, 1998, between
Detroit Edison and Anthony F. Earley, Jr.
*10(h) Amended and Restated Detroit Edison Savings Reparation Plan
(February 23, 1998).
*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)- Employment Agreement, dated April 16, 1998, between Detroit
Edison and Lynn Halpin.
*10(l)- Form of Indemnification Agreement between Detroit Edison and
its directors.
*10(m)- Executive Vehicle Program, dated October 1, 1993
<PAGE> 99
*10(n)- Amendment No. 1 to Executive Vehicle Plan, November 1993.
*10(o)- Certain arrangements pertaining to the employment of Gerard
M. Anderson.
*10(p)- Long-Term Incentive.
*10(q)- 1997 Executive Incentive Plan Measures.
*10(r)- 1998 Executive Incentive Plan Measures.
*10(s)- 1998 Shareholder Value Improvement Plan Measures.
*10-(t) Fourth Restatement of The Benefit Equalization Plan for
Certain Employees of The Detroit Edison Company (October
1997).
*10-(u) The Detroit Edison Company Key Employee Deferred
Compensation Plan (October 1997).
*10-(v) The Detroit Edison Company Executive Incentive Plan (October
1997).
*10-(w) Detroit Edison Company Shareholder Value Improvement Plan-A.
*10-(x) Trust Agreement for DTE Energy Company Change-In-Control
Severance Agreements between DTE Energy Company and Wachovia
Bank, N.A.
*10(y)- Certain arrangements pertaining to the employment of David
E. Meador.
*10(z)- Amended and Restated Supplemental Long-Term Disability Plan,
dated January 27, 1997
*10(aa)- Fourth Restatement of The Retirement Reparation Plan for
Certain Employees of The Detroit Edison Company (October
1997).
99(a)- Belle River Participation Agreement between Detroit Edison
and Michigan Public Power Agency, dated as of December 1,
1982.
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.
<PAGE> 100
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 Energy
Company, 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,
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 The Detroit Edison Company,
Renaissance Energy Company, 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
<PAGE> 101
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)- Sixth Amendment, dated as of August 27, 1998, 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(r)- 1988 Amended and Restated Nuclear Fuel Heat Purchase
Contract, dated October 4, 1988, between Detroit Edison and
Renaissance.
99(s)- First Amendment to 1988 Amended and Restated Nuclear Fuel
Heat Purchase Contract, dated as of February 1, 1990,
between Detroit Edison and Renaissance.
99(t)- Second Amendment, dated as of September 1, 1993, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance.
99(u)- Third Amendment, dated as of August 31, 1994, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract,
dated October 4, 1988, between The Detroit Edison Company
and Renaissance Energy Company.
99(v)- 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(w) Sixth Amendment, dated as of August 28, 1997, to 1988
Amended and Restated Nuclear Fuel Heat Purchase Contract
between Detroit Edison and Renaissance.
99(x) Standby Note Purchase Credit Facility, dated as of September
12, 1997, among The Detroit Edison Company 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(y)- 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(z)- First Amendment, effective as of February 1, 1995, to Master
Trust.
<PAGE> 102
99(aa)- Second Amendment, effective as of February 1, 1995 to Master
Trust.
99(bb)- Third Amendment, effective January 1, 1996, to Master Trust.
99(cc)- Fourth Amendment to Trust Agreement Between Fidelity
Management Trust Company and The Detroit Edison Company
(July 1996).
99(dd)- Fifth Amendment to Trust Agreement Between Fidelity
Management Trust Company and The Detroit Edison Company
(December 1997).
99(ee)- The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Savings Reparation Plan.
99(ff)- The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Retirement Reparation Plan.
99(gg)- The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Management Supplemental Benefit Plan.
99(hh)- The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Benefit Equalization Plan.
99(ii)- The Detroit Edison Company Irrevocable Grantor Trust for The
Detroit Edison Company Plan for Deferring the Payment of
Directors' Fees.
99(jj)- The Detroit Edison Company Irrevocable Grantor Trust for The
DTE Energy Company Retirement Plan for Non-Employee
Directors.
99(kk)- DTE Energy Company Irrevocable Grantor Trust for The DTE
Energy Company Plan for Deferring the Payment of Directors'
Fees.
99(ll)- DTE Energy Company Irrevocable Grantor Trust for The DTE
Energy Company Retirement Plan for Non-Employee Directors.
*Denotes management contract or compensatory plan or arrangement required to
be entered as an exhibit to this report.
<PAGE> 1
EXHIBIT 4-198
- --------------------------------------------------------------------------------
THE DETROIT EDISON COMPANY
AND
BANKERS TRUST COMPANY
TRUSTEE
--------
SEVENTH SUPPLEMENTAL INDENTURE
DATED AS OF OCTOBER 15, 1998
--------
SUPPLEMENTING THE COLLATERAL TRUST INDENTURE
DATED AS OF JUNE 30,1993
PROVIDING FOR
7.375% QUARTERLY INCOME DEBT SECURITIES
("QUIDS") (JUNIOR SUBORDINATED DEFERRABLE
INTEREST DEBENTURES, DUE 2028)
- --------------------------------------------------------------------------------
<PAGE> 2
SEVENTH SUPPLEMENTAL INDENTURE, dated as of the 15th day of October,
1998 between THE DETROIT EDISON COMPANY, a corporation organized and existing
under the laws of the State of Michigan (the "Company"), and BANKERS TRUST
COMPANY, a New York banking corporation, having its principal office in The City
of New York, New York, as trustee (the "Trustee");
WHEREAS, the Company has heretofore executed and delivered to the
Trustee a Collateral Trust Indenture dated as of June 30, 1993 (the "Original
Indenture"), as supplemented by a First Supplemental Indenture dated as of June
30, 1993, a Second Supplemental Indenture dated as of September 15, 1993, as
amended, a Third Supplemental Indenture dated as of August 15, 1994, as amended,
a Fourth Supplemental Indenture dated as of August 15, 1995, a Fifth
Supplemental Trust Indenture dated as of February 1, 1996 and a Sixth
Supplemental Indenture dated as of May 1, 1998 (the "Prior Supplemental
Indentures") providing for the issuance by the Company from time to time of its
debt securities; and
WHEREAS, the Company now desires to provide for the issuance of an
additional series of its unsecured, subordinated debt securities pursuant to the
Original Indenture; and
WHEREAS, the Company intends hereby to designate a series of debt
securities which shall not have the benefit of the provisions of Article Four of
the Original Indenture and the other related provisions of the Original
Indenture relating to the grant of security and which shall have the terms and
variations from the provisions of the Original Indenture as set forth herein;
and
WHEREAS, the Company, in the exercise of the power and authority
conferred upon and reserved to it under the provisions of the Original
Indenture, including Section 1001 thereof, and pursuant to appropriate
resolutions of the Board of Directors, has duly determined to make, execute and
deliver to the Trustee this Seventh Supplemental Indenture to the Original
Indenture as permitted by Sections 201 and 301 of the Original Indenture in
order to establish the form or terms of, and to provide for the creation and
issue of, a series of its debt securities under the Original Indenture, which
shall be known as the 7.375% Quarterly Income Debt Securities (the "QUIDS")
(Junior Subordinated Deferrable Interest Debentures, Due 2028); and
WHEREAS, all things necessary to make such debt securities, when
executed by the Company and authenticated and delivered by the Trustee or any
Authenticating Agent and issued upon the terms and subject to the conditions
hereinafter and in the Original Indenture set forth against payment therefor,
the valid, binding and legal obligations of the Company and to make this Seventh
Supplemental Indenture a valid, binding and legal agreement of the Company, have
been done;
NOW, THEREFORE, THIS SEVENTH SUPPLEMENTAL INDENTURE WITNESSETH that, in
order to establish the terms of a series of debt securities, and for and in
consideration of the premises and of the covenants contained in the Original
Indenture and in this Seventh Supplemental Indenture and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, it is mutually covenanted and agreed as follows:
<PAGE> 3
ARTICLE ONE
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
SECTION 101. Definitions. Each capitalized term that is used herein and
is defined in the Original Indenture shall have the meaning specified in the
Original Indenture unless such term is otherwise defined herein.
"Business Day" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions located in the State of
Michigan or in the state in which the principal corporate trust office of the
Trustee is located, are authorized or obligated by or pursuant to law or
executive order to close.
"Capital Stock" means any and all shares of the Company's Preferred
Stock, Preference Stock or Common Stock or any other equity securities of the
Company.
"Payment Obligation", when used with respect to Senior Indebtedness,
means an obligation stated in an agreement, instrument or lease to pay money
(whether for principal, premium, interest, sinking fund, periodic rent,
stipulated value, termination value, liquidated damages or otherwise), but
excluding an obligation to pay money in respect of fees of, or as payment or
reimbursement for expenses incurred by or on behalf of, or as indemnity for
losses, damages, taxes or other indemnity claims of any kind owed to, any holder
of Senior Indebtedness or other party to such agreement, instrument or lease.
"Senior Indebtedness" means each of the following, whether outstanding
on the date hereof or hereafter created, incurred or assumed:
(a) any Payment Obligation of the Company in respect of any
indebtedness, directly or indirectly, created, incurred or assumed (i)
for borrowed money other than (A) the 8.5% $49,877,700 in aggregate
principal amount of Quarterly Income Debt Securities (Junior
Subordinated Deferrable Interest Debentures, Due 2025), (B) the 7.625%
$185,000,000 in aggregate principal amount of Quarterly Income Debt
Securities (Junior Subordinated Deferrable Interest Debentures, Due
2026) and (C) the 7.54% $100,122,300 in aggregate principal amount of
Quarterly Income Debt Securities (Junior Subordinated Deferrable
Interest Debentures, Due 2028), each of which has been expressly deemed
by its terms to be subordinate or (ii) in connection with the
acquisition of any business, property or asset (including securities),
other than any account payable or other indebtedness created, incurred
or assumed in the ordinary course of business in connection with the
obtaining of materials or services;
(b) any Payment Obligation of the Company in respect of any
lease that would, in accordance with generally accepted accounting
principles, be required to be classified and accounted for as a capital
lease;
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<PAGE> 4
(c) any Payment Obligation of the Company in respect of any
interest rate exchange agreement, currency exchange agreement or
similar agreement that provides for payment (whether or not contingent)
over a period or term (including any renewals or extensions) longer
than one year from the execution thereof;
(d) any Payment Obligation of the Company in respect of any
agreement relating to the acquisition (including a sale and buyback) or
lease (including a sale and leaseback) of real or personal property
that provides for payment (whether or not contingent) over a period or
term (including any renewals or extensions) longer than one year from
the execution thereof;
(e) any Payment Obligation of any Subsidiary or of others of
the kind described in the preceding clauses (a) through (d) assumed or
guaranteed by the Company or for which the Company is otherwise
responsible or liable; and
(f) any amendment, renewal, extension or refunding of any
Payment Obligation described in the preceding subparagraphs (a) through
(e);
unless in the agreement, instrument or lease in which any such Payment
Obligation is stated it is expressly provided that such Payment Obligation is
not senior in right of payment to the QUIDS.
"Tax Event" means that the Company shall have received an opinion of
counsel (which may be counsel to the Company or an affiliate but not an employee
thereof) experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change), in the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such pronouncement or decision is announced on or after the date of
original issuance of the QUIDS, there is more than an insubstantial risk that
interest payable by the Company on the QUIDS is not, or will not be, deductible
by the Company for federal income tax purposes.
SECTION 102. Section References. Each reference to a particular section
set forth in this Supplemental Indenture shall, unless the context otherwise
requires, refer to this Seventh Supplemental Indenture.
ARTICLE TWO
TITLE AND TERMS OF THE QUIDS
SECTION 201. Title of the QUIDS. This Seventh Supplemental Indenture
hereby establishes a series of QUIDS, which shall be known as the Company's
7.375% Quarterly Income Debt Securities (Junior Subordinated Deferrable Interest
Debentures, Due 2028) (referred to herein as the "QUIDS"). For purposes of the
Original Indenture, the QUIDS shall constitute a single series of Securities.
The stated maturity of the QUIDS will be December 31, 2028.
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<PAGE> 5
SECTION 202. Variations from the Original Indenture. Notwithstanding
the provisions of the Original Indenture, the QUIDS shall be without benefit of
any security and shall be subordinated to Senior Indebtedness as and to the
extent provided in Article Four of this Supplemental Indenture. The QUIDS shall
not have the benefit of the provisions of Article Four of the Original Indenture
and shall not have the benefit of, or be subject to, the other related
provisions of the Original Indenture relating to the grant of security,
including (for avoidance of doubt and not for purposes of limitation) the
Granting Clause, the definitions of "Deliverable Mortgage Bonds," "Deliverable
Securities," "Designated Mortgage Bonds," "Grant," "Mortgage," "Mortgage Bonds,"
"Mortgage Trustee," "Previously Delivered Mortgage Bonds," and "Trust Estate,"
Section 301 (20), Sections 301 (a) (v), (ix), (x) and (xi), Sections 301 (b)
(ii) and (iii), Section 301 (d), and Sections 601(4) and (8).
SECTION 203. Amount and Denominations; DTC. The aggregate principal
amount of QUIDS that may be issued under this Seventh Supplemental Indenture is
limited to $100,000,000. The QUIDS shall be issuable only in fully registered
form and, as permitted by Sections 301 and 302 of the Original Indenture, in
denominations of $25 and integral multiples thereof. The QUIDS will initially be
issued under a book-entry system, registered in the name of The Depository Trust
Company, as depository ("DTC"), or its nominee, who is hereby designated as
"U.S. Depository" under the Original Indenture.
SECTION 204. Interest Rate and Interest Payment Dates. (a) The QUIDS
will bear interest at the rate of 7.375% per annum from the date of original
issuance until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the same rate per
annum during such overdue period. Interest on the QUIDS will be payable
quarterly (subject to deferral as set forth herein) in arrears on March 31, June
30, September 30 and December 31 of each year (each an "Interest Payment Date"),
commencing December 31, 1998, to the persons in whose names the QUIDS are
registered at the close of business on the relevant record date for such
interest installment, which will be one Business Day prior to the relevant
Interest Payment Date or, in the case of a Deferral Period (as described
herein), one Business Day prior to the Interest Payment Date for such Deferral
Period (each a "Record Date"); provided, however, that, in the event that any
Interest Payment Date shall not be a Business Day, then interest shall be
payable on the next day that is a Business Day (but without interest or other
payment in respect of such delay), except that, if such Business Day is in the
next succeeding calendar year, such payment shall be made on the immediately
preceding Business Day without reduction in amount due to such early payment
(and in which case the relevant Record Date shall be on the Business Day
immediately preceding such Interest Payment Date), in each case with the same
force and effect as if made on such Interest Payment Date, subject to certain
rights of deferral described in Section 204(b) hereof.
The amount of interest payable in any period will be computed on the
basis of twelve 30-day months and a 360-day year and, for any period shorter
than a full quarterly interest period, will be computed on the basis of the
actual number of days elapsed in such period.
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(b) The provisions of Section 204(a) notwithstanding, the Company shall
have the right at any time, on one or more occasions so long as an Event of
Default with respect to the QUIDS has not occurred and is not continuing, to
extend any interest payment period on the QUIDS for a period (a "Deferral
Period") not to exceed 20 consecutive quarterly interest payment periods;
provided that the date on which such Deferral Period ends must be an Interest
Payment Date and must be no later than December 31, 2028 or any date on which
any QUIDS are fixed for redemption. The quarterly interest payments on the QUIDS
so deferred will continue to accrue with interest thereon at the rate of
interest of the QUIDS during such Deferral Period. On the Interest Payment Date
at the end of the Deferral Period, the Company shall pay all interest then
accrued and unpaid, which shall be compounded quarterly at the rate of interest
on the QUIDS (except to the extent prohibited by law) to the date of payment, to
the persons in whose names the QUIDS are registered on the Record Date for such
Deferral Period. The Company shall give the Holders of the QUIDS notice of its
election to defer interest payments or to extend the Deferral Period ten
Business Days prior to the earlier of (1) the next scheduled quarterly payment
date and (2) the date the Company is required to give notice of the record date
of such related interest payment to the New York Stock Exchange or other
applicable self-regulatory organization or to the Holders of the QUIDS, but in
any event not less than two Business Days prior to such record date. During the
Deferral Period the Company shall not declare or pay any dividend on or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
Capital Stock or make any guaranty payment with respect to the foregoing, other
than redemptions of any series of Capital Stock of the Company pursuant to the
terms of any sinking fund provisions with respect thereto. During any Deferral
Period, the Company may not (i) make any distributions, loans or guarantees for
the benefit of, (ii) purchase, defease, redeem or otherwise acquire or retire
for value any securities of or (iii) make any other investment in, any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company, for the purpose of, or to enable the payment
of, directly or indirectly, dividends on any equity securities of DTE Energy
Company and its successors or assigns. During any Deferral Period, the Company
may continue to extend the interest payment period by extending the Deferral
Period, on one or more occasions, by notice given as aforesaid in this paragraph
(b), provided that such Deferral Period, as so extended, must end on an Interest
Payment Date and in no event shall the aggregate Deferral Period, as extended,
exceed 20 consecutive quarterly interest payment periods or extend beyond
December 31, 2028 or any date on which QUIDS are fixed for redemption. No
interest shall be due and payable during a Deferral Period except at the end
thereof.
SECTION 205. Optional Redemption of QUIDS. Other than in accordance
with Section 206 below, the QUIDS shall not be redeemable prior to December 31,
2003. Thereafter, upon notice given by mailing the same, postage prepaid, at
least 30 days and not more than 60 days prior to the date fixed for redemption,
any or all of the QUIDS may be redeemed by the Company, at its option, at any
time and from time to time, at a redemption price equal to 100% of the principal
amount of the QUIDS to be redeemed plus accrued and unpaid interest thereon to
the date fixed for redemption.
SECTION 206. Tax Event Redemption of QUIDS. If a Tax Event has occurred
and is continuing, the Company has the right, within 90 days following the
occurrence of such Tax
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Event, to redeem the QUIDS, in whole but not in part, at a redemption price
equal to the aggregate principal amount of the QUIDS plus accrued and unpaid
interest to the date of redemption.
SECTION 207. Form of QUIDS. Attached hereto as Exhibit A is a form of
the definitive QUIDS.
ARTICLE THREE
ADDITIONAL EVENTS OF DEFAULT AND COVENANTS
SECTION 301. Inapplicability of Certain Events of Default. The Events
of Default set forth in Sections 601(4) and 601(8) of the Original Indenture
shall not apply to the QUIDS. The omission by the Company to pay interest on the
QUIDS during a Deferral Period as permitted by Section 204 shall not constitute
an Event of Default under Section 601 (1) of the Original Indenture.
ARTICLE FOUR
SUBORDINATION OF QUIDS
SECTION 401. QUIDS Subordinate to Senior Indebtedness. The Company for
itself, its successors and assigns, covenants and agrees, and each Holder of
QUIDS issued, whether upon original issue or upon transfer or assignment
thereof, by its acceptance thereof likewise covenants and agrees, that the
payment of principal of and interest on each and all of the QUIDS is hereby
expressly subordinated, to the extent and in the manner hereinafter in this
Article set forth, in right of payment to the prior payment in full of all
existing and future Senior Indebtedness of the Company.
SECTION 402. Payments to Securityholders. (a) Upon (i) any acceleration
of the principal amount due on the QUIDS or (ii) any payment or distribution of
assets of the Company of any kind or character, whether in cash, property or
securities, to creditors upon any dissolution or winding-up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary
or in bankruptcy, insolvency, receivership or other proceedings, all principal,
premium, if any, and interest, if any, due upon all Senior Indebtedness shall
first be paid in full, or payment thereof provided for in money or money's worth
in accordance with its terms, before any payment is made on account of the
principal of or interest on the indebtedness evidenced by the QUIDS, and upon
any such dissolution or winding-up or liquidation or reorganization any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, to which the Holders of the QUIDS under the terms
of this Supplemental Indenture would be entitled, except for the provisions
hereof, shall (subject to the power of a court of competent jurisdiction to make
other equitable provision reflecting the rights conferred by the provisions
hereof upon the Senior Indebtedness and the holders thereof with respect to the
QUIDS and the Holders thereof by a lawful plan of reorganization under
applicable bankruptcy law), be paid by the Company or any receiver, trustee in
bankruptcy, liquidating trustee, agent or
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<PAGE> 8
other person making such payment or distribution, or by the Holders of the QUIDS
if received by them, directly to the holders of Senior Indebtedness (pro rata to
each such holder on the basis of the respective amounts of Senior Indebtedness
held by such holder) or their representatives, to the extent necessary to pay
all Senior Indebtedness (including interest thereon) in full, in money or
money's worth, in accordance with its terms, after giving effect to any
concurrent payment or distribution to or for the holders of Senior Indebtedness,
before any payment or distribution is made to the Holders of the indebtedness
evidenced by the QUIDS. The consolidation of the Company with, or a merger of
the Company into, another Person or the liquidation or dissolution of the
Company following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another Person upon the terms and conditions
provided in Section 901 of the Original Indenture shall not be deemed a
dissolution, winding-up, liquidation or reorganization for the purposes of this
Section 402(a).
(b) In the event that any payment or distribution of assets of the
Company of any kind or character not permitted by Section 402(a), whether in
cash, property or securities, shall be received by the Trustee or the Holders of
QUIDS before all Senior Indebtedness is paid in full, or provision made for such
payment, in accordance with its terms, upon written notice to the Trustee or, as
the case may be, such Holder, such payment or distribution shall be held in
trust for the benefit of, and shall be paid over or delivered to, the holders of
such Senior Indebtedness or their representative or representatives, or to the
Trustee or trustees under any indenture pursuant to which any instruments
evidencing any of such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay all such Senior
Indebtedness in full in accordance with its terms, after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.
Nothing in this Article shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 706 of the Original Indenture. In addition, nothing
in this Article shall prevent the Company from making or the Trustee from
receiving or applying any payment in connection with the redemption of the QUIDS
if the first publication of notice of such redemption (whether by mail or
otherwise in accordance with this Supplemental Indenture) has been made, and the
Trustee has received such payment from the Company, prior to the occurrence of
any of the contingencies specified in this Section 402.
(c) No payment on account of principal of or interest on the QUIDS
shall be made unless full payment of amounts then due for principal, premium, if
any, sinking funds and interest on any Senior Indebtedness has been made or duly
provided for in money or money's worth in accordance with the terms of such
Senior Indebtedness. No payment on account of principal or interest on the QUIDS
shall be made if, at the time of such payment or immediately after giving effect
thereto, (i) there shall exist a default in the payment of principal, premium,
if any, sinking fund or interest with respect to any Senior Indebtedness, or
(ii) there shall have occurred an event of default (other than a default in the
payment of principal, premium, if any, sinking funds or interest) with respect
to any Senior Indebtedness, as defined therein or in the instrument under which
the same is outstanding, permitting the holders thereof to accelerate the
maturity thereof and upon written notice thereof given to the Trustee, with a
copy to the Company (the delivery of which shall not affect the validity of the
notice to the Trustee), and such event of default shall not have been cured or
waived or shall not have ceased to exist;
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provided, however, that if the holders of the Senior Indebtedness to which the
default relates have not declared such Senior Indebtedness to be immediately due
and payable within 180 days after the occurrence of such default (or have
declared such Senior Indebtedness to be immediately due and payable and within
such period have rescinded such declaration of acceleration), then the Company
shall resume making any and all required payments in respect of the QUIDS
(including any missed payments). Only one payment blockage period under the
immediately preceding sentence may be commenced within any consecutive 365-day
period with respect to the QUIDS of any series. No event of default which
existed or was continuing on the date of the commencement of any 180-day payment
blockage period with respect to the Senior Indebtedness initiating such payment
blockage period shall be, or be made, the basis for the commencement of a second
payment blockage period by a registered holder or representative of such Senior
Indebtedness whether or not within a period of 365 consecutive days unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days (and, in the case of any such waiver, no payment shall be
made by the Company to the holders of Senior Indebtedness in connection with
such waiver other than amounts due pursuant to the terms of the Senior
Indebtedness as in effect at the time of such default).
SECTION 403. Subrogation to Rights of Holders of Senior Indebtedness.
From and after the payment in full of all Senior Indebtedness, the Holders of
the QUIDS (together with the holders of any other indebtedness of the Company
which is subordinate in right of payment to the payment in full of all Senior
Indebtedness, which is not subordinate in right of payment to the QUIDS and
which by its terms grants such right of subrogation to the holder thereof) shall
be subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets or securities of the Company applicable to
the Senior Indebtedness until the QUIDS shall be paid in full, and, for the
purposes of such subrogation, no such payments or distributions to the holders
of Senior Indebtedness of assets or securities, which otherwise would have been
payable or distributable to Holders of the QUIDS, shall, as between the Company,
its creditors other than the holders of Senior Indebtedness, and the Holders of
the QUIDS, be deemed to be a payment by the Company to or on account of the
Senior Indebtedness, it being understood that the provisions of this Article are
and are intended solely for the purpose of defining the relative rights of the
Holders of the QUIDS, on the one hand, and the holders of the Senior
Indebtedness, on the other hand, and nothing contained herein is intended to or
shall impair as between the Company, its creditors other than the holders of
Senior Indebtedness, and the Holders of the QUIDS, the obligation of the
Company, which is unconditional and absolute, to pay to the Holders of the QUIDS
the principal of and interest on the QUIDS as and when the same shall become due
and payable in accordance with their terms, or to affect the relative rights of
the Holders of the QUIDS and creditors of the Company other than the holders of
the Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or the Holder of QUIDS from exercising all remedies otherwise permitted
by applicable law upon default hereunder with respect to the QUIDS subject to
the rights of the holders of Senior Indebtedness, under Section 402, to receive
cash, property or securities of the Company otherwise payable or deliverable to
the Trustee or the Holders of the QUIDS or to a representative of such Holders,
on their behalf.
Upon any distribution or payment in connection with any proceedings or
sale referred to in Section 402(a), the Trustee and each Holder of the QUIDS
then Outstanding, shall be entitled
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<PAGE> 10
to rely upon a certificate of the liquidating trustee or agent or other Person
making any distribution or payment to the Trustee or such Holder for the purpose
of ascertaining the holders of Senior Indebtedness entitled to participate in
such payment or distribution, the amount of such Senior Indebtedness or the
amount payable thereon, the amount or amounts paid or distributed thereon and
all other facts pertinent thereto or to this Article.
SECTION 404. No Impairment of Subordination. Nothing contained in this
Article or elsewhere in this Supplemental Indenture or the QUIDS shall prevent
at any time the Company from making payments at any time of principal of or
interest on the QUIDS, except under the conditions described in Section 402 or
during the pendency of any proceedings or sale therein referred to.
SECTION 405. Trustee to Effectuate Subordination. Each Holder of QUIDS
by his acceptance thereof, whether upon original issue or upon transfer or
assignment, authorizes and directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination provisions in
this Article and appoints the Trustee his attorney-in-fact for any and all such
purposes.
No rights of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Trustee
or any Holder of the QUIDS then Outstanding, or by any act or failure to act, in
good faith, by any such holder, or by any noncompliance by any such holder, with
the terms, provisions and covenants of this Supplemental Indenture, regardless
of any knowledge thereof which any such holder may have or otherwise be charged
with.
Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to time,
without the consent of or notice to the Holders of the QUIDS, without incurring
responsibility to the Holders of the QUIDS and without impairing or releasing
the subordination provided in this Article or the obligations of the Holders of
the QUIDS to the holders of Senior Indebtedness, do any one or more of the
following: (i) change the manner, place or terms of payment of, or renew or
alter, Senior Indebtedness, or otherwise amend or supplement in any manner
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (iii) release any Person liable in any manner for the collection
of Senior Indebtedness; and (iv) exercise or refrain from exercising any rights
against the Company and any other Person.
SECTION 406. Notice to Trustee. The Company shall give prompt written
notice to the Trustee in the form of an Officers' Certificate of any fact known
to the Company which would prohibit the making of any payment of money to or by
the Trustee in respect of the QUIDS pursuant to the provisions of this Article.
Notwithstanding the provisions of this Article or any other provisions of this
Supplemental Indenture, the Trustee shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Trustee in respect of the QUIDS pursuant to the provisions of this Article,
unless and until the
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Trustee shall have received at its Corporate Trust Office written notice thereof
from the Company or a holder or holders of Senior Indebtedness or from any
trustee therefor at least two Business Days prior to such payment date; and,
prior to the receipt of any such written notice, the Trustee, shall be entitled
in all respects to assume that no such facts exist.
The Trustee shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of Senior
Indebtedness (or a trustee on behalf of such holder) to establish that such
notice has been given by a holder of Senior Indebtedness or a trustee on behalf
of any such holder. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Indebtedness to participate in any payment or distribution pursuant to
this Article, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under the Article, and, if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
SECTION 407. Reliance on Certificate of Liquidating Agent. Upon any
payment or distribution referred to in this Article, the Trustee and the Holders
of the QUIDS shall be entitled to rely upon any order or decree entered by any
court of competent jurisdiction in which a dissolution, winding up or total or
partial liquidation or reorganization of the Company is pending, or a
certificate of the trustee in bankruptcy, liquidating trustee, custodian,
receiver, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Trustee or to the Holders of the
QUIDS, for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article.
SECTION 408. Trustee Not Fiduciary for Holders of Senior Indebtedness.
The Trustee shall not be deemed to owe any fiduciary duty to the holders of
Senior Indebtedness and shall not be liable to any such holders if it shall in
good faith mistakenly pay over or distribute to Holders of the QUIDS of any
series or to the Company or to any other Person cash, property or securities to
which any holders of Senior Indebtedness shall be entitled by virtue of this
Article or otherwise.
SECTION 409. Rights of Trustee as Holder of Senior Indebtedness. The
Trustee in its individual capacity shall be entitled to all the rights set forth
in this Article with respect to any Senior Indebtedness which may at any time be
held by it, to the same extent as any other holder of Senior Indebtedness, and
nothing in this Supplemental Indenture shall deprive the Trustee of any of its
rights as such holder.
SECTION 410. Article Applicable to Paying Agent. In case at any time
any Paying Agent other than the Trustee shall have been appointed by the Company
and be then acting hereunder, the term "Trustee" as used in this Article shall
in such case (unless the context shall
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otherwise require) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that this Section shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
ARTICLE FIVE
MISCELLANEOUS PROVISIONS
The Trustee makes no undertaking or representations in respect of, and
shall not be responsible in any manner whatsoever for and in respect of, the
validity or sufficiency of this Seventh Supplemental Indenture or the proper
authorization or the due execution hereof by the Company or for or in respect of
the recitals and statements contained herein, all of which recitals and
statements are made solely by the Company.
Except as expressly amended hereby, the Original Indenture shall
continue in full force and effect in accordance with the provisions thereof and
the Original Indenture is in all respects hereby ratified and confirmed. This
Seventh Supplemental Indenture and all its provisions shall be deemed a part of
the Original Indenture in the manner and to the extent herein and therein
provided.
This Seventh Supplemental Indenture shall be governed by, and construed
in accordance with, the laws of the State of New York.
This Seventh Supplemental Indenture may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original, but
all such counterparts shall together constitute but one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Seventh
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested, all as of the day and year first above
written.
THE DETROIT EDISON COMPANY
By:
----------------------------
Name: C. C. Arvani
Title: Assistant Treasurer
ATTEST:
By:
---------------------
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[Corporate Seal]
STATE OF MICHIGAN )
) :
COUNTY OF WAYNE )
On the day of 1998, before me personally came C. C.
Arvani, to me known, who, being by me duly sworn, did depose and say that he is
Assistant Treasurer of THE DETROIT EDISON COMPANY, one of the corporations
described in and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and he signed his name thereto by like authority.
---------------------------
Notary Public
My Commission Expires
[Notarial Seal]
BANKERS TRUST COMPANY,
as Trustee
By:
---------------------------
Name:
Title:
ATTEST:
By:
------------------
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[Corporate Seal]
STATE OF NEW YORK )
) :
COUNTY OF NEW YORK )
On the day of 1998, before me personally came ,
to me known, who, being by me duly sworn, did depose and say that he is
of BANKERS TRUST COMPANY, one of the corporations described in
and which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation, and she signed her name thereto by like authority.
------------------------------
[Notarial Seal]
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EXHIBIT A
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART
FOR NOTES IN CERTIFICATED FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TRUST COMPANY ("DTC"), TO A NOMINEE OF DTC OR BY DTC OR
ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE OF SUCH SUCCESSOR. UNLESS
THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF DTC TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED
IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO.,
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC)
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS
WRONGFUL, INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
NO. R-1 $100,000,000
THE DETROIT EDISON COMPANY
7.375% QUARTERLY INCOME DEBT SECURITIES
(JUNIOR SUBORDINATED
DEFERRABLE INTEREST DEBENTURES
DUE 2028)
ISSUE PRICE ISSUE DATE CUSIP NO.
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$25.00, or any integral
multiple thereof. November 3, 1998 250847688
THE DETROIT EDISON COMPANY, a corporation duly organized and existing
under the laws of the State of Michigan (herein referred to as the "Company",
which term includes any successor corporation under the Indenture hereinafter
referred to), for value received, hereby promises to pay to Cede & Co., or
registered assigns, the principal sum of $100,000,000 on December 31, 2028 and
to pay interest at the rate of 7.375% per annum on said principal sum from the
date of issuance until the principal of this Debenture ("Note") hereof becomes
due and payable, and on any overdue principal and (to the extent that payment of
such interest is enforceable under applicable law) on any overdue installment of
interest at the same rate per annum during such overdue period. Interest on this
Note will be payable quarterly (subject to deferral as set forth herein) in
arrears on March 31, June 30, September 30 and December 31 of each year (each
such date, an "Interest Payment Date"), commencing December 31, 1998.
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The amount of interest payable for any period shall be computed on the
basis of twelve 30-day months and a 360-day year and, for any period shorter
than a full quarterly interest period, will be computed on the basis of the
actual number of days elapsed in such period. In the event that any date on
which interest is payable on this Note is not a Business Day, then payment of
the amount payable on such date will be made on the next succeeding day which is
a Business Day (and without any interest or other payment in respect of any such
delay), except that, if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day
without reduction in the amount due to such early payment (and in which case the
relevant Record Date shall be on the Business Day immediately preceding such
Interest Payment Date), in each case with the same force and effect as if made
on such date, subject to certain rights of deferral described below. A "Business
Day" shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is
not a day on which banking institutions located in the State of Michigan or in
the state in which the principal corporate trust office of the Trustee is
located are authorized or obligated by or pursuant to law or executive order to
close. The interest installment so payable, and punctually paid or duly provided
for, on any Interest Payment Date (other than interest payable on redemption or
maturity) will, as provided in the Indenture (as defined herein), be paid to the
person in whose name this Note (or one or more Predecessor Notes, as defined in
said Indenture) is registered at the close of business on the relevant record
date for such interest installment, which shall be one Business Day prior to the
relevant Interest Payment Date or, in the case of a Deferral Period (as defined
in the Indenture), one Business Day prior to Interest Payment Date for such
Deferral Period (each a "Record Date"). Interest payable on redemption or
maturity shall be payable to the person to whom the principal is paid. Any such
interest installment not punctually paid or duly provided for shall forthwith
cease to be payable to the registered holders on such Record Date, and may be
paid to the person in whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on a special record date to be fixed by the
Trustee for the payment of such defaulted interest, notice whereof shall be
given to the registered holders of this series of Notes not less than 10 days
prior to such special record date, or may be paid at any time in any other
lawful manner not inconsistent with the requirements of any securities exchange
on which the Notes may be listed, and upon such notice as may be required by
such exchange, all as more fully provided in the Indenture. The principal of and
the interest on this Note shall be payable at the office or agency of the
Company maintained for that purpose in the Borough of Manhattan, The City of New
York, in any coin or currency of the United States of America which at the time
of payment is legal tender for payment of public and private debts; provided,
however, that payment of interest may be made at the option of the Company by
check mailed to the registered holder at the close of business on the Record
Date at such address as shall appear in the Security Register.
Payment of the principal of and interest on this Note is, to the extent
provided in the Indenture, subordinated and subject in right of payment to the
prior payment in full of all existing and future Senior Indebtedness, as defined
in the Indenture, of the Company and this Note is issued subject to the
provisions of the Indenture with respect thereto. Each registered holder of this
Note, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such action as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the
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Trustee as his or her attorney-in-fact for any and all such purposes. Each
registered holder hereof, by his or her acceptance hereof, hereby waives all
notice of the acceptance of the subordination provisions contained herein and in
the Indenture by each holder of Senior Indebtedness, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.
This Note shall not be entitled to any benefit under the Indenture
hereinafter referred to, be valid or become obligatory for any purpose until the
Certificate of Authentication hereon shall have been signed by or on behalf of
the Trustee.
Unless the Certificate of Authentication hereon has been executed by
the Trustee or a duly appointed Authentication Agent referred to herein, this
Note shall not be entitled to any benefit under the Indenture or be valid or
obligatory for any purpose.
This Note is one of a duly authorized series of Notes of the Company
(herein sometimes referred to as the "Notes"), specified in the Indenture, all
issued or to be issued in one or more series under and pursuant to a Collateral
Trust Indenture dated as of June 30, 1993 (the "Original Indenture") duly
executed and delivered between the Company and Bankers Trust Company, a New York
banking corporation, as Trustee (herein referred to as the "Trustee"), as
supplemented by the First Supplemental Indenture dated as of June 30, 1993, a
Second Supplemental Indenture dated as of September 15, 1993, as amended, a
Third Supplemental Indenture dated as of August 15, 1994, as amended, a Fourth
Supplemental Indenture dated as of August 15, 1995 , a Fifth Supplemental
Indenture dated as of February 1, 1996, a Sixth Supplemental Indenture dated as
of May 1, 1998 and a Seventh Supplemental Indenture dated as of October 15,
1998, (together with the Original Indenture, the "Indenture") between the
Company and the Trustee, to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the respective rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the registered holders of the Notes and of the terms
upon which the Notes are, and are to be, authenticated and delivered. By the
terms of the Indenture, the Notes are issuable in series which may vary as to
amount, date of maturity, rate of interest and in other respects as in the
Indenture provided. This series of Notes is limited in aggregate principal
amount as specified in said Seventh Supplemental Indenture.
Notwithstanding the provisions of the Original Indenture, this Note
shall be without benefit of any security and shall be subordinated to Senior
Indebtedness (as defined in the Indenture) as and to the extent provided in
Article Four of said Seventh Supplemental Indenture. This Note shall not have
the benefit of the provisions of Article Four of the Original Indenture and
shall not have the benefit of, or be subject to, the other related provisions of
the Original Indenture relating to the grant of security, including (for
avoidance of doubt and not for purposes of limitation) the Granting Clause, the
definitions of "Deliverable Mortgage Bonds," "Deliverable Securities,"
"Designated Mortgage Bonds," "Grant," "Mortgage," "Mortgage Bonds," "Mortgage
Trustee," "Previously Delivered Mortgage Bonds," and "Trust Estate," Section
301(20), Sections 301 (a) (v), (ix), (x) and (xi), Sections 301 (b) (ii) and
(iii), and Section 301 (d). In addition, the Events of Default set forth in
Sections 601(4) and 601 (8) of the Original Indenture shall not apply to this
Note. The omission by the Company to pay interest on
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this Note during a Deferral Period as permitted by Section 204 of said Seventh
Supplemental Indenture shall not constitute an Event of Default under Section
601(l) of the Original Indenture.
The Company shall have the right to redeem this Note at the option of
the Company, without premium or penalty, in whole or in part, at any time on or
after December 31, 2003 and prior to maturity at a redemption price equal to
100% of the principal amount redeemed plus the accrued and unpaid interest
thereon to the date fixed for redemption. Any redemption pursuant to this
paragraph will be made upon not less than 30 nor more than 60 days notice. If
the Notes are only partially redeemed by the Company, the Notes will be redeemed
pro rata or by lot or by any other method utilized by the Trustee; provided that
if, at the time of redemption, the Notes are registered as a Global Note, the
Depositary shall determine by lot the principal amount of such Notes held by
each Note holder to be redeemed.
If a Tax Event (as hereinafter defined) has occurred and is continuing,
the Company shall have the right, within 90 days following the occurrence of
such Tax Event, to redeem the QUIDS, in whole but not in part, at a redemption
price equal to the aggregate principal amount of the QUIDS plus accrued and
unpaid interest to the date of redemption. "Tax Event" means that the Company
shall have received an opinion of counsel (which may be counsel to the Company
or an affiliate but not an employee thereof) experienced in such matters to the
effect that, as a result of any amendment to, or change (including any announced
prospective change) in, the laws (or any regulations thereunder) of the United
States or any political subdivision or taxing authority thereof or therein
affecting taxation, or as a result of any official administrative pronouncement
or judicial decision interpreting or applying such laws or regulations, which
amendment or change is effective or such pronouncement or decision is announced
on or after the date of original issuance of the QUIDS, there is more than an
insubstantial risk that interest payable by the Company on the QUIDS is not, or
will not be, deductible by the Company for federal income tax purposes.
In the event of redemption of this Note in part only, a new Note or
Notes of this series for the unredeemed portion hereof will be issued in the
name of the registered holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Notes may be declared,
and upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Note upon compliance by the Company with certain
conditions set forth therein.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the registered holders of not less than a majority
in aggregate principal amount of the outstanding Notes of each series affected
at the time, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
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modifying in any manner the rights of the registered holders of the Notes;
provided, however, that no such supplemental indenture shall (i) extend the
fixed maturity of any Notes of any series, or reduce the principal amount
thereof, or reduce the rate of or extend the time of payment of interest
thereon, or reduce any premium payable upon the redemption thereof, without the
consent of the registered holder of each Note so affected or (ii) reduce the
aforesaid percentage of Notes, the registered holders of which are required to
consent to any such supplemental indenture, without the consent of the
registered holders of each Note then outstanding and affected thereby. The
Indenture also contains provisions permitting (i) the registered holders of at
least 66 2/3% in aggregate principal amount of the Notes of all series at the
time outstanding affected thereby, on behalf of the registered holders of the
Notes of such series, to waive compliance by the Company with certain provisions
of the Indenture and (ii) the registered holders of a majority in aggregate
principal amount of the Notes of all series at the time outstanding affected
thereby, on behalf of the registered holders of the Notes of such series, to
waive certain past defaults under the Indenture and their consequences. Any such
consent or waiver by the registered bolder of this Note (unless revoked as
provided in the Indenture) shall be conclusive and binding upon such registered
holder and upon all future registered holders and owners of this Note and of any
Note issued in exchange hereof or in place hereof (whether by registration of
transfer or otherwise), irrespective of whether or not any notation of such
consent or waiver is made upon this Note.
No reference herein to the Indenture and no provision of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and interest on this Note at
the time and place and at the rate and in the coin or currency herein
prescribed.
The Company shall have the right at any time, on one or more occasions,
so long as an Event of Default has not occurred and is not continuing under the
Indenture with respect to the Notes, to extend any interest payment period on
this Note to a period not to exceed 20 consecutive quarterly interest payment
periods and, as a consequence, the quarterly interest payment on the Notes would
be deferred (but would continue to accrue with interest thereon compounded
quarterly at the rate of interest on the Notes, except as provided by law)
during any such Deferral Period (as defined in the Indenture). At the end of
each Deferral Period, the Company shall pay all interest then accrued and unpaid
(compounded quarterly, at the rate of interest on the Notes, except to the
extent provided by law) to the persons in whose name the QUIDS are registered on
the Record Date for such Deferral Period. In the event the Company exercises
this right, the Company shall not declare or pay any dividends on, or redeem,
purchase, acquire or make a liquidation payment with respect to, any of its
Capital Stock (as defined in the Indenture) or make any guarantee payments with
respect to the foregoing during such Deferral Period, other than redemptions of
any series of Capital Stock of the Company pursuant to the terms of any sinking
fund provisions with respect thereto. In addition, during any Deferral Period,
the Company may not (i) make any distributions, loans or guarantees for the
benefit of, (ii) purchase, defease, redeem or otherwise acquire or retire for
value any securities of or (iii) make any other investment in any person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company, for the purpose of, or to enable the payment
of, directly or indirectly, dividends on any equity security of DTE Energy
Company and
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its successors or assigns. During any Deferral Period, the Company may continue
to extend the interest payment period by extending the Deferral Period, provided
that the aggregate Deferral Period, as extended, must end on an Interest Payment
Date and in no event shall the aggregate Deferral Period exceed 20 consecutive
quarterly interest payment periods or extend beyond the maturity of the Notes or
any date on which any of the Notes are fixed for redemption. No interest shall
be due and payable on the Notes during a Deferral Period except at the end
thereof. The Company shall give the registered holders of Notes notice of its
election to defer interest payments or to extend the Deferral Period ten
Business Days prior to the earlier of (i) the next scheduled quarterly payment
date or (ii) the date the Company is required to give notice of the record date
of such related interest payment to the New York Stock Exchange or other
applicable self-regulatory organization or to the holders of the Notes, but in
any event not less than two Business Days prior to such record date.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Note is registrable in the Security Register of
the Company, upon surrender of this Note for registration of transfer at the
office or agency of the Company in any place where the principal of and any
interest on this Note are payable or at such other offices or agencies as the
Company may designate, duly endorsed by or accompanied by a written instrument
or instruments of transfer in form satisfactory to the Company and the Security
Registrar or any transfer agent duly executed by the registered holder hereof or
his or her attorney duly authorized in writing, and thereupon one or more new
Notes of this series and of like tenor, of authorized denominations and for the
same aggregate principal amount will be issued to the designated transferee or
transferees. No service charge will be made for any such transfer, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Note, the
Company, the Trustee, any paying agent and any Note Registrar may deem and treat
the registered holder hereof as the absolute owner hereof (whether or not this
Note shall be overdue and notwithstanding any notice of ownership or writing
hereon made by anyone other than the Note Registrar) for the purpose of
receiving payment of or on account of the principal hereof and interest due
hereon and for all other purposes, and neither the Company nor the Trustee nor
any paying agent nor any Note Registrar shall be affected by any notice to the
contrary.
The Notes of this series are issuable only in fully registered form
without coupons in denominations of $25 and any integral multiple thereof. This
Global Note is exchangeable for Notes in definitive form only under certain
limited circumstances set forth in the Indenture. Notes of this series so issued
are issuable only in registered form without coupons in denominations of $25 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Notes of this series are exchangeable for
a like aggregate principal amount of Notes of this series of a different
authorized denomination, as requested by the registered holder surrendering the
same.
As set forth in, and subject to the provisions of, the Indenture, no
registered owner of any Note will have any right to institute any proceeding
with respect to the Indenture or for any
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remedy thereunder, unless (i) such registered owner shall have previously given
to the Trustee written notice of a continuing Event of Default with respect to
the Notes of this series, (ii) the registered owners of not less than 25% in
principal amount of the outstanding Notes of this series shall have made written
request, and offered reasonable indemnity, to the Trustee to institute such
proceeding as trustee, (iii) the Trustee shall have failed to institute such
proceeding within 60 days and (iv) the Trustee shall not have received from the
registered owners of a majority in principal amount of the outstanding Notes of
this series a direction inconsistent with such request within such 60-day
period; provided, however, that such limitations do not apply to a suit
instituted by the registered owner hereof for the enforcement of payment of the
principal of or any interest on this Note on or after the respective due dates
expressed herein, subject to deferral as set forth herein.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
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IN WITNESS WHEREOF, the Company has caused this Instrument to be
executed.
THE DETROIT EDISON COMPANY
By
----------------------------
Attest:
By
----------------------
[Corporate Seal]
CERTIFICATE OF AUTHENTICATION
This is one of the Notes of the series of Notes described in the within
mentioned Indenture.
BANKERS TRUST COMPANY
as Trustee
By
----------------------------
Authorized Signatory
Date:
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FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto
- --------------------------------------------------------------------------------
(Please insert Social Security or Other Identifying Number of Assignee)
- --------------------------------------------------------------------------------
(Please print or type name and address, including zip code of assignee)
the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorneys to transfer the within Note on the books of the
Issuer, with full power of substitution in the premises.
Dated:
----------------------
NOTICE: The signature of this assignment must correspond with the name as
written upon the face of the within Note in every particular, without alteration
or enlargement or any change whatever and NOTICE: Signature(s) must be
guaranteed by a financial institution that is a member of the Securities
Transfer Agents Medallion Program ("STAMP"), the Stock Exchange, Inc. Medallion
Signature Program ("MSP"). When assignment is made by a guardian, trustee,
executor or administrator, an officer of a corporation, or anyone in a
representative capacity, proof of his or her authority to act must accompany
this Note.
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EXHIBIT 4-199
SUPPORT AGREEMENT
BETWEEN
DTE ENERGY COMPANY
AND
DTE CAPITAL CORPORATION
THIS SUPPORT AGREEMENT, dated as of November 18, 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 to issue $300,000,000 aggregate
principal amount of debt securities (hereinafter referred to as the "Debt
Securities," and such amount and all interest and other amounts, if any, payable
with respect thereto being hereinafter collectively referred to as "Debt") to
parties other than Parent pursuant to the Indenture dated as of June 15, 1998
(as amended or supplemented with respect to the Debt Securities, the
"Indenture") between Subsidiary and The Bank of New York (or any successor or
replacement trustee), as trustee (the "Trustee");
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 (as defined below) will rely upon this
Agreement in making loans or extending credit or otherwise acquiring Debt
Securities of 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 directly or indirectly 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 directly or indirectly by Parent or any capital stock of
Subsidiary from time to time owned directly or indirectly by Parent, provided,
however, that any restriction on the payment of dividends by DECO or Subsidiary
<PAGE> 2
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 on the relevant payment date of
interest, principal or premium, if any, on, or other amounts due in respect of,
all or any portion of the Debt Securities issued by it or related Debt, 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 on the relevant payment date in respect of such Debt as equity or
as a loan, as Parent shall determine 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 (including any Lender)
other than Parent. Each of the parties hereto acknowledges that Parent's
obligations hereunder do not constitute a guarantee by Parent of Debt of
Subsidiary. As used herein, the term "Lender" shall mean (i) any person, firm,
corporation or other entity to which Subsidiary is indebted for any Debt or
which is acting as the Trustee or a trustee or authorized representative on
behalf of such person, firm corporation or other entity or which is acting as
MAPS Agent (as defined in the Indenture), and (ii) Salomon Smith Barney Inc.,
Chase Securities Inc., Barclays Capital Inc. and First Chicago Capital Markets,
Inc., and their respective successors (collectively, the "Initial Purchasers"),
with respect to Debt owing by Subsidiary to the Initial Purchasers in accordance
with the terms of that certain Purchase Agreement, dated as of November 18,
1998, relating to the Debt Securities; provided that, notwithstanding the
foregoing, the claims of the Initial Purchasers shall be subordinated to the
claims of the holders of the Debt Securities hereunder.
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 changes in 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 that such amendment or termination does not adversely affect the rights
of the Initial Purchasers; and provided further, 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
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<PAGE> 3
been paid in full, unless such Lender shall consent in writing to the contrary.
Notwithstanding the foregoing, (A) upon not less than 30 days prior notice to
the applicable Remarketing Agent and the Trustee, Subsidiary and Parent may
amend this Agreement (subject to the proviso that such amendment shall not
adversely affect the rights of the Initial Purchasers) on any Interest Rate
Adjustment Date (as defined in the Indenture) for Debt Securities, effective
commencing on such Interest Rate Adjustment Date; provided that such amendment
shall not be applicable to such Debt Securities until after the Debt Securities
have been tendered for remarketing and successfully remarketed on such Interest
Rate Adjustment Date; and provided further that no such amendment shall be of
such nature as would require (i) registration or re-registration of the Debt
Securities under the Securities Act of 1933, as amended (the "Securities Act"),
unless Subsidiary has a registration statement under the Securities Act
effective with respect thereto or (ii) registration of Subsidiary under the
Investment Company Act of 1940, as amended, and (B) 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 long-term debt rating of not less than "A-" from Standard & Poor's
Ratings Services or its successor or a long-term debt rating of not less than
"A3" from Moody's Investors Service, Inc. or its successor and (ii) Parent shall
have submitted a written request to Subsidiary that its obligations under this
Agreement be so suspended (with a copy to the Trustee, if applicable) 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 Lenders. Subsidiary hereby assigns and pledges to the
Lenders, for the ratable benefit of each Lender (subject to the subordination of
claims of the Initial Purchasers pursuant to Section 3 hereof), Subsidiary's
right 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 Debt.
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
the 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. Parity. Parent's obligations hereunder shall be pari passu with
Parent's obligations under any existing as well as additional "make-well,"
"keep-well" or support agreements (that are not by their terms subordinated) as
are entered into between Parent and Subsidiary from time to time.
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:
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If to Parent: 2000 2nd Avenue
Detroit, Michigan 48226-1279
Attention: Assistant Treasurer-Banking
If to Subsidiary: 2000 2nd 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.
10. Governing Law. This Agreement shall be governed by the laws of
the State of New York.
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IN WITNESS WHEREOF, the parties hereto have cause this Agreement to be
duly executed as of the day and year first above written.
DTE ENERGY COMPANY
By:______________________________
Name:
Title:
DTE CAPITAL CORPORATION
By:______________________________
Name:
Title:
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<PAGE> 1
EXHIBIT 4.200
================================================================================
DTE CAPITAL CORPORATION
AND
THE BANK OF NEW YORK
Trustee
-----------
SECOND SUPPLEMENTAL INDENTURE
Dated as of November 1, 1998
Supplementing the Indenture
Dated as of June 15, 1998
----------------
$300,000,000
Remarketed Notes, 1998 Series B
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SECOND SUPPLEMENTAL INDENTURE, dated as of the 1st day of
November, 1998, between DTE CAPITAL CORPORATION, a corporation organized and
existing under the laws of the State of Michigan (the "Company"), and THE BANK
OF NEW YORK, a New York banking corporation, having its principal corporate
trust office in The City of New York, New York, as trustee (the "Trustee");
WHEREAS, the Company has heretofore executed and delivered to
the Trustee an Indenture dated as of June 15, 1998 and a First Supplemental
Indenture dated as of June 15, 1998 (the "Original Indenture" and, together with
this Second Supplemental Indenture, the "Indenture") providing for the issuance
by the Company from time to time of its debt securities to be issued in one or
more series (in the Original Indenture and herein called the "Securities"); and
WHEREAS, the Company, in the exercise of the power and
authority conferred upon and reserved to it under the provisions of the Original
Indenture, including Section 901 thereof, and pursuant to appropriate
resolutions of the Board of Directors, has duly determined to make, execute and
deliver to the Trustee this Second Supplemental Indenture to the Original
Indenture as permitted by Sections 201 and 301 of the Original Indenture in
order to establish the form or terms of, and to provide for the creation and
issue of, a series of Securities under the Original Indenture in the aggregate
principal amount of up to $300,000,000; and
WHEREAS, all things necessary to make the Securities, when
executed by the Company and authenticated and delivered by the Trustee or any
Authenticating Agent and issued upon the terms and subject to the conditions
hereinafter and in the Original Indenture set forth against payment therefor,
the valid, binding and legal obligations of the Company and to make this Second
Supplemental Indenture a valid, binding and legal agreement of the Company, have
been done;
NOW, THEREFORE, THIS SECOND SUPPLEMENTAL INDENTURE WITNESSETH
that, in order to establish the terms of a series of Securities, and for and in
consideration of the premises and of the covenants contained in the Original
Indenture and in this Second Supplemental Indenture and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, it is mutually covenanted and agreed as follows:
ARTICLE ONE
DEFINITIONS AND OTHER
PROVISIONS OF GENERAL APPLICATION
Section 101. Definitions. Each capitalized term that is used
herein and is defined in the Original Indenture shall have the meaning specified
in the Original Indenture unless such term is otherwise defined herein.
"Administrative Agent" means the entity designated as such in
the applicable Standby Note Purchase Agreement, if any.
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"Base Rate" means the interest rate established by the MAPS4
Agent, after consultation with the Company, as the applicable "Base Rate" at or
prior to the commencement of the MAPS Mode and set forth on Annex A to the
applicable Note.
"Beneficial Owner" means, for Notes in book-entry form, the
person who acquires an interest in the Notes which is reflected on the records
of DTC through its participants.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions located in the State
of Michigan or in the state in which the principal corporate trust office of the
Trustee is located are authorized or obligated by or pursuant to law or
executive order to close; provided, however, that with respect to Notes in the
Long Term Rate Mode or the MAPS Mode as to which LIBOR is an applicable Interest
Rate Basis, such day is also a London Business Day (as hereinafter defined).
"London Business Day" means a day on which commercial banks are open for
business (including for dealings in the Index Currency (as hereinafter defined)
in London.
"Calculation Agent" has the meaning specified in Section 204
hereof.
"Calculation Date" has the meaning set forth in Section 204
hereof.
"CD Rate" has the meaning specified in Section 204 hereof.
"Commercial Paper Term Mode" means, with respect to any Note,
the Interest Rate Mode in which the interest rate on such Note is reset on a
periodic basis which shall not be less than one calendar day nor more than 364
consecutive calendar days and interest is paid as provided for such Interest
Rate Mode in Section 204 hereof.
"Commercial Paper Term Period" means an Interest Rate Period
of not less than one calendar day nor more than 364 consecutive calendar days,
as determined by the Company, or if not so determined, by the Remarketing Agent.
"Conversion Date" has the meaning set forth in Section 205(d)
hereof.
"Conversion Notice" means a notice, promptly confirmed in
writing in substantially the form of Exhibit H hereto (which includes facsimile
or appropriate electronic media) from the Company, that sets forth the
applicable Note to which it relates, the new Interest Rate Mode (if applicable),
the new Interest Rate Period, the Conversion Date, and with respect to any Long
Term Rate Period, any optional redemption or repayment terms for such Note.
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MAPS4 is a servicemark of Salomon Smith Barney Inc.
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"Determination Date" means the third Business Day preceding
the applicable MAPS Remarketing Date.
"DTC" has the meaning specified in Section 203 hereof.
"DTE Energy" means DTE Energy Company, a Michigan corporation
and the owner, directly or indirectly, of 100% of the outstanding common stock
of the Company.
"Floating Interest Rate Notice" has the meaning specified in
Section 204 hereof. The form of Floating Rate Interest Notice is set forth as
Exhibit G to this Second Supplemental Indenture.
"Floating Rate Maximum Interest Rate" and "Floating Rate
Minimum Interest Rate" have the respective meanings specified in Section 204
hereof.
"Index Maturity" means the period to maturity of the
instrument or obligation with respect to which the related Interest Rate Basis
or Bases will be calculated.
"Initial Interest Rate" means the annual rate of interest
applicable to the Notes during the Initial Interest Rate Period.
"Initial Interest Rate Adjustment Date" means November 15,
2003.
"Initial Interest Rate Period" means the period commencing on
the date of issuance for the Notes and ending on the Business Day immediately
preceding the Initial Interest Rate Adjustment Date.
"Insurer" means such issuer of a financial guaranty insurance
policy in respect of the Notes as may be purchased by the Company from time to
time.
"Interest Determination Date" has the meaning specified in
Section 204 hereof.
"Interest Rate Adjustment Date" means, for a particular
Interest Rate Period in any Interest Rate Mode, each date, which shall be a
Business Day, on which interest and, in the case of a floating interest rate,
the Spread (if any) and the Spread Multiplier (if any) on the Notes subject
thereto commences to accrue at the rate determined and announced by the
applicable Remarketing Agent for such Interest Rate Period and for Notes bearing
interest at the Initial Interest Rate (as hereinafter defined), the Business Day
following the expiration of the Initial Interest Rate Period (as hereinafter
defined).
"Interest Rate Basis" has the meaning specified in Section 204
hereof.
"Interest Rate Mode" means the mode in which the Interest Rate
on a Note is being determined, i.e., the Commercial Paper Term Mode, the Long
Term Rate Mode or the MAPS Mode.
"Interest Rate Period" means, with respect to any Note in the
Commercial Paper Mode or Long Term Rate Mode, the period of time commencing on
the Interest Rate Adjustment
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Date to, but not including, the immediately succeeding Interest Rate Adjustment
Date during which such Note bears interest at a particular fixed interest rate
or floating interest rate, and with respect to any Note in the MAPS Mode, a MAPS
Rate Period.
"Interest Reset Date", "Initial Interest Reset Date" and
"Interest Reset Period" have the respective meanings specified in Section 204
hereof.
"Liquidity Provider" means, any bank or other credit provider
whose obligations such as those under the applicable Standby Note Purchase
Agreement with respect to any Notes are exempt from registration under the
Securities Act of 1933, as amended, with long term senior debt ratings from
Standard & Poor's Ratings Services and Moody's Investors Service, Inc. at least
equal to those of the Company as of the date of the Standby Note Purchase
Agreement, and a minimum combined capital and surplus of at least $50,000,000,
that has entered into a Standby Note Purchase Agreement with the Company for the
purpose of purchasing unremarketed Notes on any Interest Rate Adjustment Date.
"Long Term Rate Mode" means, with respect to any Note, the
Interest Rate Mode in which the interest rate on such Note is reset in a Long
Term Rate Period and interest is paid as provided for such Interest Rate Mode in
Section 204 hereof.
"Long Term Rate Period" means, with respect to any Note, any
period of more than 364 days and not exceeding the remaining term to the Stated
Maturity of such Note.
"MAPS Agent", or such other designation as may be used at the
time of remarketing, means such Remarketing Agent as the Company may appoint
from time to time for the purpose of remarketing Notes in the MAPS Mode.
"MAPS Mode", or such other designation as may be used at the
time of remarketing, means, with respect to any Note, the Interest Rate Mode in
which such Note shall bear interest and be subject to remarketing as "MAndatory
Putable remarketable Securities" (or such other designation as may be used at
the time of remarketing) ("MAPS") as provided for in Article Three hereof.
"MAPS Rate Period", or such other designation as may be used
at the time of remarketing, means an Interest Rate Period for any Note in the
MAPS Mode established by the Company as a period of more than 364 days and not
exceeding the remaining term to the Stated Maturity of such Note; provided,
however, that such Interest Rate Period must end on the day prior to an Interest
Payment Date for such Note. The MAPS Rate Period shall consist of the period to
and excluding the MAPS Remarketing Date and the period from and including the
MAPS Remarketing Date to but excluding the next succeeding Interest Rate
Adjustment Date.
"MAPS Remarketing Agreement", or such other designation as may
be used at the time of remarketing, shall mean the agreement dated as of the
Interest Rate Adjustment Date commencing the applicable MAPS Rate Period which
sets forth the rights and obligations of the Company and the applicable MAPS
Agent with respect to the remarketing of the MAPS.
"MAPS Remarketing Date", or such other designation as may be
used at the time of remarketing, means the date designated by the applicable
MAPS Agent after consultation with
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the Company, upon which the applicable MAPS Agent may elect to remarket the
Notes at the MAPS Interest Rate.
"Notes" or "Note" have the meaning specified in Section 201.
"Notification Date" means the Business Day not later than ten
(10) days prior to the applicable MAPS Remarketing Date on which the MAPS Agent
gives notice to the Company and the Trustee of its intention to purchase the
Notes for remarketing.
"Optional Redemption" means the redemption of any Note prior
to its maturity at the option of the Company as described herein.
"Optional Redemption Price" has the meaning set forth in
Section 304(c) hereof.
"Policy" means such financial guaranty insurance policy as may
be purchased by the Company from an Insurer from time to time in the form
attached as Exhibit F hereto or such other form as may be adopted in any manner
consistent with the requirements of this Second Supplemental Indenture and the
Original Indenture.
"Principal Financial Center" means, except as otherwise
specified in the applicable Floating Interest Rate Notice, the capital city of
the country issuing the Index Currency, except that with respect to United
States dollars, Australian dollars, Canadian dollars, Deutsche marks, Dutch
guilders, Portuguese escudos, Italian lire, South African rand, and Swiss
francs, the Principal Financial Center will be The City of New York, Sydney,
Toronto, Frankfurt, Amsterdam, London, Milan, Johannesburg and Zurich,
respectively.
"Remarketing Agent" means such agent or agents, including any
standby remarketing agent (each a "Standby Remarketing Agent"), as the Company
may appoint from time to time for the purpose of remarketing of the Notes, as
set forth in the remarketing agreement which the Company shall enter into prior
to the remarketing of such Notes.
"Special Interest Rate" means the rate of interest equal to
the rate per annum announced by Citibank, N.A., or such other nationally
recognized bank located in the United States as the Company may select, as its
prime lending rate.
"Special Mandatory Purchase" means the obligation of the
Company (or, if applicable, a Liquidity Provider) to purchase Notes not
successfully remarketed by the Remarketing Agent and the applicable Standby
Remarketing Agent(s) by 12:00 o'clock noon, New York City time, on any Interest
Rate Adjustment Date.
"Spread" means, with respect to any Note, the number of basis
points to be added to or subtracted from the related Interest Rate Basis or
Bases applicable to an Interest Rate Period for such Note.
"Spread Multiplier" means the percentage of the related
Interest Rate Basis or Bases applicable to an Interest Rate Period by which such
Interest Rate Basis or Bases will be multiplied to determine the applicable
interest rate from time to time for an Interest Rate Period.
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"Standby Note Purchase Agreement" means the agreement, which
the Company may, at its option, enter into from time to time with a Liquidity
Provider for the purpose of purchasing unremarketed Notes.
"Weekly Rate Period" means a Commercial Paper Term Period with
an Interest Rate Period of generally seven days.
Section 102. Section References. Each reference to a
particular section set forth in this Second Supplemental Indenture shall, unless
the context otherwise requires, refer to this Second Supplemental Indenture.
ARTICLE TWO
TITLE, RANKING AND TERMS OF THE NOTES
Section 201. Title and Ranking of the Notes. This Second
Supplemental Indenture hereby establishes a series of senior Securities
designated as the "Remarketed Notes, 1998 Series B" of the Company (referred to
herein as the "Notes"), and shall rank equally with each other and all other
senior and unsubordinated indebtedness of the Company. For purposes of the
Original Indenture, the Notes shall constitute a single series of Securities.
Section 202. Variations in Terms of Notes. Subject to the
terms and conditions set forth in the Original Indenture and in this Second
Supplemental Indenture, the terms of any particular Note may vary from the terms
of any other Note as contemplated by Section 301. of the Original Indenture, and
the terms for a particular Note will be set forth in such Note as delivered to
the Trustee or an Authenticating Agent for authentication pursuant to Section
303. of the Original Indenture.
Section 203. Amount and Denominations; DTC. The aggregate
principal amount of Notes that may be issued under this Second Supplemental
Indenture is limited to $300,000,000.
The Notes shall be issuable only in fully registered form and
will initially be registered in the name of The Depository Trust Company, as
depositary ("DTC"), or its nominee who is hereby designated as "U.S. Depositary"
under the Original Indenture. The authorized denominations of Notes shall be
$100,000 and integral multiples of $1,000 in excess thereof.
Section 204. Interest, Interest Rates and Interest Rate Modes.
The Notes will initially bear interest at the Initial Interest Rate as set forth
on Annex A thereof for the Initial Interest Rate Period. Thereafter, each Note
at the option of the Company will bear interest in the Commercial Paper Term
Mode, the Long Term Rate Mode or the MAPS Mode. Each Note may bear interest for
designated Interest Rate Periods in the same or a different Interest Rate Mode
from other Notes. The interest rate for the Notes will be established
periodically as described herein by the applicable Remarketing Agent.
Interest will be payable on any Note at Maturity and (i) in
the Initial Interest Rate Period, on the date or dates set forth on Annex A
thereto; (ii) for any Interest Rate Period in the
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Commercial Paper Term Mode, on the Interest Rate Adjustment Date commencing the
next succeeding Interest Rate Period for such Note and on such other dates (if
any) as will be established upon conversion of such Note to the Commercial Paper
Term Mode or upon remarketing of the Note in a new Interest Rate Period in the
Commercial Paper Term Mode and set forth in the applicable Note; and (iii) in
the Long Term Rate Mode or MAPS Mode, no less frequently than semiannually on
such dates as will be established upon conversion of such Note to the Long Term
Rate Mode or the MAPS Mode (or upon remarketing of the Note in a new Interest
Rate Period in the Long Term Rate Mode or the MAPS Mode, as the case may be) and
set forth in the applicable Note in the case of a fixed interest rate, or as
described below under "Floating Interest Rates" in the case of a floating
interest rate, and on the Interest Rate Adjustment Date commencing the next
succeeding Interest Rate Period. Such interest will be payable to the Holder
thereof as of the related Record Date, which, for any Note (x) in the Initial
Interest Rate Period, is the date or dates set for therein; (y) in the
Commercial Paper Term Mode, is the Business Day prior to the related Interest
Payment Date; and (z) bearing interest in the Long Term Rate Mode or the MAPS
Mode, is 15 days prior to the related Interest Payment Date. Except as provided
below under "Floating Interest Rates," if any Interest Payment Date would
otherwise be a day that is not a Business Day, such Interest Payment Date will
be postponed to the next succeeding Business Day, and no interest will accrue on
such payment for the period from and after such Interest Payment Date to the
date of such payment on the next succeeding Business Day. Interest on Notes
bearing interest in the Commercial Paper Term Mode or at a floating interest
rate during an Interest Rate Period in the Long Term Rate Mode or the MAPS Mode
will be computed on the basis of actual days elapsed over 360; provided that, if
an applicable Interest Rate Basis is the CMT Rate or Treasury Rate (each as
defined below), interest will be computed on the basis of actual days elapsed
over the actual number of days in the year. Interest on Notes bearing interest
at a fixed rate in the Long Term Rate Mode or MAPS Mode will be computed on the
basis of a year of 360 days consisting of twelve 30-day months. Interest on
Notes at the Initial Interest Rate will be computed on the basis of a year of
360 days consisting of twelve 30-day months.
Determination of Interest Rates.
General. The interest rate and, in the case of a floating
interest rate, the Spread (if any) and the Spread Multiplier (if any) for any
Note will be established by the applicable Remarketing Agent in a remarketing as
described in Section 207 hereof or otherwise not later than each Interest Rate
Adjustment Date for such Note as the minimum rate of interest and, in the case
of a floating interest rate, Spread (if any) and Spread Multiplier (if any)
necessary in the judgment of such Remarketing Agent to produce a par bid in the
secondary market for such Note on the date the interest rate is established.
Such rate will be effective for the next succeeding Interest Rate Period for
such Note commencing on such Interest Rate Adjustment Date.
In the event that (i) the applicable Remarketing Agent has
been removed or has resigned and no successor has been appointed, or (ii) such
Remarketing Agent has failed to announce the appropriate interest rate, Spread,
if any, or Spread Multiplier, if any, as the case may be, on the Interest Rate
Adjustment Date for any Note for whatever reason, or (iii) the appropriate
interest rate, Spread, if any, or Spread Multiplier, if any, as the case may be,
or Interest Rate Period cannot be determined for any Note for whatever reason,
then such Note shall be automatically converted to the Commercial Paper Term
Mode with a Weekly Rate Period,
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determined as provided below under "Interest Rate Modes - Commercial Paper Term
Period", and the rate of interest thereon shall be equal to the Special Interest
Rate.
The Trustee shall, upon request of any Beneficial Owner of a
Note, advise such Beneficial Owner or the applicable Remarketing Agent of the
interest rate and, in the case of a floating interest rate, the Interest Rate
Basis or Bases, Spread (if any) and Spread Multiplier (if any), and in each case
the other terms applicable to such Beneficial Owner's Notes for the next
Interest Rate Period. Neither the Trustee nor the Company will otherwise be
required to advise Beneficial Owners of the applicable interest rate. The
interest rate and other terms announced by the Remarketing Agent, absent
manifest error, will be binding and conclusive upon the Beneficial Owners, the
Company and the Trustee.
Floating Interest Rates.
While any Note bears interest in the Long Term Rate Mode or
the MAPS Mode (with respect to the period from, and including, the Interest Rate
Adjustment Date commencing such period to, but excluding, the MAPS Remarketing
Date), the Company may elect a floating interest rate by providing notice, which
will be in or promptly confirmed in writing (which includes facsimile or
appropriate electronic media), received by the Trustee and the Remarketing Agent
for such Note (the "Floating Interest Rate Notice") not less than ten (10) days
prior to the Interest Rate Adjustment Date for such Long Term Rate Period or
MAPS Rate Period. The Floating Interest Rate Notice must identify by CUSIP
number or otherwise the portion of the Note to which it relates and state the
Interest Rate Period (or portion thereof, in the case of the MAPS Mode) therefor
to which it relates. Each Floating Interest Rate Notice must also state the
Interest Rate Basis or Bases, the Initial Interest Reset Date, the Interest
Reset Period and Dates, the Interest Payment Period and Dates, the Index
Maturity and the Floating Rate Maximum Interest Rate and/or Floating Rate
Minimum Interest Rate, if any. If one or more of the applicable Interest Rate
Bases is LIBOR or the CMT Rate, the Floating Interest Rate Notice shall also
specify the Index Currency and Designated LIBOR Page or the Designated CMT
Maturity Index and Designated CMT Telerate Page, respectively.
If any Note bears interest at a floating rate in a Long Term
Rate Period or MAPS Rate Period, such Note shall bear interest at the rate
determined by reference to the applicable Interest Rate Basis or Bases (a) plus
or minus the Spread, if any, and/or (b) multiplied by the Spread Multiplier, if
any, specified by the Remarketing Agent, in the case of a Long Term Rate Period,
or the MAPS Agent, in the case of a MAPS Rate Period, and recorded in Annex A to
such Note. Commencing on the Interest Rate Adjustment Date for such Interest
Rate Period, the rate at which interest on such Note shall be payable shall be
reset as of each Interest Reset Date during such Interest Rate Period specified
in the applicable Floating Interest Rate Notice.
The applicable floating interest rate on any Note during any
Interest Rate Period will be determined by reference to the applicable Interest
Rate Basis or Interest Rate Bases, which may include (i) the CD Rate, (ii) the
CMT Rate, (iii) the Federal Funds Rate, (iv) LIBOR, (v) the Prime Rate, (vi) the
Treasury Rate, or (vii) such other Interest Rate Basis or interest rate formula
as may be specified in the applicable Floating Interest Rate Notice (each, an
"Interest Rate Basis").
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Unless otherwise specified in the applicable Floating Interest
Rate Notice, the interest rate with respect to each Interest Rate Basis will be
determined in accordance with the applicable provisions below. Except as set
forth above or in the applicable Floating Interest Rate Notice, the interest
rate in effect on each day shall be (i) if such day is an Interest Reset Date,
the interest rate determined as of the Interest Determination Date immediately
preceding such Interest Reset Date or (ii) if such day is not an Interest Reset
Date, the interest rate determined as of the Interest Determination Date
immediately preceding the most recent Interest Reset Date. If any Interest Reset
Date would otherwise be a day that is not a Business Day, such Interest Reset
Date will be postponed to the next succeeding Business Day, unless LIBOR is an
applicable Interest Rate Basis and such Business Day falls in the next
succeeding calendar month, in which case such Interest Reset Date will be the
immediately preceding Business Day. In addition, if the Treasury Rate is an
applicable Interest Rate Basis and the Interest Determination Date would
otherwise fall on an Interest Reset Date, then such Interest Reset Date will be
postponed to the next succeeding Business Day.
The applicable Floating Interest Rate Notice will specify
whether the rate of interest will be reset daily, weekly, monthly, quarterly,
semiannually or annually or on such other specified basis (each, an "Interest
Reset Period") and the dates on which such rate of interest will be reset (each,
an "Interest Reset Date"). Unless otherwise specified in the applicable Floating
Interest Rate Notice, the Interest Reset Dates will be, in the case of a
floating interest rate which resets: (i) daily, each Business Day; (ii) weekly,
the Wednesday of each week (unless the Treasury Rate is an applicable Interest
Rate Basis, in which case the Tuesday of each week except as described below);
(iii) monthly, the third Wednesday of each month; (iv) quarterly, the third
Wednesday of March, June, September and December of each year, (v) semiannually,
the third Wednesday of the two months specified in the applicable Floating
Interest Rate Notice; and (vi) annually, the third Wednesday of the month
specified in the applicable Floating Interest Rate Notice.
The interest rate applicable to each Interest Reset Period
commencing on the related Interest Reset Date will be the rate determined as of
the applicable Interest Determination Date. The "Interest Determination Date"
with respect to the CD Rate, the CMT Rate, the Federal Funds Rate and the Prime
Rate will be the second Business Day immediately preceding the applicable
Interest Reset Date; and the "Interest Determination Date" with respect to LIBOR
shall be the second London Business Day immediately preceding the applicable
Interest Reset Date, unless the Index Currency is British pounds sterling, in
which case the "Interest Determination Date" will be the applicable Interest
Reset Date. The "Interest Determination Date" with respect to the Treasury Rate
shall be the day in the week in which the applicable Interest Reset Date falls
on which day Treasury Bills (as defined below) are normally auctioned (Treasury
Bills are normally sold at an auction held on Monday of each week, unless that
day is a legal holiday, in which case the auction is normally held on the
following Tuesday, except that such auction may be held on the preceding
Friday); provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the "Interest Determination Date"
shall be such preceding Friday. If the interest rate of any Note is a floating
interest rate determined with reference to two or more Interest Rate Bases
specified in the applicable Floating Interest Rate Notice, the "Interest
Determination Date" pertaining to the Note shall be the most recent Business Day
which is at least two Business Days prior to the applicable Interest Reset Date
on which each Interest Rate Basis is determinable. Each Interest Rate Basis
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shall be determined as of such date, and the applicable interest rate shall take
effect on the related Interest Reset Date.
Either or both of the following may also apply to the floating
interest rate on any Note for an Interest Rate Period: (i) a floating rate
maximum interest rate, or ceiling, that may accrue during any Interest Reset
Period (the "Floating Rate Maximum Interest Rate") and (ii) a floating rate
minimum interest rate, or floor, that may accrue during any Interest Reset
Period (the "Floating Rate Minimum Interest Rate"). In addition to any Floating
Rate Maximum Interest Rate that may apply, the interest rate on any Note will in
no event be higher than the maximum rate permitted by New York law, as the same
may be modified by United States laws of general application.
Except as provided below or in the applicable Floating
Interest Rate Notice, interest will be payable, in the case of floating interest
rates which reset: (i) daily, weekly or monthly, on the third Wednesday of each
month or on the third Wednesday of March, June, September and December of each
year, as specified in the applicable Floating Interest Rate Notice; (ii)
quarterly, on the third Wednesday of March, June, September and December of each
year; (iii) semiannually, on the third Wednesday of the two months of each year
specified in the applicable Floating Interest Rate Notice; and (iv) annually, on
the third Wednesday of the month of each year specified in the applicable
Floating Interest Rate Notice and, in each case, on the Business Day immediately
following the applicable Long Term Rate Period or MAPS Rate Period, as the case
may be. If any Interest Payment Date for the payment of interest at a floating
rate (other than following the end of the applicable Long Term Rate Period or
MAPS Rate Period, as the case may be) would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, except that if LIBOR is an applicable Interest Rate
Basis and such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day.
All percentages resulting from any calculation of floating
interest rates will be rounded to the nearest one hundred-thousandth of a
percentage point, with five one-millionths of a percentage point rounded upwards
(e.g., 9.876545% (or .09876545) would be rounded to 9.87655% (or .0987655)), and
all amounts used in or resulting from such calculation will be rounded, in the
case of United States dollars, to the nearest cent or, in the case of a foreign
currency or composite currency, to the nearest unit (with one-half cent or unit
being rounded upwards).
Accrued floating rate interest will be calculated by
multiplying the principal amount of the applicable Note by an accrued interest
factor. Such accrued interest factor will be computed by adding the interest
factor calculated for each day in the applicable Interest Reset Period. Unless
otherwise specified in the applicable Floating Interest Rate Notice, the
interest factor for each such day will be computed by dividing the interest rate
applicable to such day by 360, if an applicable Interest Rate Basis is the CD
Rate, the Federal Funds Rate, LIBOR or the Prime Rate, or by the actual number
of days in the year if an applicable Interest Rate Basis is the CMT Rate or the
Treasury Rate. Unless otherwise specified in the applicable Floating Interest
Rate Notice, if the floating interest rate is calculated with reference to two
or more Interest Rate Bases, the interest factor will be calculated in each
period in the same manner as if only one of
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the applicable Interest Rate Bases applied as specified in the applicable
Floating Interest Rate Notice.
Unless otherwise specified in the applicable Floating Interest
Rate Notice, The Bank of New York will be the "Calculation Agent." For any
Remarketed Note bearing interest at a floating rate, the applicable Remarketing
Agent will determine the interest rate in effect from the Interest Rate
Adjustment Date for such Remarketed Note to the Initial Interest Reset Date. The
Calculation Agent will determine the interest rate in effect for each Interest
Reset Period thereafter. Upon request of the Beneficial Owner of a Note, after
any Interest Rate Adjustment Date, the Calculation Agent or the Remarketing
Agent shall disclose the interest rate and, in the case of a floating interest
rate, Interest Rate Basis or Bases, Spread (if any) and Spread Multiplier (if
any), and in each case the other terms applicable to such Note then in effect
and, if determined, the interest rate that will become effective as a result of
a determination made for the next succeeding Interest Reset Date with respect to
such Note. Except as described herein with respect to a Note earning interest at
floating rates, no notice of the applicable interest rate, Spread (if any) or
Spread Multiplier (if any) shall be sent to the Beneficial Owner of any Note.
Unless otherwise specified in the applicable Floating Interest
Rate Notice, the "Calculation Date", if applicable, pertaining to any Interest
Determination Date will be the earlier of (i) the tenth calendar day after such
Interest Determination Date or, if such day is not a Business Day, the next
succeeding Business Day or (ii) the Business Day immediately preceding the
applicable Interest Payment Date or Maturity, as the case may be.
CD Rate. If an Interest Rate Basis for any Note is specified
in the applicable Floating Interest Rate Notice as the "CD Rate," the CD Rate
means with respect to any Interest Determination Date relating to a Note for
which the interest rate is determined with reference to the CD Rate (a "CD Rate
Interest Determination Date"), the rate on such date for negotiable United
States dollar certificates of deposit having the Index Maturity specified in the
applicable Floating Interest Rate Notice as published in ("H.15(519)" (as
hereinafter defined)) under the heading "CDs (Secondary Market)," or, if not
published by 3:00 p.m., New York City time, on the related Calculation Date, the
rate on such CD Rate Interest Determination Date for negotiable United States
dollar certificates of deposit of the Index Maturity specified in the applicable
Floating Interest Rate Notice as published in H.15 Daily Update (as hereinafter
defined), or such other recognized electronic source used for the purpose of
displaying such rate under the caption "CDs (secondary market)". If such rate is
not yet published in H.15(519), H.15 Daily Update or another recognized
electronic source by 3:00 p.m., New York City time, on the related Calculation
Date, then the CD Rate on such CD Rate Interest Determination Date will be
calculated by the Calculation Agent and will be the arithmetic mean of the
secondary market offered rates as of 10:00 a.m., New York City time, on such CD
Rate Interest Determination Date, of three leading nonbank dealers in negotiable
United States dollar certificates of deposit in The City of New York (which may
include the Remarketing Agent or its affiliates) selected by the Calculation
Agent, after consultation with the Company, for negotiable United States dollars
certificates of deposit of major United States money center banks for negotiable
certificates of deposit with a remaining maturity closest to the Index Maturity
specified in the applicable Floating Interest Rate Notice in an amount that is
representative for a single transaction in that market at that time; provided,
however, that if the dealers so selected by the Calculation Agent are not
quoting as mentioned in this sentence, the CD Rate determined as of such CD Rate
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Interest Determination Date will be the CD Rate in effect on such CD Rate
Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as
such, or any successor publication published by the Board of Governors of the
Federal Reserve System.
"H.15 Daily Update" means the daily update of H.15(519),
available through the world-wide-web site of the Board of Governors of the
Federal Reserve System at http://www.bog.frb.fed.us/releases/h15/update, or any
successor site or publication.
CMT Rate. If an Interest Rate Basis for any Note is specified
in the applicable Floating Interest Rate Notice as the "CMT Rate," the CMT Rate
means, with respect to any Interest Determination Date relating to a Note for
which the interest is determined with reference to the CMT Rate (a "CMT Rate
Interest Determination Date"), the rate displayed on the Designated CMT Telerate
Page (as defined below) under the caption "...Treasury Constant
Maturities...Federal Reserve Board Release H.15...Mondays Approximately 3:45
P.M.," under the column for the Designated CMT Maturity Index (as defined below)
for (i) if the Designated CMT Telerate Page is 7051, the rate on such CMT Rate
Interest Determination Date and (ii) if the Designated CMT Telerate Page is
7052, the weekly or monthly average, as specified in the Floating Interest Rate
Notice, for the week or the month, as applicable, ended immediately preceding
the week in which the related CMT Rate Interest Determination Date occurs. If
such rate is no longer displayed on the relevant page or is not displayed by
3:00 p.m., New York City time, on the related Calculation Date, then the CMT
Rate for such CMT Rate Interest Determination Date will be such treasury
constant maturity rate for the Designated CMT Maturity Index as published in
H.15(519). If such rate is no longer published or is not published by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate on such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index (or other United States Treasury rate
for the Designated CMT Maturity Index) for the CMT Rate Interest Determination
Date with respect to such Interest Reset Date as may then be published by either
the Board of Governors of the Federal Reserve System or the United States
Department of the Treasury that the Calculation Agent determines to be
comparable to the rate formerly displayed on the Designated CMT Telerate Page
and published in H.15(519). If such information is not provided by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate on the
CMT Rate Interest Determination Date will be calculated by the Calculation Agent
and will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 p.m., New York City
time, on such CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York (which may include
the Remarketing Agent or its affiliates) selected by the Calculation Agent after
consultation with the Company (from five such Reference Dealers selected by the
Calculation Agent, after consultation with the Company, and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less than
such Designated CMT Maturity Index minus one year. If the Calculation Agent is
unable to obtain three such Treasury Note quotations, the CMT Rate on such CMT
Rate
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Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary market
offer side prices as of approximately 3:30 p.m., New York City time, on such CMT
Rate Interest Determination Date of three Reference Dealers in The City of New
York (from five such Reference Dealers selected by the Calculation Agent, after
consultation with the Company, and eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least U.S.$100 million. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer prices obtained
and neither the highest nor the lowest of such quotes will be eliminated;
provided, however, that if fewer than three Reference Dealers so selected by the
Calculation Agent, after consultation with the Company, are quoting as mentioned
herein, the CMT Rate determined as of such CMT Rate Interest Determination Date
will be the CMT Rate in effect on such CMT Rate Interest Determination Date. If
two Treasury Notes with an original maturity as described in the second
preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the Calculation Agent, after consultation with
the Company, will obtain from five Reference Dealers quotations for the Treasury
Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge
Telerate, Inc. (or any successor service) on the page specified in the
applicable Floating Interest Rate Notice (or any other page as may replace such
page on such service for the purpose of displaying Treasury Constant Maturities
as reported in H.15(519)) for the purpose of displaying Treasury Constant
Maturities as reported in H.15(519). If no such page is specified in the
applicable Floating Interest Rate Notice, the Designated CMT Telerate Page shall
be 7052 for the most recent week.
"Designated CMT Maturity Index" means the original period to
maturity of the United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20
or 30 years) specified in the applicable Floating Interest Rate Notice with
respect to which the CMT Rate will be calculated. If no such maturity is
specified in the applicable Floating Interest Rate Notice, the Designated CMT
Maturity Index shall be 2 years.
Federal Funds Rate. If an Interest Rate Basis for any Note is
specified in the applicable Floating Interest Rate Notice as the "Federal Funds
Rate," the Federal Funds Rate means, with respect to any Interest Determination
Date relating to a Note for which the interest rate is determined with reference
to the Federal Funds Rate (a "Federal Funds Rate Interest Determination Date"),
the rate on such date for United States dollar federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)" as such rate is
displayed on Bridge Telerate, Inc. (or any successor service) on page 120
("Telerate Page 120") or, if such rate does not appear on Telerate Page 120 or
is not published by 3:00 p.m., New York City time, on the Calculation Date, the
rate on such Federal Funds Rate Interest Determination Date as published in H.15
Daily Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the heading "Federal Funds (Effective)." If such
rate is not published in H.15(519), H.15 Daily Update or another recognized
electronic source by 3:00 p.m., New York City time, on the related Calculation
Date, then the Federal Funds Rate on such Federal
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Funds Rate Interest Determination Date shall be calculated by the Calculation
Agent and will be the arithmetic mean of the rates for the last transaction in
overnight United States dollar federal funds arranged by three leading brokers
of United States dollar federal funds transactions in The City of New York
(which may include the Remarketing Agent or its affiliates) selected by the
Calculation Agent after consultation with the Company, prior to 9:00 a.m., New
York City time, on such Federal Funds Rate Interest Determination Date;
provided, however, that if the brokers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Federal Funds Rate determined as
of such Federal Funds Rate Interest Determination Date will be the Federal Funds
Rate in effect on such Federal Funds Rate Interest Determination Date.
LIBOR. If an Interest Rate Basis for any Note is specified in
the applicable Floating Interest Rate Notice as "LIBOR," LIBOR means the rate
determined by the Calculation Agent as of the applicable Interest Determination
Date (a "LIBOR Interest Determination Date") in accordance with the following
provisions:
(i) if(a) "LIBOR Reuters" is specified in the applicable Floating
Interest Rate Notice, the arithmetic mean of the offered rates (unless the
Designated LIBOR Page (as defined below) by its terms provides only for a single
rate, in which case such single rate will be used) for deposits in the Index
Currency having the Index Maturity specified in the applicable Floating Interest
Rate Notice, commencing on the applicable Interest Reset Date, that appear (or,
if only a single rate is required as aforesaid, appears) on the Designated LIBOR
Page as of 11:00 a.m., London time, on such LIBOR Interest Determination Date,
or (b) "LIBOR Telerate" is specified in the applicable Floating Interest Rate
Notice, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable Floating Interest Rate Notice as the method for calculating LIBOR,
the rate for deposits in the Index Currency having the Index Maturity specified
in the applicable Floating Interest Rate Notice, commencing on such Interest
Reset Date, that appears on the Designated LIBOR Page as of 11:00 a.m., London
time, on such LIBOR Interest Determination Date. If fewer than two such offered
rates appear, or if no such rate appears, as applicable, LIBOR on such LIBOR
Interest Determination Date shall be determined in accordance with the
provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which
fewer than two offered rates appear, or no rate appears, as the case may be, on
the Designated LIBOR Page as specified in clause (i) above, the Calculation
Agent shall request the principal London offices of each of four major reference
banks in the London interbank market, as selected by the Calculation Agent,
after consultation with the Company, to provide the Calculation Agent with its
offered quotation for deposits in the Index Currency for the period of the Index
Maturity specified in the applicable Floating Interest Rate Notice, commencing
on the applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 a.m., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time. If at least two
such quotations are so provided, then LIBOR on such LIBOR Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, then LIBOR on such LIBOR Interest Determination Date
will be the arithmetic mean of the rates quoted at approximately 11:00 a.m., in
the applicable Principal Financial Center, on such LIBOR Interest Determination
Date by three major banks in such Principal Financial Center selected by the
Calculation Agent, after consultation with the Company, for loans in the
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<PAGE> 16
Index Currency to leading European banks, having the Index Maturity specified in
the applicable Floating Interest Rate Notice and in a principal amount that is
representative for a single transaction in such Index Currency in such market at
such time; provided, however, that if the banks so selected by the Calculation
Agent are not quoting as mentioned in this sentence, LIBOR determined as of such
LIBOR Interest Determination Date shall be LIBOR in effect on such LIBOR
Interest Determination Date.
"Index Currency" means the currency or composite currency
specified in the applicable Floating Interest Rate Notice as to which LIBOR
shall be calculated. If no such currency or composite currency is specified in
the applicable Floating Interest Rate Notice, the Index Currency shall be United
States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is
specified in the applicable Floating Interest Rate Notice, the display on the
Reuter Monitor Money Rates Service (or any successor service) on the page
specified in such Floating Interest Rate Notice (or on any other page as may
replace such page on such service) for the purpose of displaying the London
interbank rates of major banks for the Index Currency, or (b) if "LIBOR
Telerate" is specified in the applicable Floating Interest Rate Notice or
neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the applicable
Floating Interest Rate Notice as the method for calculating LIBOR, the display
on Bridge Telerate, Inc. (or any successor service) on the page specified in
such Floating Interest Rate Notice (or on any other page as may replace such
page on such service) for the purpose of displaying the London interbank rates
of major banks for the Index Currency.
Prime Rate. If an Interest Rate Basis for any Note is
specified in the applicable Floating Interest Rate Notice as the "Prime Rate,"
the Prime Rate means, with respect to any Interest Determination Date relating
to a Note for which the interest rate is determined with reference to the Prime
Rate (a "Prime Rate Interest Determination Date"), the rate on such date as such
rate is published in H.15(519) under the heading "Bank Prime Loan," or, if not
published prior to 3:00 p.m., New York City time, on the related Calculation
Date, the rate on such Prime Rate Interest Determination Date as published in
H.15 Daily Update, or such other recognized electronic source used for the
purpose of displaying such rate, under the caption "Bank Prime Loan." If such
rate is not yet published in H.15(519), H.15 Daily Update or another recognized
electronic source by 3:00 p.m., New York City time, on the related Calculation
Date, then the Prime Rate shall be the arithmetic mean of the rates of interest
publicly announced by each bank that appears on the Reuters Screen U.S. PRIME 1
Page (as defined below) as such bank's prime rate or base lending rate as in
effect for such Prime Rate Interest Determination Date. If fewer than four such
rates so appear on the Reuters Screen U.S. PRIME 1 Page for such Prime Rate
Interest Determination Date, the Prime Rate shall be the arithmetic mean of the
prime rates quoted on the basis of the actual number of days in the year divided
by a 360-day year as of the close of business on such Prime Rate Interest
Determination Date by three major banks (which may include The Bank of New York)
in The City of New York selected by the Calculation Agent, after consultation
with the Company; provided, however, that if the banks or trust companies so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Prime Rate determined as of such Prime Rate Interest Determination Date will
be the Prime Rate in effect on such Prime Rate Interest Determination Date.
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<PAGE> 17
"Reuters Screen U.S. PRIME 1 Page" means the display on the
Reuter Monitor Money Rates Service (or any successor service) on the "USPRIME1"
page (or such other page as may replace the USPRIME1 page on such service) for
the purpose of displaying prime rates or base lending rates of major United
States banks.
Treasury Rate. If an Interest Rate Basis for any Note is
specified in the applicable Floating Interest Rate Notice as the "Treasury
Rate," the Treasury Rate means, with respect to any Interest Determination Date
relating to a Note for which the interest rate is determined with reference to
the Treasury Rate (a "Treasury Rate Interest Determination Date"), as the rate
from the auction held on such Treasury Rate Interest Determination Date (the
"Auction") of direct obligations of the United States ("Treasury Bills") having
the Index Maturity specified in the applicable Floating Interest Rate Notice,
under the caption "AVGE INVEST YIELD" on the display on Bridge Telerate, Inc.
(or any successor service) on page 56 or page 57 or, if not published by 3:00
p.m., New York City time, on the related Calculation Date, the auction average
rate of such Treasury Bills (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of Treasury. In the event
that the results of the Auction of Treasury Bills having the Index Maturity
specified in the applicable Floating Interest Rate Notice are not reported as
provided above by 3:00 p.m., New York City time, on such Calculation Date, or if
no such Auction is held, then the Treasury Rate will be the rate (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) on such Treasury Rate Interest Determination Date of
Treasury Bills having the Index Maturity specified in the applicable Floating
Interest Rate Notice as published in H.15(519) under the caption "U.S.
Government Securities/Treasury Bills/Secondary Market" or, if not yet published
by 3:00 p.m., New York City time, on the related Calculation Date, the rate on
such Treasury Rate Interest Determination Date of such Treasury Bills as
published in H.15 Daily Update, or such other recognized electronic source used
for the purpose of displaying such rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market." If such rate is not yet published
in H.15(519), H.15 Daily Update or another recognized electronic source, then
the Treasury Rate will be calculated by the Calculation Agent and will be a
yield to maturity (expressed as a bond equivalent on the basis of a year of 365
or 366 days, as applicable, and applied on a daily basis) of the arithmetic mean
of the secondary market bid rates, as of approximately 3:30 p.m., New York City
time, on such Treasury Rate Interest Determination Date, of three primary United
States government securities dealers (which may include the Remarketing Agent or
its affiliates) selected by the Calculation Agent, after consultation with the
Company, for the issue of Treasury Bills with a remaining maturity closest to
the Index Maturity specified in the applicable Floating Interest Rate Notice;
provided, however, that if the dealers so selected by the Calculation Agent are
not quoting as mentioned in this sentence, the Treasury Rate determined as of
such Treasury Rate Interest Determination Date will be the Treasury Rate in
effect on such Treasury Rate Interest Determination Date.
Interest Rate Modes.
Commercial Paper Term Mode. The Interest Rate Period for any
Note in the Commercial Paper Term Mode shall be a period of not less than one
nor more than 364 consecutive calendar days, as determined by the Company (as
described below in Section 205) or, if not so determined, by the Remarketing
Agent for (a "Commercial Paper Term Period")
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such Note (in its best judgment in order to obtain the lowest interest cost for
such Note). Each Commercial Paper Term Period will commence on the Interest Rate
Adjustment Date therefor and end on the day preceding the date specified by such
Remarketing Agent as the first day of the next Interest Rate Period for such
Note. A "Weekly Rate Period" is a Commercial Paper Term Period and will be a
period of seven days commencing on any Interest Rate Adjustment Date and ending
on the day preceding the first day of the next Interest Rate Period for such
Note. The interest rate for any Commercial Paper Term Period relating to a Note
will be determined not later than 11:50 a.m., New York City time, on the
Interest Rate Adjustment Date for such Note (subject to Section 207), which is
the first day of each Interest Rate Period for such Note.
Long Term Rate Mode. The Interest Rate Period for any Note in
the Long Term Rate Mode will be established by the Company (as described in
Section 205 below) as a period of more than 364 days and not exceeding the
remaining term to the Stated Maturity of such Note; provided, however, that such
Interest Rate Period must end on the day prior to an Interest Payment Date for
such Note; and provided further that, if so provided in a Note in the Long Term
Rate Mode and specified at the time of remarketing into a Long Term Rate Period,
the Company may shorten the Interest Rate Period and provide for payment of a
premium, if any, in respect thereof for any such Note upon written notice to the
Remarketing Agent and the Trustee not less than thirty (30) days prior to the
date upon which such shortened Interest Rate Period shall expire. Promptly upon
receipt of such notice and, in any case, not later than the close of business on
such date, the Trustee will transmit such information to DTC in accordance with
DTC's procedures as in effect from time to time. In such case, the next Interest
Rate Adjustment Date otherwise set forth in such Note shall instead be the
Business Day immediately following the expiration of such Interest Rate Period.
The interest rate, or Spread (if any) and Spread Multiplier (if any) for any
Note in the Long Term Rate Mode will be determined not later than 11:50 a.m.,
New York City time, on the Interest Rate Adjustment Date for such Notes (subject
to Section 207), which is the first day of the Interest Rate Period for such
Note.
If any Note is subject to early remarketing as provided above,
the Interest Rate Period may be shortened by the Company to end on any date on
or after the Initial Early Remarketing Date, if any, specified in the Note, upon
prior written notice as provided above. On or after the Initial Early
Remarketing Date, if any, on the Interest Rate Adjustment Date relating to such
shortened Interest Rate Period for such Note, the Company will pay a premium to
the tendering Beneficial Owner of the Note, together with accrued interest, if
any, thereon at the applicable rate payable to such Interest Rate Adjustment
Date. Unless otherwise specified in the Note, the premium shall be an amount
equal to the Initial Early Remarketing Premium specified therein (as adjusted by
the Annual Early Remarketing Premium Percentage Reduction specified therein, if
applicable), multiplied by the principal amount of the Note subject to early
remarketing. The Initial Early Remarketing Premium, if any, shall decline at
each anniversary of the Initial Early Remarketing Date by an amount equal to the
applicable Annual Early Remarketing Premium Percentage Reduction, if any,
specified in the Note until the premium is equal to 0.
MAPS Mode. So long as any Notes are in the MAPS Mode, the
provisions set forth in Article Two applicable to the remarketing of Notes
generally shall apply to such Notes only to the extent expressly provided in
Article Three.
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The Interest Rate Period for any Note in the MAPS Mode will be
established by the Company (as described in Section 205 below) as a period of
more than 364 days and not exceeding the remaining term to the Stated Maturity
of such Note; provided, however, that such Interest Rate Period must end on the
day prior to an Interest Payment Date for such Note. The MAPS Rate Period shall
consist of the period from and including the Interest Rate Adjustment Date
commencing such Interest Rate Period to and excluding the MAPS Remarketing Date
and the period from and including the MAPS Remarketing Date to, but excluding,
the next succeeding Interest Rate Adjustment Date, as described in Article Three
and subject to the conditions therein and otherwise herein described. The
interest rate and, in the case of a floating interest rate, the Spread, if any,
and the Spread Multiplier, if any, to the MAPS Remarketing Date for any Note in
the MAPS Mode will be determined not later than 11:50 a.m., New York City time,
on the Interest Rate Adjustment Date for such Note, which for the MAPS Mode is
the first day of the Interest Rate Period for such Note.
Section 205. Conversion. The Company may change the Interest
Rate Mode or Interest Rate Period at its option in the manner described below.
(a) Conversion Between Commercial Paper Term Periods. Each
Note in Commercial Paper Term Period may be remarketed into the same Interest
Rate Period or converted at the option of the Company to a different Commercial
Paper Term Period on any Interest Rate Adjustment Date for such Note upon
receipt by the applicable Remarketing Agent and the Trustee of a Conversion
Notice prior to 9:30 a.m., New York City time, or the remarketing of such Note,
whichever later occurs, on such Interest Rate Adjustment Date.
(b) Conversion from the Commercial Paper Term Mode to the Long
Term Rate Mode or the MAPS Mode. Each Note in the Commercial Paper Term may be
converted at the option of the Company to the Long Term Rate Mode or the MAPS
Mode on any Interest Rate Adjustment Date upon receipt not less than ten days
prior to such Interest Rate Adjustment Date by the applicable Remarketing Agent
and the Trustee of a Conversion Notice from the Company.
(c) Conversion Between Long Term Rate Periods or from the Long
Term Rate Mode or the MAPS Mode to the Commercial Paper Term Mode or the MAPS
Mode. Each Note in a Long Term Rate Period may be remarketed into the same
Interest Rate Period or converted at the option of the Company to a different
Long Term Rate Period or from the Long Term Rate Mode to the Commercial Paper
Term Mode or the MAPS Mode, or from the MAPS Mode to a different MAPS Mode or to
the Long Term Rate Mode or the Commercial Paper Term Mode, on any Interest Rate
Adjustment Date for such Note upon receipt by the Trustee and the Remarketing
Agent of a Conversion Notice from the Company not less than ten days prior to
such Interest Rate Adjustment Date.
(d) Conversion Notice. Each Conversion Notice must state each
Note to which it relates and the new Interest Rate Mode (if applicable), the new
Interest Rate Period, the Conversion Date and, with respect to any Long Term
Rate Period, any optional redemption or repayment terms for each such Note. If
the Company revokes a Conversion Notice or the Trustee and the Remarketing Agent
fail to receive a Conversion Notice from the Company by
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<PAGE> 20
the specified date in advance of the Interest Rate Adjustment Date for a Note,
the Note shall be converted automatically to a Weekly Rate Period.
(e) Revocation or Change of Conversion Notice or Floating
Interest Rate Notice. The Company may, upon written notice received by the
Trustee and the applicable Remarketing Agent, revoke any Conversion Notice or
Floating Interest Rate Notice or change the Interest Rate Mode to which such
Conversion Notice relates or change any Floating Interest Rate Notice up to 9:30
a.m., New York City time, on the Conversion Date, subject to the provisions of
subsection (f) below.
(f) Limitation on Conversion, Change of Conversion Notice or
Floating Interest Rate Notice and Revocation. Notwithstanding the foregoing
subsections (a), (b), (c), (d) and (e) the Company may not, without the consent
of the applicable Remarketing Agent, convert any Note or revoke or change any
Conversion Notice or Floating Interest Rate Notice at or after the time at which
such Remarketing Agent has determined the interest rate, or Spread (if any) and
Spread Multiplier (if any), for any Note being remarketed (i.e., the time at
which such Note has been successfully remarketed, subject to settlement on the
related Interest Rate Adjustment Date). The Remarketing Agent will advise the
Company of indicative rates from time to time, or at any time upon the request
of the Company, prior to making such determination of the interest rate, Spread
or Spread Multiplier, as the case may be.
Section 206. Mandatory Tender of Notes. Each Note will be
automatically tendered for purchase, or deemed tendered for purchase, on each
Interest Rate Adjustment Date relating thereto. Notes will be purchased on the
Interest Rate Adjustment Date relating thereto as described in Section 207.
hereof.
Section 207. Remarketing. The interest rate on each Note will
be established from time to time by each Remarketing Agent responsible for the
remarketing thereof in accordance with the following procedures:
(a) Interest Rate Adjustment Date; Determination of Interest
Rate. By 11:00 a.m., New York City time, on the Interest Rate Adjustment Date
for any Note, the applicable Remarketing Agent will determine the interest rate
for such Note being remarketed to the nearest one hundred-thousandth (0.00001)
of one percent per annum for the next Interest Rate Period in the case of a
fixed interest rate, and the Spread (if any) and Spread Multiplier (if any) in
the case of a floating interest rate; provided, that between 11:00 a.m., New
York City time, and 11:50 a.m., New York City time, the Remarketing Agent and
the Standby Remarketing Agent(s), if any, shall use their reasonable efforts to
determine the interest rate for any Notes not successfully remarketed as of the
applicable deadline specified in this paragraph. In determining the applicable
interest rate for such Note and other terms, such Remarketing Agent will, after
taking into account market conditions as reflected in the prevailing yields on
fixed and variable rate taxable debt securities, (i) consider the principal
amount of all Notes tendered or to be tendered on such date and the principal
amount of such Notes prospective purchasers are or may be willing to purchase
and (ii) contact, by telephone or otherwise, prospective purchasers and
ascertain the interest rates therefor at which they would be willing to hold or
purchase such Notes.
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(b) Notification of Results; Settlement. By 12:30 p.m., New
York City time, on the Interest Rate Adjustment Date for any Notes, the
applicable Remarketing Agent will notify the Company and the Trustee in writing
(which may include facsimile or other electronic transmission), of (i) the
interest rate or, in the case of a floating interest rate, the initial interest
rate, the Spread and Spread Multiplier and the Initial Interest Reset Date,
applicable to such Notes for the next Interest Rate Period, (ii) the Interest
Rate Adjustment Date, (iii) the Interest Payment Dates, for any Notes in the
Commercial Paper Term Mode (if other than the Interest Rate Adjustment Date),
the Long Term Rate Mode or the MAPS Mode, (iv) the optional redemption terms, if
any, and early remarketing terms, if any, in the case of a remarketing into a
Long Term Rate Period, (v) the aggregate principal amount of tendered Notes and
(vi) the aggregate principal amount of such tendered Notes which such
Remarketing Agent was able to remarket, at a price equal to 100% of the
principal amount thereof plus accrued interest, if any. Immediately after
receiving such notice, and in any case, not later than 1:30 p.m. New York City
time, the Trustee will transmit such information and any other settlement
information required by DTC to DTC in accordance with DTC's procedures as in
effect from time to time.
By telephone at approximately 1:00 p.m., New York City time,
on such Interest Rate Adjustment Date, the applicable Remarketing Agent will
advise each purchaser of such Notes (or the DTC participant of each such
purchaser who it is expected in turn will advise such purchaser) of the
principal amount of such Notes that such purchaser is to purchase.
Each purchaser of Notes in a remarketing will be required to
give instructions to its DTC participant to pay the purchase price therefor in
same day funds to the applicable Remarketing Agent against delivery of the
principal amount of such Notes by book-entry through DTC by 3:00 p.m., New York
City time, on the Interest Rate Adjustment Date.
All tendered Notes will be automatically delivered to the
account of the Trustee (or such other account meeting the requirements of DTC's
procedures as in effect from time to time), by book-entry through DTC against
payment of the purchase price or redemption price therefor, on the Interest Rate
Adjustment Date relating thereto.
The applicable Remarketing Agent will make, or cause the
Trustee to make, payment to the DTC participant of each tendering Beneficial
Owner of Notes subject to a remarketing, by book-entry through DTC by the close
of business on the Interest Rate Adjustment Date against delivery through DTC of
such Beneficial Owner's tendered Notes, of the purchase price for tendered Notes
that have been sold in the remarketing. If any such Notes were purchased
pursuant to a Special Mandatory Purchase, subject to receipt of funds from the
Company or the Liquidity Provider, if any, as the case may be, the Trustee will
make such payment of the purchase price of such Notes plus accrued interest, if
any, to such date.
The transactions described above for a remarketing of any
Notes will be executed on the Interest Rate Adjustment Date for such Notes
through DTC in accordance with the procedures of DTC, and the accounts of the
respective DTC participants will be debited and credited and such Notes
delivered by book-entry as necessary to effect the purchases and sales thereof,
in each case as determined in the related remarketing.
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Except as otherwise set forth in Section 208 hereof, any Notes
tendered in a remarketing will be purchased solely out of the proceeds received
from purchasers of such Notes in such remarketing, and none of the Trustee, the
applicable Remarketing Agent, any Standby Remarketing Agent or the Company will
be obligated to provide funds to make payment upon any Beneficial Owner's tender
in a remarketing.
Although tendered Notes will be subject to purchase by a
Remarketing Agent in a remarketing, such Remarketing Agent and any Standby
Remarketing Agent will not be obligated to purchase any such Notes.
The settlement and remarketing procedures described above,
including provisions for payment by purchasers of tendered Notes or for payment
to selling Beneficial Owners of tendered Notes, may be modified to the extent
required by DTC. In addition, each Remarketing Agent may, without the consent of
the Holders of the Notes, modify the settlement and remarketing procedures set
forth above in order to facilitate the settlement and remarketing process.
As long as DTC's nominee holds the certificates representing
the Notes in the book-entry system of DTC, no certificates for such Notes will
be delivered by any selling Beneficial Owner to reflect any transfer of Notes
effected in any remarketing.
The Trustee shall confirm to DTC the interest rate for the
following Interest Rate Period in accordance with DTC's procedures as in effect
from time to time.
The interest rate announced by the applicable Remarketing
Agent, absent manifest error, shall be binding and conclusive upon the
Beneficial Owners, the Company and the Trustee.
(c) Failed Remarketing. Notes not successfully remarketed will
be subject to Special Mandatory Purchase by the Company (a "Special Mandatory
Purchase"). The obligation of the Company to effect a Special Mandatory Purchase
of the Notes (the "Special Mandatory Purchase Right") can be satisfied either
directly by the Company or through a Liquidity Provider. By 12:00 o'clock noon,
New York City time, on any Interest Rate Adjustment Date, the applicable
Remarketing Agent will notify the Liquidity Provider, if any, the Trustee and
the Company by telephone or facsimile, confirmed in writing, of the principal
amount of Notes that such Remarketing Agent and the applicable Standby
Remarketing Agent, if any, were unable to remarket on such date. In the event
that the Company has entered into a Standby Note Purchase Agreement which is in
effect on such date, such notice will constitute a demand for the benefit of the
Company to the Liquidity Provider to purchase such unremarketed Notes at a price
equal to the outstanding principal amount thereof pursuant to the terms of such
Standby Note Purchase Agreement. If a Standby Note Purchase Agreement is not in
effect on such date, or if the Liquidity Provider fails to advance funds under
the Standby Note Purchase Agreement, the Company hereby agrees to purchase such
unremarketed Notes. In each case the Company will pay all accrued and unpaid
interest, if any, on unremarketed Notes to such Interest Rate Adjustment Date.
Payment of the principal amount of unremarketed Notes by the Company or the
Liquidity Provider, as the case may be, and payment of accrued and unpaid
interest, if any, by the Company, shall be made by deposit of same-day funds
with the Trustee (or such other
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account meeting the requirements of DTC's procedures as in effect from time to
time) irrevocably in trust for the benefit of the Beneficial Owners of Notes
subject to Special Mandatory Purchase by 3:00 p.m., New York City time, on such
Interest Rate Adjustment Date.
Section 208. Purchase and Redemption of Notes.
(a) Special Mandatory Purchase. If by 12:00 o'clock noon, New
York City time, on any Interest Rate Adjustment Date for any Notes, the
applicable Remarketing Agent and the applicable Standby Remarketing Agent(s)
have not remarketed all such Notes, the Notes that are unremarketed are subject
to Special Mandatory Purchase. Either the Company or, subject to the terms and
conditions of a Standby Note Purchase Agreement, if any, which may be in effect
on such date, the Liquidity Provider (if any), will deposit same-day funds in
the account of the Trustee (or such other account meeting the requirements of
DTC's procedures as in effect from time to time) irrevocably in trust for the
benefit of the Beneficial Owners of Notes subject to Special Mandatory Purchase
by 3:00 p.m., New York City time, on such Interest Rate Adjustment Date. Such
funds shall be in an amount sufficient to pay the aggregate purchase price of
such unremarketed Notes, equal to 100% of the principal amount thereof. In the
event a Standby Note Purchase Agreement is in effect but the Liquidity Provider
shall fail to advance funds for whatever reason thereunder, the Company hereby
agrees to purchase such unremarketed Notes on such Interest Rate Adjustment
Date. The Company hereby agrees to pay the accrued interest, if any, on such
Notes by depositing sufficient same-day funds therefor in the account of the
Trustee (or such other account meeting the requirements of DTC's procedures as
in effect from time to time) by 3:00 p.m., New York City time, on such Interest
Rate Adjustment Date.
Failure by the Company to purchase Notes pursuant to a Special
Mandatory Purchase in the manner provided in the Notes will constitute an Event
of Default under the Original Indenture in which event the date of such failure
shall constitute a date of Maturity for such Notes and the principal amount
thereof may be declared due and payable in the manner and with the effect
provided for in the Original Indenture. Following such failure to pay pursuant
to a Special Mandatory Purchase, such Notes will bear interest at the Special
Interest Rate as provided for in Section 204 hereof.
If the Company enters into a Standby Note Purchase Agreement
with a Liquidity Provider, Notes purchased by the Liquidity Provider ("Purchased
Notes") shall bear interest at the rates and be payable on the dates as may be
agreed upon by the Company and the Liquidity Provider. Upon purchase of any Note
by the Liquidity Provider, all interest accruing thereon from the last date for
which interest was paid shall accrue for the benefit of and be payable to the
Liquidity Provider. Unless an event of default under the Standby Note Purchase
Agreement occurs, the applicable Remarketing Agent shall continue its
remarketing efforts with respect to Purchased Notes until the earlier to occur
of a successful remarketing of such Purchased Notes or the expiration of the
Standby Note Purchase Agreement. In the event the Liquidity Provider holds
Purchased Notes on the date the Standby Note Purchase Agreement expires, the
Company will be required to purchase such Notes on such date at a purchase price
equal to the principal amount thereof plus accrued interest thereon to the
purchase date. Such Notes will remain outstanding and enjoy the benefits of the
Original Indenture and this Second Supplemental Indenture until such time as the
Company delivers the Notes to the Trustee for cancellation.
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(b) Optional Redemption on any Interest Rate Adjustment Date. Each Note
is subject to redemption at the option of the Company in whole or in part on any
Interest Rate Adjustment Date, without notice to the Holders thereof, at a
redemption price equal to the aggregate principal amount of such Notes to be
redeemed plus accrued interest thereon to the redemption date.
(c) Redemption While Notes are in the Long Term Rate Mode. Any Notes in
the Long Term Rate Mode are subject to redemption at the option of the Company
at the times and upon the terms specified at the time of conversion to or within
such Long Term Rate Mode.
(d) Notice of Redemption. In the case of any Note being redeemed on an
Interest Rate Adjustment Date therefor, the Company shall give the applicable
Remarketing Agent and the Trustee written notice of such redemption prior to the
time the interest rate applicable to the next Interest Rate Period for such Note
is established by such Remarketing Agent. In any other case, the Company shall
give the Remarketing Agents and the Trustee written notice of redemption of any
Note at least two Business Days prior to the date notice is required to be given
to Holders. In addition, the Company shall give each Remarketing Agent with
respect to any Note being repaid at the option of the Holder thereof and the
Trustee notice as soon as practicable, and in any event not later than twelve
Business Days prior to the next succeeding Interest Rate Adjustment Date
therefor of each such Note which will be repaid by the Company at the option of
the Holder thereof on or prior to such Interest Rate Adjustment Date. Each
Remarketing Agent's obligation to remarket any Note shall terminate immediately
upon receipt by it from the Company of any notice of redemption or repayment
thereof.
(e) Allocation. Except in the case of a Special Mandatory Purchase, if
the Notes are to be redeemed in part, DTC, after receiving notice of redemption
specifying the aggregate principal amount of Notes to be so redeemed, will
determine by lot (or otherwise in accordance with the procedures of DTC) the
principal amount of such Notes to be redeemed from the account of each DTC
participant. After making its determination as described above, DTC will give
notice of such determination to each DTC participant from whose account such
Notes are to be redeemed. Each such DTC participant, upon receipt of such
notice, will in turn determine the principal amount of Notes to be redeemed from
the accounts of the Beneficial Owners of such Notes for which it serves as DTC
participant, and give notice of such determination to the Remarketing Agent.
Section 209. Form and Other Terms of the Notes.
(a) Attached hereto as Exhibit A is the form of Note, which form is
hereby established as the form in which Notes may be issued bearing interest at
the Initial Interest Rate or in the Commercial Paper Term Mode, the Long Term
Rate Mode or the MAPS Mode. Annex A to Exhibit A is deemed to be a part of such
Note and such Annex may be changed upon the mutual agreement of the Company and
the Trustee to reflect changes occasioned by remarketings. The Notes will
initially bear legends indicating that they have not been registered under the
Securities Act of 1933, as amended, and restricting transfers thereof.
(b) Attached hereto as Exhibit B is a form of Liquidity Provider Note,
which form is hereby established as a form in which Notes held by the Liquidity
Provider may be
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issued. The form of Liquidity Provider Note may be amended to reflect changes
occasioned by remarketings upon the mutual agreement of the Company and the
Trustee, but only with the consent of the applicable Administrative Agent.
(c) Subject to (a) and (b) above, any Note may be issued in such other
form as may be provided by, or not inconsistent with, the terms of the Original
Indenture and this First Supplemental Indenture.
ARTICLE THREE
THE MAPS MODE
Section 301. Applicability of Article. The provisions of this Article
Three shall apply to any Note in the MAPS Mode. To the extent that any provision
of this Article Three conflicts with any provision of Article Two, the
provisions set forth in this Article Three shall govern.
Section 302. Interest To Remarketing Date. Each Note in the MAPS Mode
shall bear interest at the annual interest rate established by the MAPS Agent
from, and including the Interest Rate Adjustment Date commencing the Interest
Rate Period for the MAPS Mode to, but excluding, the date (the "MAPS Remarketing
Date") designated at such time by the MAPS Agent after consultation with the
Company and set forth in Annex A to the applicable Note. Such interest rate will
be the minimum rate of interest and, in the case of a floating interest rate,
Spread (if any) and Spread Multiplier (if any) necessary in the judgment of such
MAPS Agent to produce a par bid in the secondary market for such Note on the
date the interest rate is established. The designated MAPS Remarketing Date
shall be an Interest Payment Date within such Interest Rate Period.
Section 303. Tender; Remarketing. The MAPS Agent's obligations set
forth herein shall be performed pursuant to the MAPS Remarketing Agreement.
(a) Mandatory Tender. Provided that the MAPS Agent gives notice to the
Company and the Trustee on a Business Day not later than ten (10) days prior to
the MAPS Remarketing Date of its intention to purchase the Notes for remarketing
(the "Notification Date"), each Note shall be automatically tendered, or deemed
tendered, to the MAPS Agent for remarketing on the MAPS Remarketing Date, except
in the circumstances set forth in Section 304. The purchase price for the
tendered Notes to be paid by the MAPS Agent shall equal 100% of the principal
amount thereof. When the Notes are tendered for remarketing, the MAPS Agent may
remarket the Notes for its own account at varying prices to be determined by the
MAPS Agent at the time of each sale. From, and including, the MAPS Remarketing
Date to, but excluding, the next succeeding Interest Rate Adjustment Date, the
Notes shall bear interest at the MAPS Interest Rate. If the MAPS Agent elects to
remarket the Notes, the obligation of the MAPS Agent to purchase the Notes on
the MAPS Remarketing Date is subject to, among other things, the conditions
specified in the applicable MAPS Remarketing Agreement. If the MAPS Agent for
any reason does not purchase all tendered Notes on the MAPS Remarketing Date or
if the MAPS Agent gives notice of its intention to remarket the Notes but for
any reason does not purchase all tendered Notes on the MAPS Remarketing Date,
then as of such date the Notes will
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cease to be in the MAPS Mode, the MAPS Remarketing Date will constitute an
Interest Rate Adjustment Date, and the Notes may be subject to remarketing on
such date by a Remarketing Agent appointed by the Company in the Commercial
Paper Mode or the Long Term Rate Mode or a new MAPS Mode established by the
Company in accordance with the procedures set forth in Section 205 hereof,
provided that, in such case, the notice period required for conversion shall be
the lesser of ten (10) days and the period commencing the date that the MAPS
Agent notifies the Company that it will not purchase the Notes for remarketing
on the MAPS Remarketing Date or fails to so purchase, as the case may be.
(b) Remarketing. The MAPS Interest Rate shall be established by the
MAPS Agent in accordance with the following procedures:
(i) The MAPS Interest Rate. Subject to the MAPS Agent's election
to remarket the Notes as provided in subsection (a) above, the MAPS Interest
Rate shall be determined by the MAPS Agent by 3:30 p.m., New York City time, on
the third Business Day preceding the MAPS Remarketing Date (the "Determination
Date") to the nearest one hundred-thousandth (0.00001) of one percent per annum,
and shall be equal to the Base Rate established by the MAPS Agent, after
consultation with the Company, at or prior to the commencement of the MAPS Mode
(the "Base Rate"), plus the Applicable Spread (as defined below), which will be
based on the Dollar Price (as defined below) of the Notes.
The "Applicable Spread" will be the lowest bid indication,
expressed as a spread (in the form of a percentage or in basis points) above the
Base Rate, obtained by the MAPS Agent on the Determination Date from the bids
quoted by up to five Reference Corporate Dealers (as defined below) for the full
aggregate principal amount of the Notes at the Dollar Price, but assuming (i) an
issue date equal to the MAPS Remarketing Date, with settlement on such date
without accrued interest, (ii) a maturity date equal to the next succeeding
Interest Adjustment Date of the Notes and (iii) a stated annual interest rate,
payable semiannually on each Interest Payment Date, equal to the Base Rate plus
the spread bid by the applicable Reference Corporate Dealer. If fewer than five
Reference Corporate Dealers bid as set forth in this subsection (b)(i) of
Section 303, then the Applicable Spread shall be the lowest of such bid
indications obtained as set forth in this subsection (b)(i) of Section 303. The
MAPS Interest Rate announced by the MAPS Agent, absent manifest error, shall be
binding and conclusive upon the Beneficial Owners and Holders of the Notes, the
Company and the Trustee.
"Dollar Price" shall mean, with respect to the Notes, the
present value determined by the MAPS Agent, as of the MAPS Remarketing Date, of
the Remaining Scheduled Payments (as defined below) discounted to the MAPS
Remarketing Date, on a semi-annual basis (assuming a 360-day year consisting of
twelve 30-day months), at the Treasury Rate (as defined below).
"Reference Corporate Dealers" means such Reference Corporate
Dealers as shall be appointed by the MAPS Agent after consultation with the
Company.
"Treasury Rate" shall mean, with respect to the MAPS
Remarketing Date, the rate per annum equal to the semi-annual equivalent yield
to maturity or interpolated (on a day count basis) yield to maturity of the
Comparable Treasury Issues (as defined below), assuming a price
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for the Comparable Treasury Issues (expressed as a percentage of its principal
amount), equal to the Comparable Treasury Price (as defined below) for such MAPS
Remarketing Date.
"Comparable Treasury Issues" shall mean the United States
Treasury security or securities selected by the MAPS Agent as having an actual
or interpolated maturity or maturities comparable or applicable to the remaining
term to the next succeeding Interest Adjustment Date of the Notes being
purchased.
"Comparable Treasury Price" means, with respect to the MAPS
Remarketing Date, (a) the offer prices for the Comparable Treasury Issues
(expressed in each case as a percentage of its principal amount) on the
Determination Date, as set forth on "Telerate Page 500" (or such other page as
may replace Telerate Page 500) or (b) if such page (or any successor page) is
not displayed or does not contain such offer prices on such Determination Date,
(i) the average of the Reference Treasury Dealer Quotations (as defined below)
for such MAPS Remarketing Date, after excluding the highest and lowest of such
Reference Treasury Dealer Quotations, or (ii) if the MAPS Agent obtains fewer
than four such Reference Treasury Dealer Quotations, the average of all such
Reference Treasury Dealer Quotations. "Telerate Page 500" means the display
designated as "Telerate Page 500" on Bridge Telerate, Inc. (or such other page
as may replace Telerate Page 500 on such service) or such other service
displaying the offer prices specified in (a) above as may replace Bridge
Telerate, Inc..
"Reference Treasury Dealer Quotations" means, with respect to
each Reference Treasury Dealer and the MAPS Remarketing Date, the offer prices
for the Comparable Treasury Issues (expressed in each case as a percentage of
its principal amount) quoted in writing to the MAPS Agent by such Reference
Treasury Dealer by 3:30 p.m. New York City time, on the Determination Date.
"Reference Treasury Dealer" means such Reference Treasury
Dealers as shall be appointed by the MAPS Agent after consultation with the
Company.
"Remaining Scheduled Payments" shall mean, with respect to the
Notes, the remaining scheduled payments of the principal thereof and interest
thereon, calculated at the Base Rate only, that would be due after the MAPS
Remarketing Date to and including the next succeeding Interest Adjustment Date
as determined by the MAPS Agent.
(ii) Notification of Results; Settlement. Provided the MAPS Agent
has previously notified the Company and the Trustee on the Notification Date of
its intention to purchase all tendered Notes on the MAPS Remarketing Date, the
MAPS Agent shall notify the Company, the Trustee and DTC by telephone, confirmed
in writing, by 4:00 p.m., New York City time, on the Determination Date, of the
MAPS Interest Rate.
All of the tendered Notes shall be automatically delivered to
the account of the Trustee, by book-entry through DTC pending payment of the
purchase price therefor, on the MAPS Remarketing Date.
In the event that the MAPS Agent purchases the tendered Notes
on the MAPS Remarketing Date, the MAPS Agent shall make or cause the Trustee to
make payment to the DTC Participant of each tendering Beneficial Owner of Notes,
by book-entry through DTC by
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the close of business on the MAPS Remarketing Date against delivery through DTC
of such Beneficial Owner's tendered Notes, of 100% of the principal amount of
the tendered Notes that have been purchased for remarketing by the MAPS Agent.
If the MAPS Agent does not purchase all of the Notes on the MAPS Remarketing
Date, the Company may attempt to convert the Notes to a new Interest Rate Mode;
the interest will be determined as provided above in Section 204 and settlement
will be effected as described above in Section 207(b) or Section 207(c), as the
case may be. In any case, the Company shall make or cause the Trustee to make
payment of interest to each Beneficial Owner of Notes due on the MAPS
Remarketing Date by book-entry through DTC by the close of business on the MAPS
Remarketing Date.
The transactions set forth in this Section 303 shall be
executed on the MAPS Remarketing Date through DTC in accordance with the
procedures of DTC, and the accounts of the respective DTC participants will be
debited and credited and the Notes delivered by book-entry as necessary to
effect the purchases and sales thereof.
Transactions involving the sale and purchase of Notes
remarketed by the MAPS Agent on and after the MAPS Remarketing Date will settle
in immediately available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures set forth above,
including provisions for payment by purchasers of Notes in the remarketing or
for payment to selling Beneficial Owners of tendered Notes, may be modified to
the extent required by DTC or to the extent required to facilitate the tender
and remarketing of Notes in certificated form, if the book-entry system is no
longer available for the Notes at the time of the remarketing. In addition, the
MAPS Agent may, without the consent of the Holders of the Notes, modify the
settlement procedures set forth above in order to facilitate the tender and
settlement process.
As long as DTC's nominee holds the certificates representing
any Notes in the book-entry system of DTC, no certificates for such Notes will
be delivered by any selling Beneficial Owner to reflect any transfer of such
Notes effected in the remarketing.
Section 304. Conversion or Redemption Following Election by
the MAPS Agent to Remarket.
(a) If the MAPS Agent elects to remarket the Notes on the MAPS
Remarketing Date, the Notes will be subject to mandatory tender to the MAPS
Agent for remarketing on such date, in each case subject to the conditions set
forth in Section 303 hereof and to the Company's right to either convert the
Notes to a new Interest Rate Mode on the MAPS Remarketing Date or to redeem the
Notes from the MAPS Agent, in each case as described in the next sentence. The
Company will notify the MAPS Agent and the Trustee, not later than the Business
Day immediately preceding the Determination Date, if the Company irrevocably
elects to exercise its right to either convert the Notes to a new Interest Rate
Mode, or to redeem the Notes, in whole but not in part, from the MAPS Agent at
the Optional Redemption Price, in each case on the MAPS Remarketing Date.
(b) In the event that the Company irrevocably elects to
convert the Notes to a new Interest Rate Mode, then as of the MAPS Remarketing
Date the Notes will cease to be in the
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MAPS Mode, the MAPS Remarketing Date will constitute an Interest Rate Adjustment
Date, and the Notes will be subject to remarketing on such date by a Remarketing
Agent appointed by the Company in the Commercial Paper Term Mode or the Long
Term Rate Mode or a new MAPS Mode established by the Company in accordance with
the set forth in Section 205 above; provided that in such case, the notice
period required for conversion shall be the period commencing the Business Day
immediately preceding the Determination Date. In such case, the Company shall
pay to the MAPS Agent the excess of the Dollar Price of the Notes over 100% of
the principal amount of the Notes in same-day funds by wire transfer to an
account designated by the MAPS Agent on the MAPS Remarketing Date.
(c) In the event that the Company irrevocably elects to redeem
the Notes, the "Optional Redemption Price" shall be the greater of (i) 100% of
the principal amount of the Notes and (ii) the Dollar Price, plus in either case
accrued and unpaid interest from the MAPS Remarketing Date on the principal
amount being redeemed to the date of redemption. If the Company elects to redeem
the Notes, it shall pay the redemption price therefor in same-day funds by wire
transfer to an account designated by the MAPS Agent on the MAPS Remarketing
Date.
(d) If notice has been given as provided in the Original
Indenture and funds for the redemption of any Notes called for redemption shall
have been made available on the redemption date referred to in such notice, such
Notes shall cease to bear interest on the date fixed for such redemption
specified in such notice and the only right of the MAPS Agent from and after the
redemption date shall be to receive payment of the Optional Redemption Price
upon surrender of such Notes in accordance with such notice.
ARTICLE FOUR
ADDITIONAL EVENT OF DEFAULT
With respect to the Notes, the following will be an additional
Event of Default to follow subsection (11) under Section 501 of the Indenture:
(12) default in the performance of the Company's
obligation to purchase Notes held by the Liquidity Provider
under the terms of the Standby Note Purchase Agreement, if
any, and continuance of such default for a period of 60 days
after there has been given, by registered or certified mail,
to the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal amount of
the Outstanding Securities of that series a written notice
specifying such default and requiring it to be remedied and
stating that such notice is a "Notice of Default" hereunder.
ARTICLE FIVE
ADDITIONAL COVENANT
With respect to the Notes, the following covenant shall
replace, and hereby supersedes, the provisions of Section 801 of the Original
Indenture in their entirety:
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"SECTION 801. Company May Consolidate, Etc., Only on Certain Terms
The Company will not 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 Company may merger or consolidate with
or into any other Subsidiary of the Company, and except that any Subsidiary of
the Company may merge into or dispose of assets to the Company, provided, in
each case, that no Event of Default shall have occurred and be continuing at the
time of such proposed transaction or would result therefrom."
ARTICLE SIX
AUTHENTICATION AND DELIVERY OF THE NOTES
Section 601. Authentication and Delivery. As provided in and
pursuant to Section 303. of the Original Indenture, each time that the Company
delivers Notes to the Trustee or Authenticating Agent for authentication, the
Company shall deliver a Supplemental Company Order in the form of Exhibit C to
this Second Supplemental Indenture for the authentication and delivery of such
Notes and the Trustee or such Authenticating Agent shall authenticate and
deliver such Notes.
ARTICLE SEVEN
THE SUPPORT AGREEMENT
Section 701. The Support Agreement. The Notes shall be
entitled to the benefit of that certain support agreement (the "Support
Agreement"), dated as of November 18, 1998, by and between the Company and DTE
Energy. The form of Support Agreement is attached as Exhibit D hereto. The
Company has assigned and pledged its rights under the Support Agreement to the
Lenders (as defined therein), pursuant to the terms and conditions of that
certain collateral assignment agreement (the "Collateral Assignment Agreement"),
dated as of November 18, 1998, by and between the Company and the Lenders. The
form of Collateral Assignment Agreement is attached as Exhibit E hereto. The
foregoing are subject to amendment or termination in accordance with the terms
of the Support Agreement or, as the case may be, the Collateral Assignment
Agreement.
ARTICLE EIGHT
INSURANCE PROVISIONS
Section 801. Applicability of Article. The provisions of this
Article Eight shall be applicable to the Notes for any Interest Rate Period so
long as a Policy is in effect with respect to the Notes and the Insurer is not
in default of its obligation to make payments thereunder. The form of Policy is
attached as Exhibit F hereto.
Section 802. Rights of Insurer Controlling. Anything herein or
under the Original Indenture to the contrary notwithstanding, if a Policy is in
effect with respect to the
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Notes and the Insurer is not in default of its obligation to make payments
thereunder, the Insurer shall be deemed to be the Holder of all Notes then
Outstanding for all purposes under the Indenture and shall have the exclusive
right to exercise or direct the exercise of remedies on behalf of the Holders of
the Notes in accordance with the terms of the Indenture following an Event of
Default, and the principal of all such Notes Outstanding may not be declared to
be due and payable immediately without the prior written consent of the Insurer.
Section 803. Payments Under the Policy in Respect of the
Applicable Interest Rate Period. Except as otherwise provided in an amendment or
supplement to this Second Supplemental Indenture, so long as a Policy is in
effect with respect to the Notes and the Insurer is not in default of its
obligations to make payments thereunder,
(a) If, as of the opening of business on any Interest Payment
Date in the applicable Interest Rate Period, through and including the
applicable Interest Rate Adjustment Date, the Trustee has not received payments
from the Company pursuant to this Second Supplemental Indenture (and after
making demand from DTE Energy pursuant to the Support Agreement) in such amounts
so that sufficient moneys are available under this Second Supplemental Indenture
to pay all interest due on the Notes on such Interest Payment Date, the Trustee
shall promptly notify the Insurer or its designee by telephone, confirmed in
writing by registered or certified mail, of the amount of the deficiency.
(b) If, as of 3:00 p.m. New York City time, on the applicable
Interest Rate Adjustment Date in the event of a Special Mandatory Purchase, the
Trustee has not received payments from the Company pursuant to this Second
Supplemental Indenture (and after making demand from DTE Energy pursuant to the
Support Agreement) in such amounts so that sufficient moneys are available under
this Second Supplemental Indenture to pay 100% of the aggregate principal amount
of the Notes subject to Special Mandatory Purchase on such Interest Rate
Adjustment Date, the Trustee shall promptly notify the Insurer or its designee
by telephone, confirmed in writing by registered or certified mail, of the
amount of the deficiency.
(c) If the deficiency in clause (a) or (b) is made up in whole
or in part on the applicable payment or purchase date, the Trustee shall so
notify the Insurer or its designee.
(d) In addition, if the Trustee has notice that any of the
Holders have been required to disgorge payments on Notes as described in clauses
(a) or (b) to the Company or to a trustee in bankruptcy for creditors or others
pursuant to a final judgment by a court of competent jurisdiction that such
payment constitutes a voidable preference to such Holders within the meaning of
any applicable bankruptcy laws, then the Trustee shall notify the Insurer or its
designee of such fact by telephone, confirmed in writing by registered or
certified mail.
(e) The Trustee is hereby irrevocably designated, appointed,
directed and authorized to act as attorney-in-fact for Holders of the Notes as
follows:
If and to the extent there is a deficiency in amounts required
to pay interest on the Notes, the Trustee shall (A) execute and deliver to an
insurance paying agent designated by the Insurer (the "Insurance Paying Agent"),
in form provided by the Insurance Paying Agent, an instrument appointing the
Insurer as agent for such Holders in any legal proceeding related to the
30
<PAGE> 32
payment of such interest and an assignment to the Insurer of the claims for
interest to which such deficiency relates and which are paid by the Insurer, (B)
receive as designee of the respective Holders in accordance with the tenor of
the Policy payment from the Insurance Paying Agent with respect to the claims
for interest so assigned and (C) disburse the same at the written direction of
the Insurance Paying Agent to such respective Holders;
(f) Irrespective of whether any such assignment is executed
and delivered, the Company and the Trustee hereby agree for the benefit of the
Insurer that:
(i) they recognize that to the extent the Insurer makes
payments, directly or indirectly (as by paying through the
Trustee), on account of interest on the Notes, the Insurer
will be subrogated to the rights of such Holders to receive
the amount of such interest from the Company, with interest
thereon as provided and solely from the sources stated in this
Second Supplemental Indenture and the Notes; and
(ii) they will accordingly pay to the Insurer the amount
of such interest (including interest recovered under
subparagraph (ii) of the first paragraph of the Policy, which
interest shall be deemed past due and not to have been paid),
with interest thereon as provided in this Indenture and the
Note, but only from the sources and in the manner provided
herein for the payment of interest on the Notes to Holders and
will otherwise treat the Insurer as the owner of such rights
to the amount of such interest.
(g) On the date of purchase, the Company shall execute and the
Trustee shall authenticate and make available for delivery to the Insurer or the
Insurer's designee all Notes purchased with the proceeds under the Policy which
Notes shall be registered and made available in the name of or as directed in
writing by the Insurer.
(h) Payments with respect to claims for interest on and
principal of Notes disbursed by the Trustee from proceeds of the Policy shall
not be considered to discharge the obligation of the Company with respect to
such Notes, and the Insurer shall become the owner of such unpaid Notes and
claims for interest in accordance with the tenor of the assignment made to it
under the provisions of this section.
Section 804. Amendments. Copies of any amendments made to the
documents executed in connection with the issuance of the Notes which are
consented to by the Insurer shall be sent at the expense of the Company to the
rating agencies then rating the Notes.
Section 805. Notice of Defaults. Notwithstanding Section 601
of the Original Indenture, the Insurer is to receive from the Trustee prompt
notice of all defaults of which the Trustee has actual knowledge.
Section 806. Company Acting as Paying Agent. Notwithstanding
anything to the contrary in the Indenture, so long as a Policy is in effect or
the Insurer is the Holder of Notes, the Company shall not act as its own Paying
Agent.
31
<PAGE> 33
Section 807. Redemption of Insurer Notes. Notwithstanding
Section 1103 of the Original Indenture, all Notes of which the Insurer is the
Holder shall be redeemed prior to any other Notes.
Section 808. Change in Trustee. The Insurer shall receive
notice of the resignation or removal of the Trustee and the appointment of a
successor thereto.
Section 809. Effect of Amendments. In determining whether any
amendments or supplement to the Indenture may be made without the consent of the
Holders or in determining whether any action should be taken the effect of such
action on the rights of the Holders shall be considered as if the Policy were
not in effect.
Section 810. Copies of Financial Statements. The Insurer shall
receive a copy of all financial statements and reports to be delivered to the
Trustee pursuant to Section 704 of the Original Indenture at the time such
financial statements and reports are delivered to the Trustee.
Section 811. Defeasance. Notwithstanding Section 403 of the
Original Indenture, for so long as the Policy is in effect and the Insurer is
not in default of its obligation to make payments thereunder, the Company shall
not exercise its rights to satisfy and discharge the entire indebtedness on the
Notes without the consent of the Insurer, which consent shall not be
unreasonably withheld.
Section 812. Notices to Holders. Any notice, certificate or
report that is required to be given to a Holder of the Notes or to the Trustee
pursuant to the Indenture shall also be provided by the Company to the Insurer.
All notices, certificates or reports required to be given to the Insurer shall
be in writing and shall be sent by registered or certified mail to such address
as shall be designated in writing by the Insurer from time to time.
Section 813. Third Party Beneficiary. Notwithstanding Section
112 of the Original Indenture, so long as the Policy is in effect and the
Insurer is not in default of its obligation to make payments thereunder, the
Insurer is an express third-party beneficiary of the Indenture.
ARTICLE NINE
AMENDMENTS
Section 901. Notwithstanding anything herein or in the
Original Indenture to the contrary, this Second Supplemental Indenture and the
Original Indenture (in the case of the Original Indenture, with respect to any
amendment of or affecting the Notes or the Insurer) may be amended at any time
in accordance with the provisions of Article Nine of the Original Indenture, but
subject to the consent of the Insurer (which consent shall not be unreasonably
withheld) so long as the Policy is in effect and the Insurer is not in default
of its obligation to make payments under the Policy.
ARTICLE TEN
MISCELLANEOUS PROVISIONS
32
<PAGE> 34
The Trustee makes no undertaking or representations in respect
of, and shall not be responsible in any manner whatsoever for and in respect of,
the validity or sufficiency of this Second Supplemental Indenture or the proper
authorization or the due execution hereof by the Company or for or in respect of
the recitals and statements contained herein, all of which recitals and
statements are made solely by the Company.
Except as expressly amended hereby, the Original Indenture
shall continue in full force and effect in accordance with the provisions
thereof and the Original Indenture is in all respects hereby ratified and
confirmed. This Second Supplemental Indenture and all its provisions shall be
deemed a part of the Original Indenture in the manner and to the extent herein
and therein provided.
This Second Supplemental Indenture shall be governed by, and
construed in accordance with, the laws of the State of New York.
This Second Supplemental Indenture may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
33
<PAGE> 35
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed and attested, all as of the day and
year first above written.
DTE CAPITAL CORPORATION
By:
---------------------------------------
Name:
Title:
ATTEST:
By:
----------------------------------
THE BANK OF NEW YORK,
as Trustee
By:
---------------------------------------
Name:
Title:
ATTEST:
By:
----------------------------------
34
<PAGE> 36
STATE OF MICHIGAN )
) :
COUNTY OF WAYNE )
On the ___ day of November ____, 1998, before me personally came_______________,
to me known, who, being by me duly sworn, did depose and say that he is
_________ of DTE CAPITAL CORPORATION, one of the corporations described in and
which executed the foregoing instrument and he signed his name thereto by like
authority.
____________________________________________
Notary Public, State of
Michigan
[Notarial Seal]
STATE OF NEW YORK )
) :
COUNTY OF )
On the _____ day of November ____, 1998, before me personally came____________,
to me known, who, being by me duly sworn, did depose and say that she is
_____________ of THE BANK OF NEW YORK, one of the corporations described in and
which executed the foregoing instrument and she signed his name thereto by like
authority.
____________________________________________
Notary Public, State of
New York
[Notarial Seal]
35
<PAGE> 37
EXHIBIT A
FORM OF NOTE
(Attached)
A-1
<PAGE> 38
THIS CERTIFICATE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITARY OR A
NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES
IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE
BY THE DEPOSITORY TRUST COMPANY (THE "DEPOSITARY") TO A NOMINEE OF THE
DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS CERTIFICATE IS PRESENTED BY
AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY, TO THE COMPANY OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS NOTE
NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH
REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION. THIS NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM
DENOMINATIONS OF $100,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF.
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR
OTHERWISE TRANSFER THIS NOTE, PRIOR TO THE DATE (THE "RESALE RESTRICTION
TERMINATION DATE") WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUANCE
DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY "AFFILIATE" OF THE
COMPANY WAS THE OWNER OF THIS NOTE (OR ANY PREDECESSOR OF THIS NOTE) ONLY (A) TO
THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A REGISTRATION STATEMENT
WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE NOTES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT
("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (D) IN A TRANSACTION
OTHERWISE EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT UPON
THE DELIVERY
A-2
<PAGE> 39
OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO
THE COMPANY, SUBJECT IN EACH OF THE FOREGOING CASES, TO A CERTIFICATE OF
TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF THIS NOTE BEING COMPLETED
AND DELIVERED BY THE TRANSFEROR TO THE COMPANY. THIS LEGEND WILL BE REMOVED UPON
THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
THE HOLDER OF THIS NOTE (A) IS NOT ITSELF, AND IS NOT ACQUIRING THIS
NOTE WITH "PLAN ASSETS" OF, AN EMPLOYEE BENEFIT OR OTHER PLAN SUBJECT TO TITLE I
OF EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED, OR SECTION 4975
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (EACH, A "PLAN"), OR AN ENTITY
WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT
IN THE ENTITY (A "PLAN ASSET ENTITY") OR (B) (1) IS ITSELF, OR IS ACQUIRING THIS
NOTE WITH THE ASSETS OF, AN "INVESTMENT FUND" (WITHIN THE MEANING OF PART V(b)
OF PTCE 84-14) MANAGED BY A "QUALIFIED PROFESSIONAL ASSET MANAGER" (WITHIN THE
MEANING OF PART V(a) OF PROHIBITED TRANSACTION CLASS EXEMPTION ("PTCE") 84-14)
WHICH HAS MADE OR PROPERLY AUTHORIZED THE DECISION FOR SUCH FUND TO PURCHASE
THIS NOTE, UNDER CIRCUMSTANCES SUCH AS PTCE 84-14 IS APPLICABLE TO THE PURCHASE
AND HOLDING OF THIS NOTE, (2) IS ITSELF, OR IS ACQUIRING THIS NOTE WITH THE
ASSETS OF, A PLAN MANAGED BY AN "IN-HOUSE ASSET MANAGER" (WITHIN THE MEANING OF
PART IV(a) OF PTCE 96-23) WHICH HAS MADE OR PROPERLY AUTHORIZED THE DECISION FOR
SUCH PLAN TO PURCHASE THIS NOTE, UNDER CIRCUMSTANCES SUCH THAT PTCE 96-23 IS
APPLICABLE TO THE PURCHASE AND HOLDING OF THIS NOTE, (3) IS AN INSURANCE COMPANY
POOLED SEPARATE ACCOUNT PURCHASING THIS NOTE PURSUANT TO PART I OF PTCE 90-1, OR
A BANK COLLECTIVE INVESTMENT FUND PURCHASING THIS NOTE PURSUANT TO SECTION I OF
PTCE 91-38, AND IN EITHER CASE, NO PLAN OWNS MORE THAN 10% OF THE ASSETS OF SUCH
ACCOUNT OR COLLECTIVE FUND (WHEN AGGREGATED WITH OTHER PLANS OF THE SAME
EMPLOYER (OR ITS AFFILIATES) OR EMPLOYEE ORGANIZATION) OR (4) IS AN INSURANCE
COMPANY USING THE ASSETS OF ITS GENERAL ACCOUNT TO PURCHASE THIS NOTE PURSUANT
TO PART I OF PTCE 95-60, IN WHICH CASE THE RESERVES AND LIABILITIES FOR THE
GENERAL ACCOUNT CONTRACTS HELD BY OR ON BEHALF OF ANY PLAN, TOGETHER WITH ANY
OTHER PLANS MAINTAINED BY THE SAME EMPLOYER (OR ITS AFFILIATES) OR EMPLOYEE
ORGANIZATION, DO NOT EXCEED 10% OF THE TOTAL RESERVES AND LIABILITIES OF THE
INSURANCE COMPANY GENERAL ACCOUNT (EXCLUSIVE OF SEPARATE ACCOUNT LIABILITIES),
PLUS SURPLUS AS SET FORTH IN THE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONS
ANNUAL STATEMENT FILED WITH THE STATE OF DOMICILE OF THE INSURER.
A-3
<PAGE> 40
No:
DTE Capital Corporation
REMARKETED NOTE, 1998 SERIES B
THIS NOTE SHALL NOT BE VALID FOR ANY PURPOSE UNLESS PRESENTED TOGETHER
WITH ANNEX A HERETO (INCLUDING ANY CONTINUATION THEREOF). REFERENCE IS MADE TO
ANNEX A FOR CERTAIN TERMS OF THIS NOTE.
DTE CAPITAL CORPORATION, a corporation duly organized and existing under
the laws of the State of Michigan (the "Company"), for value received hereby
promises to pay to CEDE & CO., or registered assigns, the principal sum
specified in Annex A on November 15, 2038 (the "Stated Maturity"), upon the
presentation and surrender hereof at the principal corporate trust office of The
Bank of New York, or its successor in trust (the "Trustee") or such other office
as the Trustee has designated in writing, and to pay interest on the unpaid
principal balance hereof from, and including, the Original Issue Date specified
in Annex A to, but excluding, the Initial Interest Rate Adjustment Date
specified in Annex A (the "Initial Interest Rate Period") at the Initial
Interest Rate specified therein payable on the related Interest Payment Date or
Dates specified in Annex A, to the person in whose name this Note is registered
at the close of business on the related Record Date. From and after the Initial
Interest Rate Adjustment Date, this Note will bear interest in either the
Commercial Paper Term Mode, the Long Term Rate Mode or the MAPS4 Mode, in
each case as provided in this Note and set forth in Annex A, and interest will
be payable on the Interest Payment Dates to the person in whose name this Note
is registered at the close of business on the related Record Date as provided
below or as set forth in Annex A. In each case, payments shall be made in
accordance with the provisions hereof and Annex A, including any additional
terms specified in Annex A, until the principal hereof is paid or duly made
available for payment. References herein to "this Note", "hereof", "herein" and
comparable terms shall include Annex A.
So long as this Note bears interest in the Commercial Paper Term Mode,
interest will be payable on the Interest Rate Adjustment Date which commences
the next succeeding Interest Rate Period for this Note and on such other dates
(if any) as will be established by the Company and set forth in Annex A upon
conversion of this Note to the Commercial Paper Term Mode or upon remarketing of
this Note in a new Interest Rate Period in the Commercial Paper Term Mode. So
long as this Note bears interest in the Long Term Rate Mode or the MAPS Mode,
interest will be payable no less frequently than semiannually on such dates as
will be established by the Company and set forth in Annex A upon conversion of
this Note to the Long Term Rate Mode or the MAPS Mode (or upon remarketing of
this Note in a new Interest Rate Period in the Long Term Rate Mode or the MAPS
Mode, as the case may be) in the case of a fixed interest
- --------------------
MAPS4 is a service mark of Salomon Smith Barney Inc.
A-4
<PAGE> 41
rate, or as set forth below under "Interest Rate" in the case of a floating
interest rate and on the Interest Rate Adjustment Date commencing the next
succeeding Interest Rate Period. Such interest will be payable to the Holder
hereof as of the related Record Date, which, so long as this Note bears interest
(i) in the Initial Interest Rate Period, are the dates specified in Annex A;
(ii) in the Commercial Paper Term Mode, is the Business Day prior to the related
Interest Payment Date; and (iii) in the Long Term Rate Mode or the MAPS Mode, is
15 days prior to the related Interest Payment Date. Except as provided below
under "Interest Rate-Floating Interest Rates," if any Interest Payment Date
would otherwise be a day that is not a Business Day, such Interest Payment Date
will be postponed to the next succeeding Business Day, and no interest will
accrue on such payment for the period from and after such Interest Payment Date
to the date of such payment on the next succeeding Business Day. Interest on
this Note while bearing interest in the Commercial Paper Term Mode or at a
floating interest rate during a Long Term Rate Period or a MAPS Rate Period will
be computed on the basis of actual days elapsed over 360; provided that, if an
applicable Interest Rate Basis is the CMT Rate or Treasury Rate (each as defined
below), interest will be computed on the basis of actual days elapsed over the
actual number of days in the year. Interest on this Note while bearing interest
at a fixed rate in the Long Term Rate Mode or the MAPS Mode will be computed on
the basis of a year of 360 days consisting of twelve 30-day months. Interest on
this Note while bearing interest at the Initial Interest Rate will be computed
on the basis a year of 360 days consisting of twelve 30-day months.
Payment of the principal of and interest on this Note will be made at the
office or agency maintained for that purpose in the Borough of Manhattan, The
City of New York, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that payment of interest may be made at the option of the
Company by check mailed to the person in whose name this Note is registered at
the close of business on the related Record Date.
This Note is one of a duly authorized series of Securities of the Company
(herein called the "Notes") issued and to be issued under an Indenture, dated as
of June 15, 1998, as supplemented by the First Supplemental Indenture dated as
of June 15, 1998 and the Second Supplemental Indenture, dated as of November 1,
1998 (the "Second Supplemental Indenture") (as further amended or supplemented,
the "Indenture"), between the Company and the Trustee, to which Indenture and
all indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the registered owners of the Notes and of the
terms upon which the Notes are, and are to be, authenticated and delivered.
This Note is entitled to the benefit of that certain support agreement (the
"Support Agreement"), dated as of November 18, 1998, by and between the Company
and DTE Energy Company, the owner, directly or indirectly, of 100% of the
outstanding common stock of the Company and that certain assignment and pledge
of the Company's rights under the Support Agreement to the Lenders (as defined
in the Support Agreement), pursuant to the terms and conditions of the
collateral assignment agreement (the "Collateral Assignment Agreement"),
A-5
<PAGE> 42
dated as of November 18, 1998, by and between the Company and the Lenders,
subject in each case to amendment or termination of the Support Agreement or, as
the case may be, the Collateral Assignment Agreement, in accordance with their
respective terms. In addition, if a Policy (as defined below) is in effect with
respect to any Interest Rate Period, this Note shall be entitled to the benefit
of such Policy for such Interest Rate Period to the extent and subject to the
conditions set forth in the Second Supplemental Indenture, as then amended. A
copy of any applicable Policy is on file at the office of the Trustee.
DEFINITIONS
The following terms, as used herein, have the following meanings unless the
context or use clearly indicates another or different meaning or intent:
"Applicable Spread" means the lowest bid indication, expressed as a spread
(in the form of a percentage or in basis points) above the Base Rate, obtained
by the MAPS Agent on the Determination Date from the bids quoted by up to five
Reference Corporate Dealers for the full aggregate principal amount of this Note
at the Dollar Price, but assuming (i) an issue date equal to the MAPS
Remarketing Date, with settlement on such date without accrued interest, (ii) a
maturity date equal to the next succeeding Interest Rate Adjustment Date and
(iii) a stated annual interest rate, payable semiannually on each Interest
Payment Date, equal to the Base Rate plus the spread bid by the applicable
Reference Corporate Dealer. If fewer than five Reference Corporate Dealers bid
as set forth herein, then the Applicable Spread shall be the lowest of such bid
indications obtained.
"Base Rate" means the interest rate established by the MAPS Agent,
after consultation with the Company, as the applicable "Base Rate" at or prior
to the commencement of the MAPS Mode and set forth on Annex A hereto.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions located in the State of
Michigan or in the state in which the principal corporate trust office of the
Trustee is located are authorized or obligated by or pursuant to law or
executive order to close; provided, however, that with respect to Notes in the
Long Term Rate Mode or the MAPS Mode as to which LIBOR is an applicable Interest
Rate Basis, such day is also a London Business Day (as hereinafter defined).
"London Business Day" means a day on which commercial banks are open for
business (including for dealings in the Index Currency (as hereinafter defined)
in London.
"Commercial Paper Term Mode" means, with respect to this Note, the Interest
Rate Mode in which the interest rate on this Note is reset on a periodic basis
which shall not be less than one calendar day nor more than 364 consecutive
calendar days and interest is paid as provided for such Interest Rate Mode as
set forth herein.
"Commercial Paper Term Period" shall mean the Interest Rate Period for this
Note in the Commercial Paper Term Mode that is a period of not less than one or
more than 364 consecutive calendar days, as determined by the Company (as
described below under "Conversion") or, if not
A-6
<PAGE> 43
so determined, by the Remarketing Agent for this Note (in its best judgment in
order to obtain the lowest interest cost for this Note). The interest rate for
any Commercial Paper Term Period relating to this Note will be determined not
later than 11:50 a.m., New York City time, on the Interest Rate Adjustment Date
for this Note, which is the first day of each Interest Rate Period for this
Note. Each Commercial Paper Term Period shall commence on the Interest Rate
Adjustment Date therefor and end on the day preceding the date specified by such
Remarketing Agent as the first day of the next Interest Rate Period for this
Note.
"Comparable Treasury Issues" shall mean the United States Treasury
security or securities selected by the MAPS Agent as having an actual or
interpolated maturity or maturities comparable or applicable to the remaining
term to the next succeeding Interest Rate Adjustment Date.
"Comparable Treasury Price" shall mean, with respect to the MAPS
Remarketing Date, (a) the offer prices for the Comparable Treasury Issues
(expressed in each case as a percentage of its principal amount) on the
Determination Date, as set forth on "Telerate Page 500" (or such other page as
may replace Telerate Page 500) or (b) if such page (or any successor page) is
not displayed or does not contain such offer prices on such Determination Date,
(i) the average of the Reference Treasury Dealer Quotations for such MAPS
Remarketing Date, after excluding the highest and lowest of such Reference
Treasury Dealer Quotations, or (ii) if the MAPS Agent obtains fewer than four
such Reference Treasury Dealer Quotations, the average of all such Reference
Treasury Dealer Quotations. "Telerate Page 500" shall mean the display
designated as "Telerate Page 500" on Bridge Telerate, Inc. (or such other page
as may replace Telerate Page 500 on such service) or such other service
displaying the offer prices specified in (a) above as may replace Bridge
Telerate, Inc.
"Determination Date" means the third Business Day preceding the applicable
MAPS Remarketing Date.
"Dollar Price" shall mean the present value determined by the MAPS Agent,
as of the MAPS Remarketing Date, of the Remaining Scheduled Payments discounted
to the MAPS Remarketing Date, on a semi-annual basis (assuming a 360-day year
consisting of twelve 30-day months), at the Treasury Rate.
"DTC" or the "Depositary" shall mean The Depository Trust Company, or its
nominee.
"Floating Interest Rate Notice" has the meaning specified under "Interest
Rate - (c) Floating Interest Rates" below. The form of Floating Rate Interest
Notice is set forth as Exhibit G to the Second Supplemental Indenture.
"Floating Rate Maximum Interest Rate" and "Floating Rate Minimum
Interest Rate" have the respective meanings specified under "Interest Rate - (c)
Floating Interest Rates" below.
"Index Maturity" means the period to maturity of the instrument or
obligation with respect to which the related Interest Rate Basis or Bases will
be calculated.
A-7
<PAGE> 44
"Initial Interest Rate" means the annual rate of interest applicable to
this Note during the Initial Interest Rate Period.
"Initial Interest Rate Adjustment Date" means November 15, 2003.
"Initial Interest Rate Period" means the period commencing on the date of
issuance for this Note and ending on the Business Day immediately preceding the
Initial Interest Rate Adjustment Date.
"Insurer" means such issuer of a financial guaranty policy in respect of
this Note as may be purchased by the Company from time to time.
"Interest Determination Date" has the meaning specified under "Interest
Rate - (c) Floating Interest Rates" below.
"Interest Rate Adjustment Date" means for a particular Interest Rate Period
in any Interest Rate Mode, each date, which shall be a Business Day, on which
interest and, in the case of a floating interest rate, the Spread (if any) and
the Spread Multiplier (if any) on this Note commences to accrue at the rate
determined and announced by the applicable Remarketing Agent for such Interest
Rate Periods, and if this Note is bearing interest at the Initial Interest Rate,
the Business Day following the expiration of the Initial Interest Rate Period.
"Interest Rate Basis" has the meaning specified under "Interest Rate - (c)
Floating Interest Rates" below.
"Interest Rate Mode" means the mode in which the Interest Rate on this Note
is being determined, i.e., the Commercial Paper Term Mode, the Long Term Rate
Mode, or the MAPS Mode.
"Interest Rate Period" means, with respect to the Commercial Paper Term
Mode or the Long Term Rate Mode, the period of time commencing on the Interest
Rate Adjustment Date to, but not including, the immediately succeeding Interest
Rate Adjustment Date during which this Note bears interest at a particular fixed
interest rate or floating interest rate, and, with respect to an Interest Rate
Period for this Note in the MAPS Mode, a MAPS Rate Period. So long as this Note
bears interest in the Long Term Rate Mode, if so provided in Annex A at
"Interest Rate Period Adjustment" and if specified by the Company at the time of
remarketing into such Long Term Rate Period, the Company may shorten the
Interest Rate Period and provide for payment of a premium in respect thereof for
this Note upon written notice to the Remarketing Agent and the Trustee not less
than thirty (30) days prior to the date upon which such shortened Interest Rate
Period shall expire. Promptly upon receipt of such notice and, in any case, not
later than the close of business on such date, the Trustee will transmit such
information to DTC in accordance with DTC's procedures as in effect from time to
time. In such case, the next Interest Rate Adjustment Date otherwise set forth
in Annex A shall instead be the date upon which such Interest Rate Period shall
expire.
A-8
<PAGE> 45
If this Note is subject to early remarketing as provided above, the
Interest Rate Period may be shortened by the Company on any date on and after
the Initial Early Remarketing Date, if any, specified in Annex A, upon prior
written notice as provided above. On and after the Initial Early Remarketing
Date, if any, on the Interest Rate Adjustment Date relating to such shortened
Interest Rate Period for this Note, the Company will pay a premium to the
tendering beneficial owner of this Note, together with accrued interest, if any,
hereon at the applicable rate payable to such Interest Rate Adjustment Date.
Unless otherwise specified in Annex A, the premium shall be an amount equal to
the Initial Early Remarketing Premium specified in Annex A, the premium shall be
an amount equal to the Initial Early Remarketing Premium specified in Annex A
(as adjusted by the Annual Early Remarketing Premium Percentage Reduction, if
applicable), multiplied by the principal amount of this Note subject to early
remarketing. The Initial Early Remarketing Premium, if any, shall decline at
each anniversary of the Initial Early Remarketing Date by an amount equal to the
applicable Annual Early Remarketing Premium Percentage Reduction, if any,
specified in Annex A until the premium is equal to 0.
"Interest Reset Date", "Initial Interest Reset Date" and "Interest
Reset Period" have the respective meanings specified under "Interest Rate - (c)
Floating Interest Rates" below.
"Liquidity Provider" means, any bank or other credit provider whose
obligations such as those under the applicable Standby Note Purchase Agreement
with respect to any Notes are exempt from registration under the Securities Act
of 1933, as amended, with long term senior debt ratings from Standard & Poor's
Ratings Services and Moody's Investors Service, Inc. at least equal to those of
the Company as of the date of the Standby Note Purchase Agreement, and a minimum
combined capital and surplus of at least $50,000,000, that has entered into a
Standby Note Purchase Agreement with the Company for the purpose of purchasing
unremarketed Notes on any Interest Rate Adjustment Date.
"Long Term Rate Mode" means, with respect to this Note, the Interest Rate
Mode in which the interest rate on this Note is reset in a Long Term Rate Period
and interest is paid as provided for such Interest Rate Mode as set forth
herein.
"Long Term Rate Period" means any period of more than 364 days and not
exceeding the remaining term to the Stated Maturity of this Note.
"MAPS Interest Rate" means the rate equal to the Base Rate established by
the MAPS Agent, after consultation with the Company, at or prior to the
commencement of the MAPS Mode plus the Applicable Spread, which will be based on
the Dollar Price.
"MAPS Mode", or such other designation as may be used at the time of
remarketing, means the Interest Rate Mode in which this Note shall bear interest
and be subject to remarketing as "MAndatory Putable/remarketable Securities" (or
such other designation as may be used at the time of remarketing) ("MAPS").
"MAPS Rate Period", or such other designation as may be used at the time of
remarketing, means an Interest Rate Period in the MAPS Mode established by the
Company as a
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<PAGE> 46
period of more than 364 days and not exceeding the remaining term to the Stated
Maturity of this Note; provided, however, that such Interest Rate Period must
end on the day prior to an Interest Payment Date for this Note. The MAPS Rate
Period shall consist of the period to and excluding the MAPS Remarketing Date
and the period from and including the MAPS Remarketing Date to but excluding the
next succeeding Interest Rate Adjustment Date.
"MAPS Remarketing Agreement", or such other designation as may be used at
the time of remarketing, shall mean the agreement dated as of the Interest Rate
Adjustment Date commencing the applicable MAPS Rate Period which sets forth the
rights and obligations of the Company and the applicable MAPS Agent with respect
to the remarketing of Notes in the MAPS Mode.
"MAPS Remarketing Date", or such other designation as may be used at the
time of remarketing, means the date designated by the applicable MAPS Agent,
after consultation with the Company, within the MAPS Rate Period on which the
applicable MAPS Agent may elect to remarket the Note at the MAPS Interest Rate.
"Notification Date" means the Business Day not later than ten (10) days
prior to the applicable MAPS Remarketing Date on which the MAPS Agent gives
notice to the Company and the Trustee of its intention to purchase this Note for
remarketing.
"Optional Redemption" means the redemption of this Note prior to its
maturity at the option of the Company as described herein.
"Policy" means such financial guaranty insurance policy as may be purchased
by the Company from time to time in the form attached as Exhibit F to the Second
Supplemental Indenture or such other form as may be adopted in any manner
consistent with the requirements of this Second Supplemental Indenture and the
Original Indenture.
"Principal Financial Center" means, except as otherwise specified in the
applicable Floating Interest Rate Notice, the capital city of the country
issuing the Index Currency, except that with respect to United States dollars,
Australian dollars, Canadian dollars, Deutsche marks, Dutch guilders, Portuguese
escudos, Italian lire, South African rand, and Swiss francs, the Principal
Financial Center will be The City of New York, Sydney, Toronto, Frankfurt,
Amsterdam, London, Milan, Johannesburg and Zurich, respectively.
"Reference Corporate Dealers" means such Reference Corporate Dealers as
shall be appointed by the MAPS Agent after consultation with the Company.
"Reference Treasury Dealer" shall mean such Reference Treasury Dealers
as shall be appointed by the MAPS Agent after consultation with the Company.
"Reference Treasury Dealer Quotations" shall mean, with respect to each
Reference Treasury Dealer and the MAPS Remarketing Date, the offer prices for
the Comparable Treasury Issues (expressed in each case as a percentage of its
principal amount) quoted in writing to the
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<PAGE> 47
MAPS Agent by such Reference Treasury Dealer by 3:30 p.m. New York City time, on
the Determination Date.
"Remaining Scheduled Payments" shall mean with respect to this Note the
remaining scheduled payments of the principal hereof and interest hereon,
calculated at the Base Rate only, that would be due after the MAPS Remarketing
Date to and including the next succeeding Interest Rate Adjustment Date as
determined by the MAPS Agent.
"Remarketing Agent" means such Remarketing Agent or agent, including any
standby Remarketing Agent (each a "Standby Remarketing Agent"), appointed by the
Company from time to time, for this Note.
"Special Interest Rate" means the rate of interest equal to the rate per
annum announced by Citibank, N.A., or such other nationally recognized bank
located in the United States as the Company may select, as its prime lending
rate.
"Special Mandatory Purchase" means the obligation of the Company (or,
if applicable, a Liquidity Provider) to purchase Notes not successfully
remarketed by the Remarketing Agent and the applicable Standby Remarketing
Agent(s) by 12:00 o'clock noon, New York City time, on any Interest Rate
Adjustment Date.
"Spread" means the number of basis points to be added to or subtracted from
the related Interest Rate Basis or Bases applicable to an Interest Rate Period,
as the case may be, for this Note.
"Spread Multiplier" means the percentage of the related Interest Rate
Basis or Bases applicable to an Interest Rate Period by which such Interest Rate
Basis or Bases will be multiplied to determine the applicable interest rate from
time to time for such Long Term Interest Rate Period, as the case may be.
"Standby Note Purchase Agreement" means the agreement, which the Company
may, at its option, enter into from time to time with a Liquidity Provider for
the purpose of purchasing unremarketed Notes.
"Treasury Rate" shall mean, with respect to the MAPS Remarketing Date, the
rate per annum equal to the semi-annual equivalent yield to maturity or
interpolated (on a day count basis) yield to maturity of the Comparable Treasury
Issues, assuming a price for the Comparable Treasury Issues (expressed as a
percentage of its principal amount), equal to the Comparable Treasury Price for
such MAPS Remarketing Date.
"Weekly Rate Period" means a Commercial Paper Term Period with an Interest
Rate Period of generally seven days.
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<PAGE> 48
INTEREST RATE
(a) Initial Interest Rate. From the Original Issue Date set forth in Annex
A to the Initial Interest Rate Adjustment Date set forth in Annex A, this Note
will bear interest at the Initial Interest Rate specified therein. Thereafter,
this Note will bear interest in the Commercial Paper Term Mode, the Long Term
Rate Mode or the MAPS Mode.
(b) Interest Rates. The interest rate and, in the case of a floating
interest rate, the Spread (if any) and the Spread Multiplier (if any) for this
Note will be announced by the Remarketing Agent on or prior to the Interest Rate
Adjustment Date for the next succeeding Interest Rate Period and will be the
minimum interest rate per annum and, in the case of a floating interest rate,
the Spread (if any) and the Spread Multiplier (if any) necessary, during the
Interest Rate Period commencing on such Interest Rate Adjustment Date, in the
judgment of the Remarketing Agent, to produce a par bid in the secondary market
for this Note on the date the interest rate is established. Such rate will be
effective for the next succeeding Interest Rate Period for this Note commencing
on such Interest Rate Adjustment Date.
(c) Floating Interest Rates. While this Note bears interest in the Long
Term Rate Mode or the MAPS Mode (with respect to the period from, and including,
the Interest Rate Adjustment Date commencing such period to, but excluding, the
MAPS Remarketing Date), the Company may elect a floating interest rate by
providing notice, which will be in or promptly confirmed in writing (which
includes facsimile or appropriate electronic media), received by the Trustee and
the Remarketing Agent for this Note (the "Floating Interest Rate Notice") not
less than ten (10) days prior to the Interest Rate Adjustment Date for such Long
Term Rate Period or MAPS Rate Period. The Floating Interest Rate Notice must
identify by CUSIP number or otherwise the portion of this Note to which it
relates and state the Interest Rate Period (or portion thereof, in the case of
the MAPS Mode) therefor to which it relates. Each Floating Interest Rate Notice
must also state the Interest Rate Basis or Bases, the Initial Interest Reset
Date, the Interest Reset Period and Dates, the Interest Payment Period and
Dates, the Index Maturity, the Floating Rate Maximum Interest Rate and/or
Floating Rate Minimum Interest Rate, if any, and the Day Count Convention. If
one or more of the applicable Interest Rate Bases is LIBOR or the CMT Rate, the
Floating Interest Rate Notice shall also specify the Index Currency and
Designated LIBOR Page or the Designated CMT Maturity Index and Designated CMT
Telerate Page, respectively.
If this Note bears interest at a floating rate in a Long Term Rate Period
or a MAPS Rate Period, this Note shall bear interest at the rate determined by
reference to the applicable Interest Rate Basis or Bases (a) plus or minus the
Spread, if any, and/or (b) multiplied by the Spread Multiplier, if any,
specified by the Remarketing Agent, in the case of a Long Term Rate Period, or
the MAPS Agent in the case of a MAPS Rate Period, and recorded in Annex A to
this Note. Commencing on the Interest Rate Adjustment Date for such Interest
Rate Period, the rate at which interest on this Note shall be payable shall be
reset as of each Interest Reset Date during such Interest Rate Period specified
in the applicable Floating Interest Rate Notice.
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<PAGE> 49
The applicable floating interest rate on this Note during any Interest Rate
Period will be determined by reference to the applicable Interest Rate Basis or
Interest Rate Bases, which may include (i) the CD Rate, (ii) the CMT Rate, (iii)
the Federal Funds Rate, (iv) LIBOR, (v) the Prime Rate, (vi) the Treasury Rate,
or (vii) such other Interest Rate Basis or interest rate formula as may be
specified in the applicable Floating Interest Rate Notice (each, an "Interest
Rate Basis").
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the interest rate with respect to each Interest Rate Basis will be determined in
accordance with the applicable provisions below. Except as set forth above or in
the applicable Floating Interest Rate Notice, the interest rate in effect on
each day shall be (i) if such day is an Interest Reset Date, the interest rate
determined as of the Interest Determination Date immediately preceding such
Interest Reset Date or (ii) if such day is not an Interest Reset Date, the
interest rate determined as of the Interest Determination Date immediately
preceding the most recent Interest Reset Date. If any Interest Reset Date would
otherwise be a day that is not a Business Day, such Interest Reset Date will be
postponed to the next succeeding Business Day, unless LIBOR is an applicable
Interest Rate Basis and such Business Day falls in the next succeeding calendar
month, in which case such Interest Reset Date will be the immediately preceding
Business Day. In addition, if the Treasury Rate is an applicable Interest Rate
Basis and the Interest Determination Date would otherwise fall on an Interest
Reset Date, then such Interest Reset Date will be postponed to the next
succeeding Business Day.
The applicable Floating Interest Rate Notice will specify whether the rate
of interest will be reset daily, weekly, monthly, quarterly, semiannually or
annually or on such other specified basis (each, an "Interest Reset Period") and
the dates on which such rate of interest will be reset (each, an "Interest Reset
Date"). Unless otherwise specified in the applicable Floating Interest Rate
Notice, the Interest Reset Dates will be, in the case of a floating interest
rate which resets: (i) daily, each Business Day; (ii) weekly, the Wednesday of
each week (unless the Treasury Rate is an applicable Interest Rate Basis, in
which case the Tuesday of each week except as described below); (iii) monthly,
the third Wednesday of each month; (iv) quarterly, the third Wednesday of March,
June, September and December of each year, (v) semiannually, the third Wednesday
of the two months specified in the applicable Floating Interest Rate Notice; and
(vi) annually, the third Wednesday of the month specified in the applicable
Floating Interest Rate Notice.
The interest rate applicable to each Interest Reset Period commencing on
the related Interest Reset Date will be the rate determined as of the applicable
Interest Determination Date. The "Interest Determination Date" with respect to
the CD Rate, the CMT Rate, the Federal Funds Rate and the Prime Rate will be the
second Business Day immediately preceding the applicable Interest Reset Date;
and the "Interest Determination Date" with respect to LIBOR shall be the second
London Business Day immediately preceding the applicable Interest Reset Date,
unless the Index Currency is British pounds sterling, in which case the
"Interest Determination Date" will be the applicable Interest Reset Date. The
"Interest Determination Date" with respect to the Treasury Rate shall be the day
in the week in which the applicable Interest Reset Date falls on which day
Treasury Bills (as defined below) are normally auctioned
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<PAGE> 50
(Treasury Bills are normally sold at an auction held on Monday of each week,
unless that day is a legal holiday, in which case the auction is normally held
on the following Tuesday, except that such auction may be held on the preceding
Friday); provided, however, that if an auction is held on the Friday of the week
preceding the applicable Interest Reset Date, the "Interest Determination Date"
shall be such preceding Friday. If the interest rate of this Note is a floating
interest rate determined with reference to two or more Interest Rate Bases
specified in the applicable Floating Interest Rate Notice, the "Interest
Determination Date" pertaining to this Note shall be the most recent Business
Day which is at least two Business Days prior to the applicable Interest Reset
Date on which each Interest Rate Basis is determinable. Each Interest Rate Basis
shall be determined as of such date, and the applicable interest rate shall take
effect on the related Interest Reset Date.
Either or both of the following may also apply to the floating interest
rate on this Note for an Interest Rate Period: (i) a floating rate maximum
interest rate, or ceiling, that may accrue during any Interest Reset Period (the
"Floating Rate Maximum Interest Rate") and (ii) a floating rate minimum interest
rate, or floor, that may accrue during any Interest Reset Period (the "Floating
Rate Minimum Interest Rate"). In addition to any Floating Rate Maximum Interest
Rate that may apply, the interest rate on this Note will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
United States laws of general application.
Except as provided below or in the applicable Floating Interest Rate
Notice, interest will be payable, in the case of floating interest rates which
reset: (i) daily, weekly or monthly, on the third Wednesday of each month or on
the third Wednesday of March, June, September and December of each year, as
specified in the applicable Floating Interest Rate Notice; (ii) quarterly, on
the third Wednesday of March, June, September and December of each year; (iii)
semiannually, on the third Wednesday of the two months of each year specified in
the applicable Floating Interest Rate Notice; and (iv) annually, on the third
Wednesday of the month of each year specified in the applicable Floating
Interest Rate Notice and, in each case, on the Business Day immediately
following the applicable Long Term Rate Period or MAPS Rate Period, as the case
may be. If any Interest Payment Date for the payment of interest at a floating
rate (other than following the end of the applicable Long Term Rate Period or
MAPS Rate Period, as the case may be) would otherwise be a day that is not a
Business Day, such Interest Payment Date will be postponed to the next
succeeding Business Day, except that if LIBOR is an applicable Interest Rate
Basis and such Business Day falls in the next succeeding calendar month, such
Interest Payment Date will be the immediately preceding Business Day.
All percentages resulting from any calculation of floating interest rates
will be rounded to the nearest one hundred-thousandth of a percentage point,
with five one-millionths of a percentage point rounded upwards (e.g., 9.876545%
(or .09876545) would be rounded to 9.87655% (or .0987655)), and all amounts used
in or resulting from such calculation will be rounded, in the case of United
States dollars, to the nearest cent or, in the case of a foreign currency or
composite currency, to the nearest unit (with one-half cent or unit being
rounded upwards).
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<PAGE> 51
Accrued floating rate interest will be calculated by multiplying the
principal amount of this Note by an accrued interest factor. Such accrued
interest factor will be computed by adding the interest factor calculated for
each day in the applicable Interest Reset Period. Unless otherwise specified in
the applicable Floating Interest Rate Notice, the interest factor for each such
day will be computed by dividing the interest rate applicable to such day by
360, if an applicable Interest Rate Basis is the CD Rate, the Federal Funds
Rate, LIBOR or the Prime Rate, or by the actual number of days in the year if an
applicable Interest Rate Basis is the CMT Rate or the Treasury Rate. Unless
otherwise specified in the applicable Floating Interest Rate Notice, if the
floating interest rate is calculated with reference to two or more Interest Rate
Bases, the interest factor will be calculated in each period in the same manner
as if only one of the applicable Interest Rate Bases applied as specified in the
applicable Floating Interest Rate Notice.
Unless otherwise specified in the applicable Floating Interest Rate
Notice, The Bank of New York will be the "Calculation Agent." If this Note is
bearing interest at a floating rate, the applicable Remarketing Agent will
determine the interest rate in effect from the Interest Rate Adjustment Date to
the Initial Interest Reset Date. The Calculation Agent will determine the
interest rate in effect for each Interest Reset Period thereafter. Upon request
of the beneficial owner of this Note, after any Interest Rate Adjustment Date,
the Calculation Agent or the Remarketing Agent shall disclose the interest rate
and, in the case of a floating interest rate, Interest Rate Basis or Bases,
Spread (if any) and Spread Multiplier (if any), and in each case the other terms
applicable to this Note then in effect and, if determined, the interest rate
that will become effective as a result of a determination made for the next
succeeding Interest Reset Date with respect to this Note. Except as described
herein, no notice of the applicable interest rate, Spread (if any) or Spread
Multiplier (if any) shall be sent to the beneficial owner of this Note.
Unless otherwise specified in the applicable Floating Interest Rate Notice,
the "Calculation Date", if applicable, pertaining to any Interest Determination
Date will be the earlier of (i) the tenth calendar day after such Interest
Determination Date or, if such day is not a Business Day, the next succeeding
Business Day or (ii) the Business Day immediately preceding the applicable
Interest Payment Date or Maturity, as the case may be.
CD Rate. If an Interest Rate Basis for this Note is specified in the
applicable Floating Interest Rate Notice as the "CD Rate," the CD Rate means
with respect to any Interest Determination Date relating to this Note for which
the interest rate is determined with reference to the CD Rate (a "CD Rate
Interest Determination Date"), the rate on such date for negotiable United
States dollar certificates of deposit having the Index Maturity specified in the
applicable Floating Interest Rate Notice as published in ("H.15(519)" (as
hereinafter defined)) under the heading "CDs (Secondary Market)," or, if not
published by 3:00 p.m., New York City time, on the related Calculation Date, the
rate on such CD Rate Interest Determination Date for negotiable United States
dollar certificates of deposit of the Index Maturity specified in the applicable
Floating Interest Rate Notice as published in H.15 Daily Update (as hereinafter
defined), or such other recognized electronic source used for the purpose of
displaying such rate under the caption "CDs (secondary market)". If such rate is
not yet published in H.15(519), H.15 Daily Update or
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<PAGE> 52
another recognized electronic source by 3:00 p.m., New York City time, on the
related Calculation Date, then the CD Rate on such CD Rate Interest
Determination Date will be calculated by the Calculation Agent and will be the
arithmetic mean of the secondary market offered rates as of 10:00 a.m., New York
City time, on such CD Rate Interest Determination Date, of three leading nonbank
dealers in negotiable United States dollar certificates of deposit in The City
of New York (which may include the Remarketing Agent or its affiliates) selected
by the Calculation Agent, after consultation with the Company, for negotiable
United States dollars certificates of deposit of major United States money
center banks for negotiable certificates of deposit with a remaining maturity
closest to the Index Maturity specified in the applicable Floating Interest Rate
Notice in an amount that is representative for a single transaction in that
market at that time; provided, however, that if the dealers so selected by the
Calculation Agent are not quoting as mentioned in this sentence, the CD Rate
determined as of such CD Rate Interest Determination Date will be the CD Rate in
effect on such CD Rate Interest Determination Date.
"H.15(519)" means the weekly statistical release designated as such, or
any successor publication published by the Board of Governors of the Federal
Reserve System.
"H.15 Daily Update" means the daily update of H.15(519), available
through the world-wide-web site of the Board of Governors of the Federal Reserve
System at http://www.bog.frb.fed.us/releases/h15/update, or any successor site
or publication.
CMT Rate. If an Interest Rate Basis for this Note is specified in the
applicable Floating Interest Rate Notice as the "CMT Rate," the CMT Rate means,
with respect to any Interest Determination Date relating to this Note for which
the interest is determined with reference to the CMT Rate (a "CMT Rate Interest
Determination Date"), the rate displayed on the Designated CMT Telerate Page (as
defined below) under the caption "...Treasury Constant Maturities...Federal
Reserve Board Release H.15...Mondays Approximately 3:45 P.M.," under the column
for the Designated CMT Maturity Index (as defined below) for (i) if the
Designated CMT Telerate Page is 7051, the rate on such CMT Rate Interest
Determination Date and (ii) if the Designated CMT Telerate Page is 7052, the
weekly or monthly average, as specified in the Floating Interest Rate Notice,
for the week or the month, as applicable, ended immediately preceding the week
in which the related CMT Rate Interest Determination Date occurs. If such rate
is no longer displayed on the relevant page or is not displayed by 3:00 p.m.,
New York City time, on the related Calculation Date, then the CMT Rate for such
CMT Rate Interest Determination Date will be such treasury constant maturity
rate for the Designated CMT Maturity Index as published in H.15(519). If such
rate is no longer published or is not published by 3:00 p.m., New York City
time, on the related Calculation Date, then the CMT Rate on such CMT Rate
Interest Determination Date will be such treasury constant maturity rate for the
Designated CMT Maturity Index (or other United States Treasury rate for the
Designated CMT Maturity Index) for the CMT Rate Interest Determination Date with
respect to such Interest Reset Date as may then be published by either the Board
of Governors of the Federal Reserve System or the United States Department of
the Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and
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<PAGE> 53
published in H.15(519). If such information is not provided by 3:00 p.m., New
York City time, on the related Calculation Date, then the CMT Rate on the CMT
Rate Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity, based on the arithmetic mean of the secondary
market closing offer side prices as of approximately 3:30 p.m., New York City
time, on such CMT Rate Interest Determination Date reported, according to their
written records, by three leading primary United States government securities
dealers (each, a "Reference Dealer") in The City of New York (which may include
the Remarketing Agent or its affiliates) selected by the Calculation Agent after
consultation with the Company (from five such Reference Dealers selected by the
Calculation Agent, after consultation with the Company, and eliminating the
highest quotation (or, in the event of equality, one of the highest) and the
lowest quotation (or, in the event of equality, one of the lowest)), for the
most recently issued direct noncallable fixed rate obligations of the United
States ("Treasury Notes") with an original maturity of approximately the
Designated CMT Maturity Index and a remaining term to maturity of not less than
such Designated CMT Maturity Index minus one year. If the Calculation Agent is
unable to obtain three such Treasury Note quotations, the CMT Rate on such CMT
Rate Interest Determination Date will be calculated by the Calculation Agent and
will be a yield to maturity based on the arithmetic mean of the secondary market
offer side prices as of approximately 3:30 p.m., New York City time, on such CMT
Rate Interest Determination Date of three Reference Dealers in The City of New
York (from five such Reference Dealers selected by the Calculation Agent, after
consultation with the Company, and eliminating the highest quotation (or, in the
event of equality, one of the highest) and the lowest quotation (or, in the
event of equality, one of the lowest)), for Treasury Notes with an original
maturity of the number of years that is the next highest to the Designated CMT
Maturity Index and a remaining term to maturity closest to the Designated CMT
Maturity Index and in an amount of at least U.S.$100 million. If three or four
(and not five) of such Reference Dealers are quoting as described above, then
the CMT Rate will be based on the arithmetic mean of the offer prices obtained
and neither the highest nor the lowest of such quotes will be eliminated;
provided, however, that if fewer than three Reference Dealers so selected by the
Calculation Agent, after consultation with the Company, are quoting as mentioned
herein, the CMT Rate determined as of such CMT Rate Interest Determination Date
will be the CMT Rate in effect on such CMT Rate Interest Determination Date. If
two Treasury Notes with an original maturity as described in the second
preceding sentence have remaining terms to maturity equally close to the
Designated CMT Maturity Index, the Calculation Agent, after consultation with
the Company, will obtain from five Reference Dealers quotations for the Treasury
Note with the shorter remaining term to maturity.
"Designated CMT Telerate Page" means the display on Bridge Telerate,
Inc. (or any successor service) on the page specified in the applicable Floating
Interest Rate Notice (or any other page as may replace such page on such service
for the purpose of displaying Treasury Constant Maturities as reported in
H.15(519)) for the purpose of displaying Treasury Constant Maturities as
reported in H.15(519). If no such page is specified in the applicable Floating
Interest Rate Notice, the Designated CMT Telerate Page shall be 7052 for the
most recent week.
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<PAGE> 54
"Designated CMT Maturity Index" means the original period to maturity
of the United States Treasury securities (either 1, 2, 3, 5, 7, 10, 20 or 30
years) specified in the applicable Floating Interest Rate Notice with respect to
which the CMT Rate will be calculated. If no such maturity is specified in the
applicable Floating Interest Rate Notice, the Designated CMT Maturity Index
shall be 2 years.
Federal Funds Rate. If an Interest Rate Basis for any Note is specified
in the applicable Floating Interest Rate Notice as the "Federal Funds Rate," the
Federal Funds Rate means, with respect to any Interest Determination Date
relating to a Note for which the interest rate is determined with reference to
the Federal Funds Rate (a "Federal Funds Rate Interest Determination Date"), the
rate on such date for United States dollar federal funds as published in
H.15(519) under the heading "Federal Funds (Effective)" as such rate is
displayed on Bridge Telerate, Inc. (or any successor service) on page 120
("Telerate Page 120") or, if such rate does not appear on Telerate Page 120 or
is not published by 3:00 p.m., New York City time, on the Calculation Date, the
rate on such Federal Funds Rate Interest Determination Date as published in H.15
Daily Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the heading "Federal Funds (Effective)." If such
rate is not published in H.15(519), H.15 Daily Update or another recognized
electronic source by 3:00 p.m., New York City time, on the related Calculation
Date, then the Federal Funds Rate on such Federal Funds Rate Interest
Determination Date shall be calculated by the Calculation Agent and will be the
arithmetic mean of the rates for the last transaction in overnight United States
dollar federal funds arranged by three leading brokers of United States dollar
federal funds transactions in The City of New York (which may include the
Remarketing Agent or its affiliates) selected by the Calculation Agent after
consultation with the Company, prior to 9:00 a.m., New York City time, on such
Federal Funds Rate Interest Determination Date; provided, however, that if the
brokers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Federal Funds Rate determined as of such Federal Funds Rate
Interest Determination Date will be the Federal Funds Rate in effect on such
Federal Funds Rate Interest Determination Date.
LIBOR. If an Interest Rate Basis for this Note is specified in the
applicable Floating Interest Rate Notice as "LIBOR," LIBOR means the rate
determined by the Calculation Agent as of the applicable Interest Determination
Date (a "LIBOR Interest Determination Date") in accordance with the following
provisions:
(i) if (a) "LIBOR Reuters" is specified in the applicable Floating
Interest Rate Notice, the arithmetic mean of the offered rates (unless the
Designated LIBOR Page (as defined below) by its terms provides only for a single
rate, in which case such single rate will be used) for deposits in the Index
Currency having the Index Maturity specified in the applicable Floating Interest
Rate Notice, commencing on the applicable Interest Reset Date, that appear (or,
if only a single rate is required as aforesaid, appears) on the Designated LIBOR
Page as of 11:00 a.m., London time, on such LIBOR Interest Determination Date,
or (b) "LIBOR Telerate" is specified in the applicable Floating Interest Rate
Notice, or if neither "LIBOR Reuters" nor "LIBOR Telerate" is specified in the
applicable Floating Interest Rate Notice as the method for calculating LIBOR,
the rate for deposits in the Index Currency having the Index Maturity
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<PAGE> 55
specified in the applicable Floating Interest Rate Notice, commencing on such
Interest Reset Date, that appears on the Designated LIBOR Page as of 11:00 a.m.,
London time, on such LIBOR Interest Determination Date. If fewer than two such
offered rates appear, or if no such rate appears, as applicable, LIBOR on such
LIBOR Interest Determination Date shall be determined in accordance with the
provisions described in clause (ii) below.
(ii) With respect to a LIBOR Interest Determination Date on which fewer
than two offered rates appear, or no rate appears, as the case may be, on the
Designated LIBOR Page as specified in clause (i) above, the Calculation Agent
shall request the principal London offices of each of four major reference banks
in the London interbank market, as selected by the Calculation Agent, after
consultation with the Company, to provide the Calculation Agent with its offered
quotation for deposits in the Index Currency for the period of the Index
Maturity specified in the applicable Floating Interest Rate Notice, commencing
on the applicable Interest Reset Date, to prime banks in the London interbank
market at approximately 11:00 a.m., London time, on such LIBOR Interest
Determination Date and in a principal amount that is representative for a single
transaction in such Index Currency in such market at such time. If at least two
such quotations are so provided, then LIBOR on such LIBOR Interest Determination
Date will be the arithmetic mean of such quotations. If fewer than two such
quotations are so provided, then LIBOR on such LIBOR Interest Determination Date
will be the arithmetic mean of the rates quoted at approximately 11:00 a.m., in
the applicable Principal Financial Center, on such LIBOR Interest Determination
Date by three major banks in such Principal Financial Center selected by the
Calculation Agent, after consultation with the Company, for loans in the Index
Currency to leading European banks, having the Index Maturity specified in the
applicable Floating Interest Rate Notice and in a principal amount that is
representative for a single transaction in such Index Currency in such market at
such time; provided, however, that if the banks so selected by the Calculation
Agent are not quoting as mentioned in this sentence, LIBOR determined as of such
LIBOR Interest Determination Date shall be LIBOR in effect on such LIBOR
Interest Determination Date.
"Index Currency" means the currency or composite currency specified in
the applicable Floating Interest Rate Notice as to which LIBOR shall be
calculated. If no such currency or composite currency is specified in the
applicable Floating Interest Rate Notice, the Index Currency shall be United
States dollars.
"Designated LIBOR Page" means (a) if "LIBOR Reuters" is specified in
the applicable Floating Interest Rate Notice, the display on the Reuter Monitor
Money Rates Service (or any successor service) on the page specified in such
Floating Interest Rate Notice (or on any other page as may replace such page on
such service) for the purpose of displaying the London interbank rates of major
banks for the Index Currency, or (b) if "LIBOR Telerate" is specified in the
applicable Floating Interest Rate Notice or neither "LIBOR Reuters" nor "LIBOR
Telerate" is specified in the applicable Floating Interest Rate Notice as the
method for calculating LIBOR, the display on Bridge Telerate, Inc. (or any
successor service) on the page specified in such Floating Interest Rate Notice
(or on any other page as may replace such page on such service) for the purpose
of displaying the London interbank rates of major banks for the Index Currency.
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Prime Rate. If an Interest Rate Basis for this Note is specified in the
applicable Floating Interest Rate Notice as the "Prime Rate," the Prime Rate
means, with respect to any Interest Determination Date relating to a Note for
which the interest rate is determined with reference to the Prime Rate (a "Prime
Rate Interest Determination Date"), the rate on such date as such rate is
published in H.15(519) under the heading "Bank Prime Loan," or, if not published
prior to 3:00 p.m., New York City time, on the related Calculation Date, the
rate on such Prime Rate Interest Determination Date as published in H.15 Daily
Update, or such other recognized electronic source used for the purpose of
displaying such rate, under the caption "Bank Prime Loan." If such rate is not
yet published in H.15(519), H.15 Daily Update or another recognized electronic
source by 3:00 p.m., New York City time, on the related Calculation Date, then
the Prime Rate shall be the arithmetic mean of the rates of interest publicly
announced by each bank that appears on the Reuters Screen U.S. PRIME 1 Page (as
defined below) as such bank's prime rate or base lending rate as in effect for
such Prime Rate Interest Determination Date. If fewer than four such rates so
appear on the Reuters Screen U.S. PRIME 1 Page for such Prime Rate Interest
Determination Date, the Prime Rate shall be the arithmetic mean of the prime
rates quoted on the basis of the actual number of days in the year divided by a
360-day year as of the close of business on such Prime Rate Interest
Determination Date by three major banks (which may include The Bank of New York)
in The City of New York selected by the Calculation Agent, after consultation
with the Company; provided, however, that if the banks or trust companies so
selected by the Calculation Agent are not quoting as mentioned in this sentence,
the Prime Rate determined as of such Prime Rate Interest Determination Date will
be the Prime Rate in effect on such Prime Rate Interest Determination Date.
"Reuters Screen U.S. PRIME 1 Page" means the display on the Reuter
Monitor Money Rates Service (or any successor service) on the "USPRIME1" page
(or such other page as may replace the USPRIME1 page on such service) for the
purpose of displaying prime rates or base lending rates of major United States
banks.
Treasury Rate. If an Interest Rate Basis for this Note is specified in
the applicable Floating Interest Rate Notice as the "Treasury Rate," the
Treasury Rate means, with respect to any Interest Determination Date relating to
this Note for which the interest rate is determined with reference to the
Treasury Rate (a "Treasury Rate Interest Determination Date"), as the rate from
the auction held on such Treasury Rate Interest Determination Date (the
"Auction") of direct obligations of the United States ("Treasury Bills") having
the Index Maturity specified in the applicable Floating Interest Rate Notice,
under the caption "AVGE INVEST YIELD" on the display on Bridge Telerate, Inc.
(or any successor service) on page 56 or page 57 or, if not published by 3:00
p.m., New York City time, on the related Calculation Date, the auction average
rate of such Treasury Bills (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of Treasury. In the event
that the results of the Auction of Treasury Bills having the Index Maturity
specified in the applicable Floating Interest Rate Notice are not reported as
provided above by 3:00 p.m., New York City time, on such Calculation Date, or if
no such Auction is held, then the Treasury Rate will be the rate (expressed as a
bond equivalent on the basis of a year of 365 or 366 days, as applicable, and
applied on a daily basis) on such
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Treasury Rate Interest Determination Date of Treasury Bills having the Index
Maturity specified in the applicable Floating Interest Rate Notice as published
in H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market" or, if not yet published by 3:00 p.m., New York City
time, on the related Calculation Date, the rate on such Treasury Rate Interest
Determination Date of such Treasury Bills as published in H.15 Daily Update, or
such other recognized electronic source used for the purpose of displaying such
rate, under the caption "U.S. Government Securities/Treasury Bills/Secondary
Market." If such rate is not yet published in H.15(519), H.15 Daily Update or
another recognized electronic source, then the Treasury Rate will be calculated
by the Calculation Agent and will be a yield to maturity (expressed as a bond
equivalent on the basis of a year of 365 or 366 days, as applicable, and applied
on a daily basis) of the arithmetic mean of the secondary market bid rates, as
of approximately 3:30 p.m., New York City time, on such Treasury Rate Interest
Determination Date, of three primary United States government securities dealers
(which may include the Remarketing Agent or its affiliates) selected by the
Calculation Agent, after consultation with the Company, for the issue of
Treasury Bills with a remaining maturity closest to the Index Maturity specified
in the applicable Floating Interest Rate Notice; provided, however, that if the
dealers so selected by the Calculation Agent are not quoting as mentioned in
this sentence, the Treasury Rate determined as of such Treasury Rate Interest
Determination Date will be the Treasury Rate in effect on such Treasury Rate
Interest Determination Date.
(d) Failure of Remarketing Agent or Agents to Announce Interest. In the
event that (i) the Remarketing Agent has been removed or has resigned and no
successor has been appointed, or (ii) the Remarketing Agent has failed to
announce the appropriate interest rate, Spread, if any, or Spread Multiplier, if
any, as the case may be, on an Interest Rate Adjustment Date for whatever
reason, or (iii) the appropriate interest rate, Spread, if any, or Spread
Multiplier, if any, as the case may be, or Interest Rate Period cannot be
determined for whatever reason, then this Note shall be automatically converted
to a Weekly Rate Period, and the rate of interest hereon shall be equal to the
Special Interest Rate.
(e) Notice of Interest Rate, Binding Effect. On each Interest Rate
Adjustment Date of this Note, the Remarketing Agent or the MAPS Agent, as the
case may be, will notify the Company and the Trustee of the interest rate,
Spread, if any, or Spread Multiplier, if any, as the case may be, to be borne by
this Note for the following Interest Rate Period. After such Interest Rate
Adjustment Date, any beneficial owner of this Note may contact the Trustee or
the Remarketing Agent in order to be advised of the applicable interest rate
and, in the case of a floating interest rate, the Spread (if any) and the Spread
Multiplier (if any). Immediately upon receipt of such notice, the Trustee will
transmit such information to DTC in accordance with DTC's procedures as in
effect from time to time and note such rate in Annex A. The Trustee shall
confirm to DTC the interest rate for the following Interest Rate Period in
accordance with DTC's procedures as in effect from time to time. No notice of
the applicable interest rate will be sent to the beneficial owner of this Note.
The interest rate announced by the Remarketing Agent, absent manifest
error, is binding and conclusive upon the beneficial owner of this Note, the
Company and the Trustee.
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(f) Conversion. This Note may be converted at the option of the Company
to the Commercial Paper Term Mode, Long Term Rate Mode or MAPS Mode on any
Interest Rate Adjustment Date for this Note in accordance with the procedures
set forth in the Indenture, and will be subject to mandatory tender by the
beneficial owner hereof as described herein on such Interest Rate Adjustment
Date. The Company may also change the Interest Rate Period at its option in
accordance with the procedures set forth in the Indenture. The beneficial owner
of this Note will be deemed to have tendered such Note as of the Interest Rate
Adjustment Date upon which such conversion occurs and will not be entitled to
further accrual of interest on this Note after such date.
TENDER
This Note will be automatically tendered for purchase, or deemed
tendered for purchase by the beneficial owner hereof, on each Interest Rate
Adjustment Date relating hereto. Notes will be purchased on such Interest Rate
Adjustment Date in accordance with the procedures set forth in "Remarketing and
Settlement" or, as the case may be, "MAPS Mode" below.
REMARKETING AND SETTLEMENT
Interest Rate Adjustment Date; Determination of Interest Rate. By 11:00
a.m., New York City time on each Interest Rate Adjustment Date for this Note,
the applicable Remarketing Agent will determine the interest rate hereon to the
nearest one hundred-thousandth (0.00001) of one percent per annum for the next
Interest Rate Period in the case of a fixed interest rate, and the Spread (if
any) and Spread Multiplier (if any) in the case of a floating interest rate;
provided, that between 11:00 a.m., New York City time and 11:50 a.m., New York
City time, the Remarketing Agent and the Standby Remarketing Agent(s), if any,
shall use their reasonable efforts to determine the interest rate for this Note
if it is not successfully remarketed as of the applicable deadline specified in
this paragraph. In determining the applicable interest rate for this Note and
other terms, the Remarketing Agent will, after taking into account market
conditions as reflected in the prevailing yields on fixed and variable rate
taxable debt securities, (i) consider the principal amount of all Notes tendered
or to be tendered on such date and the principal amount of such Notes
prospective purchasers are or may be willing to purchase and (ii) contact, by
telephone or otherwise, prospective purchasers and ascertain the interest rates
or the Spread or Spread Multiplier therefor at which they would be willing to
hold or purchase this Note.
Notification of Results; Settlement. By 12:30 p.m., New York City time,
on each Interest Rate Adjustment Date for this Note, the applicable Remarketing
Agent will notify the Company and the Trustee in writing (which may include
facsimile or other electronic transmission), of (i) the interest rate or, in the
case of a floating interest rate, the initial interest rate, the Spread and
Spread Multiplier and the Initial Interest Reset Date, applicable to this Note
for the next Interest Rate Period, (ii) the Interest Rate Adjustment Date, (iii)
the Interest Payment Dates, if this Note will then be in the Commercial Paper
Term Mode (if other than the Interest Rate Adjustment Date), the Long Term Rate
Mode or the MAPS Mode, (iv) the optional redemption terms, if any,
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and early remarketing terms, if any, in the case of remarketing into a Long Term
Rate Period, (v) the aggregate principal amount of all Notes tendered for
remarketing on such date, and (vi) the aggregate principal amount of such
tendered Notes which such Remarketing Agent was able to remarket, at a price
equal to 100% of the principal amount thereof plus accrued interest, if any.
Immediately after receiving such notice and, in any case, not later than 1:30
p.m., New York City time, the Trustee will transmit such information and any
other settlement information required by DTC to DTC in accordance with DTC's
procedures as in effect from time to time.
By telephone at approximately 1:00 p.m., New York City time, on such
Interest Rate Adjustment Date, the applicable Remarketing Agent will advise the
purchaser of this Note (or the DTC participant of each such purchaser who it is
expected in turn will advise such purchaser) of the principal amount of such
Notes that such purchaser is to purchase.
The purchaser of this Note in a remarketing will be required to give
instructions to its DTC participant to pay the purchase price therefor in same
day funds to the applicable Remarketing Agent against delivery of the principal
amount of this Note by book-entry through DTC by 3:00 p.m., New York City time,
on the Interest Rate Adjustment Date.
When tendered, or deemed tendered, this Note will be automatically
delivered to the account of the Trustee (or such other account meeting the
requirements of DTC's procedures as in effect from time to time), by book-entry
through DTC against payment of the purchase price or redemption price herefor,
on the Interest Rate Adjustment Date relating hereto.
The applicable Remarketing Agent will make, or cause the Trustee to
make, payment to the DTC participant of the tendering beneficial owner hereof
subject to a remarketing, by book-entry through DTC by the close of business on
the related Interest Rate Adjustment Date against delivery through DTC of the
beneficial owner's tendered Note, of the purchase price for this Note. If this
Note was purchased pursuant to a Special Mandatory Purchase, subject to receipt
of funds from the Company or the Liquidity Provider (if any), as the case may
be, the Trustee will make such payment of the purchase price for this Note plus
accrued interest, if any, to such date.
The transactions described above for a remarketing of this Note will be
executed on each Interest Rate Adjustment Date for this Note through DTC in
accordance with the procedures of DTC, and the accounts of the respective DTC
participants will be debited and credited and this Note will be delivered by
book-entry as necessary to effect the purchases and sales hereof, in each case
as determined in the related remarketing.
Except as otherwise set forth below, the purchase price for this Note
to the tendering beneficial owner shall be paid solely out of the proceeds
received from a purchaser of this Note in such remarketing, and neither the
Trustee, the applicable Remarketing Agent, any Standby Remarketing Agent(s) nor
the Company (except as set forth below) will be obligated to provide funds to
make payment upon any beneficial owner's tender of this Note in a remarketing.
The tender and settlement procedures described above, including
provisions for payment by purchasers of this Note or for payment to the selling
beneficial owners of this Note, may be
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modified to the extent required by DTC. In addition, each Remarketing Agent may,
without the consent of the Holders of the Notes, modify the tender and
settlement procedures set forth above in order to facilitate the settlement and
remarketing process.
As long as DTC's nominee holds the certificates representing this Note
in the book-entry system of DTC, no certificates for this Note will be delivered
by any selling beneficial owner to reflect any transfer of this Note effected in
any remarketing.
Failed Remarketing. If this Note is not successfully remarketed, this
Note shall be subject to Special Mandatory Purchase by the Company (a "Special
Mandatory Purchase"). The obligation of the Company to effect a Special
Mandatory Purchase can be satisfied either directly by the Company or through a
Liquidity Provider. By 12:00 o'clock noon, New York City time, on any Interest
Rate Adjustment Date for this Note, the applicable Remarketing Agent will notify
the Liquidity Provider, if any, the Trustee and the Company by telephone or
facsimile, confirmed in writing, if it, or the Standby Remarketing Agent or
Agents were unable to remarket all or a portion of the principal amount of this
Note on such date. In the event that the Company has entered into a Standby Note
Purchase Agreement which is in effect on such date, such notice will constitute
a demand for the benefit of the Company to the Liquidity Provider, if any, to
purchase this Note at a price equal to the outstanding principal amount hereof
pursuant to the terms of such Standby Note Purchase Agreement. If a Standby Note
Purchase Agreement is not in effect on such date, or if the Liquidity Provider
fails to advance funds under the Standby Note Purchase Agreement, the Company
hereby agrees to purchase this Note. In each case, the Company will pay all
accrued and unpaid interest, if any, on this Note to such Interest Rate
Adjustment Date. Payment of the principal amount of this Note by the Company or
the Liquidity Provider, as the case may be, and payment of accrued and unpaid
interest, if any, by the Company, shall be made by deposit of same-day funds in
the account of the Trustee (or such other account meeting the requirements of
DTC's procedures as in effect from time to time) irrevocably in trust for the
benefit of the beneficial owners of this Note subject to Special Mandatory
Purchase by 3:00 p.m., New York City time, on the related Interest Rate
Adjustment Date.
TRANSFER OR EXCHANGE
As provided in the Indenture and subject to certain limitations set
forth therein and herein, the transfer of this Note is registrable in the
Security Register, upon surrender of this Note for registration of transfer at
the office or agency of the Company in any place where the principal of and
premium, if any, and any interest on this Note are payable or at such other
offices or agencies as the Company may designate, duly endorsed by, or
accompanied by a written instrument of transfer in the form attached hereto, the
Company and the Security Registrar or any transfer agent duly executed, by the
registered owner hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.
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The Notes are issuable only in fully registered form in denominations
of $100,000 and integral multiples of $1,000 in excess thereof. As provided in
the Indenture and subject to certain limitations set forth therein and herein,
this Note is exchangeable for a like aggregate principal amount of Notes of this
series and of like tenor of any authorized denomination, as requested by the
registered owner surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of this Note, but, subject to certain limitations set forth in the
Indenture, the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
Subject to the terms of the Indenture, prior to due presentment of this
Note for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note is
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
REDEMPTION AND ACCELERATION
Special Mandatory Purchase. If by 12:00 o'clock noon, New York City
time, on any Interest Rate Adjustment Date for this Note, the applicable
Remarketing Agent and the applicable Standby Remarketing Agent(s) have not
remarketed this Note, this Note shall be subject to Special Mandatory Purchase.
Either the Company or, subject to the terms and conditions of a Standby Note
Purchase Agreement, if any, which may be in effect on such date, the Liquidity
Provider (if any), will deposit same-day funds in the account of the Trustee (or
such other account meeting the requirements of DTC's procedures as in effect
from time to time) irrevocably in trust for the benefit of the beneficial owners
of this Note subject to Special Mandatory Purchase by 3:00 p.m., New York City
time, on such Interest Rate Adjustment Date. Such funds shall be in an amount
sufficient to pay the aggregate purchase price of this Note, equal to 100% of
the principal amount thereof. In the event a Standby Note Purchase Agreement is
in effect but the Liquidity Provider shall fail to advance funds for whatever
reason thereunder, the Company hereby agrees to purchase this Note on such
Interest Rate Adjustment Date. The Company has agreed in the Indenture to pay
the accrued interest, if any, on this Note by depositing sufficient same-day
funds therefor with the Trustee (or such other account meeting the requirements
of DTC's procedures as in effect from time to time) by 3:00 p.m., New York City
time, on such Interest Rate Adjustment Date.
Failure by the Company to purchase this Note pursuant to a Special
Mandatory Purchase in the manner provided in this Note will constitute an Event
of Default under the Indenture in which event the date of such failure shall
constitute a date of Maturity for this Note and the principal hereof may be
declared due and payable in the manner and with the effect provided in the
Indenture. Following such failure to pay pursuant to a Special Mandatory
Purchase, this Note will bear interest at the Special Interest Rate as provided
above under "Interest."
Optional Redemption on any Interest Rate Adjustment Date. This Note is
subject to Optional Redemption, at the direction of the Company and without
notice to the Holders, on any
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Interest Rate Adjustment Date relating hereto, in whole or in part, at a
redemption price equal to 100% of the principal amount to be redeemed plus
accrued and unpaid interest to the date set for redemption (the "Redemption
Date").
Optional Redemption While This Note is in the Long Term Rate Mode. So
long as this Note bears interest in the Long Term Rate Mode, this Note is
subject to Optional Redemption at the written direction of the Company if so
specified at the time of conversion to or within such Long Term Rate Mode (a)
commencing on the Commencement Date, if any, specified in Annex A, in whole or
in part at any time, at the applicable redemption prices for any Redemption Date
(dates inclusive) (i) from the Commencement Date to but not including the first
anniversary of the Commencement Date, (ii) from the first anniversary of the
Commencement Date to but not including the second anniversary of the
Commencement Date, and (iii) from the second anniversary of the Commencement
Date and thereafter (expressed as percentage of the principal amount so
redeemed) set forth in Annex A, plus accrued interest to the Redemption Date or
(b) otherwise as set forth in Annex A.
Notice of redemption shall be given by mail to the registered owner of
this Note, 30 days prior to the Redemption Date, all as provided in the
Indenture. As provided in the Indenture, notice of redemption as aforesaid may
state that such redemption shall be conditioned upon the receipt by the Trustee
of the redemption monies on or before the date fixed for such redemption; a
notice of redemption so conditioned shall be of no force or effect if such money
is not so received.
The Company shall not be required to (a) issue, register the transfer
of or exchange Notes of this series during a period beginning at the opening of
business 15 days before any selection of Notes of this series to be redeemed and
ending at the close of business on the day of the mailing of the relevant notice
of redemption or (b) register the transfer of or exchange any Notes selected for
redemption, in whole or in part, except the unredeemed portion of any Note being
redeemed in part.
In the event of redemption of this Note in part only, a new Note or
Notes of this series, of like tenor, for the unredeemed portion hereof will be
issued in the name of the registered owner hereof upon the cancellation hereof.
Allocation. Except in the case of a Special Mandatory Purchase, if this
Note is to be redeemed in part, DTC, after receiving notice of redemption
specifying the aggregate principal amount of this Note to be so redeemed, will
determine by lot (or otherwise in accordance with the procedures of DTC) the
principal amount of this Note to be redeemed from the account of each DTC
participant. After making its determination as described above, DTC will give
notice of such determination to each DTC participant from whose account this
Note is to be redeemed. Each such DTC participant, upon receipt of such notice,
will in turn determine the principal amount of this Note to be redeemed from the
accounts of the beneficial owners of this Note for which it serves as DTC
participant, and give notice of such determination to the Remarketing Agent.
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Acceleration. If any Event of Default with respect to the Notes shall
occur and be continuing, the principal of the Notes may be declared due and
payable in the manner and with the effect provided in the Indenture.
MAPS MODE
Notwithstanding anything herein to the contrary, the provisions of this
section shall apply to this Note upon conversion to the MAPS Mode, and shall
supersede any conflicting provisions of general applicability contained
elsewhere herein, during the period from, and including, the Interest Rate
Adjustment Date beginning a MAPS Rate Period to, but excluding, the next
succeeding Interest Rate Adjustment Date (or if the MAPS Agent does not elect to
purchase this Note on the MAPS Remarketing Date designated for such MAPS Mode or
if after electing to so purchase this Note the MAPS Agent fails for any reason
to so purchase this Note, to the MAPS Remarketing Date).
(a) Interest To MAPS Remarketing Date. The Interest Rate Period for
this Note in the MAPS Mode will be established by the Company (as described in
"Interest Rate" above) as a period of more than 364 days and not exceeding the
remaining term to the Stated Maturity of this Note; provided, however, that such
Interest Rate Period must end on the day prior to an Interest Payment Date for
this Note. The MAPS Rate Period shall consist of the period from, and including,
the Interest Rate Adjustment Date commencing such Interest Rate Period to, but
excluding, the date (the "MAPS Remarketing Date") designated at such time by the
MAPS Agent after consultation with the Company and set forth in Annex A hereto.
The interest rate and, in the case of a floating interest rate, the Spread, if
any, and the Spread Multiplier, if any, to the MAPS Remarketing Date for this
Note in the MAPS Mode will be determined not later than 11:50 a.m., New York
City time, on the Interest Rate Adjustment Date for this Note, which for the
MAPS Mode is the first day of the MAPS Rate Period for this Note. Such interest
rate will be the minimum rate of interest and, in the case of a floating
interest rate, Spread (if any) and Spread Multiplier (if any) necessary in the
judgment of such MAPS Agent to produce a par bid in the secondary market for
this Note on the date the interest is established. The designated MAPS
Remarketing Date shall be an Interest Payment Date within such Interest Rate
Period.
(b) Mandatory Tender. Provided that the MAPS Agent gives notice to the
Company and the Trustee on a Business Day not later than ten (10) days prior to
the MAPS Remarketing Date of its intention to purchase this Note for remarketing
(the "Notification Date"), this Note shall be automatically tendered, or deemed
tendered, to the MAPS Agent for purchase on the MAPS Remarketing Date, except in
the circumstances described in "Redemption" below, for 100% of the principal
amount hereof. Upon tender, the MAPS Agent may remarket this Note for its own
account at varying prices to be determined by the MAPS Agent at the time of such
sale. From, and including, the MAPS Remarketing Date to, but excluding, the next
succeeding Interest Rate Adjustment Date, this Note shall bear interest at the
MAPS Interest Rate. If the MAPS Agent elects to remarket this Note, the
obligation of the MAPS Agent to purchase this Note on the MAPS Remarketing Date
is subject to, among other things, the conditions that, since the Notification
Date, no material adverse change in the condition of the Company and its
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subsidiaries, considered as one enterprise, shall have occurred and that no
Event of Default (as defined in the Indenture), or any event which, with the
giving of notice or passage of time, or both, would constitute an Event of
Default, with respect to this Note shall have occurred and be continuing.
(c) Remarketing; Establishing the MAPS Interest Rate. Subject to the
MAPS Agent's election to remarket this Note, the MAPS Interest Rate shall be
determined by the MAPS Agent by 3:30 p.m., New York City time, on the third
Business Day immediately preceding the MAPS Remarketing Date (the "Determination
Date") to the nearest one hundred-thousandth (0.00001) of one percent per annum,
and shall be equal to the Base Rate established by the MAPS Agent, after
consultation with the Company, at or prior to the commencement of the MAPS Mode
(the "Base Rate") plus the Applicable Spread, which shall be based on the Dollar
Price of this Note as of the MAPS Remarketing Date.
(d) Notification of Results; Settlement. Provided the MAPS Agent has
previously notified the Company and the Trustee on the Notification Date of its
intention to purchase this Note on the MAPS Remarketing Date, the MAPS Agent
shall notify the Company, the Trustee and DTC by telephone, confirmed in
writing, by 4:00 p.m., New York City time, on the Determination Date, of the
MAPS Interest Rate, and this Note shall be automatically delivered to the
account of the Trustee, by book-entry through DTC pending payment of the
purchase price therefor, on the MAPS Remarketing Date.
In the event that the MAPS Agent purchases this Note on the MAPS
Remarketing Date, the MAPS Agent shall make or cause the Trustee to make payment
to the DTC participant of each tendering beneficial owner hereof, by book-entry
through DTC by the close of business on the MAPS Remarketing Date against
delivery through DTC of such beneficial owner's interest herein, of 100% of the
principal amount for this Note. If the MAPS Agent does not purchase this Note on
the MAPS Remarketing Date, the Company may attempt to convert this Note to a new
Interest Rate Mode; the interest rate will be determined as provided above in
"Interest Rate" and settlement will be effected as described under "Remarketing
and Settlement" above. In any case, the Company shall make or cause the Trustee
to make payment of interest to each beneficial owner of this Note due on the
MAPS Remarketing Date by book-entry through DTC by the close of business on the
MAPS Remarketing Date.
The transactions set forth above shall be executed on the MAPS
Remarketing Date through DTC in accordance with the procedures of DTC, and the
accounts of the respective DTC participants shall be debited and credited and
this Note shall be delivered by book-entry as necessary to effect the purchases
and sales thereof.
Transactions involving the sale and purchase of Notes remarketed by the
MAPS Agent on and after the MAPS Remarketing Date will settle in immediately
available funds through DTC's Same-Day Funds Settlement System.
The tender and settlement procedures set forth above, including
provisions for payment by purchasers of this Note in the remarketing or for
payment to selling beneficial owners of this
A-28
<PAGE> 65
Note, may be modified to the extent required by DTC or to the extent required to
facilitate the tender and remarketing of this Note in certificated form, if the
book-entry system is no longer available for this Note at the time of the
remarketing. In addition, the MAPS Agent may, without the consent of the Holders
of the Notes, modify the settlement procedures set forth above in order to
facilitate the tender and settlement process.
As long as DTC's nominee holds the certificates representing this Note
in the book-entry system of DTC, no certificates for this Note shall be
delivered by any selling beneficial owner to reflect any transfer of such Notes
effected in the remarketing.
(e) Conversion or Redemption Following Election by the MAPS Agent to
Remarket. If the MAPS Agent elects to remarket this Note on the MAPS Remarketing
Date, this Note will be subject to a mandatory tender to the MAPS Agent for
remarketing on such date, in each case subject to the conditions set forth above
and to the Company's right to either convert this Note to a new Interest Rate
Mode on the MAPS Remarketing Date or to redeem this Note from the MAPS Agent, in
each case as described in the next sentence. The Company will notify the MAPS
Agent and the Trustee, not later than the Business Day immediately preceding the
Determination Date, if the Company irrevocably elects to exercise its right to
either convert the Notes to a new Interest Rate Mode, or to redeem the Notes, in
whole but not in part, from the MAPS Agent at the Optional Redemption Price, in
each case on the MAPS Remarketing Date.
In the event that the Company irrevocably elects to convert this Note
to a new Interest Rate Mode, then as of the MAPS Remarketing Date the Notes will
cease to be in the MAPS Mode, the MAPS Remarketing Date will constitute an
Interest Rate Adjustment Date, and this Note will be subject to remarketing on
such date by a Remarketing Agent appointed by the Company in the Commercial
Paper Term Mode or the Long Term Rate Mode or a new MAPS Mode established by the
Company in accordance with the procedures set forth herein; provided that in
such case, the notice period required for conversion shall be the period
commencing the Business Day immediately preceding the Determination Date. In
such case, the Company shall pay to the MAPS Agent the excess of the Dollar
Price of this Note over 100% of the principal amount of this Note in same-day
funds by wire transfer to an account designated by the MAPS Agent on the MAPS
Remarketing Date.
In the event that the Company irrevocably elects to redeem this Note,
the "Optional Redemption Price" shall be the greater of (i) 100% of the
principal amount of this Note and (ii) the Dollar Price, plus in either case
accrued and unpaid interest from the MAPS Remarketing Date on the principal
amount being redeemed to the date of redemption. If the Company elects to redeem
this Note, it shall pay the redemption price therefor in same-day funds by wire
transfer to an account designated by the MAPS Agent on the MAPS Remarketing
Date.
If notice has been given as provided in the Indenture and funds for the
redemption of any Notes called for redemption shall have been made available on
the redemption date referred to in such notice, this Note shall cease to bear
interest on the date fixed for such redemption specified in such notice and the
only right of the MAPS Agent from and after the redemption date shall be
A-29
<PAGE> 66
to receive payment of the Optional Redemption Price upon surrender of this Note
in accordance with such notice.
OTHER PROVISIONS
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the registered owners of the securities of each series
thereunder to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the registered owners of not less than a majority in
principal amount of such securities then Outstanding of each series to be
affected. The Indenture also contains provisions permitting the registered
owners of specified percentages in principal amount of the securities of each
series thereunder at the time Outstanding, on behalf of the registered owners of
all securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the registered owner of this
Note shall be conclusive and binding upon such registered owner and upon all
future registered owners of this Note issued upon the registration of transfer
hereof or in exchange for or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
As set forth in, and subject to the provisions of, the Indenture, no
registered owner of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless (i) such
registered owner shall have previously given to the Trustee written notice of a
continuing Event of Default with respect to the Notes of this series, (ii) the
registered owners of not less than 25% in principal amount of the Outstanding
Notes of this series shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, (iii) the
Trustee shall have failed to institute such proceeding within 60 days and (iv)
the Trustee shall not have received from the registered owners of a majority in
principal amount of the Outstanding Notes of this series a direction
inconsistent with such request within such 60 day period; provided, however,
that such limitations do not apply to a suit instituted by the registered owner
hereof for the enforcement of payment of the principal of and premium, if any,
or any interest on this Note on or after the respective due dates expressed
herein.
Notwithstanding anything to the contrary contained herein, if a Policy
is in effect with respect to this Note and the Insurer is not in default of its
obligations to make payments thereunder, the Insurer shall be deemed to be the
Holder of this Note for all purposes under the Indenture and shall have the
exclusive right to exercise or direct the exercise of remedies on behalf of the
Holders of this Note in accordance with the terms of the Indenture following an
Event of Default, and the principal of this Note may not be declared due and
payable immediately without the prior written consent of the Insurer.
No reference to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the
A-30
<PAGE> 67
principal of and premium, if any, and any interest including additional
amounts, on this Note at the times, places and rate, and in the coin or
currency, herein prescribed.
The Indenture and this Note shall be governed by and construed in
accordance with the laws of the State of New York.
All terms used in this Note which are not defined herein and which are
defined in the Indenture shall have the meanings assigned to them in the
Indenture.
This Note shall not be valid or become obligatory for any purpose until
the Trustee's Certificate of Authentication hereon shall have been executed by
the Trustee.
A-31
<PAGE> 68
IN WITNESS WHEREOF, DTE CAPITAL CORPORATION has caused this instrument
to be duly executed.
DTE CAPITAL CORPORATION
--------------------------------------
Name:
Title:
Attest:
By
-------------------------------
Name:
Title:
This is one of the Notes of the series designated herein, referred to
in the within-mentioned Indenture.
THE BANK OF NEW YORK,
as Trustee
By
---------------------------------------
Authorized Signatory
Date:
A-32
<PAGE> 69
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Note fill in the form below:
(I) or (we) assign and transfer this Note to
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
Your signature:
--------------------------------------------------------
(Sign exactly as your name appears on the other side of
this Note)
Date:
-----------------------------------------
Signature Guarantee:*
--------------------------
In connection with any transfer of any of the Notes evidenced by this
certificate occurring prior to the date that is two years (or such shorter
period as may then be applicable under Rule 144(k) of the United States
Securities Act or 1933, as amended (the "Securities Act") (or any successor
provision)) after the later of the date of original issuance of such Notes and
the last date, if any, on which this Note is owned by the Company or any
Affiliate (as defined in the Indenture) of the Company, the undersigned confirms
that this Note is being transferred:
CHECK ONE BOX BELOW
(1) : to the Company or a Subsidiary thereof; or
(2) : pursuant to and in compliance with Rule 144A under the
Securities Act; or
(3) : pursuant to Rule 144 under the Securities Act; or
(4) : pursuant to an effective registration statement under the
Securities Act; or
(5) : pursuant to another available exemption from
the registration requirements of the Securities Act.
- --------
* Signature must be guaranteed by a commercial bank, trust company or member
firm or a major stock exchange.
A-33
<PAGE> 70
Unless one of the boxes is checked, the Trustee will refuse to register
this Note in the name of any person other than the registered Holder thereof;
provided, however, that if box (5) is checked, the Trustee (as instructed by the
Company) and the Company may require, prior to registering any transfer of this
Note, such certifications, legal opinions or other information as the Company
has reasonably requested to confirm that such transfer is being made pursuant to
an exemption from, or in a transaction not subject to, the registration
requirements of the Securities Act.
A-34
<PAGE> 71
ANNEX A(1)
DTE CAPITAL CORPORATION
Remarketed Notes, 1998 Series B
Initial Interest Rate Period
CUSIP Number: 23333MAB7
Principal Amount: $
Original Issue Date: November 23 , 1998
Issue Price: 100%
Stated Maturity: November 15, 2038
Initial Interest Rate: 7.11% per annum
Interest Payment Dates: May 15 and November 15, commencing May 15, 1999
Record Dates: 15 days prior to the related Interest Payment Date
Initial Interest Rate
Adjustment Date: November 15, 2003
Subsequent Interest Rate Period(s):
CUSIP Number:
Principal Amount:
Interest Rate Adjustment Date:
Record Date(s):
Interest Payment Date(s):
- ----------
(1) Trustee may complete this Annex A or attach a copy of the applicable
Conversion Notice or Floating Interest Rate Notice from the Company, or
notice from the applicable Remarketing Agent containing all of
the applicable terms set forth herein, as Annex A.
A-35
<PAGE> 72
Interest Rate Mode:
[ ] Commercial Paper Term Mode
[ ] Long Term Rate Mode
[ ] MAPS Mode
[ ] MAPS Agent: _____________
[ ] Base Rate: _________________
[ ] MAPS Remarketing Date: ________________
[ ] Reference Corporate Dealers:
[ ] Reference Treasury Dealer: ________________
[ ] MAPS Interest Rate: ___________
Interest Rate:
[ ] Fixed Rate:
[ ] Floating Rate:
Calculation Agent (if other than The Bank of New York):
Initial Interest Rate to Initial Interest Reset Date:
Interest Rate Basis(es):
[ ] CD Rate
Index Maturity:
[ ] CMT Rate
Index Maturity:
Designated CMT Telerate Page:
[ ] Commercial Paper Rate
Index Maturity:
[ ] Federal Funds Rate
A-36
<PAGE> 73
[ ] LIBOR
[ ] LIBOR Reuters
Index Currency:
Index Maturity:
[ ] LIBOR Telerate
Index Currency:
Index Maturity:
[ ] Prime Rate
[ ] Treasury Rate
Index Maturity:
Spread (+/-):
Spread Multiplier:
Floating Rate Maximum Interest Rate:
Floating Rate Minimum Interest Rate:
Initial Interest Reset Date:
Interest Reset Date:
Interest Reset Period(s):
Day Count Convention:
[ ] Actual/360
[ ] Actual/Actual
[ ] 30/360
Applicable Interest Rate Basis:
Optional Redemption Provisions (Long Term Rate Mode):
Commencement Dates:
Redemption Price: (i) __________________%
(ii) __________________%
(iii) __________________%
Other or Alternative Terms of Optional Repayment:
A-37
<PAGE> 74
Early Remarketing Provisions (Long Term Rate Mode):
Initial Early Remarketing Date: _________________
Initial Early Remarketing Premium: ______________
Annual Early Remarketing Premium Percentage Reduction: _____________
Other or Alternative Terms of Early Remarketing:
Other Provisions:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
A-38
<PAGE> 75
[FORM OF STATEMENT OF INSURANCE]
(the "Insurer") has issued a policy containing the following
provisions, such policy being on file at the office of The Bank of New York, New
York, New York.
[ ] (the "Insurer"), in consideration of the payment of the
premium and subject to the terms of this policy, hereby unconditionally and
irrevocably guarantees to any owner, as hereinafter defined, of the following
described obligations, the full and complete payment required to be made by or
on behalf of the Issuer to The Bank of New York or its successor (the "Paying
Agent") of an amount equal to (i) the principal of the Obligations (as that term
is defined below) on the mandatory tender date of [ ] and interest on the
Obligations as such payments become due on and prior to such mandatory tender
date but shall not be so paid (except that in the event of any acceleration of
the due date of such principal by reason of mandatory or optional redemption, or
acceleration resulting from default or otherwise, the payments guaranteed hereby
shall be made in such amounts and at such times as such payments of principal
would have been due had there not been any such acceleration); and (ii) the
reimbursement of any such payment which is subsequently recovered from any owner
pursuant to a final judgment by a court of competent jurisdiction that such
payment constitutes an avoidable preference to such owner within the meaning of
any applicable bankruptcy law. The amounts referred to in clauses (i) and (ii)
of the preceding sentence shall be referred to herein collectively as the
"Insured Amounts." "Obligations" shall mean:
[$
]
Upon receipt of telephonic or telegraphic notice, such notice subsequently
confirmed in writing by registered or certified mail, or upon receipt of written
notice by registered or certified mail, by the Insurer from the Paying Agent or
any owner of an Obligation the payment of an Insured Amount for which is then
due, that such required payment has not been made, the Insurer on the due date
of such payment or within one business day after receipt of notice of such
nonpayment, whichever is later, will make a deposit of funds, in an account with
[ ], in New York, New York, or its successor, sufficient for the
payment of any such Insured Amounts which are then due. Upon presentment and
surrender of such Obligations or presentment of such other proof of ownership of
the Obligations, together with any appropriate instruments of assignment to
evidence the assignment of the Insured Amounts due on the Obligations as are
paid by the Insurer, and appropriate instruments to effect the appointment of
the Insurer as agent for such owners of the Obligations in any legal proceeding
related to payment of Insured Amounts on the Obligations, such instruments being
in a form satisfactory to [ ] shall disburse to such owners,
or the Payment Agent payment of the Insured Amounts due on such Obligations,
less any amount held by the Paying Agent for the payment of such Insured
A-39
<PAGE> 76
Amounts and legally available therefor. This policy does not insure against loss
of any prepayment premium which may at any time be payable with respect to any
Obligation.
As used herein, the term "owner" shall mean the registered owner of any
Obligation as indicated in the books maintained by the Paying Agent, the Issuer,
or any designee of the Issuer for such purpose. The term owner shall not include
the Issuer or any party whose agreement with the Issuer constitutes the
underlying security for the Obligations.
Any service of process on the Insurer may be made to the Insurer at its offices
located at [ ] and such service of process shall be valid and
binding.
This policy is non-cancelable for any reason. The premium on this policy is not
refundable for any reason including the payment prior to maturity of the
Obligations.
This policy is not covered by the Property/Casualty Insurance Security Fund
specified in Article 76 of the New York Insurance Law.
A-40
<PAGE> 77
EXHIBIT B
FORM OF LIQUIDITY PROVIDER NOTE
(Attached)
B-1
<PAGE> 78
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TRUST
COMPANY (THE "DEPOSITARY") TO A NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY
OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY . UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITARY, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, REGISTRATION.
LIQUIDITY PROVIDER NOTE
No. $____________
DTE CAPITAL CORPORATION
REMARKETED NOTES,
1998 SERIES B
Facility
Expiration Date of Original
Date Maturity Issue Date CUSIP
November 15, 2038
DTE CAPITAL CORPORATION, a corporation duly organized and existing
under the laws of the State of Michigan (the "Company"), for value received
hereby promises to pay to
B-2
<PAGE> 79
_______________________ or registered assigns, the principal sum of
$________________ on November 15, 2038, upon the presentation and surrender
hereof at the principal office of The Bank of New York, or its successor in
trust (the "Trustee"), and to pay interest on the unpaid principal balance
hereof from the Original Issue Date specified above or such date to which
interest has been paid or duly provided for, until such principal balance has
been paid in full, at such interest rates, and payable at such times, as are
specified in the applicable Standby Note Purchase Agreement and are notified to
the Trustee by the Administrative Agent under such Standby Note Purchase
Agreement. Payment of the principal of and interest on this Note will be made at
the office or agency maintained for that purpose in the Borough of Manhattan,
The City of New York, in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts; provided, however, that payment of interest may be made at the option of
the Company by check mailed to the person in whose name this Note is registered
at the close of business on the Record Date.
This Note is one of a duly authorized series of Securities of the
Company (the "Notes"), issued and to be issued under an Indenture, dated as of
June 15, 1998, as amended and supplemented by the First Supplemental Indenture
dated as of June 15, 1998 and the Second Supplemental Indenture, dated as of
November 1, 1998 (together, the "Indenture"), between the Company and the
Trustee, to which Indenture and all indentures supplemental thereto reference is
hereby made for a statement of the respective rights, limitations of rights,
duties and immunities thereunder of the Company, the Trustee and the registered
owners of the Notes and of the terms upon which the Notes are, and are to be
authenticated and delivered.
This Note is entitled to the benefit of that certain support agreement
(the "Support Agreement"), dated as of November 18, 1998, by and between the
Company and DTE Energy Company, the owner, directly or indirectly, of 100% of
the outstanding common stock of the Company and that certain assignment and
pledge of the Company's rights under the Support Agreement to the Lenders (as
defined in the Support Agreement), pursuant to the terms and conditions of the
collateral assignment agreement (the "Collateral Assignment Agreement"), dated
as of November 18, 1998, by and between the Company and the Lenders, subject in
each case to amendment or termination of the Support Agreement or, as the case
may be, the Collateral Assignment Agreement, in accordance with their respective
terms.
REMARKETING, TENDER AND SETTLEMENT
In the event of a successful remarketing, this Note will automatically
be tendered for purchase, or deemed tendered for purchase, by the beneficial
owner hereof on the day set forth in a notice by the applicable Remarketing
Agent to the Company, the Liquidity Provider and the Trustee (the "Tender
Date"). The applicable Remarketing Agent will make payment to the DTC
participant of the tendering beneficial owner hereof subject to a remarketing,
by book-entry through DTC by the close of business on such Tender Date against
delivery through DTC of the beneficial owner's tendered Note, of the purchase
price for this Note, plus accrued interest, if any, to such date.
B-3
<PAGE> 80
The transactions described above for a remarketing of this Note will be
executed through DTC in accordance with the procedures of DTC, and the accounts
of the respective DTC participants will be debited and credited and this Note
will be delivered by book-entry as necessary to effect the purchases and sales
hereof, in each case as determined in the related remarketing.
The purchase price for this Note to the beneficial owner hereof shall
be paid solely out of the proceeds received from a purchaser of this Note in
such remarketing and neither the Remarketing Agent nor the Company will be
obligated to provide funds to make payment upon any beneficial owner's tender of
this Note in a remarketing.
The settlement procedures described above, including provisions for
payment by purchasers of this Note or for payment to the beneficial owner of
this Note, may be modified to the extent required by DTC. In addition, the
Remarketing Agent may, in accordance with the terms of the Indenture, modify the
settlement procedures set forth above in order to facilitate the settlement
process.
As long as DTC's nominee holds the certificates representing this Note
in the book-entry system of DTC, no certificates for this Note will be delivered
by the beneficial owner hereof to reflect any transfer of this Note effected in
any remarketing.
TRANSFER OR EXCHANGE
As provided in the Indenture and subject to certain limitations set
forth therein and herein, the transfer of this Note is registrable in the
Security Register, upon surrender of this Note for registration of transfer at
the office or agency of the Company in any place where the principal of and
premium, if any, and any interest on this Note are payable or at such other
offices or agencies as the Company may designate, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to, the
Company and the Security Register or any transfer agent duly executed, by the
registered owner hereof or his attorney duly authorized in writing, and
thereupon one or more new Notes of this series and of like tenor, of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.
The Notes are issuable only in fully registered form in denominations
of $100,000 and integral multiples of $1,000 in excess thereof. As provided in
the Indenture and subject to certain limitations therein set forth, this Note is
exchangeable for a like aggregate principal amount of Notes of this series and
of like tenor of any authorized denomination, as requested by the registered
owner surrendering the same.
No service charge shall be made for any registration of transfer or
exchange of this Note, but, subject to certain limitations set forth in the
Indenture, the Company may require payment of a sum sufficient to cover any tax
or other governmental charge payable in connection therewith.
B-4
<PAGE> 81
Subject to the terms of the Indenture, prior to due presentment of this
Note for registration of transfer, the Company, the Trustee and any agent of the
Company or the Trustee may treat the Person in whose name this Note is
registered as the owner hereof for all purposes, whether or not this Note is
overdue, and neither the company, the Trustee nor any such agent shall be
affected by notice to the contrary.
ACCELERATION
If an Event of Default with respect to the Notes shall occur and be
continuing, the principal of the Notes may be declared due and payable in the
manner and to the effect provided in the Indenture.
OTHER PROVISIONS
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of the
Company and the rights of the registered owners of the securities of each series
thereunder to be affected under the Indenture at any time by the Company and the
Trustee with the consent of the registered owners of not less than a majority in
principal amount of such securities then Outstanding of each series to be
affected. The Indenture also contains provisions permitting the registered
owners of specified percentages in principal amount of the securities of each
series thereunder at the time Outstanding, on behalf of the registered owners of
all securities of such series, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture and
their consequences. Any such consent or waiver by the registered owner of this
Note shall be conclusive and binding upon such registered owner and upon all
future registered owners of this Note issued upon the registration of transfer
hereof or in exchange for or in lieu hereof, whether or not notation of such
consent or waiver is made upon this Note.
As set forth in, and subject to the provisions of, the Indenture, no
registered owner of any Note will have any right to institute any proceeding
with respect to the Indenture or for any remedy thereunder, unless (i) such
registered owner shall have previously given to the Trustee written notice of a
continuing Event of Default with respect to the Notes of this series, (ii) the
registered owners of not less than 25% in principal amount of the Outstanding
Notes of this series shall have made written request, and offered reasonable
indemnity, to the Trustee to institute such proceeding as trustee, (iii) the
Trustee shall have failed to institute such proceeding within 60 days and (iv)
the Trustee shall not have received from the registered owners of a majority in
principal amount of the Outstanding Notes of this series a direction
inconsistent with such request within such 60-day period; provided, however,
that such limitations do not apply to a suit instituted by the registered owner
hereof for the enforcement of payment of the principal of and premium, if any,
or any interest on this Note on or after the respective due dates expressed
herein.
No reference to the Indenture and no provision of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is absolute
and unconditional, to pay the
B-5
<PAGE> 82
principal of and premium, if any, and any interest on this Note at the times,
places and rate, and in the coin or currency, herein prescribed.
The Indenture and the Notes shall be governed by and construed in
accordance with the laws of the State of New York.
All terms used in this Note which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
This Note shall not be valid or become obligatory for any purpose until
the Trustee's Certificate of Authentication hereon shall have been executed by
the Trustee.
IN WITNESS WHEREOF, DTE CAPITAL CORPORATION has caused this instrument
to be duly executed.
DTE CAPITAL CORPORATION
By:
-------------------------------------
Attest:
By:
----------------------------------
This Note is one of the Notes of the series designated herein, referred
to in the within-mentioned Indenture.
THE BANK OF NEW YORK,
By:
-------------------------------------
Authorized Signatory
Date:
B-6
<PAGE> 83
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
- -------------------------------------------------------------------------------|
Please insert Social Security or Other Identifying Number of Assignee
- --------------------------------------------------------------------------------
(please print or type name and address of transferee)
the within Note and all rights thereunder and does hereby irrevocably constitute
and appoint ________________ attorney to transfer the within Note on the books
kept for registration thereof, with full power of substitution in the premises.
Dated:
----------------------------- ----------------------------
In the presence of:
- ----------------------------------------------------------------------------
NOTICE: The signature to this assignment must correspond with the name as it
appears upon the face of the within Note in every particular, without alteration
or enlargement or any change whatever. When assignment is made by a guardian,
trustee, executor or administrator, an officer of a corporation, or anyone in a
representative capacity, proof of his authority to act must accompany the Note.
B-7
<PAGE> 84
EXHIBIT C
DTE CAPITAL CORPORATION
REMARKETED NOTES, 1998 SERIES B DUE 2038
SUPPLEMENTAL COMPANY ORDER
Pursuant to Article Six of the Second Supplemental Indenture, dated as
of November 1, 1998, to the Indenture, dated as of June 15, 1998, as amended,
you are instructed to prepare and authenticate a Note, of the series identified
above, in the principal amount of $300,000,000. The Note is being delivered in
exchange for issued and outstanding Notes of the series identified above.
IN WITNESS WHEREOF, I have hereunto set my hand this 23rd day of
November, 1998.
-----------------------------------
Christopher C. Arvani
Assistant Treasurer
DTE Capital Corporation
C-1
<PAGE> 85
EXHIBIT D
[FORM OF SUPPORT AGREEMENT]
(Attached)
D-1
<PAGE> 86
EXHIBIT E
[FORM OF COLLATERAL ASSIGNMENT AGREEMENT]
(Attached)
E-1
<PAGE> 87
EXHIBIT F
[FORM OF POLICY]
(Attached)
F-1
<PAGE> 88
EXHIBIT G
[DTE Capital Corporation Letterhead]
FLOATING INTEREST RATE NOTICE
[Date]
To: [Remarketing Agent(s)]
[Address]
The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Telecopy: (212) 815-5915
Re: Remarketed Notes, 1998 Series B (the "Notes")
Ladies and Gentlemen:
This Floating Interest Rate Notice relates to (i) $300,000,000
principal amount of the Notes (CUSIP No. ____________) and (ii) the proposed
[Long Term Rate Period] [MAPS Rate Period] of the Note (the "Interest Rate
Period") commencing on ______________ and ending on ___________. Capitalized
terms used and not otherwise defined herein shall have their respective meanings
assigned to them in the Notes.
We hereby notify you that the above-referenced Notes will bear the
following floating rate terms during the Interest Rate Period specified above:
1. The Interest Rate Basis(es) shall be:
[ ] CD Rate, where the Index Maturity will be _______________;
[ ] CMT Rate, where the Designated CMT Maturity Index will be
______________, and the Designated CMT Telerate Page will be
_______________;
[ ] Federal Funds Rate;
G-1
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[ ] LIBOR Reuters, where the Index Currency will be __________,
and the Designated LIBOR Page will be ____________;
[ ] LIBOR Telerate, where the Index Currency will be __________,
and the Designated LIBOR Page will be ____________;
[ ] Prime Rate;
[ ] Treasury Rate ____________.
2. The floating interest rate will be reset as follows:
[ ] Initial Interest Reset Date will be _____________;
[ ] Interest Reset Dates will be _____________;
[ ] Interest Reset Period will be ______________.
3. The interest will be paid as follows:
[ ] Interest Payment Dates will be _____________;
[ ] Interest Payment Period will be _____________;
[ ] Index Maturity will be _____________;
[ ] Floating Rate Maximum Interest Rate will be _____________;
[ ] Floating Rate Minimum Interest Rate will be ______________.
4. Day Count Convention:
[ ] Actual/360 _____________;
[ ] Actual/Actual _____________;
[ ] 30/360.
Applicable Interest Rate Basis:
5. Other terms: [ ]
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<PAGE> 90
Each Beneficial Owner of the Note will be deemed to have tendered such
Note as of the Interest Rate Adjustment Date and will not be entitled to further
accrual of interest after the Interest Rate Adjustment Date.
DTE CAPITAL CORPORATION
By:
-------------------------------
Name:
Title:
G-3
<PAGE> 91
EXHIBIT H
[FORM OF CONVERSION NOTICE]
(Attached)
H-1
<PAGE> 92
[DTE Capital Corporation Letterhead]
CONVERSION NOTICE
[Date]
To: [Remarketing Agent(s)]
THE BANK OF NEW YORK
101 Barclay Street, Floor 21W
New York, New York 10286
Attn: Corporate Trust Administration
Re: Remarketed Notes, 1998 Series B
Dear Sirs:
This Conversion Notice relates to $ ______ principal amount of the
Remarketed Notes (CUSIP No. ________), (the "Notes"). Capitalized terms used and
not otherwise defined herein shall have their respective meanings assigned to
them in the Notes.
We hereby notify you each of the following, to become effective for the
Interest Rate Period commencing on _____________ (the "Conversion Date"):
Interest Rate Mode:
[ ] Commercial Paper Term Mode
[ ] Long Term Rate Mode
[ ] MAPS Mode
[ ] MAPS Agent: _____________
[ ] Base Rate: _________________
[ ] MAPS Remarketing Date: ________________
[ ] Reference Corporate Dealers:
[ ] Reference Treasury Dealer: ________________
[ ] Interest Rate Period: ___________
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<PAGE> 93
[ ] Interest Rate Adjustment Date: _______________
[ ] Optional Redemption Provisions (Long Term Rate Mode):
[ ] Commencement Date:
[ ] Redemption Price: (i) __________________%
(ii) __________________%
(iii) __________________%
[ ] Other or Alternative Terms of Optional Redemption:
[ ] Early Remarketing Provisions (Long Term Rate Mode):
[ ] Initial Early Remarketing Date: _________________
[ ] Initial Early Remarketing Premium: ______________
[ ] Annual Early Remarketing Premium Percentage
Reduction: __________
[ ] Other or Alternative Terms of Early Remarketing:
_____________
Each beneficial owner of the Notes will be deemed to have tendered such
Notes as of the Conversion Date and will not be entitled to further accrual of
interest after the Conversion Date.
DTE CAPITAL CORPORATION
By:
---------------------------------
Name:
Title:
<PAGE> 94
COLLATERAL ASSIGNMENT AGREEMENT dated as of November 18, 1998, made by
DTE CAPITAL CORPORATION, a Michigan corporation (the "Grantor"), to the Lenders
(as defined in the Support Agreement (as hereinafter defined)).
PRELIMINARY STATEMENTS:
(1) the Grantor and The Bank of New York, as trustee (the "Trustee")
have entered into an Indenture dated as of June 15, 1998 (the "Original
Indenture") pursuant to which the Grantor may issue its debt securities from
time to time. The Grantor and the Trustee have also entered into a second
supplemental indenture (the "Second Supplemental Indenture") and, together with
the Original Indenture, and as further supplemented or amended the "Indenture")
pursuant to the terms of which the Grantor has agreed to issue $300,000,000
Remarketed Notes, 1998 Series B due 2038 (the "Debt Securities").
(2) the Grantor and the Initial Purchasers (as defined in the Support
Agreement) have entered into a Purchase Agreement, dated as of November 18,
1998, relating to the issuance and sale of the Debt Securities by the Company.
(3) the Grantor has entered into a support agreement, dated as of
November 18, 1998 (the "Support Agreement") with DTE Energy Company, a Michigan
corporation and the parent of the Grantor (the "Parent"), to provide for support
with respect to payments due by the Grantor on the Debt Securities and related
Debt (as defined in the Support Agreement) to the Lenders, and the Grantor
desires to grant the assignment and security interest contemplated by this
Agreement in accordance with the Support Agreement. Terms defined in the Support
Agreement and not otherwise defined herein are used herein as therein defined.
(4) the Grantor and the Lenders wish to set forth their respective
understandings as to the enforcement of the Lenders rights hereunder relating to
the Collateral (as defined below).
NOW, THEREFORE, in consideration of the premises, and subject to the
terms and conditions set forth herein, the Grantor hereby agrees with the
Lenders as follows:
Section 1. Collateral Assignment. The Grantor hereby assigns to the
Lenders for their ratable benefit, and hereby grants to the Lenders for their
ratable benefit a security interest in, all of the Grantor's right, title and
interest in and to the following (the "Collateral"): the Support Agreement as it
may be amended or otherwise modified from time to time) (the "Assigned
Agreement"), including, without limitation, (i) all rights of the Grantor to
receive moneys due and to become due under or pursuant to the Assigned
Agreement, (ii) all rights of the Grantor to receive proceeds of any insurance,
indemnity, warranty or guaranty with respect to the Assigned Agreement, (iii)
claims of the Grantor for damages arising out of or for breach of or default
under the Assigned Agreement, (iv) the right of the Grantor to terminate the
Assigned Agreement, to perform thereunder and to compel performance and
otherwise exercise all remedies thereunder, and (v) all proceeds of any and all
of the foregoing Collateral, subject, in each case, to the subordination
provisions set forth in Section 15 hereof.
<PAGE> 95
Section 2. Security for Obligations. This Agreement secures the
payment of all obligations of the Grantor now or hereafter existing under the
Debt Securities or related Debt, whether for principal, interest, premium, fees,
expenses or otherwise, and all obligations of the Grantor now or hereafter
existing under this Agreement (all such obligations of the Grantor being the
"Obligations"). Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Obligations and
would be owed by the Grantor to the Lenders but for the fact that they are
unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Grantor.
Section 3. Grantor Remains Liable. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by any Lender of any of the
rights hereunder shall not release the Grantor from any of its duties or
obligations under the Debt Securities, and the contracts and agreements included
in the Collateral, and (c) no Lender shall have any obligation or liability
under the Debt Securities, or the contracts and agreements included in the
Collateral, by reason of this Agreement, nor shall any Lender be obligated to
perform any of the obligations or duties of the Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
Section 4. Representations and Warranties. The Grantor represents and
warrants as follows:
(a) The Assigned Agreement, a true and complete copy of
which has been furnished to the Lenders, has been duly authorized,
executed and delivered by all parties thereto, has not been amended
or otherwise modified except as permitted by Section 7, is in full
force and effect and is binding upon and enforceable against all
parties thereto in accordance with its terms. There exists no
default under the Assigned Agreement by any party thereto.
(b) The chief place of business and chief executive
office of the Grantor and the office where the Grantor keeps it
records concerning the Collateral are located at its address
specified in Section 12. None of the Collateral is evidenced by a
promissory note or other instrument (it being understood that the
Assigned Agreement does not constitute a promissory note or other
instrument).
(c) The Grantor is the legal and the beneficial owner
of the Collateral free and clear of any lien, security interest,
option or other charge or encumbrance except for the security
interest created by this Agreement. No effective financing
statement or other document similar in effect covering all or any
part of the Collateral is on file in any recording office, except
such as may have been filed in favor of the Lenders relating to
this Agreement. The Grantor has no trade names but is known from
time to time as a DTE Energy Company.
(d) This Agreement creates a valid and perfected first
priority security interest in the Collateral, securing the payment
of the Obligations, and all filings and
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<PAGE> 96
other actions necessary or desirable to perfect and protect such
security interest have been duly taken.
(e) No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or
filing with, any governmental authority or regulatory body is
required (i) for the grant by the Grantor of the assignment and
security interest granted hereby or for the execution, delivery or
performance of this Agreement by the Grantor, (ii) for the
perfection or maintenance of the assignment and security interest
created hereby (including the first priority nature of such
assignment and security interest) or (iii) for the exercise by any
Lender of its rights and remedies hereunder.
(f) There are no conditions precedent to the
effectiveness of this Agreement that have not been satisfied or
waived.
(g) The Grantor has, independently and without reliance
upon any Lender and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision
to enter into this Agreement.
Section 5. Further Assurances. (a) The Grantor agrees that from time
to time, at the expense of the Grantor, the Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or any Lender may reasonably request, in order to
perfect and protect the assignment and security interest granted or purported to
be granted hereby or to enable the Lenders for their ratable benefit to exercise
and enforce their rights and remedies, hereunder with respect to any Collateral.
Without limiting the generality of the foregoing, the Grantor will execute and
file such financing or continuation statements, or amendments thereto, and such
other instruments or notices, as may be necessary or desirable, or as the
Lenders may reasonably request, in order to perfect and preserve the assignment
and security interest granted or purported to be granted hereby.
(b) The Grantor hereby authorizes the Lenders to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Grantor where permitted
by law. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
Section 6. Place of Perfection: Records. The Grantor shall keep its
chief place of business and chief executive office and the office where it keeps
its records concerning the Collateral at the location therefor specified in
Section 4(b) or, upon 30 days' prior written notice to the Lenders, at any other
locations in a jurisdiction where all action required by Section 5 shall have
been taken with respect to the Collateral. The Grantor will hold and preserve
such records and will permit representatives of the Lenders at any time during
normal business hours to inspect and make abstracts from such records.
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<PAGE> 97
Section 7. As to the Assigned Agreement.
(a) The Grantor shall at its expense:
(i) perform and observe all the terms and provisions of the
Assigned Agreement to be performed or observed by it, maintain the
Assigned Agreement in full force and effect, enforce the Assigned
Agreement in accordance with its terms, and take all such action to
such end as may be from time to time reasonably requested by the
Lenders.
(ii) furnish to the Lenders promptly upon receipt thereof
copies of all notices, requests and other documents received by the
Grantor under or pursuant to the Assigned Agreement, and from time to
time (A) furnish to the Lenders such information and reports regarding
the Collateral as the Lenders may reasonably request and (B) upon
request of the Lenders make to any other party to the Assigned
Agreement such demands and requests for information and other reports
or for the action as the Grantor is entitled to make thereunder.
(b) The Grantor shall not:
(i) sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, or create or permit to exist any lien, security interest,
option or other charge or encumbrance upon or with respect to any of
the Collateral, except for the assignment and security interest under
by this Agreement.
(ii) cancel or terminate the Assigned Agreement or consent to
or accept any cancellation or termination thereof, other than in
accordance with the terms thereof;
(iii) amend or otherwise modify the Assigned Agreement or give
any consent, waiver or approval thereunder, other than in accordance
with the terms thereof;
(iv) waive any default under or breach of the Assigned
Agreement; or
(v) take any other action in connection with the Assigned
Agreement which would impair the value of the interest or rights of the
Grantor thereunder or which would impair the interest or rights of the
Lenders.
Section 8. Payments Under the Assigned Agreement.
(a) The Grantor agrees, and has effectively so instructed the Parent
that upon the occurrence and during the continuance of an Event of Default (as
defined in the Indenture) or any event that, with the passage of time or the
giving of notice, or both, would become an Event of Default, subject to the
subordination provision set forth in Section 15, all payments due or to become
due under or in connection with the Assigned Agreement shall be made directly to
the Lenders, as applicable, at their respective addresses set forth in Section
12.
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<PAGE> 98
(b) All moneys received or collected pursuant to subsection (a) above
shall be applied ratably to the Obligations owed to the Lenders in accordance
with the terms hereof.
Section 9. Lenders May Perform; Expenses (a) If the Grantor fails to
perform any agreement contained herein, any Lender may itself perform, or cause
performance of, such agreement, and the reasonable expenses of such Lender
incurred in connection therewith shall be payable by the Grantor under (b)
below.
(b) The Grantor will, upon demand, pay to the applicable Lender (in the
case of the holders of the Debt Securities, the Trustee) the amount of any and
all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which such Lender may incur in connection
with (1) the administration of this Agreement, (2) the custody or preservation
of, or the sale of, collection from or other realization upon, any of the
Collateral, (3) the exercise or enforcement of any rights of such Lender
hereunder or (4) the failure by the Grantor to perform or observe any of the
provisions hereof.
Section 10. Remedies. If any Event of Default, or any event that, with
the passage of time or the giving of notice, or both, would become an Event of
Default, shall have occurred and be continuing:
(a) The Lenders may exercise any and all rights and remedies of the
Grantor under or in connection with the Assigned Agreement or otherwise in
respect of the Collateral, including, without limitation, any and all rights of
the Grantor to demand or otherwise require payment of any amount under, or
performance of any provision of, the Assigned Agreement.
(b) All payments received by the Grantor under or in connection with
the Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the ratable benefit of the Lenders in accordance with the
terms hereof, shall be segregated from other funds of the Grantor and shall be
forthwith paid over to the Lenders in the same form as so received (with any
necessary endorsement).
(c) The Lenders may exercise in respect of the Collateral, in addition
to other rights and remedies provided for herein or otherwise available to it,
all the rights and remedies of a secured party on default under the Uniform
Commercial Code in effect in the State of New York at that time (the "Code")
(whether or not the Code applies to the affected Collateral).
Section 11. Amendments; Etc. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Grantor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Lenders, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
Section 12. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telex or cable communication) and mailed, telecopied, telexed, cabled or
delivered to:
if to the Grantor, at the following address:
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<PAGE> 99
DTE Capital Corporation
2000 2nd Avenue
Detroit, MI 48226
Attention: Corporate Secretary
if to the Trustee or to the holders of the Debt Securities, at its
address specified for the Trustee in the Indenture;
if to the Initial Purchasers at the following addresses:
Salomon Smith Barney Inc.
Seven World Trade Center
New York, NY 10048
Attn: Howard L. Hiller
Chase Securities Inc.
270 Park Avenue
New York, NY 10017
Attn: William D. Rogers
Barclays Capital Inc.
222 Broadway
New York, NY 10038
Attn: Michael Brennan
First Chicago Capital Markets, Inc.
One First National Plaza
Mail Suite 0363
Chicago, Illinois 60670
Attn: Evonne Taylor
or, as to any party, at such other address as shall be designated by such party
in a written notice to each other Lender. All such notices and other
communications shall, when mailed or telecopied, be effective when deposited in
the mails or telecopied, respectively.
Section 13. Continuing Assignment and Security Interest; Assignments
under the Indenture. This Agreement shall create a continuing assignment of and
security interest in the Collateral and shall (i) remain in full force and
effect until the payment in full of the Obligations and all other amounts
payable under this Agreement, (ii) be binding upon the Grantor, its successors
and assigns, and (iii) inure to the benefit of the Lenders and their respective
successors, transferees and assigns. Upon the earlier of the payment in full of
the Obligations and
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all other amounts payable under this Agreement or the termination of the
Support Agreement in accordance with its terms, the security interest granted
hereby shall terminate and all rights to the Collateral shall revert to the
Grantor. Upon any such termination, the Lenders will, at the Grantor's expense,
execute and deliver to the Grantor such documents as the Grantor shall
reasonably request to evidence such termination.
Section 14 . Trustee Provisions.
(a) Trustee Appointed Attorney-in-Fact. The Grantor hereby appoints the
Trustee, as the Grantor's attorney-in-fact to administer all matters concerning
the rights of the holders of the Debt Securities, as Lenders, with full
authority in the place and stead of the Grantor and in the name of the Grantor
or otherwise, from time to time to take any action and to execute any instrument
which is necessary or advisable or which the Trustee may deem necessary or
advisable to accomplish the purposes of this Agreement with respect to the
interests of the holders of the Debt Securities hereunder, including, without
limitation:
(i) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under on connection with the Collateral;
(ii) to receive, indorse and collect any drafts or other
instruments or documents in connection therewith; and
(iii) to file any claims or take any action or institute any
proceedings which is necessary or desirable or which the Trustee may
deem necessary or desirable for the collection of any of the Collateral
or otherwise to enforce compliance with the terms and conditions of the
Assigned Agreement or the rights of the holders of the Debt Securities
with respect to any of the Collateral.
(b) Payments Received By Trustee. All payments made under or in
connection with the Assigned Agreement or otherwise in respect of the
Collateral, and all cash proceeds in respect of any sale of, collection from, or
other realization upon all or any part of the Collateral, received by the
Trustee for the benefit of the holders of the Debt Securities shall be applied
by the Trustee in accordance with the terms of the Indenture. Any surplus of
such payments or cash proceeds held by the Trustee and the remaining after
payment in full of all the Obligations shall be paid over to the Grantor.
(c) The Trustee's Duties. The Trustee shall act on behalf of the
holders of the Debt Securities hereunder in accordance with the same standard of
care as under the Indenture.
(d) Indemnity and Expenses. The Grantor agrees to indemnify the Trustee
from and against any and all claims, losses and liabilities (including
reasonable attorneys' fees and expenses) growing out of or resulting from this
Agreement (including, without limitation, enforcement of this Agreement), except
claims, losses or liabilities resulting solely from the Trustee's own negligence
or willful misconduct.
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Section 15. Initial Purchasers' Provisions. Each Initial Purchaser is
a Lender for all purposes of this Agreement as to any amounts owing to such
Initial Purchaser in accordance with the terms of the Purchase Agreement (as
defined in the Support Agreement) and shall possess the same rights, in all
respects, as any Lender under this Agreement, except that (i) for so long as the
Policy (as defined in the Indenture) in respect of the Initial Interest Rate
Period (as defined in the Indenture) is in effect and the Insurer is not in
default of its payment obligations thereunder, the Insurer shall be entitled to
exercise or direct the exercise of the rights of the Initial Purchasers, as
Lenders, in accordance with Section 16 hereof, and (ii) the claims of the
Initial Purchasers with respect to the Collateral shall be subordinated to the
claims of the holders of the Debt Securities and, for so long as the Policy is
in effect and the Insurer is not in default of its payment obligations
thereunder, the Insurer. Subject only to the foregoing and notwithstanding any
other provision herein, including, without limitation, Section 14 hereof, the
Initial Purchasers, as Lenders, may act hereunder in their own behalf.
Section 16. Insurer Provisions. (a) Notwithstanding anything to the
contrary herein, if a Policy issued by an Insurer is in effect with respect to
any Debt Securities and the Insurer is not in default with respect to its
obligations under the Policy, this Agreement shall be amended in writing signed
by all parties hereto so that such Insurer shall become a party to this
Agreement, and the Insurer shall be deemed a Lender for all purposes of this
Agreement and shall possess the same rights, in all respects, as any Lender
under this Agreement for such time as the Policy is in effect and the Insurer
shall possess the exclusive right to exercise or direct the exercise of the
rights of all Lenders in accordance with the terms of this Agreement as so
amended.
(b) For so long as the Policy is in effect or the Insurer is a holder
of any Debt Securities, this Agreement shall be amended in writing signed by all
parties hereto so that the Insurer's consent shall be required for any action by
the Grantor that would require the Lenders' consent under the terms of this
Agreement.
Section 17. Governing Law; Terms. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the validity or perfection of the assignment and security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws of a jurisdiction other than the State of
New York. Unless otherwise defined herein, terms used in Article 9 of the Code
are used herein as therein defined.
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IN WITNESS WHEREOF, each of the Grantor and the other parties
indicated below has caused this Agreement to be duly executed and delivered by
its officer thereunto duly authorized as of the date first above written.
DTE CAPITAL CORPORATION
By: ________________________________
Name:
Title:
THE BANK OF NEW YORK, as Trustee
By: ________________________________
Authorized Signatory
SALOMON SMITH BARNEY INC.
Consented to as of the date By: ________________________________
first above written: Name:
Title:
DTE ENERGY COMPANY CHASE SECURITIES INC.
By: ________________________________ By: ________________________________
Name: Name:
Title: Title:
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BARCLAYS CAPITAL INC.
By: ________________________________
Name:
Title:
FIRST CHICAGO CAPITAL MARKETS, INC.
By: ________________________________
Name:
Title:
10
<PAGE> 1
EXHIBIT 4-201
EXECUTION COPY
SUPPORT AGREEMENT BETWEEN
DTE ENERGY COMPANY
AND
DTE CAPITAL CORPORATION
THIS SUPPORT AGREEMENT, dated as of January 19, 1999, 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 Second 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 as of January 19, 1999 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. SECTION 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.
1. SECTION 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,
<PAGE> 2
preferred stock or preference stock of DECO or Subsidiary shall not constitute a
lien, security interest or other charge or encumbrance.
1. SECTION 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 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.
1. SECTION 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.
1. SECTION 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 than "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
<PAGE> 3
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.
1. SECTION 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 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.
1. SECTION 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 ally 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:
(1) 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;
(1) 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.
a) 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:
<PAGE> 4
(1) 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;
(1) 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;
(1) Parent irrevocably authorizes and empowers the Lenders to
demand, sue for, collect and receive any such payment or distribution and to
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
(1) 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.
a) 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).
a) Notwithstanding anything contained in this Section 7, the
Parent shall have the right to loan up to $1,200,000,000 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.
1. SECTION 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:
<PAGE> 5
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
1. SECTION 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.
1. SECTION GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York.
DTE ENERGY COMPANY
By
Title:
DTE CAPITAL CORPORATION
By
Title:
<PAGE> 1
EXHIBIT 10-27
SIXTH 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, October 28, 1996, and October 27, 1997 is hereby amended
and restated as of December 2, 1998, by this Sixth 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
1
<PAGE> 2
Plan. All corporate officers and other administrative personnel referred to
herein refer to officers and administrative personnel of The Detroit Edison
Company.
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)(A) Were members of Management Council (pursuant to OR3,
Management Groups) November 20, 1998; such employees being
named on Exhibit D, or
(B) Are designated by the Chairman as key managerial employees
eligible to participate in the Plan; or
(C) With respect to management employees of a Company other than
The Detroit Edison Company, are Certain Management or Highly
Compensated Employees, and
(3) 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
(4) Do not have an effective Executive Post-Employment Income
Arrangement; and
(5) 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
3
<PAGE> 4
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.
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:
<TABLE>
<CAPTION>
AGE AT EARLY RETIREMENT
TERMINATION ADJUSTMENT PERCENTAGE
<S> <C>
55 60%
56 68%
57 76%
58 84%
59 92%
60 or older 100%
</TABLE>
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
4
<PAGE> 5
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, 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
5
<PAGE> 6
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 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.
6
<PAGE> 7
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).
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.
7
<PAGE> 8
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.
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).
8
<PAGE> 9
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.
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.
9
<PAGE> 10
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
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.
10
<PAGE> 11
EXHIBIT A
TARGET PERCENTAGE
<TABLE>
<CAPTION>
TARGET PERCENTAGE
MANAGEMENT OF AVERAGE FINAL SERVICE
GROUP COMPENSATION INDEX
----- ------------ -----
<S> <C> <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. Detroit Edison employees/participants 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.
11
<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)
<TABLE>
<CAPTION>
REMAINING
YEARS OF
GUARANTEED
TERM
PAYMENT
INTEREST RATE
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:
Adjusted Lump Sum = Pmt x (1 -(1 + i) -n)/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
<TABLE>
<CAPTION>
ASSUMPTIONS:
<S> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
(GIVEN THE ABOVE, THE TARGET PERCENTAGE IS 55%)
<S> <C>
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
</TABLE>
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:
<TABLE>
<S> <C>
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
</TABLE>
14
<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
<TABLE>
<CAPTION>
ASSUMPTIONS:
<S> <C>
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)
</TABLE>
<TABLE>
<CAPTION>
(GIVEN THE ABOVE, THE TARGET PERCENTAGE IS 55.5%)
<S> <C>
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
</TABLE>
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:
<TABLE>
<S> <C>
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
</TABLE>
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:
<TABLE>
<S> <C>
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
</TABLE>
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:
<TABLE>
<S> <C>
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
</TABLE>
<TABLE>
<CAPTION>
(GIVEN THE ABOVE, THE TARGET PERCENTAGE IS 54%)
<S> <C>
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
</TABLE>
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)
<TABLE>
<S> <C>
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
</TABLE>
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
EXHIBIT D
<TABLE>
<S> <C>
Active:
Gerard M Anderson Leslie L Loomans
Joseph P Arresto Barry Markowitz
Susan M Beale Ronnie A May
Donald J Brett David E Meador
Daniel G Brudzynski S. Snick Meyers
Robert J Buckler Sandra J Miller
Michael E Champley Steven M Nagy
Frederic E Champnella II Christopher C Nern
Paul A Childs William T O'Connor Jr
James F Connelly Evan J O'Neil
Anthony F Earley Jr David L Peterson
Katherine E Fellows A R Pierce Jr
Paul Fessler Peter J Pintar
Larry G Garberding Michael C Porter
Lonnie E Gillum Jean M Redfield
Douglas R Gipson Thomas M Roberts
Paul R Gurizzian William R Roller
Lynne E Halpin J J Roosen
T M Holton Albert J Tack
Robert J Horn S M Taylor
Thomas A Hughes Richard C Viinikainen
Melinda A Jones Morley A Wassermann
Ronald L Klinect Joseph L Welch
Gary E Lapplander John M Wisniewski
Robert S Lenart Alan J Yonkman
John E Lobbia
Retired:
Norman Barthlow Willard Holland
Leon Cohan Walter McCarthy
Malcolm Dade Robert McKeon
Ronald Gresens James O'Hara
Ernest Grove Richard Thomas
Saul Waldman
</TABLE>
19
<PAGE> 20
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;
20
<PAGE> 21
(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
21
<PAGE> 22
and for purposes of clause (1) under the second paragraph under "Eligibility"
the participant or employee 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:
<TABLE>
<CAPTION>
AGE AT EARLY RETIREMENT
TERMINATION ADJUSTMENT PERCENTAGE
<S> <C>
55 60%
54 52%
53 44%
52 36%
51 28%
50 20%
49 12%
48 4%
47.5 0%
</TABLE>
22
<PAGE> 23
(5) If the participant or employee has received awarded
service under the Plan, the lump sum payable shall be
reduced by the actuarial 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.
23
<PAGE> 1
EXHIBIT 10-28
Amendment No. 1 To
The Detroit Edison Company
Long-Term Incentive Plan
The Detroit Edison Company Long-Term Incentive Plan (the
"Plan") is hereby amended, pursuant to Section 14 of the Plan, in the following
respect effective as of December 31, 1998:
By deleting the first sentence of Section 10 of the Plan and
inserting in lieu thereof the following:
On the date of the 1995 annual meeting of Common
Stock shareholders of the Company and on the date of each
annual meeting of Common Stock shareholders of the Company
thereafter each Non-employee Director shall receive
automatically an Award of 300 shares of Common Stock if he or
she is elected at such meeting or continuing to serve
immediately after such meeting as a Non-employee Director. The
shares of Common Stock awarded pursuant to this Section 10
shall not be subject to any restriction under the Plan (other
than any that may be required pursuant to Section 16(N)).
IN WITNESS WHEREOF, DTE Energy Company, pursuant to
resolutions of the Special Committee on Compensation of its Board of Directors,
has caused this instrument to be executed in its name by its _________________
as of this _____ day of December, 1998.
DTE Energy Company
By ___________________________
<PAGE> 1
EXHIBIT 10-29
DTE ENERGY COMPANY
PLAN FOR DEFERRING THE PAYMENT OF DIRECTORS' FEES
(AS AMENDED AND RESTATED EFFECTIVE AS OF JANUARY 1, 1999)
The DTE Energy Company Plan for Deferring the Payment of Directors'
Fees (the "Plan") was established by DTE Energy Company (the "Company")
effective as of January 1, 1996. The Company now desires, effective as of
January 1, 1999, to amend and restate the Plan upon the terms and conditions
hereinafter set forth and to merge The Detroit Edison Company Plan for Deferring
the Payment of Directors' Fees (the "DECO Plan") heretofore maintained by the
Detroit Edison Company ("DECO") into the Plan as so amended and restated.
SECTION I - PURPOSE
The purpose of the Plan is to enable each Director (as defined below) to defer
all or a portion of his or her fees for future services as a member of the Board
of Directors or as a member of any committee thereof.
SECTION II - ELIGIBILITY
Any Director of the Company who is not a Company employee or an employee of any
Affiliate (a "Director") shall be eligible to participate in the Plan. For
purposes of the Plan, "Affiliate" shall mean any entity in which the Company
directly or indirectly beneficially owns more than 50% of the voting securities.
SECTION III - ELECTION, MODIFICATION, AND TERMINATION PROCEDURES
Any Director wishing to participate in the Plan must file with the Corporate
Secretary of the Company at 2000 Second Avenue, Detroit, MI 48226, a written
Notice of Election on the form attached as Exhibit "A" to defer payment of all
or a portion of his or her Director's fees payable in cash. Such an election to
participate in the Plan must be made prior to the beginning of the month for
which fees are payable. In addition, with respect to any Director who had a
deferred Director's fee account under the DECO Plan as of December 31, 1998,
effective beginning January 1, 1999, any Notice of Election filed by such
Director under the DECO Plan shall be deemed to have been made under and shall
be subject to the terms and conditions of this Plan as if it had been made
hereunder. An effective election with respect to Directors' fees that have been
deferred under the terms of this Plan or DECO Plan and fees that have already
been earned may not be modified or revoked. An effective election with regard to
fees that have not been deferred or earned may be modified by filing a new
Notice of Election or may be terminated by filing a Notice of Termination on the
form attached as Exhibit "B". A Director who shall have terminated an effective
election may thereafter file a new election covering a subsequent period.
SECTION IV - ESTABLISHMENT AND ADMINISTRATION OF DEFERRED DIRECTORS' FEE
ACCOUNT
The amount of any Director's fees deferred in accordance with an election,
including effective January 1, 1999, the deferred Director's fee account balance
under the DECO Plan transferred to
-1-
<PAGE> 2
this Plan by merger effective January 1, 1999, shall be credited to a deferred
Director's fee account maintained by the Company, which account shall be divided
into subaccounts to specifically identify the portion of the account subject to
adjustment under Section IV(b) ("Subaccount I") and the portion of the account
subject to adjustment under Section IV(c) ("Subaccount II"). Such account shall
remain a part of the general funds of the Company and DECO, and nothing
contained in this Plan shall be deemed to create a trust or fund of any kind or
create any fiduciary relationship.
As of the last day of each month for each Director participating in this Plan,
the deferred Director's fee account for such Director shall be adjusted as
follows:
(a) The account and applicable Subaccounts thereof shall first be
charged with any distributions made during the month and effective as
of January 1, 1999 the account and applicable Subaccounts thereof shall
be credited with any transfer to the Plan of the deferred Director's
fee account balance from the DECO Plan effective as of such date.
(b) The account balance in Subaccount I shall then be credited with
interest for that month. Such interest shall be computed by multiplying
the applicable portion of the account balance in Subaccount I after the
adjustment provided for in Subsection (a) but before the adjustments
provided for in Subsections (d) and (e) of this Section IV by a
fraction, the numerator of which is the 5-Year United States Treasury
Bond rate, as reported in The Wall Street Journal as of the last
business day of each month, and the denominator of which is 12.
(c) The account balance in Subaccount II shall then be adjusted to reflect
the number of hypothetical shares of Company Common Stock allocated to
Subaccount II as of such date. The number of hypothetical shares of
Company Common Stock allocated to Subaccount II as of any date shall be
equal to the number of shares of Company Common Stock that would be
allocated to Subaccount II as of such date if (i) the deferred
Director's fees to be credited to the Director's account for allocation
to Subaccount II were invested in the Company Common Stock at Fair
Market Value (as defined below) on the trading day that is coincident
with or next following the last day of the month on which such amount
is to be credited to the account, (ii) any balance transferred from
Subaccount I due to a change in election under Section V were invested
in the Company Common Stock at Fair Market Value on the trading day
that is coincident with or next following the effective date of such
change, (iii) cash dividends on the shares of Company Common Stock
treated as allocated to Subaccount II were automatically reinvested in
the Company Common Stock at Fair Market Value on the trading day that
is coincident with or next following the applicable dividend payment
date, and (v) any transfers to Subaccount I due to a change in election
under Section V or any cash distributions from Subaccount II Account
were made at Fair Market Value on the trading day that is coincident
with or next preceding the effective date of such change of election or
distribution of the number of hypothetical shares of Company Common
Stock needed to make such transfer or distribution, which hypothetical
shares shall be subtracted from the number of shares treated as
allocated to Subaccount II of the Participant's Account as of the
effective date of the transfer
-2-
<PAGE> 3
or distribution. In the event of any stock dividend or split,
recapitalization, reclassification, increase or decrease in the number
of outstanding shares, merger, consolidation or exchanges in shares or
other similar changes in the Company's Common Stock, appropriate
adjustments shall be made in the hypothetical shares of Company Common
Stock allocated to each Director's Subaccount II to reflect any such
change. For purposes of the Plan, "Fair Market Value" means the average
of the high and low sales prices of Company Common Stock as listed in
the Wall Street Journal for the New York Stock Exchange Composite tape
on a specified date.
(d) Next, the account shall be credited with the amount, if any, of
Director's fees deferred during that month, which amount shall be
allocated to Subaccount I and Subaccount II in accordance with the
Director's election or deemed election under Section V as in effect as
of such date.
(e) Finally, the amount of any transfer to or from Subaccount I or
Subaccount II of the account, pursuant to a change in election or
deemed election under Section V, made as of such date shall be added to
or subtracted from, as the case may be, the applicable Subaccounts.
A separate record of deferred Director's fees and adjustments thereto shall be
maintained by the Company for each participant in this Plan.
SECTION V - ELECTION OF ACCOUNT EARNINGS ADJUSTMENTS
At the time a Director elects to participate in the Plan or as of January 1,
1999, if later, the Director shall elect by filing a notice with the Corporate
Secretary of the Company to have Director fees thereafter deferred under the
terms of the Plan allocated, in specified multiples of 10%, to Subaccount I or
Subaccount II of the deferred Director's fee account. If a Director who is
participating in the Plan or the DECO Plan as of December 31, 1998 fails to make
an election hereunder as of January 1, 1999, he or she will be deemed to have
elected to have Director's fees deferred on or after January 1, 1999 allocated
to Subaccount I. In addition, if a Director is participating in the Plan or the
DECO Plan as of December 31, 1998, the Director will be deemed to have elected
to have his or her deferred Director's fee account balances as of December 31,
1998 allocated to Subaccount I effective as of January 1, 1999 unless the
Director changes such deemed election as hereinafter provided in this Section V.
A Director's election or deemed election under this Section V shall remain in
effect until changed as hereinafter provided in this Section V.
A Director may change his or her election or deemed election under this Section
V effective as of the last day of any month beginning on or after January 1,
1999 (or effective as of January 1, 1999 if the Director has a deferred
Director's fee account balance under the Plan or the DECO Plan as of December
31, 1998), by filing with the Corporate Secretary of the Company written notice
of such change at least 14 days (or by such other date as the Corporate
Secretary of the Company shall prescribe) prior to the effective date of such
change. Any change shall direct that either or both of (a) that the balance
credited to Subaccount I or Subaccount II of the deferred Director's fee account
as of such date (determined before the adjustment in Subsection (e) of Article
IV) be transferred, in specified multiples of 10%, to the other Subaccount or
(b) subsequent Director's
-3-
<PAGE> 4
fees deferred under the terms of the Plan be allocated, in specified multiples
of 10%, to Subaccount I or Subaccount II. Such change shall be effective as of
the date elected and shall remain in effect until further changed as provided
herein.
Any election or change in election under this Section V shall be made on the
forms attached as Exhibit "D" and Exhibit "E", respectively.
SECTION VI - PAYMENT OF DEFERRED DIRECTORS' FEES
Deferred fees shall be paid to a Director or, in the event of death, to his or
her designated beneficiary in accordance with the Notice of Election and
Beneficiary Designation forms that have been filed with the Corporate Secretary
of the Company. Payment shall be made in cash, and the amount of any payment
from Subaccount II of a deferred Director's fee account shall be made at Fair
Market Value on the trading day that is coincident with or next preceding the
effective date of payment. If a Director elects to receive payment of his or her
deferred fees in installments rather than in a lump sum, the payment period
shall not exceed ten years following the payment commencement date. The amount
of any installment payment shall be determined by multiplying the Director's
unpaid account balance on the date of such installment by a fraction, the
numerator of which is one and the denominator of which is the number of
remaining unpaid installments. Such balance shall be appropriately reduced to
reflect the installment payments made hereunder which shall be made prorata from
Subaccounts I and II.
SECTION VII - WHEN PAYMENT OF DEFERRED DIRECTORS' FEES COMMENCES
The payment in a lump sum or installments of amounts deferred pursuant to an
election under this Plan shall commence on January 15 of the first year to which
payment has been deferred and shall be paid in accordance with the terms of such
election. If a Director shall die prior to the first year to which payment has
been deferred, such payment shall commence on January 15 of the calendar year
immediately following the year of death and shall be paid in the manner
specified in such election.
In the event a participating Director receives an assessment of income taxes
from the Internal Revenue Service which treats any amount payable under this
Plan as being includible in such Director's gross income prior to the actual
payment of such amount to such Director, the Company shall pay an amount equal
to such income taxes to such Director within 30 days after written notice from
such Director of such assessment, and such Director's fee account shall be
reduced prorata from Subaccounts I and II by an amount equal to such income
taxes.
Each payment under this Plan shall be reduced by any federal, state, or local
taxes which the Company determines should be withheld from such payment.
Benefits under this Plan shall be payable solely from the general assets of the
Company and, with respect to amounts attributable to DECO, of DECO, as the case
may be, provided, however, that no provision in this Plan shall preclude the
Company or DECO from segregating assets which are intended to be a source for
payment of benefits under this Plan. Each participant in this Plan shall have
the status of a general unsecured creditor of the Company and of DECO. This Plan
constitutes a promise by the Company and DECO to make benefit payments in the
future. It is
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<PAGE> 5
intended that this Plan be unfunded for tax purposes and that this Plan shall
remain unfunded for the entire period of its existence.
Notwithstanding the foregoing or anything to the contrary in the Plan, the
distribution of all or any portion of a deferred Director's fee account will be
delayed for a period not to exceed seven months or may be subject to prior
approval by the Board to the extent that the Corporate Governance Committee of
the Board of Directors of the Company determines that such delay or approval is
necessary or desirable to ensure that any transaction under the Plan will
qualify for an exemption from the liability provisions imposed on the Director
under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
rules and regulations issued thereunder. In the event of any such delay, the
undistributed portion of the deferred Director's fee account shall continue to
be subject to adjustment as provided in Section IV until distribution is made.
SECTION VIII - DESIGNATION OF BENEFICIARY
Each Director, on becoming a participant, shall file with the Corporate
Secretary of the Company a beneficiary designation on the form attached as
Exhibit "C" designating one or more beneficiaries to whom payments otherwise due
the participant shall be made in the event of his or her death while serving as
a Director or after leaving the Board. A beneficiary designation will be
effective only if the signed beneficiary designation form is filed with the
Corporate Secretary of the Company when the Director is alive, and will cancel
all beneficiary designations signed and filed previously under this Plan. If the
primary beneficiary shall survive the Director but dies before receiving all the
amounts due hereunder, the deferred amounts remaining unpaid at the time of
death shall be paid in one lump sum to the legal representative of the primary
beneficiary's estate. If the primary beneficiary shall predecease the Director,
amounts remaining unpaid at the time of the Director's death shall be paid in
the order specified by the Director to the contingent beneficiary(s) surviving
the Director. If the contingent beneficiary(s) dies before receiving all the
amounts due hereunder, the unpaid amount shall be paid in one lump sum to the
legal representative of such contingent beneficiary(s) estate. If the Director
shall fail to designate a beneficiary(s) as provided in this Section, or if all
designated beneficiaries shall predecease the Director, the deferred amounts
remaining unpaid at the time of such Director's death shall be paid in one lump
sum to the legal representative of the Director's estate.
SECTION IX - NON-ALIENABILITY AND NON-TRANSFERABILITY
No Director, beneficiary designated by the Director, or creditors of the
Director shall have any right to, directly or indirectly, anticipate, alienate,
sell, transfer, assign, pledge, encumber, attach, or garnish any amount that is
or may be payable hereunder.
SECTION X - ADMINISTRATION OF PLAN; ARBITRATION
(a) Full power and authority to construe, interpret, and administer the
Plan shall be vested in the Corporate Governance Committee of the Board
of Directors of the Company. Decisions of the Corporate Governance
Committee shall be final, conclusive, and binding upon all parties.
(b) Notwithstanding Section X(a) hereof, in the event of any dispute,
claim, or controversy (hereinafter referred to as a "Grievance")
between a Director who is eligible to elect to
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<PAGE> 6
receive the benefits provided under this Plan and the Company with
respect to the payment of benefits to such Director 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 (b).
(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 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 Director 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 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 Director 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 Director or
the Company with respect to any Grievance which is arbitrable as
herein set forth.
(6) The arbitration provisions shall, with respect to any Grievance,
survive the termination of this Plan.
(c) No Director shall be deemed for any purpose to be or to have the rights
and privileges of the owner of Company Common Stock with respect to any
hypothetical shares treated as allocated to his or her deferred
Director's fee account.
SECTION XI - AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend or terminate this Plan at any
time. Any amendment or termination of this Plan shall not affect the rights of
participants or beneficiaries to the amounts in the deferred Directors' fee
accounts at the time of such amendment or termination.
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<PAGE> 7
SECTION XII - APPLICABLE LAW
The provisions of this Plan shall be interpreted and construed in accordance
with the laws of the state of Michigan.
SECTION XIII - SUCCESSORS
The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and to agree to perform this Plan in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Plan shall be binding upon and inure to the benefit of the Company
and any successor of or to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of the business and/or
assets of the Company whether by sale, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the "Company" for the
purposes of this Plan), and the heirs, executors and administrators of each
Director.
IN WITNESS WHEREOF, DTE Energy Company, pursuant to resolutions of its Board of
Directors, has caused this instrument to be executed in its name and by its
Chairman of the Board as of the 2nd day of December, 1998.
DTE ENERGY COMPANY
By:
------------------------
Anthony F. Earley, Jr.
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<PAGE> 8
EXHIBIT "A"
NOTICE OF ELECTION TO DEFER THE
PAYMENT OF DIRECTORS' FEES
Corporate Secretary
DTE Energy Company
2000 2nd Avenue
Detroit, MI 48226
DTE ENERGY COMPANY PLAN FORDEFERRING THE PAYMENT OF DIRECTORS' FEES
Pursuant to provisions of the above-referenced Plan, I hereby elect to have fees
payable in cash to me for services on the DTE Energy Company Board of Directors
and on any committee of such Board deferred in the manner specified below. It is
understood and agreed that this election shall become effective on the first day
of the month following receipt of this Notice of Election by the Secretary of
the Company. I understand that this election shall be irrevocable with respect
to fees that have been deferred and fees that have been earned for the month in
which a Notice of Termination shall be filed. This election shall continue in
effect for subsequent terms of office unless I shall modify or revoke it.
Payment of deferred fees shall commence on January 15 of the Year of Deferred
Payment selected.
YEAR TO WHICH PAYMENT IS DEFERRED:
-----
PERCENTAGE OF FEES DEFERRED:
----%
METHOD OF PAYMENt: (Select one)
Lump Sum , or
-----
Installments (Number of Years, not over 10)
------
FREQUENCY OF INSTALLMENTS: (Select one)
Annually
--------
Quarterly
--------
Signature: Date:
------------------------------ ----------------------
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<PAGE> 9
EXHIBIT "B"
NOTICE OF TERMINATION
Corporate Secretary
DTE Energy Company
2000 2nd Avenue
Detroit, MI 48226
DTE ENERGY COMPANY PLAN FOR DEFERRiNG THE PAYMENT OF DIRECTORS' FEES
Pursuant to provisions of the above-referenced Plan, I hereby terminate my
participation in the Plan effective as of the first day of the month following
receipt of this Notice of Termination by the Secretary of the Company.
Signature: Date:
--------------------------- ---------------------
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<PAGE> 10
EXHIBIT "C"
BENEFICIARY DESIGNATION
Corporate Secretary
DTE Energy Company
2000 2nd Avenue
Detroit, MI 48226
DTE ENERGY COMPANY PLAN FOR DEFERRiNG THE PAYMENT OF DIRECTORS' FEES
Any amounts held in my account under the above-referenced Plan which remain
unpaid at my death shall be paid to the following primary beneficiary:
Name: Address:
--------------------------- -------------------------
-------------------------
-------------------------
-------------------------
If the above-named primary beneficiary shall predecease me, I designate the
following persons as contingent beneficiaries, in the order shown, to receive
any such unpaid amounts:
1. Name: Address:
--------------------- -------------------------
-------------------------
-------------------------
-------------------------
2. Name: Address:
--------------------- -------------------------
-------------------------
-------------------------
-------------------------
3. Name: Address:
----------------------- -------------------------
-------------------------
-------------------------
-------------------------
This supersedes any previous beneficiary designation made by me with respect to
my deferred Director's fee account balance under the Plan. I reserve the right
to change the beneficiary in accordance with the terms of the Plan.
Signature: Date:
------------------------------- ------------------
Witnesses
-------------------------
-------------------------
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<PAGE> 11
EXHIBIT "D"
NOTICE OF ELECTION OF ACCOUNT EARNINGS ADJUSTMENTS
Corporate Secretary
DTE Energy Company
2000 2nd Avenue
Detroit, MI 48226
DTE ENERGY COMPANY PLAN FOR DEFERRiNG THE PAYMENT OF DIRECTORS' FEES
Pursuant to provisions of the above-referenced Plan, I hereby elect to have my
Director fees deferred under the Plan commencing on the later of January 1, 1999
or the date I begin to participate in the Plan allocated to the following
Subaccount(s) for adjustment in accordance with the terms of the Plan (indicate
from 0% to 100% - in 10% increments - in front of each item; total must equal
100%):
Subaccount I. Adjustment based on the 5-Year
- ---------------------- United States Treasury Bond rate
Subaccount II. Adjustment made by making a
- ---------------------- hypothetical investment in
accordance with the Plan in DTE
Energy Company Common Stock with
the assumption of automatic
dividend reinvestment.
I understand that this election of the form of account earnings adjustment will
remain in effect until I elect to change my election effective as of the last
day of any month by filing with the Corporate Secretary of the Company a change
of election form at least 14 days (or by such other date as the Corporate
Secretary of the Company shall prescribe) prior to the effective date of the
change.
Signature: Date:
----------------------------------- -----------------------
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<PAGE> 12
EXHIBIT "E"
NOTICE OF ELECTION OF CHANGE IN ACCOUNT EARNINGS ADJUSTMENTS
Corporate Secretary
DTE Energy Company
2000 2nd Avenue
Detroit, MI 48226
DTE ENERGY COMPANY PLAN FOR DEFERRiNG THE PAYMENT OF DIRECTORS' FEES
Pursuant to provisions of the above-referenced Plan, I hereby make the following
election(s) with respect to the manner in which my deferred Director's fee
account under the Plan is adjusted (complete Section I or Section II, or both,
as desired):
I. (Complete this Section I only if you want to transfer all or part of
your existing deferred Director's fee account balance from one
Subaccount for adjustment under the other Subaccount.* If you desire to
make such a transfer, check the applicable item below and insert desired
percentage from 10% to 100% - in 10% increments.)
I elect to transfer % of my existing
---------------------- ----
account balance in Subaccount I (under which
adjustment is based on the 5-Year United
States Treasury Bond rate) to Subaccount II
(under which adjustment is made by making a
hypothetical investment in accordance with
the Plan in DTE Energy Company Common Stock
with the assumption of automatic dividend
reinvestment).
- or -
I elect to transfer % of my existing
--------------------- ----
account balance in Subaccount II (under
which adjustment is made by making a
hypothetical investment in accordance with
the Plan in DTE Energy Company Common Stock
with the assumption of automatic dividend
reinvestment) to Subaccount I (under which
adjustment is based on the 5-Year United
States Treasury Bond rate).
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<PAGE> 13
II. (Complete this Section II only if you want to change your Subaccount
allocation election with respect to future Director's fees deferred
under the Plan. If you desire to make such a change, indicate from 0% to
100% - in 10% increments - in front of each item; total equal 100%):
Subaccount I. Adjustment based on the
---------------- 5-Year United States Treasury Bond rate
Subaccount II. Adjustment made by making a
---------------- hypothetical investment in accordance with
the Plan in DTE Energy Company Common Stock
with the assumption of automatic dividend
reinvestment.
I understand that the change(s) elected on this form will become effective as of
the last day of the month (or January 1, 1999 if the change is to be effective
under the Plan as of that date) occurring after the date this form is filed with
the Corporate Secretary of the Company, provided that it is filed at least 14
days (or by such other date as the Corporate Secretary of the Company shall
prescribe) prior to the effective date of the change.
Signature: Date:
------------------------------ ---------------------
- -------------
*.* Please note that a transfer is a discretionary transaction under Rule
16-b of the Securities Exchange Act of 1934, as amended, and
accordingly an election to transfer all or any portion of your account
balance would be "exempt" from the short-swing trading liability
provisions of Rule 16-b only if you have not made an "opposite way"
election under the Plan or any other plan of the Company or its
affiliates within the prior six months. Please contact the Company's
Corporate Secretary if you have any questions.
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<PAGE> 1
EXHIBIT 10-30
DTE ENERGY COMPANY
DEFERRED STOCK COMPENSATION PLAN
FOR NON-EMPLOYEE DIRECTORS
The DTE Energy Company Deferred Stock Compensation Plan (the "Plan") is
established by DTE Energy Company (the "Company") effective as of January 1,
1999.
SECTION I - PURPOSE
The purpose of the Plan is to further the growth, development and financial
success of the Company by providing incentives to Directors (as defined below)
and to assist the Company in attracting and retaining Directors by offering
Directors an opportunity to earn Company Common Stock.
SECTION II - ELIGIBILITY
Any Director of the Company who is not a Company employee or an employee of any
Affiliate (a "Director") shall become a participant in the Plan as of the later
of January 1, 1999 or the January 1st occurring on or next following the date he
or she becomes a Director. For purposes of the Plan, "Affiliate" shall mean any
entity in which the Company directly or indirectly beneficially owns more than
50% of the voting securities.
SECTION III - ANNUAL AWARDS
Each Director participating in the Plan who is a Director on the first business
day of a calendar year beginning on or after January 1, 1999 shall receive
automatically on such date as a credit to an unfunded deferred stock account
established for the Director under Section IV below, 900 hypothetical shares of
Company Common Stock.
SECTION IV - ESTABLISHMENT AND ADMINISTRATION OF DEFERRED STOCK ACCOUNT
The annual amount of hypothetical Company Common Stock awarded to a Director
under Section III shall be credited to a deferred stock account maintained by
the Company. Such account shall remain a part of the general funds of the
Company, and nothing contained in this Plan shall be deemed to create a trust or
fund of any kind or create any fiduciary relationship.
As of the last day of each month for each Director participating in this Plan,
the deferred stock account for such Director shall be adjusted as follows:
a. The account shall first be charged with any distributions
made during the month as of the date made.
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<PAGE> 2
b. Next, the account shall be credited with the amount, if any,
of hypothetical Company Common Stock awarded during that
month under Section III, with such credit to be made as of
the date provided in Section III.
c. Finally, the account shall be adjusted to reflect the number
of hypothetical shares of Company Common Stock allocated to
the account during the month to reflect reinvested cash
dividends. The number of such hypothetical shares of Company
Common Stock allocated to reflect reinvested cash dividends
shall be equal to the number of shares of Company Common
Stock that would have been allocated to the account as of any
date if cash dividends paid on the equivalent number of
shares of Company Common Stock treated as allocated to the
account were automatically reinvested in the Company Common
Stock at Fair Market Value on the trading day that is
coincident with or next following the applicable dividend
payment date. For purposes of the Plan, "Fair Market Value"
means the average of the high and low sales prices of Company
Common Stock as listed in the Wall Street Journal for the New
York Stock Exchange Composite tape specified date.
In the event of any stock dividend or split, recapitalization, reclassification,
increase or decrease in the number of outstanding shares, merger, consolidation
or exchanges in shares or other similar changes in the Company's Common Stock,
appropriate adjustments shall be made in the hypothetical shares of Company
Common Stock allocated to each Director's deferred stock account to reflect any
such change.
A separate record of the deferred stock account and adjustments thereto shall be
maintained by the Company for each participant in this Plan.
SECTION V - PAYMENT OF DEFERRED STOCK ACCOUNT
The balance of the Director's deferred stock account shall be paid to a Director
or, in the event of death, to his or her designated beneficiary in accordance
with the Beneficiary Designation form that has been filed with the Corporate
Secretary of the Company, within 15 days after the date the Director terminates
his or her service on the Board of Directors of the Company for any reason.
Payment shall be made in a lump sum in cash, or at the election of the Director
made prior to termination of service and with the approval of the Board, in
whole shares of Company Common Stock with any fractional share being paid in
cash. The amount of any cash distribution from a Director's deferred stock
account shall be made at Fair Market Value on the trading day that is coincident
with or next preceding the date of the Director's termination of service.
In the event a participating Director receives an assessment of income taxes
from the Internal Revenue Service which treats any amount payable under this
Plan as being includible in such Director's gross income prior to the actual
payment of such amount to such Director, the Company shall pay an amount equal
to such income taxes to such Director within 30 days after written notice from
such Director of such assessment, and such Director's deferred stock account
shall be reduced by an amount equal to such income taxes.
-2-
<PAGE> 3
Each payment under this Plan shall be reduced by any federal, state, or local
taxes which the Company determines should be withheld from such payment.
Benefits under this Plan shall be payable solely from the general assets of the
Company, provided, however, that no provision in this Plan shall preclude the
Company from segregating assets which are intended to be a source for payment of
benefits under this 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 for
the entire period of its existence.
Notwithstanding the foregoing or anything to the contrary in the Plan, the
distribution of all or any portion of a Director's deferred stock account will
be delayed for a period not to exceed seven months or may be subject to prior
approval by the Board to the extent that the Corporate Governance Committee of
the Board of Directors of the Company determines that such delay or approval is
necessary or desirable to ensure that any transaction under the Plan will
qualify for an exemption from the liability provisions imposed on the Director
under Section 16(b) of the Securities Exchange Act of 1934, as amended, or any
rules and regulations issued thereunder. In the event of any such delay, the
undistributed portion of the Director's deferred stock account shall continue to
be subject to adjustment as provided in Section IV until distribution is made.
SECTION VI - DESIGNATION OF BENEFICIARY
Each Director, on becoming a participant, shall file with the Corporate
Secretary of the Company a beneficiary designation on the form attached as
Exhibit "A" designating one or more beneficiaries to whom payments otherwise due
the participant shall be made in the event of his or her death while serving as
a Director or after leaving the Board. A beneficiary designation will be
effective only if the signed beneficiary designation form is filed with the
Corporate Secretary of the Company when the Director is alive, and will cancel
all beneficiary designations signed and filed previously under this Plan. If the
primary beneficiary shall survive the Director but dies before receiving all the
amounts due hereunder, the deferred amounts remaining unpaid at the time of
death shall be paid in one lump sum to the legal representative of the primary
beneficiary's estate. If the primary beneficiary shall predecease the Director,
amounts remaining unpaid at the time of the Director's death shall be paid in
the order specified by the Director to the contingent beneficiary(s) surviving
the Director. If the contingent beneficiary(s) dies before receiving all the
amounts due hereunder, the unpaid amount shall be paid in one lump sum to the
legal representative of such contingent beneficiary(s) estate. If the Director
shall fail to designate a beneficiary(s) as provided in this Section, or if all
designated beneficiaries shall predecease the Director, the deferred amounts
remaining unpaid at the time of such Director's death shall be paid in one lump
sum to the legal representative of the Director's estate.
SECTION VII - NON-ALIENABILITY AND NON-TRANSFERABILITY
No Director, beneficiary designated by the Director, or creditors of the
Director shall have any right to, directly or indirectly, anticipate, alienate,
sell, transfer, assign, pledge, encumber, attach, or garnish any amount that is
or may be payable hereunder.
SECTION VIII - ADMINISTRATION OF PLAN; ARBITRATION
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<PAGE> 4
(a) Full power and authority to construe, interpret, and administer the
Plan shall be vested in the Corporate Governance Committee of the Board
of Directors of the Company. Decisions of the Corporate Governance
Committee shall be final, conclusive, and binding upon all parties.
(a) Notwithstanding Section VIII(a) hereof, in the event of any dispute,
claim, or controversy (hereinafter referred to as a "Grievance")
between a Director 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 Director 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 VIII(b).
(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 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 Director 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 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 Director 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 Director or the Company with respect to any
Grievance which is arbitrable as herein set forth.
(6) The arbitration provisions shall, with respect to any
Grievance, survive the termination of this Plan.
(c) The obligation of the Company to deliver shares of Company Common Stock
under the Plan shall be subject to all applicable laws, rules and
regulations, including all applicable
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<PAGE> 5
federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or
appropriate by the Corporate Governance Committee.
(d) If at any time the Corporate Governance Committee determines, in its
sole discretion, that the listing, registration or qualification of
shares of Company Common Stock issuable pursuant to the Plan is
required by any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, the
issuance of shares, no shares shall be issued, in whole or in part,
unless listing, registration, qualification, consent or approval has
been effected or obtained free of any conditions as acceptable to the
Corporate Governance Committee.
(e) In the event that the disposition of shares of Company Common Stock
acquired pursuant to the Plan is not covered by a then current
registration statement under the Securities Act of 1933 as amended (the
"Securities Act"), and is not otherwise exempt from such registration,
such shares shall be restricted against transfer to the extent required
by the Securities Act or regulations thereunder, and the Corporate
Governance Committee may require any individual receiving shares
pursuant to the Plan, as a condition precedent to receipt of such
shares, to represent to the Company in writing that the shares acquired
by such individual are acquired for investment only and not with a view
to distribution. The certificate for any shares acquired pursuant to
the Plan shall include any legend that the Corporate Governance
Committee deems appropriate to reflect any restrictions on transfer.
(f) No Director shall be deemed for any purpose to be or to have the rights
and privileges of the owner of Company Common Stock with respect to any
hypothetical shares treated as allocated to his or her deferred stock
account unless and until such Director shall have become the holder
thereof upon distribution under the Plan.
SECTION IX - AMENDMENT OR TERMINATION OF PLAN
The Board of Directors of the Company may amend or terminate this Plan at any
time. Any amendment or termination of this Plan shall not affect the rights of
participants or beneficiaries to the amounts in the Directors' deferred stock
accounts at the time of such amendment or termination.
SECTION X - APPLICABLE LAW
The provisions of this Plan shall be interpreted and construed in accordance
with the laws of the state of Michigan.
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<PAGE> 6
SECTION XI - SUCCESSORS
The Company shall require any successor (whether direct or indirect, by
purchase, merger, consolidation, reorganization or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and to agree to perform this Plan in the same manner and to the same
extent the Company would be required to perform if no such succession had taken
place. This Plan shall be binding upon and inure to the benefit of the Company
and any successor of or to the Company, including without limitation any persons
acquiring directly or indirectly all or substantially all of the business and/or
assets of the Company whether by sale, merger, consolidation, reorganization or
otherwise (and such successor shall thereafter be deemed the "Company" for the
purposes of this Plan), and the heirs, executors and administrators of each
Director.
IN WITNESS WHEREOF, DTE Energy Company, pursuant to the resolutions of its Board
of Directors, has caused this instrument to be executed in its name and by its
Chairman as of the 2nd day of December, 1998.
DTE Energy Company
By --------------------------
Anthony F. Earley, Jr.
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<PAGE> 7
EXHIBIT "A"
BENEFICIARY DESIGNATION
Corporate Secretary
DTE Energy Company
2000 2nd Avenue
Detroit, MI 48226
DTE ENERGY COMPANY DEFERRED STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS
Any balance in my deferred stock account held under the Plan which remains
unpaid at my death shall be paid to the following primary beneficiary:
Name: Address:
----------------------------- --------------------------
--------------------------
--------------------------
--------------------------
If the above-named primary beneficiary shall predecease me, I designate the
following persons as contingent beneficiaries, in the order shown, to receive
any such unpaid amounts:
1. Name: Address:
------------------------- ----------------------------
----------------------------
----------------------------
----------------------------
2. Name: ------------------------- Address: ----------------------------
----------------------------
----------------------------
----------------------------
3. Name: Address:
--------------------------- ----------------------------
----------------------------
----------------------------
----------------------------
This supersedes any previous beneficiary designation made by me with respect to
my deferred stock account under the Plan. I reserve the right to change the
beneficiary in accordance with the terms of the Plan.
Signature: Date:
---------------------------- ------------------------------
Witnesses:
----------------------------
----------------------------
-7-
<PAGE> 1
EXHIBIT 10-31
DTE ENERGY COMPANY
RETIREMENT PLAN
FOR NON-EMPLOYEE DIRECTORS
(AS AMENDED AND RESTATED EFFECTIVE AS OF DECEMBER 31, 1998)
1. PURPOSE
In order to provide a retirement allowance for service as a director
while not an employee of The Detroit Edison Company ("DECO"), The
Detroit Edison Company Retirement Plan For Non-Employee Directors was
established effective January 1, 1990. As the result of the Agreement
and Plan of Exchange effective January 1, 1996, DTE Energy Company (the
"Company") became the parent holding company of DECO. Accordingly, the
Company established the DTE Energy Company Retirement Plan for
Non-Employee Directors (the "Plan") to provide a retirement allowance
for service as a director of the Company and/or of DECO while not an
employee of the Company, DECO or their Affiliates, and The Detroit
Edison Company Retirement Plan for Non-Employee Directors was merged
into the Plan, all effective as of January 1, 1996, (the "Effective
Date"). The Company now desires to amend and restate the Plan to freeze
participation in and the benefits provided under the Plan effective as
of December 31, 1998. The terms and conditions of the Plan, as amended
and restated effective as of December 31, 1998, are hereinafter set
forth.
2. ELIGIBILITY
This Plan provides a monthly retirement allowance to each director
("participant") of the Company or of DECO who has served (a) on any and
all of the Board of Directors of the Company and the Board of Directors
of DECO (each of which is referred to herein as a "Board" and
collectively as the "Boards") as a director for five or more years (not
counting any year more than once) and (b) as a director of the Company
or of DECO at any time on or after the Effective Date and prior to
January 1, 1999 while not an employee of the Company, DECO or any
Affiliate; provided, however, that the requirement in clause (a) above
to have served as a director for five or more years will not be
applicable to any director of the Company or DECO on December 31, 1998.
In addition, each former director of DECO who was receiving benefits
under The Detroit Edison Company Retirement Plan for Non-Employee
Directors immediately prior to the Effective Date shall be a
participant herein and entitled on and after the Effective Date to
continued payment under this Plan of the benefit the participant was
entitled to under The Detroit Edison Company Retirement Plan for
Non-Employee Directors. For purposes of the Plan, "Affiliate" shall
mean any entity in which the Company directly or indirectly owns more
than 50% of the voting securities.
3. AMOUNT OF DISTRIBUTION
(1) The monthly retirement allowance in respect of a participant
terminating service from the Boards on or after the Effective
Date shall be determined as follows:
<PAGE> 2
-2-
(1) The monthly retirement allowance in respect of a participant who is a
member of the Board of Directors of the Company and of DECO immediately
prior to the participant's termination of service from all Boards on which
the participant was serving will be equal to one-twelfth (1/12th) of the
sum of (A) the aggregate annual cash retainer (not including Committee
Chairman's Fees and Board meeting, Board committee meeting or Company or
DECO-related meeting fees) for members of the Board of Directors of the
Company and of DECO in effect on the earlier of the date of the
participant's termination of service from such Boards or December 31, 1998
and (B) the aggregate cash value of the stock, if any, awarded to the
participant under the Long-Term Incentive Plan of the Company or DECO and,
if applicable, the resolutions of the Board of Directors of the Company
approved on September 22, 1997, in each case on the date of the most recent
annual meeting of shareholders of the Company or DECO, as the case may be,
occurring prior to the earlier of the date of participant's termination of
service from the Boards or January 1, 1999. For this purpose, the cash
value of any stock awarded to the participant under the Long-Term Incentive
Plan or the aforesaid resolutions of the Board of Directors of the Company
shall be equal to the number of shares of stock awarded to the participant
multiplied by the average of the high and low sales prices of such stock as
listed in the Wall Street Journal for the New York Stock Exchange
Composite Tape on the date of award, or if such date is not a business day,
on the business day immediately preceding the award date.
(2) The monthly retirement allowance in respect of a participant who is not
a member of the Board of Directors of DECO but is a member of the Board of
Directors of the Company immediately prior to the participant's termination
of service from all Boards on which the participant was serving will be
equal to one-twelfth (1/12th) of the sum of (A) the annual cash retainer
(not including Committee Chairman's Fees and Board meeting, Board committee
meeting or Company or DECO-related meeting fees) for members of the Board
of Directors of the Company in effect on the earlier of the date of the
participant's termination of service from such Board or December 31, 1998
and (B) the aggregate cash value of the stock, if any, awarded to the
participant under the Long-Term Incentive Plan of the Company or DECO and,
if applicable, the resolutions of the Board of Directors of the Company
approved on September 22, 1997, in each case on the date of the most recent
annual meeting of shareholders of the Company or DECO, as the case may be,
occurring prior to the earlier of the date of participant's termination of
service from the Board of Directors of the Company or January 1, 1999. For
this purpose, the cash value of any stock awarded to the participant under
the Long-Term Incentive Plan or the aforesaid resolutions of the Board of
Directors of the Company shall be equal to the number of shares of stock
awarded to the participant multiplied by the average of the high and low
sales prices of such stock as listed in the Wall Street Journal for the New
York Stock Exchange
<PAGE> 3
-3-
Composite Tape on the date of award, or if such date is not a business
day, on the business day immediately preceding the award date.
(3) The monthly retirement allowance in respect of a participant who
is not a member of the Board of Directors of the Company but is a
member of the Board of Directors of DECO immediately prior to the
participant's termination of service from all Boards on which the
participant was serving will be equal to one-twelfth (1/12th) of the
sum of (A) the annual cash retainer (not including Committee
Chairman's Fees and Board meeting, Board Committee meeting or Company
or DECO-related meeting fees) for members of the Board of Directors of
DECO in effect on the earlier of the date of the participant's
termination of service from such Board or December 31, 1998 and (B)
the aggregate cash value of the stock, if any, awarded to the
participant under the Long-Term Incentive Plan of the Company or DECO
and, if applicable, the resolutions of the Board of Directors of the
Company approved on September 22, 1997, in each case on the date of
the most recent annual meeting of shareholders of the Company or DECO,
as the case may be, occurring prior to the earlier of the date of
participant's termination of service from the Board of Directors of
DECO or January 1, 1999. For this purpose, the cash value of any stock
awarded to the participant under the Long-Term Incentive Plan or the
aforesaid resolutions of the Board of Directors of the Company shall
be equal to the number of shares of stock awarded to the participant
multiplied by the average of the high and low sales prices of such
stock as listed in the Wall Street Journal for the New York Stock
Exchange Composite Tape on the date of award, or if such date is not a
business day, on the business day immediately preceding title award
date.
(2) Payments shall be made monthly commencing with the month following such
participant's termination of service from all of the Boards on which the
participant was serving.
(3) In the event a participant receives an assessment of income taxes from
the Internal Revenue Service which treats any amounts payable under this
Plan as being includible in such participants gross income prior to the
actual payment of such amount to such participant, the Company shall pay,
or cause to be paid, an amount equal to such income taxes to such
participant within 30 days after written notice from such participant of
such assessment. The amount of the monthly retirement allowance which would
otherwise be paid following such participants termination of service on the
Boards shall be reduced, dollar for dollar, starting with the first such
payment, by the amount of income taxes previously advanced to the
participant hereunder, until such amount has been fully recovered under the
Plan.
(4) Each payment under this Plan shall be reduced by an federal, state or
local taxes which the Company determines should be withheld from such
payment.
(5) Benefits under this Plan should be payable solely from the general
assets of the Company or DECO, as the case maybe. Each participant in this
Plan shall have the
<PAGE> 4
-4-
status of a general unsecured creditor of the Company or of DECO,
respectively. This Plan constitutes a promise by the Company or DECO,
as the case may be, 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.
4. DURATION
The monthly retirement allowance payments will continue for a period equal
to the aggregate number of months served on any and all of the Boards prior
to January 1, 1999 while not an employee of the Company, DECO or any
Affiliate (but not counting any month more than once), or until the
participant's death, whichever occurs first. In the event of death prior to
the conclusion of scheduled payments under this Plan, any and all liability
of the Company and DECO under this Plan is terminated. The participant's
estate shall have no rights hereunder. There is no allowance to a surviving
spouse or other beneficiary.
5. SUSPENSION OF PAYMENTS
Payment of the retirement allowance to a participant who is again elected
to the Board of Directors of the Company or of DECO will be suspended.
Any future allowance will not be recalculated, and the amount of retirement
allowance on subsequent termination will remain unchanged. The duration of
payments upon subsequent termination will be determined by the cumulative
number of whole months served on any and all of the Boards prior to
January 1, 1999 (not counting any month more than once) minus the number of
retirement allowance payments received prior to re-election to a Board.
6. NONALIENATION OF BENEFITS
The right of a participant to payment of a retirement allowance hereunder
shall not be anticipated, alienated, sold, assigned, transferred, pledged,
encumbered, attached, or garnished by a participant or a participant's
creditors 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.
7. ADMINISTRATION; ARBITRATION
(1) This Plan shall be administered by the Corporate Governance
Committee of the Board of Directors of the Company (the "Corporate
Governance Committee"), who shall have full power and authority to
make each determination provided for in this Plan, to interpret this
Plan, and to establish rules, regulations and procedures for carrying
out its purpose.
(2) The Secretary of the Company shall be responsible for recordkeeping
under this Plan and shall also be responsible for making, or causing
to be made, all payments provided for by this Plan.
<PAGE> 5
-5-
(3) Notwithstanding Section 7(a) hereof, in the event of any dispute,
claim, or controversy (hereinafter referred to as a "Grievance") between a
director 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
director 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 7(c).
(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 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 director 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 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 director eligible to receive benefits provided under
this Plan has the right to resort to any federal court, state court,
local court, or any 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 director or the Company with respect to
any Grievance which is arbitrable as herein set forth.
(6) The arbitration provisions shall, with respect to any Grievance,
survive the termination of this Plan.
<PAGE> 6
-6-
(4) This Plan is a non-contributory, non-qualified and unfunded plan
and represents only an unsecured general obligation of the Company and
of DECO, respectively. Neither the foregoing or any other provision of
this Plan shall preclude, however, the Company or DECO from
segregating assets which are intended to be a source for payment of
benefits under this Plan. The Company shall pay, or cause to be paid,
benefit payments to which a director is entitled under this Plan from
the general assets of the Company or DECO, as the case may be, based
on service attributable to the respective Boards prior to January 1,
1999.
8. AMENDMENT OR TERMINATION
The Board of Directors of the Company reserves the right to amend, modify,
supplement, suspend or terminate this Plan at any time, provided, however,
that no such amendment, modification, supplement or termination shall
affect the right of any participant who is immediately eligible to receive
an allowance hereunder to receive benefits theretofore accrued.
IN WITNESS WHEREOF, DTE Energy Company, pursuant to resolutions of its
Board of Directors, has caused this instrument to be executed in its name and by
its Chairman as of the 2nd day of December, 1998.
DTE ENERGY COMPANY
By
----------------------
Anthony F. Earley, Jr.
Chairman
<PAGE> 1
EXHIBIT 11-14
DTE ENERGY COMPANY
BASIC AND DILUTED EARNINGS PER SHARE
OF COMMON STOCK
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------
1998 1997 1996
---- ---- ----
(Thousands, except per share amounts)
BASIC:
<S> <C> <C> <C>
Net Income..................................... $ 443,012 $ 417,333 $ 309,296
Weighted average number of common
shares outstanding (a)....................... 145,076 145,101 145,120
Earnings per share of Common Stock
based on weighted average number
of shares outstanding........................ $ 3.05 $ 2.88 $ 2.13
DILUTED:
Net Income..................................... $ 443,012 $ 417,333 $ 309,296
Weighted average number of common
shares outstanding (a)....................... 145,076 145,101 145,120
Incremental shares from assumed
conversion of options........................ 106 12 -
------------ ------------ ------------
145,182 145,113 145,120
============ ============ ============
Earnings per share of Common Stock
assuming conversion of options............... $ 3.05 $ 2.88 $ 2.13
</TABLE>
- ---------------------------
(a) Based on a daily average.
<PAGE> 1
EXHIBIT 12-14
DTE ENERGY COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31
-----------------------------------------------
1998 1997 1996
---- ---- ----
(Millions, except for ratio and percent)
<S> <C> <C> <C>
Net income.................................... $ 443 $ 417 $ 309
---------- ----------- ------------
Taxes based on income:
Current income taxes....................... 143 267 219
Deferred taxes - net....................... 26 5 17
Investment tax credit adjustments - net.... (15) (15) (15)
Municipal and state........................ 3 4 3
---------- ----------- ------------
Total taxes based on income.............. 157 261 224
---------- ----------- ------------
Fixed charges:
Interest on long-term debt................. 279 275 275
Amortization of debt discount, premium
and expense.............................. 11 11 12
Other interest............................. 29 11 4
Interest factor of rents................... 34 34 34
Preferred stock dividend factor............ 7 18 26
---------- ----------- ------------
Total fixed charges........................... 360 349 351
---------- ----------- ------------
Earnings before taxes based on income
and fixed charges.......................... $ 960 $ 1,027 $ 884
=========== =========== ============
Ratio of earnings to fixed charges............ 2.67 2.94 2.52
Preferred stock dividends..................... $ 6 $ 12 $ 16
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......................... 4 10 14
Ratio of pretax income to net income.......... 1.35 1.61 1.69
Dividend factor for amount not deductible..... 5 16 24
Amount deductible............................. 2 2 2
----------- ----------- ------------
Total preferred stock dividend factor.. $ 7 $ 18 $ 26
=========== =========== ============
</TABLE>
<PAGE> 1
EXHIBIT 12-15
THE DETROIT EDISON COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------
1998 1997 1996
---- ---- ----
(Millions, except for ratio)
<S> <C> <C> <C>
Net income................................... $ 418 $ 417 $ 328
--------------- ---------------- ---------------
Taxes based on income:
Current income taxes...................... 280 308 224
Deferred taxes - net...................... (5) (6) 16
Investment tax credit adjustments - net... (15) (14) (15)
Municipal and state....................... 3 4 3
--------------- ---------------- ---------------
Total taxes based on income............. 263 292 228
--------------- ---------------- ---------------
Fixed charges:
Interest on long-term debt................ 254 262 275
Amortization of debt discount, premium
and expense............................. 11 11 12
Other interest............................ 13 9 4
Interest factor of rents.................. 34 34 34
--------------- ---------------- ---------------
Total fixed charges..................... 312 316 325
--------------- ---------------- ---------------
Earnings before taxes based on income
and fixed charges......................... $ 993 $ 1,025 $ 881
=============== ================ ===============
Ratio of earnings to fixed charges........... 3.18 3.24 2.71
</TABLE>
<PAGE> 1
EXHIBIT 12-16
THE DETROIT EDISON COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Year Ended December 31
------------------------------------------------------
1998 1997 1996
---- ---- ----
(Millions, except for ratio and percent)
<S> <C> <C> <C>
Net income.................................... $ 418 $ 417 $ 328
-------------- --------------- --------------
Taxes based on income:
Current income taxes....................... 280 308 224
Deferred taxes - net....................... (5) (6) 16
Investment tax credit adjustments - net.... (15) (14) (15)
Municipal and state........................ 3 4 3
-------------- --------------- --------------
Total taxes based on income............ 263 292 228
-------------- --------------- --------------
Fixed charges:
Interest on long-term debt................. 254 262 275
Amortization of debt discount, premium
and expense.............................. 11 11 12
Other interest............................. 13 9 4
Interest factor of rents................... 34 34 34
-------------- --------------- --------------
Total fixed charges.................... 312 316 325
-------------- --------------- --------------
Earnings before taxes based on income
and fixed charges.......................... $ 993 $ 1,025 $ 881
============== =============== ==============
Preferred stock dividends..................... $ 6 $ 12 $ 16
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......................... 4 10 14
Ratio of pretax income to net income.......... 1.63 1.70 1.70
Dividend factor for amount not deductible..... 7 17 24
Amount deductible............................. 2 2 2
-------------- --------------- --------------
Total preferred stock dividend factor.. 9 19 26
Total fixed charges.................... 312 316 325
-------------- --------------- --------------
Total fixed charges and preferred
stock dividends...................... $ 321 $ 335 $ 351
============== =============== ==============
Ratio of earnings to fixed charges and
preferred stock dividends.................. 3.09 3.06 2.51
</TABLE>
<PAGE> 1
EXHIBIT 21-3
Subsidiaries and Affiliates of DTE Energy
and The Detroit Edison Company
The Detroit Edison Company
Midwest Energy Resources Company
St. Clair Energy Corporation
The Edison Illuminating Company of Detroit
DTE Capital Corporation
DTE Edison America, Inc.
Edison Development Corporation
EdVenture Capital Corp.
Huron Energy Services, Inc.
Syndeco Realty Corporation
UTS Systems, Inc.
DE Energy Services, Inc.
Edison Energy Services, Inc.
PCI Enterprises Company
EES Coke Battery Company, Inc.
DTE Coal Services, Inc.
Biomass Energy Systems, Inc.
Belleville Gas Producers, Inc.
Alabama Energy Systems, Inc.
DTE Arbor Gas Producers, Inc.
ESCA Gas Producers, Inc.
Plainville Gas Producers, Inc.
RES Power, Inc.
Winston Gas Producers, Inc.
Orlando Gas Producers, Inc.
FW Gas Producers, Inc.
Sonoma Energy Systems, Inc.
Riverview Gas Producers, Inc.
Inactive subsidiaries and affiliates:
DTE Center Point, Inc.
Great Lakes Energy Products, Inc.
Great Lakes Energy Services, Inc.
Superior Energy Services, Inc.
Wolverine Energy Services, Inc.
<PAGE> 1
EXHIBIT 23-12
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference of our report dated January 27,
1999 appearing in this Annual Report on Form 10-K of DTE Energy Company and The
Detroit Edison Company for the year ended December 31, 1998 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
Form S-3 333-65765
Deloitte & Touche LLP
Detroit, Michigan
February 24, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
Consolidated Statement of Income, Balance Sheet, Statement of Cash Flows,
Statement of Changes in Shareholders' Equity and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000936340
<NAME> DTE Energy Company
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 251
<SECURITIES> 0
<RECEIVABLES> 624
<ALLOWANCES> 20
<INVENTORY> 338
<CURRENT-ASSETS> 1232
<PP&E> 12178
<DEPRECIATION> 5235
<TOTAL-ASSETS> 12088
<CURRENT-LIABILITIES> 1392
<BONDS> 4197
0
0
<COMMON> 1951
<OTHER-SE> 1747
<TOTAL-LIABILITY-AND-EQUITY> 12088
<SALES> 0
<TOTAL-REVENUES> 4221
<CGS> 0
<TOTAL-COSTS> 3284
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 319
<INCOME-PRETAX> 597
<INCOME-TAX> 154
<INCOME-CONTINUING> 443
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 443
<EPS-PRIMARY> 3.05
<EPS-DILUTED> 3.05
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted from the
Consolidated Statement of Income, Balance Sheet, Statement of Cash Flows and
Statement of Changes in Shareholders' Equity and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<CIK> 0000028385
<NAME> The Detroit Edison Company
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 5
<SECURITIES> 0
<RECEIVABLES> 570
<ALLOWANCES> 20
<INVENTORY> 309
<CURRENT-ASSETS> 885
<PP&E> 11629
<DEPRECIATION> 5201
<TOTAL-ASSETS> 10987
<CURRENT-LIABILITIES> 1262
<BONDS> 3462
0
0
<COMMON> 1951
<OTHER-SE> 1562
<TOTAL-LIABILITY-AND-EQUITY> 10987
<SALES> 0
<TOTAL-REVENUES> 3902
<CGS> 0
<TOTAL-COSTS> 2932
<OTHER-EXPENSES> 15
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 277
<INCOME-PRETAX> 678
<INCOME-TAX> 260
<INCOME-CONTINUING> 418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 418
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
EXHIBIT 99-28
SECOND AMENDED AND RESTATED CREDIT AGREEMENT dated as of January 19,
1999 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 ABN AMRO BANK N.V., BARCLAYS BANK PLC,
BAYERISCHE LANDESBANK GIROZENTRALE, CAYMAN ISLANDS BRANCH, COMERICA BANK and DEN
DANSKE BANK AKTIESELSKAB, as co-agents, for the Lenders (as hereinafter
defined).
PRELIMINARY STATEMENTS.
(1) The Borrower has entered into an Amended and Restated Credit
Agreement dated as of January 21, 1998, as amended as of October 21, 1998 and as
of January 18, 1999 (as so amended, the "Original Credit Agreement") with the
Agent and certain lenders, financial institutions and other institutional
lenders named therein or a party thereto immediately prior to the effectiveness
of this Agreement (collectively, the "Existing Lenders").
(2) The Borrower has requested that the Initial Lenders enter into this
Agreement to amend and restate the Original Credit Agreement as set forth
herein. The Initial Lenders have indicated their willingness to amend and
restate the Original Credit Agreement upon the terms and conditions stated
herein.
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
<PAGE> 2
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 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 Two Penns Way, Suite 200, New Castle,
Delaware, 19720, Account No. 36852248, Attention: Christian Laughton.
"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% .400%
--------------------------------------------------------------------------------------------------------------
Level 2
Lower than Level 1, but at least
BBB+ / Baa1 or above 0% .500%
--------------------------------------------------------------------------------------------------------------
Level 3
Lower than Level 2, but at least
BBB / Baa2 or above 0% .600%
--------------------------------------------------------------------------------------------------------------
Level 4
Lower than Level 3, but at least
BBB- / Baa3 or above 0% .800%
--------------------------------------------------------------------------------------------------------------
Level 5
Lower than Level 4, or
no Public Debt Rating in Effect 0% 1.600%
==============================================================================================================
</TABLE>
At any time more than 50% of the Commitments are utilized, the Applicable
Margin will increase by (i) .125% at Levels 1, 2, 3 and 4 and (ii) .250% at
Level 5.
<PAGE> 3
"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 .100%
----------------------------------------------------------------------
Level 2
Lower than Level 1, but at least BBB+
/ Baa1 or above .125%
----------------------------------------------------------------------
Level 3
Lower than Level 2, but at least
BBB / Baa2 or above .150%
----------------------------------------------------------------------
Level 4
Lower than Level 3, but at least BBB-
/ Baa3 or above .200%
----------------------------------------------------------------------
Level 5
Lower than Level 4, or
no Public Debt Rating in Effect .400%
======================================================================
</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 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
<PAGE> 4
(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 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).
<PAGE> 5
"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
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
<PAGE> 6
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).
<PAGE> 7
"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 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.
<PAGE> 8
"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; 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.
<PAGE> 9
"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.
<PAGE> 10
"Events of Default" has the meaning specified in Section 6.01.
"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.
"Existing Lenders" has the meaning specified in the Preliminary
Statements hereto.
"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.
<PAGE> 11
"Information Memorandum" means the information memorandum dated
December 1998 used by the Agent and Salomon Smith Barney Inc., as arranger
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;
(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.
<PAGE> 12
"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.
<PAGE> 13
"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
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).
<PAGE> 14
"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.
"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 senior unsecured Debt
issued by the Borrower. 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
<PAGE> 15
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 18,
2000 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:
<PAGE> 16
(a) the Form 10K of DECO for the year ended December
31, 1997,
(b) the Forms 10Q of DECO for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998, and
(c) the Audited Consolidated Financial Statements of the
Parent for the year ended December 31, 1997, together with the
notes thereto, as contained in the Parent's 1997 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.
<PAGE> 17
"Year 2000 Problem" shall mean that the computer hardware,
software or equipment containing embedded microchips of the Parent or
any of its Subsidiaries which is essential to its business or
operations will, as a result of processing dates or time periods
occurring after December 31, 1999, malfunction causing a system failure
or miscalculations resulting in disruptions of operations or inability
to engage in normal business activities.
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> 18
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Revolving Credit Advances. 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
<PAGE> 19
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.
(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.
<PAGE> 20
(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
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
<PAGE> 21
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
<PAGE> 22
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.
(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,
<PAGE> 23
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 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
<PAGE> 24
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 date
hereof 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, 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
<PAGE> 25
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.
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
<PAGE> 26
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.
(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.
<PAGE> 27
(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
<PAGE> 28
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) 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
<PAGE> 29
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 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
<PAGE> 30
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
<PAGE> 31
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.
(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
<PAGE> 32
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 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
<PAGE> 33
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
<PAGE> 34
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.
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 date hereof (the "Effective Date"), provided that the following
conditions precedent have been satisfied on such date:
(a) There shall have occurred no Material Adverse Change since
December 31, 1997.
(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
<PAGE> 35
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 (i) all accrued fees and expenses
of the Agent and the Lenders with respect to this Agreement, including
fees contemplated in the Information Memorandum, and (ii) all facility
fees accrued under the Original Credit Agreement as of the Effective
Date.
(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> 36
(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 audited 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,
1997.
(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 (or amendments to 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
<PAGE> 37
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 King & Spalding, counsel for
the Agent, 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 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
<PAGE> 38
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.
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.
<PAGE> 39
(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 sheets of the Parent and its
Subsidiaries and of the Borrower and its Subsidiaries as at December
31, 1997, and the related Consolidated statements of income and cash
flows of the Parent and its Subsidiaries and of the Borrower and its
Subsidiaries for the fiscal year then ended, accompanied by opinions of
Deloitte & Touche LLP, independent public accountants, and the
Consolidated balance sheets of the Parent and its Subsidiaries and of
the Borrower and its Subsidiaries as at September 30, 1998, and the
related Consolidated statements of income and cash flows of the Parent
and its Subsidiaries and of the Borrower and its Subsidiaries for the
nine months then ended, duly certified by a Financial Officer of the
Parent, or the Borrower, as the case may be, copies of each of which
have been furnished to each Lender, fairly present, subject in the case
of said balance sheets as at September 30, 1998 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 and of the Borrower and its Subsidiaries, as the case may
be, as at such dates all in accordance with generally accepted
accounting principles consistently applied. Since December 31, 1997,
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,
<PAGE> 40
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.
(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
<PAGE> 41
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 and enforceable in accordance with its terms.
(q) The Parent is reviewing its operations and those of its
Subsidiaries with a view to assessing whether its businesses, or the
business of any of its Subsidiaries, (i) will be vulnerable to a Year
2000 Problem or (ii) will be vulnerable to the effects of a Year 2000
Problem suffered by the Parent's or any of its Subsidiaries' major
counterparties, in the case of clause (ii), as described in the
Parent's Quarterly Report on Form 10-Q for the quarter ended September
30, 1998. The Borrower represents and warrants that it does not believe
that any Year 2000 Problem will impair the Borrower's ability to pay
principal or interest on the Notes in accordance with their terms.
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,
<PAGE> 42
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.
<PAGE> 43
(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;
(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 sheet of the
Borrower and its Consolidated 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, in each case 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 consistent with those applied in the
preparation of the financial statements referred to in Section
4.01;
<PAGE> 44
(iv) as soon as available and in any event within 90 days
after the end of each fiscal year of the Borrower, the
Consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as of the end of such fiscal year and Consolidated
statements of income and cash flows of the Borrower and its
Subsidiaries for such fiscal year, in each case accompanied by an
opinion by Deloitte & Touche LLP or other independent public
accountants acceptable to the Required Lenders;
(v) 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;
(vi) 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;
(vii) 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);
(viii) promptly upon becoming aware of any fact or
circumstance affecting the Parent or any of its Subsidiaries that
would at any time render the Borrower unable to make the
representation and warranty contained in Section 4.01(q) on such
date, a statement of a duly authorized officer of the Borrower
setting forth the details of such fact or circumstance and what
action the Parent or such Subsidiary, as the case may be, has
taken and proposes to take with respect thereto; and
(ix) 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:
<PAGE> 45
(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 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) Liens on the rights of the Borrower under one or more
agreements between the Parent and the Borrower, whereby the Parent
agrees to provide to the Borrower financial support (in the form
of cash or liquid assets) in an aggregate amount no greater than
$1,200,000,000, to the extent that the Borrower is unable to make
timely payment of interest, principal or premium (or expenses or
other obligations related thereto) on any Debt of the Borrower
(other than the Debt hereunder), provided that such Liens are
granted in favor of one or more creditors under such Debt in order
to secure the obligations of the Borrower thereunder, and
<PAGE> 46
(vii) the replacement, extension or renewal of any Lien
permitted by clause (iii), (iv) or (vi) 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
(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
<PAGE> 47
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
<PAGE> 48
(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
(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;
<PAGE> 49
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 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
<PAGE> 50
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
<PAGE> 51
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 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.
<PAGE> 52
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 Two Penns Way, Suite 200, New Castle, Delaware 19720 Attention:
Christian Laughton, with a copy to J. Nicholas McKee, 399 Park Avenue, New York,
New York 10043; 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.
<PAGE> 53
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 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
<PAGE> 54
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 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
<PAGE> 55
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,
<PAGE> 56
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.
(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.
<PAGE> 57
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
Borrower, the Agent and the Lenders may
<PAGE> 58
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
<PAGE> 59
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 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. As of the Effective Date, (i) the
Original Credit Agreement is amended and restated in full as set forth in this
Agreement, (ii) the Commitments (including the Existing Commitments) are
restated as set forth in the signature pages hereof, (iii) the Existing Notes
are cancelled and
<PAGE> 60
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.
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.
<PAGE> 61
SIGNATURE PAGE TO CREDIT AGREEMENT
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 /s/ C.C. Arvani
-------------------------------------
Assistant Treasurer
<PAGE> 62
Commitment Lenders
- -----------------------------------------------
$30,000,000 CITIBANK, N.A.
By /s/ Anita Brickell
-------------------
Managing Director
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 63
$26,250,000 ABN AMRO BANK N.V.
By /s/ Mark R. Lasek
------------------
Group Vice President
By /s/ Robert E. Lee IV
---------------------
Assistant Vice President
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 64
$26,250,000 BARCLAYS BANK PLC
By /s/
---
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 65
$26,250,000 BAYERISCHE LANDESBANK
GIROZENTRALE, CAYMAN
ISLANDS BRANCH
By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 66
$26,250,000 COMERICA BANK
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 67
$26,250,000 DEN DANSKE BANK AKTIESELSKAB
By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 68
$26,250,000 THE FIRST NATIONAL BANK OF
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 69
$20,000,000 THE BANK OF NEW YORK
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 70
$20,000,000 THE BANK OF NOVA SCOTIA
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 71
$20,000,000 THE CHASE MANHATTAN BANK
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 72
$20,000,000 SOCIETE GENERALE, CHICAGO
BRANCH
By
---------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 73
$15,250,000 BW CAPITAL MARKETS, INC.
By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
<PAGE> 74
$15,250,000 BANK HAPOALIM B.N.
By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
<PAGE> 75
$12,000,000 THE INDUSTRIAL BANK OF JAPAN,
By
---------------------------------------
Name:
Title:
<PAGE> 76
$12,000,000 MELLON BANK, N.A.
By
---------------------------------------
Name:
Title:
<PAGE> 77
$12,000,000 MICHIGAN NATIONAL BANK
By
---------------------------------------
Name:
Title:
<PAGE> 78
$12,000,000 PARIBAS
By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
<PAGE> 79
$12,000,000 THE SANWA BANK, LIMITED, CHICAGO
BRANCH
By
---------------------------------------
Name:
Title:
<PAGE> 80
$12,000,000 UNION BANK OF CALIFORNIA, N.A.
By
----------------------------
Name:
Title:
<PAGE> 81
$10,000,000 CIBC, INC.
By
---------------------------------------
Name:
Title:
<PAGE> 82
$10,000,000 THE DAI-ICHI KANGYO BANK, LTD.
By
---------------------------------------
Name:
Title:
<PAGE> 83
$10,000,000 KEYBANK NATIONAL ASSOCIATION
By
---------------------------------------
Name:
Title:
By
---------------------------------------
Name:
Title:
<PAGE> 84
SCHEDULE I
DTE CAPITAL CORPORATION
APPLICABLE LENDING OFFICES
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Name of Initial Lender Domestic Lending Office Eurodollar Lending Office
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Citibank, N.A. Two Penns Way, Suite 200 Same as Domestic Lending Office
New Castle, DE 19720
Attention: Christian Laughton
Telecopier: (302) 894-6120
------------------------------------------------------------------------------------------------------------------
ABN AMRO Bank N.V. 208 South LaSalle, Suite 1500 Same as Domestic Lending Office
Chicago, IL 60604-1003
Attention: Loan Administration
Telecopier: (312) 992-5155
------------------------------------------------------------------------------------------------------------------
Bank Hapoalim B.N. 1177 Avenue of the Americas Same as Domestic Lending Office
New York, New York 10036
Attention: Laura Raffa
Telecopier: (212) 782-2187
------------------------------------------------------------------------------------------------------------------
The Bank of New York One Wall Street Same as Domestic Lending Office
New York, NY 10286
Attention: Lisa Williams
Telecopier: (212) 635-7923
------------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia 600 Peachtree St. N.E., Suite 2700 Same as Domestic Lending Office
Atlanta, GA 30308
Attention: Shannon Dancila
Telecopier: (404) 888-8998
------------------------------------------------------------------------------------------------------------------
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 Same as Domestic Lending Office
Girozentrale New York, NY 10022
Attention: Sean O'Sullivan
Telecopier: (212) 310-9868
------------------------------------------------------------------------------------------------------------------
BW Capital Markets, Inc. 630 Fifth Avenue Same as Domestic Lending Office
Rockefeller Center, Suite 1919
New York, NY 10111
Attention: Thomas Lowe
Telecopier: (212) 218-1810
------------------------------------------------------------------------------------------------------------------
The Chase Manhattan Bank One Chase Manhattan Plaza Same as Domestic Lending Office
Third Floor
New York, NY 10081
Attention: Lynett Lang
Telecopier: (212) 552-5777
------------------------------------------------------------------------------------------------------------------
CIBC, Inc. Two Paces West Same as Domestic Lending Office
2727 Paces Ferry Road, Suite 1200
Atlanta, GA 30339
</TABLE>
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 85
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
Attention: Sheryl Leonard
Telecopier: (770) 319-4950
------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Comerica Bank 500 Woodward Avenue, MC 3268 Same as Domestic Lending Office
Detroit, MI 48226
Attention: Donna Pierzynowski
Telecopier: (313) 222-9514
------------------------------------------------------------------------------------------------------------------
The Dai-Ichi Kangyo 10 S. Wacker Drive, Suite 2600 10 S. Wacker Drive, Suite 2600
Bank, Ltd. Chicago, IL 60606 Chicago, IL 60606
Attention: Bonita Conley Attention: R. Cummings
Telecopier: (312) 876-2011 Telecopier: (312) 876-2011
------------------------------------------------------------------------------------------------------------------
Den Danske Bank 280 Park Avenue, 4th Floor Same as Domestic Lending Office
New York, NY 10017
Attention: Loan Administration
Telecopier: (212) 490-0252
------------------------------------------------------------------------------------------------------------------
The First National Bank One First National Plaza Same as Domestic Lending Office
of Chicago Chicago, IL 60670
Attention: Lynn Pozsgay
Telecopier: (312) 732-3055
------------------------------------------------------------------------------------------------------------------
The Industrial Bank of Japan, 227 West Monroe Street, Suite 2600 Same as Domestic Lending Office
Limited Chicago, IL 60606
Attention: Debbie Sapyta
Telecopier: (312) 855-8200
------------------------------------------------------------------------------------------------------------------
KeyBank National Association 127 Public Square 127 Public Square
Cleveland, OH 44114 Cleveland, OH 44114
Attention: Michael Jackson Attention: Laura Binkley
Telecopier: (216) 689-4981 Telecopier: (216) 689-4981
------------------------------------------------------------------------------------------------------------------
Mellon Bank, N.A. Three Mellon Bank Center, Rm 2332 Same as Domestic Lending Office
Pittsburgh, PA 15259
Attention: Kathy Capp
Telecopier: (412) 234-4644
------------------------------------------------------------------------------------------------------------------
Michigan National Bank 27777 Inkster Road Same as Domestic Lending Office
Dept. 10-64
Farmington Hills, MI 48333-9065
Attention: James Tesen
Telecopier: (248) 473-3577
------------------------------------------------------------------------------------------------------------------
Paribas 787 Seventh Avenue Same as Domestic Lending Office
New York, NY 10019
Attention: Tecla Hurley
Telecopier: (212) 841-2217
------------------------------------------------------------------------------------------------------------------
The Sanwa Bank 10 South Wacker Drive Same as Domestic Lending Office
Chicago, IL 60606
Attention: Richard Ault
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
</TABLE>
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 86
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Union Bank of Energy Capital Services Same as Domestic Lending Office
California, N.A. 445 S. Figueroa Street, 15th Floor
Los Angeles, CA 90071
Attention: Patricia Gonzalez
Telecopier: (213) 236-4096
------------------------------------------------------------------------------------------------------------------
</TABLE>
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 87
Schedule 5.02(a)
Existing Liens
None.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 88
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 Second Amended and Restated Credit
Agreement dated as of January 19, 1999 (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 Two Penns Way, Suite 200, New
Castle, Delaware 19720, Account No. 36852248, Attention: Christian Laughton, 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:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 89
ADVANCES AND PAYMENTS OF PRINCIPAL
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
==============================================================================================================================
Amount of Amount of Principal Unpaid Notation
Date Advance Paid or Prepaid Principal Made By
Balance
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
</TABLE>
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 90
EXHIBIT A-2 - FORM OF
COMPETITIVE BID
PROMISSORY NOTE
U.S.$_______________
Dated: _______________, ____
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 Second Amended and Restated Credit Agreement
dated as of January 19, 1999 (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
_______________, ____ 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:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 91
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 Second
Amended and Restated Credit Agreement, dated as of January 19, 1999 (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
_______________, ____.
(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
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 92
(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:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 93
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 Second
Amended and Restated Credit Agreement, dated as of January 19, 1999 (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;
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 94
(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.
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:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 95
EXHIBIT C - FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Second Amended and Restated Credit Agreement
dated as of January 19, 1999 (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
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 96
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, 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.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 97
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.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 98
Schedule 1
to
Assignment and Acceptance
<TABLE>
<S> <C> <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): _______________, ____
</TABLE>
[NAME OF ASSIGNOR], as
Assignor
By
__________________________________
Title:
Dated: _______________, ____
[NAME OF ASSIGNEE], as
Assignee
By
__________________________________
Title:
Dated: _______________, ____
Domestic Lending Office:
[Address]
Eurodollar Lending Office:
[Address]
(1) This date should be no earlier than five Business Days after the delivery
of this Assignment and Acceptance to the Agent.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 99
Accepted [and Approved](2) this
__________ day of _______________, ____
_________________________, as Agent
By____________________________
Title:
[Approved this __________ day of _______________, ____.]
[NAME OF BORROWER]
By____________________________]**
Title:
(2) Required if the Asignee is an Eligible Asignee solely by reason of clause
(viii) of the definition of "Eligible Asignee".
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 100
EXHIBIT D - FORM OF
DESIGNATION AGREEMENT
Dated _______________, ____
Reference is made to the Second Amended and Restated Credit Agreement
dated as of January 19, 1999 (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
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<PAGE> 101
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.
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): _______________, _____
[NAME OF DESIGNOR],
as Designor
By________________________________________
Title:
[NAME OF DESIGNEE],
as Designee
By________________________________________
Title:
Applicable Lending Office (and address for notices):
[Address]
(3) This date should be no earlier than five Business Days after the delivery
of this Designation Agreement to the Agent.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 102
Accepted this ____ day
of _______________, ____
_________________________, as Agent
By____________________________
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 103
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 Second Amended and Restated Credit Agreement dated as of January 19,
1999 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, 1997, and the related Consolidated statements of income and
cash flows of the Parent and its Subsidiaries for the fiscal year then
ended,
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 104
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, 1998 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, 1998, 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, 1997 there has been no Material
Adverse Change with respect to the Parent.
IN WITNESS WHEREOF, I have signed this certificate this 19th day of
January, 1999.
------------------------------------
[Title:]
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 105
EXHIBIT F - FORM OF SUPPORT
AGREEMENT BETWEEN DTE
COMPANY AND DTE CAPITAL
CORPORATION
THIS SUPPORT AGREEMENT, dated as of January 19, 1999, 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 Second 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 as of January 19, 1999 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. SECTION 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.
1. SECTION 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
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 106
DECO or Subsidiary shall not constitute a lien, security interest or other
charge or encumbrance.
1. SECTION 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 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.
1. SECTION 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.
1. SECTION 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
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 107
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.
1. SECTION 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 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.
1. SECTION 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 ally 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:
(1) 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;
(1) 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.
a) 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
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 108
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:
(1) 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;
(1) 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;
(1) Parent irrevocably authorizes and empowers the Lenders to
demand, sue for, collect and receive any such payment or distribution and to
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
(1) 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.
a) 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).
a) Notwithstanding anything contained in this Section 7, the
Parent shall have the right to loan up to $1,200,000,000 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.
2. SECTION 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:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 109
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
1. SECTION 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.
1. SECTION GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York.
DTE ENERGY COMPANY
By
-------------------------------------
Title:
DTE CAPITAL CORPORATION
By
-------------------------------------
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 110
EXHIBIT G-FORM OF COLLATERAL
ASSIGNMENT AGREEMENT
COLLATERAL ASSIGNMENT AGREEMENT dated as of January 19, 1999, made by
DTE CAPITAL CORPORATION, a Michigan corporation (the "GRANTOR"), to CITIBANK,
N.A. ("CITIBANK"), as agent (the "AGENT") for the banks (the "LENDERS") parties
to the Credit Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
(1) The Lenders and the Agent have entered into a Second Amended and
Restated Credit Agreement dated as of January 19, 1999 (said Agreement, as it
may hereafter be amended or otherwise modified from time to time, being the
"CREDIT AGREEMENT") with the Grantor, as borrower and Salomon Smith Barney Inc.,
as arranger. Terms defined in the Credit Agreement and not otherwise defined
herein are used herein as therein defined.
(2) It is a condition precedent to the making of Advances by the
Lenders under the Credit Agreement that the Grantor shall have granted the
assignment and security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Advances under the Credit Agreement, the Grantor hereby
agrees with the Agent for its benefit and the ratable benefit of the Lenders as
follows:
1. SECTION COLLATERAL ASSIGNMENT. The Grantor hereby assigns to the
Agent for its benefit and the ratable benefit of the Lenders, and hereby grants
to the Agent for its benefit and the ratable benefit of the Lenders a security
interest in, all of the Grantor's right, title and interest in and to the
following (the "COLLATERAL"): the Support Agreement as it may be amended or
otherwise modified from time to time (the "ASSIGNED AGREEMENT"), including,
without limitation, (i) all rights of the Grantor to receive moneys due and to
become due under or pursuant to the Assigned Agreement, (ii) all rights of the
Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Assigned Agreement, (iii) claims of the Grantor for damages
arising out of or for breach of or default under the Assigned Agreement, (iv)
the right of the Grantor to terminate the Assigned Agreement, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder, and (iv) all proceeds of any and all of the foregoing Collateral.
1. SECTION SECURITY FOR OBLIGATIONS. This Agreement secures the
payment of all obligations of the Borrower now or hereafter existing under the
Credit Agreement and the Notes, whether for principal, interest, fees, expenses
or otherwise, and all obligations of the Grantor now or hereafter existing under
this Agreement (all such obligations of the Borrower and the Grantor being the
"OBLIGATIONS"). Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Obligations and
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<PAGE> 111
would be owed by the Borrower to the Agent or the Lenders under the Credit
Agreement and the Notes but for the fact that they are unenforceable or not
allowable due to the existence of a bankruptcy, reorganization or similar
proceeding involving the Borrower.
1. SECTION GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Agent of any of the
rights hereunder shall not release the Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) neither the Agent nor any Bank shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Agent or any Bank be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
1. SECTION REPRESENTATIONS AND WARRANTIES. The Grantor represents and
warrants as follows:
a) The Assigned Agreement, a true and complete copy of which has
been furnished to each Bank, has been duly authorized, executed and delivered by
all parties thereto, has not been amended or otherwise modified except as
permitted by Section 7, is in full force and effect and is binding upon and
enforceable against all parties thereto in accordance with its terms. There
exists no default under the Assigned Agreement by any party thereto.
a) The chief place of business and chief executive office of the
Grantor and the office where the Grantor keeps its records concerning the
Collateral are located at its address specified in Section 15. None of the
Collateral is evidenced by a promissory note or other instrument (it being
understood that the Assigned Agreement does not constitute a promissory note or
other instrument).
a) The Grantor is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or other charge
or encumbrance except for the security interest created by this Agreement. No
effective financing statement or other document similar in effect covering all
or any part of the Collateral is on file in any recording office, except such as
may have been filed in favor of the Agent relating to this Agreement. The
Grantor has no trade names.
a) This Agreement creates a valid and perfected first priority
security interest in the Collateral, securing the payment of the Obligations,
and all filings and other actions necessary or desirable to perfect and protect
such security interest have been duly taken.
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<PAGE> 112
a) No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required (i) for the grant by the
Grantor of the assignment and security interest granted hereby or for the
execution, delivery or performance of this Agreement by the Grantor, (ii) for
the perfection or maintenance of the assignment and security interest created
hereby (including the first priority nature of such assignment and security
interest) or (iii) for the exercise by the Agent of its rights and remedies
hereunder.
a) There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived.
a) The Grantor has, independently and without reliance upon the
Agent or any Bank and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.
a) SECTION FURTHER ASSURANCES. The Grantor agrees that from time
to time, at the expense of the Grantor, the Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Agent may reasonably request, in
order to perfect and protect the assignment and security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Grantor will execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Agent may
reasonably request, in order to perfect and preserve the assignment and security
interest granted or purported to be granted hereby.
a) The Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Grantor where permitted
by law. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
1. SECTION PLACE OF PERFECTION; RECORDS. The Grantor shall keep its
chief place of business and chief executive office and the office where it keeps
its records concerning the Collateral at the location therefor specified in
Section 4(b) or, upon 30 days' prior written notice to the Agent, at any other
locations in a jurisdiction where all action required by Section 5 shall have
been taken with respect to the Collateral. The Grantor will hold and preserve
such records and will permit representatives of the Agent at any time during
normal business hours to inspect and make abstracts from such records.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 113
a) SECTION AS TO THE ASSIGNED AGREEMENT. The Grantor shall at its
expense:
(1) perform and observe all the terms and provisions of the
Assigned Agreement to be performed or observed by it, maintain the Assigned
Agreement in full force and effect, enforce the Assigned Agreement in accordance
with its terms, and take all such action to such end as may be from time to time
reasonably requested by the Agent.
(1) furnish to the Agent promptly upon receipt thereof copies of
all notices, requests and other documents received by the Grantor under or
pursuant to the Assigned Agreement, and from time to time (A) furnish to the
Agent such information and reports regarding the Collateral as the Agent may
reasonably request and (B) upon request of the Agent make to any other party to
the Assigned Agreement such demands and requests for information and reports or
for action as the Grantor is entitled to make thereunder.
a) The Grantor shall not:
(1) sell, assign (by operation of law or otherwise) or otherwise
dispose of, or grant any option with respect to, any of the Collateral, or
create or permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
assignment and security interest under this Agreement;
(1) cancel or terminate the Assigned Agreement or consent to or
accept any cancellation or termination thereof;
(1) amend or otherwise modify the Assigned Agreement or give any
consent, waiver or approval thereunder; or
(1) waive any default under or breach of the Assigned Agreement;
or
(1) take any other action in connection with the Assigned
Agreement which would impair the value of the interest or rights of the Grantor
thereunder or which would impair the interest or rights of the Agent.
a) SECTION PAYMENTS UNDER THE ASSIGNED AGREEMENT. The Grantor agrees,
and has effectively so instructed the Parent that upon the occurrence and during
the continuance of an Event of Default, all payments due or to become due under
or in connection with the Assigned Agreement shall be made directly to the Agent
at its address set forth in Section 15.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 114
a) Except as set forth in Section 12, all moneys received or
collected pursuant to subsection (a) above shall be applied to all or any part
of the Obligations as the Agent may elect.
1. SECTION AGENT APPOINTED ATTORNEY-IN-FACT. The Grantor hereby
appoints the Agent the Grantor's attorney-in-fact, with full authority in the
place and stead of the Grantor and in the name of the Grantor or otherwise, from
time to time in the Agent's discretion to take any action and to execute any
instrument which the Agent may deem necessary or advisable to accomplish the
purposes of this Agreement, including, without limitation:
a) to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become due under
or in connection with the Collateral,
a) to receive, indorse and collect any drafts or other
instruments or documents in connection therewith, and
a) to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the collection
of any of the Collateral or otherwise to enforce compliance with the terms and
conditions of the Assigned Agreement or the rights of the Agent with respect to
any of the Collateral.
1. SECTION AGENT MAY PERFORM. If the Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by the Grantor under Section 13(b).
1. SECTION THE AGENT'S DUTIES. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Agent shall have no duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against any parties
or any other rights pertaining to any Collateral. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which Citibank accords its own property.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 115
1. SECTION REMEDIES. If any Event of Default shall have occurred and
be continuing:
a) The Agent may exercise any and all rights and remedies of the
Grantor under or in connection with the Assigned Agreement or otherwise in
respect of the Collateral, including, without limitation, any and all rights of
the Grantor to demand or otherwise require payment of any amount under, or
performance of any provision of, the Assigned Agreement.
a) All payments received by the Grantor under or in connection
with the Assigned Agreement or otherwise in respect of the Collateral shall be
received in trust for the benefit of the Agent, shall be segregated from other
funds of the Grantor and shall be forthwith paid over to the Agent in the same
form as so received (with any necessary indorsement).
a) All payments made under or in connection with the Assigned
Agreement or otherwise in respect of the Collateral, and all cash proceeds in
respect of any sale of, collection from, or other realization upon all or any
part of the Collateral, received by the Agent may, in the discretion of the
Agent, be held by the Agent as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to the Agent pursuant
to Section 13) in whole or in part by the Agent for the ratable benefit of the
Lenders against, all or any part of the Obligations in such order as the Agent
shall elect. Any surplus of such payments or cash proceeds held by the Agent and
remaining after payment in full of all the Obligations shall be paid over to the
Grantor or to whomsoever may be lawfully entitled to receive such surplus.
a) The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise available
to it, all the rights and remedies of a secured party on default under the
Uniform Commercial Code in effect in the State of New York at that time (the
"CODE") (whether or not the Code applies to the affected Collateral).
a) SECTION INDEMNITY AND EXPENSES. The Grantor agrees to indemnify
the Agent from and against any and all claims, losses and liabilities (including
reasonable attorneys' fees) growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from the Agent's gross negligence or willful
misconduct.
a) The Grantor will upon demand pay to the Agent the amount of
any and all reasonable expenses, including the reasonable fees and expenses of
its counsel and of any experts and agents, which the Agent may incur in
connection with (i) the administration of this Agreement, (ii) the custody or
preservation of, or the sale of, collection from or other realization upon, any
of the Collateral, (iii) the exercise or
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 116
enforcement of any of the rights of the Agent or the Lenders hereunder or (iv)
the failure by the Grantor to perform or observe any of the provisions hereof.
1. SECTION AMENDMENTS; ETC. No amendment or waiver of any provision
of this Agreement, and no consent to any departure by the Grantor herefrom shall
in any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
1. SECTION ADDRESSES FOR NOTICES. All notices and other
communications provided for hereunder shall be in writing (including telecopier,
telegraphic, telex or cable communication) and mailed, telecopied, telegraphed,
telexed, cabled or delivered to it, if to the Grantor, at its address at 2000
Second Avenue, Detroit, MI 48226, Attention: Christopher Arvani, and if to the
Agent, at its address specified in the Credit Agreement, or, as to either party,
at such other address as shall be designated by such party in a written notice
to the other party. All such notices and other communications shall, when
mailed, telecopied, telegraphed, telexed or cabled, be effective when deposited
in the mails, telecopied, delivered to the telegraph company, confirmed by telex
answerback or delivered to the cable company, respectively.
1. SECTION CONTINUING ASSIGNMENT AND SECURITY INTEREST; ASSIGNMENTS
UNDER CREDIT AGREEMENT. This Agreement shall create a continuing assignment of
and security interest in the Collateral and shall (i) remain in full force and
effect until the later of (x) the payment in full of the Obligations and all
other amounts payable under this Agreement and (y) the expiration or termination
of the Commitments, (ii) be binding upon the Grantor, its successors and
assigns, and (iii) inure, together with the rights and remedies of the Agent
hereunder, to the benefit of the Agent, the Lenders and their respective
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), any Bank may assign or otherwise transfer all or any
portion of its rights and obligations under the Credit Agreement (including,
without limitation, all or any portion of its Commitment, the Advances owing to
it and any Note held by it) held by it to any other person or entity, and such
other person or entity shall thereupon become vested with all the benefits in
respect thereof granted to such Bank herein or otherwise, subject, however, to
the provisions of Article VI (concerning the Agent) of the Credit Agreement.
Upon the later of the payment in full of the Obligations and all other amounts
payable under this Agreement and the expiration or termination of the
Commitments, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Agent will, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination.
1. SECTION GOVERNING LAW; TERMS. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, except to
the extent that the validity or perfection of the assignment and security
interest hereunder, or remedies hereunder, in respect of any particular
Collateral are governed by the laws
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 117
of a jurisdiction other than the State of New York. Unless otherwise defined
herein or in the Credit Agreement, terms used in Article 9 of the Code are used
herein as therein defined.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
DTE CAPITAL CORPORATION
By
------------------------------------------
Name:
Title:
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 118
EXHIBIT H - FORM OF
OPINION OF COUNSEL TO THE LOAN PARTIES
[Date]
To each of the Lenders parties
to the Second Amended and
Restated Credit Agreement
dated as of January __, 1999
among DTE Capital Corporation,
said Lenders and Citibank, N.A.
as Agent, with Salomon Smith Barney
Inc. as Arranger
DTE Capital Corporation
Ladies and Gentlemen:
This opinion is furnished to you pursuant to Section 3.01(h)(vii) of
the Second Amended and Restated Credit Agreement, dated as of January __, 1999
(the "CREDIT AGREEMENT"), among DTE Capital Corporation (the "BORROWER"), the
Lenders parties thereto and Citibank, N.A., as Agent for said Lenders, with
Salomon Smith Barney Inc. as Arranger. Terms defined in the Credit Agreement are
used herein as therein defined.
I am General Counsel for each Loan Party, and have acted in that
capacity in connection with the preparation, execution and delivery of the Loan
Documents.
In that connection, I, in conjunction with the members of my staff,
have examined:
(i) Each Loan Document, executed by each of the parties thereto.
(i) The other documents furnished by the Borrower pursuant to
Article III of the Credit Agreement.
(i) The Articles of Incorporation of each Loan Party and all
amendments thereto (the "CHARTERS").
(i) The By-Laws of each Loan Party and all amendments thereto
(the "BY-LAWS").
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 119
(i) Certificates from the State of Michigan attesting to the
continued corporate existence and good standing of each Loan Party in that
State.
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 120
To each of the Lenders parties
to the Second Amended and
Restated Credit Agreement
dated as of January __, 1999
among DTE Capital Corporation,
said Lenders and Citibank, N.A.
as Agent, with Salomon Smith Barney
Inc. as Arranger
(ii) Acknowledgment copies or stamped receipt copies of the UCC-1
financial statement filed by the Agent in connection with the Original Credit
Agreement and any amendments thereto (the "UCC FILINGS") under the Uniform
Commercial Code as in effect the State of Michigan (the "UCC"), naming the
Borrower as debtor and the Agent as secured party, which UCC Filings have been
filed in the filing offices listed in Schedule 1 hereto.
I have also examined the originals, or copies certified to my satisfaction, of
the documents listed in a certificate of a Financial Officer of each Loan Party,
dated the date hereof (the "CERTIFICATES"), certifying that the documents listed
in such certificate are all of the indentures, loan or credit agreements,
leases, guarantees, mortgages, security agreements, bonds, notes and other
agreements or instruments, and all of the orders, writs, judgments, awards,
injunctions and decrees, that affect or purport to affect the Borrower's right
to borrow money or any Loan Party's obligations under the Loan Documents to
which it is party. In addition, I have examined the originals, copies certified
to my satisfaction, of such other corporate records of each Loan Party,
certificates of public officials and of officers of each Loan Party, and
agreements, instruments and other documents, as we have deemed necessary as a
basis for the opinions expressed below. As to questions of fact material to such
opinions, I have, when relevant facts were not independently established by me,
relied upon certificates of public officials. I have assumed the due execution
and delivery, pursuant to due authorization, of the Credit Agreement by the
Initial Lenders and the Agent.
My opinions expressed below are limited to the law of the State of
Michigan and the federal law of the United States.
Based upon the foregoing and upon such investigation as I have deemed
necessary, I am of the following opinion:
1. Each Loan Party is a corporation duly organized, validly
existing and in good standing under the laws of the State of Michigan.
1. The execution, delivery and performance by each Loan Party of
the Loan Documents to which it is party, and the consummation of the
transactions contemplated thereby, are within such Loan Party's corporate
powers, have been duly authorized by all necessary corporate action, and do not
contravene (i) the Charters or the By-Laws of such Loan Party or (ii) any law,
rule or regulation applicable to such Loan Party (including, without limitation,
Regulation X of the Board of Governors of
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 121
To each of the Lenders parties
to the Second Amended and
Restated Credit Agreement
dated as of January __, 1999
among DTE Capital Corporation,
said Lenders and Citibank, N.A.
as Agent, with Salomon Smith Barney
Inc. as Arranger
the Federal Reserve System) or (iii) any contractual or legal restriction
contained in any document listed in the Certificates or, to the best of my
knowledge (after due inquiry), contained in any other similar document.
1. No authorization, 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 (i) the due execution, delivery, recordation, filing
or performance by the Loan Parties of the Loan Documents to which each is a
party, and (ii) the grant by the Borrower of the security interest granted by it
pursuant to the Assignment Agreement.
1. Each Loan Document has been duly executed and delivered on
behalf of each Loan Party thereto.
1. Except as may have been disclosed to you in the SEC Reports,
to the best of my knowledge (after due inquiry) there are no pending or overtly
threatened actions or proceedings affecting any Loan Party or any of their
Subsidiaries before any court, governmental agency or arbitrator that (i) could
be reasonably likely to have a Material Adverse Effect or (ii) purport to affect
the legality, validity, binding effect or enforceability of any Loan Documents
or the consummation of the transactions contemplated thereby.
1. If, despite the provisions of Section 8.09 of the Credit
Agreement, Section 17 of the Collateral Assignment Agreement and Section 10 of
the Support Agreement wherein the parties thereto agree that the Loan Documents
shall be governed by, and construed in accordance with, the laws of the State of
New York, a court of the State of Michigan or a federal court sitting in the
State of Michigan were to hold that the Loan Documents are governed by, and to
be construed in accordance with the laws of the State of Michigan, the Loan
Documents would be, under the laws of the State of Michigan, legal, valid and
binding obligations of each Loan Party thereto enforceable against such Loan
Party in accordance with their respective terms.
1. The Collateral Assignment Agreement creates a valid first
priority security interest in the Assigned Rights, securing the payment of the
Obligations. The UCC Filings are in appropriate form and have been filed
pursuant to the UCC, resulting in the perfection of such security interest in
the Assigned Rights.
1. Neither the Borrower nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or "principal
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 122
To each of the Lenders parties
to the Second Amended and
Restated Credit Agreement
dated as of January __, 1999
among DTE Capital Corporation,
said Lenders and Citibank, N.A.
as Agent, with Salomon Smith Barney
Inc. as Arranger
underwriter" for, an "investment company," as such terms are defined in the
Investment Company Act of 1940, as amended; the Parent is an exempt holding
company pursuant to the provisions of Rule 2 of the rules and regulations
promulgated pursuant to the Public Utility Holding Company Act of 1935, as
amended.
The opinions set forth above are subject to the following
qualifications:
a) Our opinion in paragraph 6 above as to enforceability is
subject to the effect of any applicable bankruptcy, insolvency (including,
without limitation, all laws relating to fraudulent transfers), reorganization,
moratorium or similar law affecting creditors' rights generally.
a) Our opinion in paragraph 6 above as to enforceability is
subject to the effect of general principles of equity, including, without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether considered in a proceeding in equity or at law).
a) We express no opinion as to participation and the effect of
the law of any jurisdiction other than the State of Michigan wherein any Lender
may be located or wherein enforcement of the Loan Documents may be sought that
limits the rates of interest legally chargeable or collectible.
Very truly yours,
SIGNATURE PAGE TO CREDIT AGREEMENT
<PAGE> 123
EXECUTION COPY
COLLATERAL ASSIGNMENT AGREEMENT
COLLATERAL ASSIGNMENT AGREEMENT dated as of January 19, 1999, made by
DTE CAPITAL CORPORATION, a Michigan corporation (the "GRANTOR"), to CITIBANK,
N.A. ("CITIBANK"), as agent (the "AGENT") for the banks (the "LENDERS") parties
to the Credit Agreement (as hereinafter defined).
PRELIMINARY STATEMENTS
(1) The Lenders and the Agent have entered into a Second Amended and
Restated Credit Agreement dated as of January 19, 1999 (said Agreement, as it
may hereafter be amended or otherwise modified from time to time, being the
"CREDIT AGREEMENT") with the Grantor, as borrower and Salomon Smith Barney Inc.,
as arranger. Terms defined in the Credit Agreement and not otherwise defined
herein are used herein as therein defined.
(2) It is a condition precedent to the making of Advances by the
Lenders under the Credit Agreement that the Grantor shall have granted the
assignment and security interest contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and in order to induce
the Lenders to make Advances under the Credit Agreement, the Grantor hereby
agrees with the Agent for its benefit and the ratable benefit of the Lenders as
follows:
SECTION . COLLATERAL ASSIGNMENT. The Grantor hereby assigns to the
Agent for its benefit and the ratable benefit of the Lenders, and hereby grants
to the Agent for its benefit and the ratable benefit of the Lenders a security
interest in, all of the Grantor's right, title and interest in and to the
following (the "COLLATERAL"): the Support Agreement as it may be amended or
otherwise modified from time to time (the "ASSIGNED AGREEMENT"), including,
without limitation, (i) all rights of the Grantor to receive moneys due and to
become due under or pursuant to the Assigned Agreement, (ii) all rights of the
Grantor to receive proceeds of any insurance, indemnity, warranty or guaranty
with respect to the Assigned Agreement, (iii) claims of the Grantor for damages
arising out of or for breach of or default under the Assigned Agreement, (iv)
the right of the Grantor to terminate the Assigned Agreement, to perform
thereunder and to compel performance and otherwise exercise all remedies
thereunder, and (iv) all proceeds of any and all of the foregoing Collateral.
SECTION . SECURITY FOR OBLIGATIONS. This Agreement secures the payment
of all obligations of the Borrower now or hereafter existing under the Credit
Agreement and the Notes, whether for principal, interest, fees, expenses or
otherwise, and all obligations of the Grantor now or hereafter existing under
this Agreement (all such obligations of the Borrower and the Grantor being the
"OBLIGATIONS"). Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Obligations and
would be owed by the Borrower to the Agent or the Lenders under the Credit
Agreement and the Notes but for the fact that
<PAGE> 124
they are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Borrower.
SECTION . GRANTOR REMAINS LIABLE. Anything herein to the contrary
notwithstanding, (a) the Grantor shall remain liable under the contracts and
agreements included in the Collateral to the extent set forth therein to perform
all of its duties and obligations thereunder to the same extent as if this
Agreement had not been executed, (b) the exercise by the Agent of any of the
rights hereunder shall not release the Grantor from any of its duties or
obligations under the contracts and agreements included in the Collateral, and
(c) neither the Agent nor any Bank shall have any obligation or liability under
the contracts and agreements included in the Collateral by reason of this
Agreement, nor shall the Agent or any Bank be obligated to perform any of the
obligations or duties of the Grantor thereunder or to take any action to collect
or enforce any claim for payment assigned hereunder.
SECTION . REPRESENTATIONS AND WARRANTIES. The Grantor represents and
warrants as follows:
() The Assigned Agreement, a true and complete copy of which
has been furnished to each Bank, has been duly authorized, executed and
delivered by all parties thereto, has not been amended or otherwise
modified except as permitted by Section 7, is in full force and effect
and is binding upon and enforceable against all parties thereto in
accordance with its terms. There exists no default under the Assigned
Agreement by any party thereto.
() The chief place of business and chief executive office of
the Grantor and the office where the Grantor keeps its records
concerning the Collateral are located at its address specified in
Section 15. None of the Collateral is evidenced by a promissory note or
other instrument (it being understood that the Assigned Agreement does
not constitute a promissory note or other instrument).
() The Grantor is the legal and beneficial owner of the
Collateral free and clear of any lien, security interest, option or
other charge or encumbrance except for the security interest created by
this Agreement. No effective financing statement or other document
similar in effect covering all or any part of the Collateral is on file
in any recording office, except such as may have been filed in favor of
the Agent relating to this Agreement. The Grantor has no trade names.
() This Agreement creates a valid and perfected first priority
security interest in the Collateral, securing the payment of the
Obligations, and all filings and other actions necessary or desirable
to perfect and protect such security interest have been duly taken.
() No consent of any other person or entity and no
authorization, approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body is required () for
the grant by the Grantor of the assignment and security interest
granted hereby or for the execution, delivery or performance of this
Agreement by the Grantor, () for the
<PAGE> 125
perfection or maintenance of the assignment and security interest
created hereby (including the first priority nature of such assignment
and security interest) or () for the exercise by the Agent of its
rights and remedies hereunder.
() There are no conditions precedent to the effectiveness of
this Agreement that have not been satisfied or waived.
() The Grantor has, independently and without reliance upon
the Agent or any Bank and based on such documents and information as it
has deemed appropriate, made its own credit analysis and decision to
enter into this Agreement.
SECTION . FURTHER ASSURANCES. () The Grantor agrees that from time to
time, at the expense of the Grantor, the Grantor will promptly execute and
deliver all further instruments and documents, and take all further action, that
may be necessary or desirable, or that the Agent may reasonably request, in
order to perfect and protect the assignment and security interest granted or
purported to be granted hereby or to enable the Agent to exercise and enforce
its rights and remedies hereunder with respect to any Collateral. Without
limiting the generality of the foregoing, the Grantor will execute and file such
financing or continuation statements, or amendments thereto, and such other
instruments or notices, as may be necessary or desirable, or as the Agent may
reasonably request, in order to perfect and preserve the assignment and security
interest granted or purported to be granted hereby.
() The Grantor hereby authorizes the Agent to file one or more
financing or continuation statements, and amendments thereto, relating to all or
any part of the Collateral without the signature of the Grantor where permitted
by law. A photocopy or other reproduction of this Agreement or any financing
statement covering the Collateral or any part thereof shall be sufficient as a
financing statement where permitted by law.
SECTION . PLACE OF PERFECTION; RECORDS. The Grantor shall keep its
chief place of business and chief executive office and the office where it keeps
its records concerning the Collateral at the location therefor specified in
Section 4(b) or, upon 30 days' prior written notice to the Agent, at any other
locations in a jurisdiction where all action required by Section 5 shall have
been taken with respect to the Collateral. The Grantor will hold and preserve
such records and will permit representatives of the Agent at any time during
normal business hours to inspect and make abstracts from such records.
SECTION . AS TO THE ASSIGNED AGREEMENT. () The Grantor shall at its
expense:
() perform and observe all the terms and provisions of the
Assigned Agreement to be performed or observed by it, maintain the
Assigned Agreement in full force and effect, enforce the Assigned
Agreement in accordance with its terms, and take all such action to
such end as may be from time to time reasonably requested by the Agent.
<PAGE> 126
() furnish to the Agent promptly upon receipt thereof copies
of all notices, requests and other documents received by the Grantor
under or pursuant to the Assigned Agreement, and from time to time (A)
furnish to the Agent such information and reports regarding the
Collateral as the Agent may reasonably request and (B) upon request of
the Agent make to any other party to the Assigned Agreement such
demands and requests for information and reports or for action as the
Grantor is entitled to make thereunder.
() The Grantor shall not:
() sell, assign (by operation of law or otherwise) or
otherwise dispose of, or grant any option with respect to, any of the
Collateral, or create or permit to exist any lien, security interest,
option or other charge or encumbrance upon or with respect to any of
the Collateral, except for the assignment and security interest under
this Agreement;
() cancel or terminate the Assigned Agreement or consent to or
accept any cancellation or termination thereof;
() amend or otherwise modify the Assigned Agreement or give
any consent, waiver or approval thereunder; or
() waive any default under or breach of the Assigned
Agreement; or
() take any other action in connection with the Assigned
Agreement which would impair the value of the interest or rights of the
Grantor thereunder or which would impair the interest or rights of the
Agent.
SECTION . PAYMENTS UNDER THE ASSIGNED AGREEMENT. () The Grantor agrees,
and has effectively so instructed the Parent that upon the occurrence and during
the continuance of an Event of Default, all payments due or to become due under
or in connection with the Assigned Agreement shall be made directly to the Agent
at its address set forth in Section 15.
() Except as set forth in Section 12, all moneys received or collected
pursuant to subsection (a) above shall be applied to all or any part of the
Obligations as the Agent may elect.
SECTION . AGENT APPOINTED ATTORNEY-IN-FACT. The Grantor hereby appoints
the Agent the Grantor's attorney-in-fact, with full authority in the place and
stead of the Grantor and in the name of the Grantor or otherwise, from time to
time in the Agent's discretion to take any action and to execute any instrument
which the Agent may deem necessary or advisable to accomplish the purposes of
this Agreement, including, without limitation:
() to ask, demand, collect, sue for, recover, compromise,
receive and give acquittance and receipts for moneys due and to become
due under or in connection with the Collateral,
() to receive, indorse and collect any drafts or other
instruments or documents in connection therewith, and
<PAGE> 127
() to file any claims or take any action or institute any
proceedings which the Agent may deem necessary or desirable for the
collection of any of the Collateral or otherwise to enforce compliance
with the terms and conditions of the Assigned Agreement or the rights
of the Agent with respect to any of the Collateral.
SECTION . AGENT MAY PERFORM. If the Grantor fails to perform any
agreement contained herein, the Agent may itself perform, or cause performance
of, such agreement, and the expenses of the Agent incurred in connection
therewith shall be payable by the Grantor under Section 13(b).
SECTION . THE AGENT'S DUTIES. The powers conferred on the Agent
hereunder are solely to protect its interest in the Collateral and shall not
impose any duty upon it to exercise any such powers. Except for the safe custody
of any Collateral in its possession and the accounting for moneys actually
received by it hereunder, the Agent shall have no duty as to any Collateral or
as to the taking of any necessary steps to preserve rights against any parties
or any other rights pertaining to any Collateral. The Agent shall be deemed to
have exercised reasonable care in the custody and preservation of any Collateral
in its possession if such Collateral is accorded treatment substantially equal
to that which Citibank accords its own property.
SECTION . REMEDIES. If any Event of Default shall have occurred and be
continuing:
() The Agent may exercise any and all rights and remedies of
the Grantor under or in connection with the Assigned Agreement or
otherwise in respect of the Collateral, including, without limitation,
any and all rights of the Grantor to demand or otherwise require
payment of any amount under, or performance of any provision of, the
Assigned Agreement.
() All payments received by the Grantor under or in connection
with the Assigned Agreement or otherwise in respect of the Collateral
shall be received in trust for the benefit of the Agent, shall be
segregated from other funds of the Grantor and shall be forthwith paid
over to the Agent in the same form as so received (with any necessary
indorsement).
() All payments made under or in connection with the Assigned
Agreement or otherwise in respect of the Collateral, and all cash
proceeds in respect of any sale of, collection from, or other
realization upon all or any part of the Collateral, received by the
Agent may, in the discretion of the Agent, be held by the Agent as
collateral for, and/or then or at any time thereafter applied (after
payment of any amounts payable to the Agent pursuant to Section 13) in
whole or in part by the Agent for the ratable benefit of the Lenders
against, all or any part of the Obligations in such order as the Agent
shall elect. Any surplus of such payments or cash proceeds held by the
Agent and remaining after payment in full of all the Obligations shall
be paid over to the Grantor or to whomsoever may be lawfully entitled
to receive such surplus.
() The Agent may exercise in respect of the Collateral, in
addition to other rights and remedies provided for herein or otherwise
available to it, all the rights and remedies of a secured party on
default under the Uniform Commercial Code in effect in the State of New
York at that time (the "CODE") (whether or not the Code applies to the
affected Collateral).
<PAGE> 128
SECTION . INDEMNITY AND EXPENSES. () The Grantor agrees to indemnify
the Agent from and against any and all claims, losses and liabilities (including
reasonable attorneys' fees) growing out of or resulting from this Agreement
(including, without limitation, enforcement of this Agreement), except claims,
losses or liabilities resulting from the Agent's gross negligence or willful
misconduct.
() The Grantor will upon demand pay to the Agent the amount of any and
all reasonable expenses, including the reasonable fees and expenses of its
counsel and of any experts and agents, which the Agent may incur in connection
with () the administration of this Agreement, () the custody or preservation of,
or the sale of, collection from or other realization upon, any of the
Collateral, () the exercise or enforcement of any of the rights of the Agent or
the Lenders hereunder or () the failure by the Grantor to perform or observe any
of the provisions hereof.
SECTION . AMENDMENTS; ETC. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Grantor herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Agent, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION . ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including telecopier, telegraphic,
telex or cable communication) and mailed, telecopied, telegraphed, telexed,
cabled or delivered to it, if to the Grantor, at its address at 2000 Second
Avenue, Detroit, MI 48226, Attention: Christopher Arvani, and if to the Agent,
at its address specified in the Credit Agreement, or, as to either party, at
such other address as shall be designated by such party in a written notice to
the other party. All such notices and other communications shall, when mailed,
telecopied, telegraphed, telexed or cabled, be effective when deposited in the
mails, telecopied, delivered to the telegraph company, confirmed by telex
answerback or delivered to the cable company, respectively.
SECTION . CONTINUING ASSIGNMENT AND SECURITY INTEREST; ASSIGNMENTS
UNDER CREDIT AGREEMENT. This Agreement shall create a continuing assignment of
and security interest in the Collateral and shall () remain in full force and
effect until the later of (x) the payment in full of the Obligations and all
other amounts payable under this Agreement and (y) the expiration or termination
of the Commitments, () be binding upon the Grantor, its successors and assigns,
and () inure, together with the rights and remedies of the Agent hereunder, to
the benefit of the Agent, the Lenders and their respective successors,
transferees and assigns. Without limiting the generality of the foregoing clause
(iii), any Bank may assign or otherwise transfer all or any portion of its
rights and obligations under the Credit Agreement (including, without
limitation, all or any portion of its Commitment, the Advances owing to it and
any Note held by it) held by it to any other person or entity, and such other
person or entity shall thereupon become vested with all the benefits in respect
thereof granted to such Bank herein or otherwise, subject, however, to the
provisions of Article VI (concerning the Agent) of the Credit Agreement. Upon
the later of the payment in full of the Obligations and all other amounts
payable under this Agreement and the expiration or termination of the
Commitments, the security interest granted hereby shall terminate and all rights
to the Collateral shall revert to the Grantor. Upon any such termination, the
Agent
<PAGE> 129
will, at the Grantor's expense, execute and deliver to the Grantor such
documents as the Grantor shall reasonably request to evidence such termination.
SECTION . GOVERNING LAW; TERMS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that the validity or perfection of the assignment and security interest
hereunder, or remedies hereunder, in respect of any particular Collateral are
governed by the laws of a jurisdiction other than the State of New York. Unless
otherwise defined herein or in the Credit Agreement, terms used in Article 9 of
the Code are used herein as therein defined.
IN WITNESS WHEREOF, the Grantor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
DTE CAPITAL CORPORATION
By /s/ C.C. Arvani
--------------------------
Assistant Treasurer
