EX-1.2 3 k63078ex1-2.txt FORM OF DISTRIBUTION AGREEMENT 1 EXHIBIT 1.2 THE DETROIT EDISON COMPANY $__________________ Secured Medium-Term Notes, Series __ Due Not Less than Two Years from Date of Issue FORM OF DISTRIBUTION AGREEMENT _______________, [Names and addresses of Agents] Dear Sirs: The Detroit Edison Company, a Michigan corporation (the "Company"), confirms its agreement with you with respect to the issue and sale from time to time by the Company of up to $_____________ aggregate initial public offering price of its Secured Medium-Term Notes, Series _, due not less than two years from date of issue (the "Notes"). The Notes are to be issued under and secured by the Mortgage and Deed of Trust dated as of October 1, 1924 between the Company and First Chicago Trust Company of New York, as successor trustee (the "Trustee"), as amended and supplemented by various Supplemental Indentures and as to be further amended and supplemented by a Supplemental Indenture to be dated as of____________, creating the Notes (the "Mortgage"). Reference is hereby made to the Mortgage for full and complete statements of the provisions thereof, including the definitions of certain terms used, and for other information with respect to the Notes. The Notes will have the maturities, interest rates, redemption provisions, if any, and other terms as set forth in supplements to the Basic Prospectus referred to below. Subject to the terms and conditions stated herein and subject to the reservation by the Company of the right to sell Notes directly to investors (other than broker-dealers) on its own behalf, the Company hereby appoints you as its exclusive agents for the purpose of soliciting and receiving offers to purchase Notes from the Company by others and, on the basis of the representations and warranties herein contained, but subject to the terms and 2 conditions herein set forth, you agree to use reasonable efforts to solicit and receive offers to purchase Notes upon terms acceptable to the Company at such times and in such amounts as the Company shall from time to time specify. In addition, you may also purchase Notes as principal pursuant to the terms of a Terms Agreement relating to such sale (a "Terms Agreement") in accordance with the provisions of Section 2(b) hereof. The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement, including a prospectus, relating to the Notes. Such registration statement, including the exhibits thereto, as amended at the Commencement Date (as hereinafter defined), is hereinafter referred to as the "Registration Statement." The Company proposes to file with the Commission from time to time, pursuant to Rule 424 under the Securities Act of 1933, as amended (the "Securities Act"), supplements to the prospectus included in the Registration Statement that will describe certain terms of the Notes. The prospectus in the form in which it appears in the Registration Statement is hereinafter referred to as the "Basic Prospectus." The term "Prospectus" means the Basic Prospectus together with the prospectus supplement or supplements (each a "Prospectus Supplement") specifically relating to Notes, as filed with, or transmitted for filing to, the Commission pursuant to Rule 424. As used herein, the terms "Basic Prospectus" and "Prospectus" shall include in each case the documents, if any, incorporated by reference therein. The terms "supplement," "amendment" and "amend" as used herein shall include all documents deemed to be incorporated by reference in the Prospectus that are filed subsequent to the date of the Basic Prospectus by the Company with the Commission pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"). 1. Representations and Warranties. The Company represents and warrants to and agrees with you as of the Commencement Date, as of each date on which you solicit offers to purchase Notes, as of each date on which the Company accepts an offer to purchase Notes (including any purchase by you as principal pursuant to a Terms Agreement), as of each date the Company issues and sells Notes and as of each date the Registration Statement or the Basic Prospectus is amended or supplemented, as follows (it being understood that such representations, warranties and agreements shall be deemed to relate to the Registration Statement, the Basic Prospectus and the Prospectus, each as amended or supplemented to each such date): -2- 3 (a) The Registration Statement has become effective; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or threatened by the Commission. (b) (i) Each document, if any, filed or to be filed pursuant to the Exchange Act and incorporated by reference in the Prospectus complied or will comply when so filed in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (ii) each part of the Registration Statement (including material incorporated by reference therein), when such part became effective, did not contain, and each such part, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) the Registration Statement and the Prospectus comply, and, as amended or supplemented, if applicable, will comply in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder and (iv) the Registration Statement and the Prospectus do not contain and, as amended or supplemented, if applicable, will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except that (1) the representations and warranties set forth in this Section 1(b) do not apply (A) to statements or omissions in the Registration Statement or the Prospectus based upon information relating to you furnished to the Company in writing by you expressly for use therein or (B) to those parts of the Registration Statement that constitute the Statements of Eligibility (Form T-1) under the Trust Indenture Act of 1939, as amended (the "Trust Indenture Act"), of the Trustee and (2) the representations and warranties set forth in clauses (iii) and (iv) above, when made as of the Commencement Date or as of any date on which you solicit offers to purchase Notes or on which the Company accepts an offer to purchase Notes, shall be deemed not to cover information concerning an offering of particular Notes to the extent such information will be set forth in a supplement to the Basic Prospectus. (c) The Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Michigan, has the corporate power and authority to own its property and to conduct its busi- -3- 4 ness as described in the Prospectus and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (d) This Agreement and any applicable Written Terms Agreement has been duly authorized, executed and delivered by the Company. (e) The Mortgage has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. (f) The forms of Notes have been duly authorized and established in conformity with the provisions of the Mortgage and, when the Notes have been executed and authenticated in accordance with the provisions of the Mortgage and delivered to and duly paid for by the purchasers thereof, the Notes will be entitled to the benefits of the Mortgage and will be valid and binding obligations of the Company, enforceable in accordance with their respective terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability. (g) The execution and delivery by the Company of this Agreement, the Notes, the Mortgage and any applicable Written Terms Agreement, and the performance by the Company of its obligations under, this Agreement, the Notes, the Mortgage and any applicable Terms Agreement will not contravene any provision of applicable law or the articles of incorporation or by-laws of the Company or any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its subsidiaries, taken as a whole, or any judgment, order or decree of any governmental body, agency or court having -4- 5 jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of or qualification with any governmental body or agency not already obtained is required for the performance by the Company of its obligations under this Agreement, the Notes, the Mortgage and any applicable Terms Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes. (h) There has not been any material adverse change, or any development involving a prospective material adverse change (in either case not in the ordinary course of business), in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus. (i) Other than as disclosed in the Prospectus, there are no legal or governmental proceedings pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus and are not so described or any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus or to be filed or incorporated by reference as exhibits to the Registration Statement that are not described, filed or incorporated as required. (j) Each of the Company and its subsidiaries has all necessary consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with, all federal, state, local and other governmental authorities and all courts and other tribunals, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, except to the extent that the failure to obtain or file would not have a material adverse effect on the Company and its subsidiaries, taken as a whole. (k) The Company has good and marketable title to all properties standing of record in its name (which includes, without limitation, all of those properties, except pollution control facilities standing in the names of certain municipalities which are being purchased by the Company pursuant to installment sales contracts and the undivided ownership interest of Michigan Public Power Agen- -5- 6 cy in a portion of the Belle River Power Plant, in each case as described in the Prospectus, which constitute or on which there are erected its principal plants, generating stations and substations and on which its general office and service buildings are constructed and all other important parcels of real estate) and improvements thereon, subject to the lien of the Mortgage and to minor exceptions and minor defects, irregularities and deficiencies which, in the opinion of the Company, do not materially impair the use of such property for the purpose for which it is held by the Company, and the Company has adequate rights to maintain and operate such of its distribution facilities as are located on public or other property not owned by the Company. (1) The Mortgage is a first lien (subject to no prior liens, charges, encumbrances or security interests, except current taxes and assessments not yet due and minor encumbrances which do not materially impair the use of such property for the purpose for which it is held by the Company), duly filed and recorded, on substantially all of the Company's tangible properties and franchises (other than items purchased for resale in the ordinary course of business) and (subject to the necessity for particular filings and recordings in the case of certain personal property such as railroad rolling stock) will constitute a like lien on any such properties hereafter acquired by the Company except that any such after-property will be subject to prior liens and encumbrances, if any, existing when acquired by the Company, except that the Mortgage will not become a lien upon after-acquired real property in a new county until it has been duly filed and recorded and except that the Mortgage may not be effective as to property acquired subsequent to the filing of a case with respect to the Company under the Bankruptcy Code. 2. Solicitations as Agent; Purchases as Principal. (a) Solicitations as Agent. In connection with your actions as agent hereunder, you agree to use reasonable efforts to solicit offers to purchase Notes upon the terms and conditions set forth in the Prospectus as then amended or supplemented. The Company reserves the right, in its sole discretion, to instruct you to suspend at any time, for any period of time or permanently, the solicitation of offers to purchase Notes. Upon receipt of at least one business -6- 7 day's prior notice from the Company, you will forthwith suspend solicitations of offers to purchase Notes from the Company until such time as the Company has advised you that such solicitation may be resumed. While such solicitation is suspended, the Company shall not be required to deliver any certificates, opinions or letters in accordance with Sections 5(a), 5(b) and 5(c); provided, however, that if the Registration Statement or Prospectus is amended or supplemented during the period of suspension (other than by an amendment or supplement providing solely for a change in the interest rates, redemption provisions, amortization schedules or maturities offered on the Notes or for a change you deem to be immaterial), you shall not be required to resume soliciting offers to purchase Notes until the Company has delivered such certificates, opinions and letters as you may reasonably request. The Company agrees to pay to you, as consideration for the sale of each Note resulting from a solicitation made or an offer to purchase received by you, a commission, by means of a deduction from the proceeds of a sale of Notes, equal to the applicable percentage of the public offering price of each Note sold by the Company as a result of a solicitation made by such Agent as set forth in Schedule I hereto or such other discount as may be specified in the Prospectus Supplement relating to such Note. You shall communicate to the Company, orally or in writing, each offer to purchase Notes received by you as agent that in your judgment should be considered by the Company. The Company shall have the sole right to accept offers to purchase Notes and may reject any offer in whole or in part. You shall have the right to reject any offer to purchase Notes that you consider to be unacceptable, and any such rejection shall not be deemed a breach of your agreements contained herein. The procedural details relating to the issue and delivery of Notes sold by you as agent and the pavement therefor shall be as set forth in the Administrative Procedures (as hereinafter defined). (b) Purchases as Principal. Each sale of Notes to you as principal shall be made in accordance with the terms of this Agreement. In connection with each such sale, the Company will enter into a Terms Agreement that will provide for the sale of such Notes to and the purchase thereof by you. Each Terms Agreement will take the form of either (i) a written agreement between you and the Company, which may be substantially in the form of Exhibit A hereto (a "Written Terms Agreement"), or (ii) an oral agreement -7- 8 between you and the Company confirmed in writing by you to the Company. Your commitment to purchase Notes as principal, pursuant to a Terms Agreement, shall be deemed to have been made on the basis of the representations and warranties of the Company herein contained and shall be subject to the terms and conditions herein set forth. Each Terms Agreement shall specify the principal amount of Notes to be purchased by you pursuant thereto, the maturity date of such Notes, the price to be paid to the Company for such Notes, the interest rate and interest rate formula, if any, applicable to such Notes and any other terms of such Notes. Each such Terms Agreement may also specify any requirements for officers' certificates, opinions of counsel and letters from the independent auditors of the Company pursuant to Section 4 hereof. A Terms Agreement may also specify certain provisions relating to the reoffering of such Notes by you. Each Terms Agreement shall specify the time and place of delivery of and payment for such Notes. Unless otherwise specified in a Terms Agreement, the procedural details relating to the issue and delivery of Notes purchased by you as principal and the payment therefor shall be as set forth in the Administrative Procedures. Each date of delivery of and payment for Notes to be purchased by you as principal pursuant to a Terms Agreement is referred to herein as a "Settlement Date." Unless otherwise specified in a Terms Agreement, if you are purchasing Notes as principal you may resell such Notes to other dealers. Any such sales may be at a discount, which shall not exceed the amount set forth in the Prospectus Supplement relating to such Notes. (c) Administrative Procedures. You and the Company agree to perform the respective duties and obligations specifically provided to be performed in the Secured Medium-Term Notes Administrative Procedures (attached hereto as Exhibit B) (the "Administrative Procedures"), as amended from time to time. The Administrative Procedures may be amended only by written agreement of the Company and you. (d) Delivery. The documents required to be delivered by Section 4 of this Agreement as a condition precedent to your obligation to begin soliciting offers to purchase Notes as agent of the Company shall be delivered at or telecopied and confirmed to (in which case, an origi- -8- 9 nal hard copy shall promptly be forwarded) the office of your counsel, not later than 4:00 p.m., New York time, on the date hereof, or at such other time and/or place as you and the Company may agree upon in writing, but in no event later than the day prior to the earlier of (i) the date on which you begin soliciting offers to purchase Notes and (ii) the first date on which the Company accepts any offer by you to purchase Notes as principal. The date of delivery of such documents is referred to herein as the "Commencement Date." 3. Agreements. The Company agrees with you that: (a) Prior to the termination of the offering of the Notes pursuant to this Agreement or any Terms Agreement, the Company will not file any Prospectus Supplement relating to the Notes or any amendment to the Registration Statement unless the Company has previously furnished to you a copy thereof for your review and will not file any such proposed supplement or amendment to which you reasonably object; provided, however, that the foregoing requirement shall not apply to any of the Company's periodic filings with the Commission required to be filed pursuant to Section 13(a), 13(c), 13(f), 14 or 15(d) of the Exchange Act, copies of which filings the Company will cause to be delivered to you promptly after being transmitted for filing with the Commission. Subject to the foregoing sentence, the Company will promptly cause each Prospectus Supplement to be filed with or transmitted for filing to the Commission in accordance with Rule 424(b) under the Securities Act. The Company will promptly advise you (i) of the filing of any amendment or supplement to the Basic Prospectus, (ii) of the filing and effectiveness of any amendment to the Registration Statement, (iii) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Basic Prospectus or for any additional information, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for that purpose and (v) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Notes for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or notice of suspension of qualification and, if issued, to obtain as soon as possible the withdrawal thereof. If the Basic Prospectus is amended or supple- -9- 10 mented as a result of the filing under the Exchange Act of any document incorporated by reference in the Prospectus, you shall not be obligated to solicit offers to purchase Notes so long as you are not reasonably satisfied with such document. (b) If, at any time when a prospectus relating to the Notes is required to be delivered under the Securities Act, any event occurs or condition exists as a result of which the Prospectus, as then amended or supplemented, would include an untrue statement of a material fact, or omit to state any material fact necessary to make the statements therein, in the light of the circumstances when the prospectus, as then amended or supplemented, is delivered to a purchaser, not misleading, or if, in your opinion or in the opinion of the Company, it is necessary at any time to amend or supplement the Prospectus, as then amended or supplemented, to comply with applicable law, the Company will immediately notify you by telephone (with confirmation in writing) to suspend solicitation of offers to purchase Notes and, if so notified by the Company, you shall forth-with suspend such solicitation and cease using the Prospectus, as then amended or supplemented. If the Company shall decide to amend or supplement the Registration Statement or Prospectus, as then amended or supplemented, it shall so advise you promptly by telephone (with confirmation in writing) and, at its expense, shall prepare and cause to be filed promptly with the Commission an amendment or supplement to the Registration Statement or Prospectus, as then amended or supplemented, satisfactory in all respects to you, that will correct such statement or omission or effect such compliance and will supply such amended or supplemented Prospectus to you in such quantities as you may reasonably request. If any documents, certificates, opinions and letters furnished to you pursuant to paragraph (f) below and Sections 5(a), 5(b) and 5(c) in connection with the preparation and filing of such amendment or supplement are satisfactory in all respects to you, upon the filing with the Commission of such amendment or supplement to the Prospectus or upon the effectiveness of an amendment to the Registration Statement, you will resume the solicitation of offers to purchase Notes hereunder. Notwithstanding any other provision of this Section 3(b), until the distribution of any Notes you may own as principal has been completed, if any event described above in this paragraph (b) occurs, the Company will, at its own expense, forthwith prepare and cause to be filed promptly with the Commission an amendment or supplement to the Registration Statement or Prospectus, as then amended or supplemented, satisfactory -10- 11 in all respects to you, will supply such amended or supplemented Prospectus to you in such quantities as you may reasonably request and shall furnish to you pursuant to paragraph (f) below and Sections 5(a), 5(b) and 5(c) such documents, certificates, opinions and letters as you may request in connection with the preparation and filing of such amendment or supplement. (c) The Company will make generally available to its security holders and to you as soon as practicable earning statements that satisfy the provisions of Section 11(a) of the Securities Act and the rules and regulations of the Commission thereunder covering twelve month periods beginning, in each case, not later than the first day of the Company's fiscal quarter next following the "effective date" (as defined in Rule 158 under the Securities Act) of the Registration Statement with respect to each sale of Notes. If such fiscal quarter is the last fiscal quarter of the Company's fiscal year, such earning statement shall be made available not later than 90 days after the close of the period covered thereby and in all other cases shall be made available not later than 45 days after the close of the period covered thereby. (d) The Company will furnish to you, without charge, a signed copy of the Registration Statement, including exhibits and all amendments thereto, and as many copies of the Prospectus, any documents incorporated by reference therein and any supplements and amendments thereto as you may reasonably request. (e) The Company will endeavor to qualify the Notes for offer and sale under the securities or Blue Sky laws of such jurisdictions as you shall reasonably request and to maintain such qualifications for as long as you shall reasonably request. (f) During the term of this Agreement, the Company shall furnish to you such relevant documents and certificates of officers of the Company relating to the business, operations and affairs of the Company, the Registration Statement, the Basic Prospectus, any amendments or supplements thereto, the Mortgage, the Notes, this Agreement, the Administrative Procedures, any Terms Agreement and the performance by the Company of its obligations hereunder or thereunder as you may from time to time reasonably request and shall notify you promptly in writing of any downgrading, or of its receipt of any notice of any intended or potential downgrading or of any review for possible -11- 12 change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act. (g) During the term of this Agreement, the Company will, whether or not any sale of Notes is consummated, pay all expenses incident to the performance of its obligations under this Agreement and any Terms Agreement, including: (i) the preparation and filing of the Registration Statement and the Prospectus and all amendments and supplements thereto, (ii) the preparation, issuance and delivery of the Notes, (iii) the fees and disbursements of the Company's counsel and accountants and of the Trustee and their counsel, (iv) the qualification of the Notes under securities or Blue Sky laws in accordance with the provisions of Section 3(e), including filing fees and the fees and disbursements of your counsel in connection therewith and in connection with the preparation of any Blue Sky or Legal Investment Memoranda, (v) the printing and delivery to you in quantities as hereinabove stated of copies of the Registration Statement and all amendments thereto and of the Basic Prospectus and any amendments or supplements thereto, (vi) the printing and delivery to you of copies of the Mortgage and any Blue Sky or Legal Investment Memoranda, (vii) any fees charged by rating agencies for the rating of the Notes, (viii) the fees and expenses, if any, incurred with respect to any filing with the National Association of Securities Dealers, Inc., (ix) the fees and disbursements of your counsel incurred in connection with the offering and sale of the Notes, including any opinions to be rendered by such counsel hereunder, and (x) any reasonable out-of-pocket expenses incurred by you; provided that any advertising expenses incurred by you shall have been approved by the Company. (h) Between the date of any Terms Agreement and the Settlement Date with respect to such Terms Agreement, the Company will not, without your prior consent, offer, sell, contract to sell or otherwise dispose of any debt securities of the Company substantially similar to such Notes (other than (i) the Notes that are to be sold pursuant to such Terms Agreement, (ii) Notes previously determined to be sold by the Company and disclosed to the relevant Agent or Agents (including, without limitation, Mortgage Bonds collateralizing industrial development revenue bonds) and (iii) commercial paper issued in the ordinary -12- 13 course of business), except as may otherwise be provided in such Terms Agreement. 4. Conditions of the Obligations of the Agents. Your obligation to solicit offers to purchase Notes as agent of the Company, your obligation to purchase Notes as principal pursuant to any Terms Agreement and the obligation of any other purchaser to purchase Notes will be subject to the accuracy of the representations and warranties on the part of the Company herein, to the accuracy of the statements of the Company's officers made in each certificate furnished pursuant to the provisions hereof and to the performance and observance by the Company of all covenants and agreements herein contained on its part to be performed and observed (in the case of your obligation to solicit offers to purchase Notes, at the time of such solicitation, and, in the case of your or any other purchaser's obligation to purchase Notes, at the time the Company accepts the offer to purchase such Notes and at the time of purchase) and (in each case) to the following additional conditions precedent when and as specified: (a) Prior to such solicitation or purchase, as the case may be: (i) there shall not have occurred any change, or any development involving a prospective change (other than such as may have occurred in the ordinary course of business), in the condition, financial or otherwise, or in the earnings, business or operations, of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus, as amended or supplemented at the time of such solicitation or at the time such offer to purchase was made, that, in your judgment, is material and adverse and that makes it, in your judgment, impracticable to market the Notes on the terms and in the manner contemplated by the Prospectus, as so amended or supplemented; (ii) there shall not have occurred any (A) suspension or material limitation of trading generally on or by, as the case may be, the New York Stock Exchange, the American Stock Exchange, the National Association of Securities Dealers, Inc., the Chicago Board Options Exchange, the Chicago Mercantile Exchange or the Chicago Board of Trade, (B) suspension of trading of any securities of the Company on any exchange or in any over-the-counter market, (C) declaration of a general moratorium on commercial banking activities in New York by either Federal or New York -13- 14 State authorities or (D) any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and, in the case of any of the events described in clauses (ii)(A) through (D), such event, singly or together with any other such event, makes it, in your judgment, impracticable to market the Notes on the terms and in the manner contemplated by the Prospectus, as amended or supplemented at the time of such solicitation or at the time such offer to purchase was made; and (iii) there shall not have occurred any downgrading, nor shall any notice have been given of any intended or potential downgrading or of any review for a possible change that does not indicate the direction of the possible change, in the rating accorded any of the Company's securities by any "nationally recognized statistical rating organization," as such term is defined for purposes of Rule 436(g)(2) under the Securities Act; (A) except, in each case described in paragraph (i), (ii) or (iii) above, as disclosed to you in writing by the Company prior to such solicitation or, in the case of a purchase of Notes, before the offer to purchase such Notes was made or (B) unless in each case described in (ii) above, the relevant event shall have occurred and been known to you prior to such solicitation or, in the case of a purchase of Notes, before the offer to purchase such Notes was made. (b) On the Commencement Date and, if called for by any Terms Agreement, on the corresponding Settlement Date, you shall have received: (i) The opinion, dated as of such date, of the General Counsel of the Company, to the effect that: (A) the Company has been duly incorporated, is validly existing as a corporation in good standing under the laws of the State of Michigan, has the corporate power and authority to own its property and to conduct its business as described in the Prospectus, as amended or supplemented, and is duly qualified to transact business and is in good standing in each jurisdiction in which the conduct of its business or its -14- 15 ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or be in good standing would not have a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole; (B) the Company has all necessary consents, authorizations, approvals, orders, certificates and permits of and from, and has made all declarations and filings with, all federal, state, local and other governmental authorities and all courts and other tribunals, to own, lease, license and use its properties and assets and to conduct its business in the manner described in the Prospectus, as amended or supplemented, except to the extent that the failure to obtain or file would not have a material adverse effect on the Company and its consolidated subsidiaries, taken as a whole; (C) each of this Agreement and any applicable Written Terms Agreement has been duly authorized, executed and delivered by the Company; (D) the Mortgage has been duly qualified under the Trust Indenture Act and has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (E) the forms of Notes have been duly authorized and established in conformity with the provisions of the Mortgage and, when the Notes are executed by the Company and authenticated by the Trustee or its duly appointed agent in accordance with the provisions of the Mortgage and delivered to and duly paid for by the purchasers thereof on -15- 16 the date of such opinion, the Notes will be entitled to the benefits of the Mortgage and would be valid and binding obligations of the Company, enforceable in accordance with their respective terms except as (i) the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally and (ii) rights of acceleration and the availability of equitable remedies may be limited by equitable principles of general applicability; (F) the execution and delivery by the Company of the Notes, the Mortgage and any applicable Written Terms Agreement, and the performance by the Company of its obligations under, this Agreement, the Notes, the Mortgage and any applicable Terms Agreement will not contravene any provision of applicable law or the articles of incorporation or by-laws of the Company or, to the best of such counsel's knowledge after due inquiry, any agreement or other instrument binding upon the Company or any of its subsidiaries that is material to the Company and its consolidated subsidiaries, taken as a whole, or, to the best of such counsel's knowledge after due inquiry, any judgment, order or decree of any governmental body, agency or court having jurisdiction over the Company or any subsidiary, and no consent, approval, authorization or order of or qualification with any governmental body or agency not already obtained is required for the performance by the Company of its obligations under this Agreement, the Notes, the Mortgage and any applicable Terms Agreement, except such as may be required by the securities or Blue Sky laws of the various states in connection with the offer and sale of the Notes; (G) the statements (1) in the Prospectus Supplement as of the date hereof, under the captions "Description of Secured Medium- Term Notes, Series "and "Plan of Distribution" and (2) in'the Basic Prospectus, as supplemented as of the date hereof, -16- 17 under the caption "Description of General and Refunding Mortgage Bonds" (except insofar as such statements specify the amount of bonds which could be issued), in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarize the matters referred to therein; (H) after due inquiry, such counsel does not know of any legal or governmental proceeding pending or threatened to which the Company or any of its subsidiaries is a party or to which any of the properties of the Company or any of its subsidiaries is subject that are required to be described in the Registration Statement or the Prospectus, as then amended or supplemented, and are not so described or of any statutes, regulations, contracts or other documents that are required to be described in the Registration Statement or the Prospectus, as then amended or supplemented, or to be filed or incorporated by reference as exhibits to such Registration Statement that are not described, filed or incorporated by reference as required; (I) such counsel (1) is of the opinion that each document filed pursuant to the Exchange Act and incorporated by reference in the Prospectus, as then amended or supplemented (except for financial statements and schedules included therein as to which such counsel need not express any opinion), complied when so filed as to form in all material respects with the Exchange Act and the applicable rules and regulations of the Commission thereunder, (2) believes that (except for financial statements and schedules indicated therein and that part of the Registration Statement that constitutes the Forms T-1 heretofore referred to as to which such counsel need not express any belief) each part of the Registration Statement, as then amended, if applicable, when such part -17- 18 became effective did not, and as of the date such opinion is delivered, does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (3) is of the opinion that the Registration Statement and Prospectus, as then amended or supplemented, if applicable (except for the content of the financial statements and schedules included therein as to which such counsel need not express any opinion), comply as to form in all material respects with the Securities Act and the applicable rules and regulations of the Commission thereunder including such rules and regulations as govern the financial statements required to be included therein and (4) believes that (except for financial statements and schedules indicated therein as to which such counsel need not express any belief) the Prospectus, as then amended or supplemented, if applicable, as of the date such opinion is delivered does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that in the case of an opinion delivered on the Commencement Date or pursuant to Section 5(b), the opinion and belief set forth in clauses (3) and (4) above shall be deemed not to cover information concerning an offering of particular Notes to the extent such information will be set forth in a supplement to the Basic Prospectus; (J) the Company has good and marketable title to all properties standing of record in its name (which includes, without limitation, all of those properties, except pollution control facilities standing in the names of certain municipalities which are being purchased by the Company pursuant to installment sales contracts and the undivided ownership interest of Michigan Public Power Agency in a portion of the Belle River Power Plant, in each case as described in -18- 19 the Prospectus, which constitute or on which there are erected its principal plants, generating stations and substations and on which its general office and service buildings are constructed and all other important parcels of real estate) and improvements thereon, subject to the lien of the Mortgage and to minor exceptions and minor defects, irregularities and deficiencies which, in the opinion of the Company, do not materially impair the use of such property for the purpose for which it is held by the Company, and the Company has adequate rights to maintain and operate such of its distribution facilities as are located on public or other property not owned by the Company; and (K) the Mortgage is a first lien (subject to no prior liens, charges, encumbrances or security interests, except current taxes and assessments not yet due and minor encumbrances which, in such counsel's opinion, do not materially impair the use of such property for the purpose for which it is held by the Company), duly filed and recorded, on substantially all of the Company's tangible properties and franchises (other than items purchased for resale in the ordinary course of business) and (subject to the necessity for particular filings and recordings in the case of certain personal property such as railroad rolling stock) will constitute a like lien on any such properties hereafter acquired by the Company except that any such after-acquired property will be subject to prior liens and encumbrances, if any, existing when acquired by the Company, except that the Mortgage will not become a lien upon after-acquired real property in a new county until it has been duly filed and recorded and except that the Mortgage may not be effective as to property acquired subsequent to the filing of a case with respect to the Company under the Bankruptcy Code. (ii) The opinion, dated as of such date, of ________ your special counsel, covering the matters in -19- 20 subparagraphs (C), (D), (E) and (G) (with respect to statements in the Prospectus, as then amended or supplemented, under the captions "Description of Notes" (in the Prospectus Supplement), "Description of Debt Securities" (in the Basic Prospectus) and "Plan of Distribution" (in the Prospectus Supplement and in the Basic Prospectus)) and clauses (2), (3) and (4) of subparagraph (I) in paragraph (b)(i) above, with such changes therein as you may approve. With respect to subparagraph (I) of paragraph (b)(i) above, the General Counsel of the Company may state that his opinion and belief are based upon his participation, or the participation of someone under his supervision, in the preparation of the Registration Statement and Prospectus and any amendments or supplements thereto and documents incorporated therein by reference and review and discussion of the contents thereof, but are without independent check or verification, except as specified. With respect to clauses (2), (3) and (4) of subparagraph (I) of paragraph (b)(i) above, may state that their opinion and belief are based upon their participation in the preparation of the Registration Statement and Prospectus (or review thereof) and any amendments or supplements thereto (but not including documents incorporated therein by reference) and review and discussion of the contents thereof (including documents incorporated therein by reference), but are without independent check or verification, except as specified. (c) On the Commencement Date and, if called for by any Terms Agreement, on the corresponding Settlement Date, you shall have received a certificate, dated such Commencement Date or Settlement Date, as the case may be, signed by an executive officer of the Company to the effect set forth in subparagraph (a)(iii) above and to the effect that the representations and warranties of the Company contained herein are true and correct as of such date and that the Company has complied with all of the agreements and satisfied all of the conditions on its part to be performed or satisfied on or before such date and that there have been no material adverse change or any development involving a prospective material adverse change (other than such as may have occurred in the ordinary course of business) in the condition, financial or otherwise, or in the earnings, business or operations of the Company and its subsidiaries, taken as a whole, from that set forth in the Prospectus, as supplemented. -20- 21 The officer signing and delivering such certifi- cate may rely upon the best of his knowledge as to proceed- ings threatened. (d) On the Commencement Date and, if called for by any Terms Agreement, on the corresponding Settlement Date, the Company's independent auditors shall have fur- nished to you a letter or letters, dated as of the Com- mencement Date or such Settlement Date, as the case may be, in form and substance satisfactory to you containing state- ments and information of the type ordinarily included in accountants' "comfort letters" to underwriters with respect to the financial statements and certain financial informa- tion contained in or incorporated by reference into the Prospectus, as then amended or supplemented. (e) On the Commencement Date and on each Settle- ment Date, the Company shall have furnished to you such appropriate further information, certificates and documents as you may reasonably request. 5. Additional Agreements of the Company. (a) Each time the Registration Statement or Prospectus is amen- ded or supplemented (other than by an amendment or supple- ment providing solely for a change in the interest rates, redemption provisions, amortization schedules or maturities offered on the Notes or for a change you deem to be immate- rial), the Company will deliver or cause to be delivered forthwith to you a certificate signed by an executive offi- cer of the Company, dated the date of such amendment or supplement, as the case may be, in form reasonably satis- factory to you, of the same tenor as the certificate referred to in Section 4(c) relating to the Registration Statement or the Prospectus as amended or supplemented to the time of delivery of such certificate. (b) Each time the Company furnishes a certifi- cate pursuant to Section 5(a), the Company will furnish or cause to be furnished forthwith to you a written opinion of counsel for the Company. Any such opinion shall be dated the date of such amendment or supplement, as the case may be, shall be in a form satisfactory to you and shall be of the same tenor as the opinion referred to in Section 4(b)(i), but modified to relate to the Registration State- ment and the Prospectus as amended and supplemented to the time of delivery of such opinion. In lieu of such opinion, counsel last furnishing such an opinion to you may furnish to you a letter to the effect that you may rely on such last opinion to the same extent as though it were dated the -21- 22 date of such letter (except that statements in such last opinion will be deemed to relate to the Registration State- ment and the Prospectus as amended or supplemented to the time of delivery of such letter.) (c) Each time the Registration Statement or the Prospectus is amended or supplemented to set forth amended or supplemental financial information or such amended or supplemental information is incorporated by reference in the Registration Statement or the Prospectus, the Company, upon the written request of an Agent, shall cause its inde- pendent public accountants forthwith to furnish you with a letter, dated the date of such amendment or supplement, as the case may be, in form satisfactory to you, of the same tenor as the letter referred to in Section 4(d), with regard to the amended or supplemental financial information included or incorporated by reference in the Registration Statement or the Prospectus as amended or supplemented to the date of such letter. 6. Indemnification and Contribution. (a) The Company agrees to indemnify and hold harmless you and each person, if any, who controls you within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limita- tion, any legal or other expenses reasonably incurred by you or any such controlling person in connection with investigating or defending any such action or claim) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or in any amendment thereof or the Prospectus (as amended or supplemented if the Company shall have furnished any amend- ments or supplements thereto), or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to you furnished to the Company in writing by you expressly for use therein. (b) You agree to indemnify and hold harmless the Company, its directors, its officers who sign the Registra- tion Statement and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the foregoing indemnity from the Company to you, but only with reference to information relating to you -22- 23 furnished to the Company in writing by you expressly for use in the Registration Statement or the Prospectus or any amendments or supplements thereto. (c) In case any proceeding (including any gov- ernmental investigation) shall be instituted involving any person in respect of which indemnity may be sought pursuant to either paragraph (a) or (b) above, such person (the "indemnified party") shall promptly notify the person against whom such indemnity may be sought (the "indemni- fying party") in writing and the indemnifying party, upon request of the indemnified party, shall retain counsel reasonably satisfactory to the indemnified party to repre- sent the indemnified party and any others the indemnifying party may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any such proceeding, any indemnified party shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such indemnified party unless (i) the indemnifying party and the indemnified party shall have mutually agreed to the retention of such counsel or (ii) the named parties to any such proceeding (including any impleaded parties) include both the indemnifying party and the indemnified party and representation of both parties by the same counsel would be inappropriate due to actual or potential differing inter- ests between them. It is understood that the indemnifying party shall not, in respect of the legal expenses of any indemnified party in connection with any proceeding or related proceedings in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (in addition to one local counsel) for all such indem- nified parties and that all such fees and expenses shall be reimbursed as they are incurred. Such firm shall be desig- nated in writing by you, in the case of parties indemnified pursuant to paragraph (a) above, and by the Company, in the case of parties indemnified pursuant to paragraph (b) above. The indemnifying party shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the indemnifying party agrees to indemnify the indemnified party from and against any loss or liability by reason of such settlement or judg- ment. Notwithstanding the foregoing sentence, if at any time an indemnified party shall have requested an indemni- fying party to reimburse the indemnified party for fees and expenses of counsel as contemplated by the third sentence of this paragraph, the indemnifying party agrees that it shall be liable for any settlement of any proceeding -23- 24 effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed the indemni- fied party in accordance with such request prior to the date of such settlement. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened proceed- ing in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party, unless such settlement includes an unconditional release of such indemnified party from all liability on claims that are the subject matter of such proceeding. (d) If the indemnification provided for in para- graph (a) or (b) of this Section 6 is unavailable to an indemnified party or insufficient in respect of any losses, claims, damages or liabilities referred to therein in con- nection with any offering of Notes, then each indemnifying party under such paragraph, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the rela- tive benefits received by the Company on the one hand and you on the other hand from the offering of such Notes or (ii) if the allocation provided by clause (i) is not per- mitted by applicable law, in such proportion as is appro- priate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and you on the other hand in con- nection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and you on the other hand in connection with the offering of such Notes shall be deemed to be in the same respective propor- tions as the total net proceeds from the offering of such Notes (before deducting expenses) received by the Company bear to the total discounts and commissions received by you in respect thereof. The relative fault of the Company on the one hand and of you on the other hand shall be deter- mined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or by you and the parties' relative intent, knowledge, access to -24- 25 information and opportunity to correct or prevent such statement or omission. (e) The Company and you agree that it would not be just or equitable if contribution pursuant to this Sec- tion 6 were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an indemnified party as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indem- nified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 6, you shall not be required to contribute any amount in excess of the amount by which the total price at which the Notes referred to in paragraph (d) above that were offered and sold to the public through you exceeds the amount of any damages that you have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contrib- ution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Sec- tion 6 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemni- fied party at law or in equity. 7. Position of the Agent. In acting under this Agreement and in connection with the sale of any Notes by the Company (other than Notes sold to you as principal), you are acting solely as agent of the Company and do not assume any obligation towards or relationship of agency or trust with any purchaser of Notes. You shall make reason- able efforts to assist the Company in obtaining performance by each purchaser whose offer to purchase Notes has been solicited by you and accepted by the Company, but you shall not have any liability to the Company in the event any such purchase is not consummated for any reason. If the Company shall default in its obligations to deliver Notes to a pur- chaser whose offer it has accepted, the Company shall hold you harmless against any loss, claim, damage or liability arising from or as a result of such default and shall, in particular, pay to you the commission you would have received had such sale been consummated. -25- 26 8. Termination. This Agreement may be termi- nated at any time either by the Company or by you upon the giving of written notice of such termination to the other party hereto, but without prejudice to any rights, obliga- tions or liabilities of either party hereto accrued or incurred prior to such termination. The termination of this Agreement shall not require termination of any Terms Agreement, and the termination of any such Terms Agreement shall not require termination of this Agreement. If this Agreement is terminated, the provisions of the third para- graph of Section 2(a), the last sentence of Section 3(b) and Sections 3(c), 3(g), 6, 7, 9, 11 and 13 shall survive; provided that if at the time of termination an offer to purchase Notes has been accepted by the Company but the time of delivery to the purchaser or its agent of such Notes has not occurred, the provisions of Sections 2(b), 2 (c) , 3 (a), 3 (b), 3 (e), 3 (f) , 3 (h), 4 and 5 shall also survive until such delivery has been made. 9. Representations and Indemnities to Survive. The respective indemnity and contribution agreements, representations, warranties and other statements of the Company, its officers and you set forth in or made pursuant to this Agreement or any Terms Agreement will remain in full force and effect, regardless of any termination of this Agreement or any such Terms Agreement, any investiga- tion made by or on behalf of you or the Company or any of the officers, directors or controlling persons referred to in Section 6 and delivery of and payment for the Notes. 10. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to you, will be mailed, delivered or telefaxed and con- firmed if to [names, addresses and telefax numbers of Agents]; or, if sent to the Company, will be mailed, deliv- ered or telefaxed and confirmed to the Company at 2000 2nd Avenue, Detroit, Michigan 48226, Attention: (telefax number: (313) ). 11. Successors. This Agreement and any Terms Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors and controlling persons referred to in Section 6 and the purchasers of Notes (to the extent ex- pressly provided in Section 4), and no other person will have any right or obligation hereunder. 12. Counterparts. This Agreement may be signed in any number of counterparts, each of which shall be an -26- 27 original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 13. APPLICABLE LAW. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. 14. Headings. The headings of the sections of this Agreement have been inserted for convenience of refer- ence only and shall not be deemed a part of this Agreement. -27- 28 If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall represent a binding agreement between the Company and you. Very truly yours, THE DETROIT EDISON COMPANY By______________________ Title: The foregoing Agreement is hereby confirmed and accepted as of the date first above written. [ NAME OF AGENT ] By __________________________ Title: [ NAME OF AGENT ] By __________________________ Title: [NAME OF AGENT] By __________________________ Title: -28 - 29 EXHIBIT A THE DETROIT EDISON COMPANY SECURED MEDIUM-TERM NOTES, SERIES TERMS AGREEMENT _________________, 20____ [Name and Address of Agent ] Attention: Re: Distribution Agreement dated ________________, (the "Distribution Agreement") The undersigned agrees to purchase your Secured Medium-Term Notes, Series _, having the following terms: Principal Interest Amount: Rate: Purchase Applicability Price: of Modified Payment upon Acceleration: Price to Public: If yes, state Settlement issue price: Date and Time: Place of Amortization Delivery: Schedule: A-1 30 EXHIBIT A Face Amount Applicability (if any): of Annual Interest Original Issue Payments: Date: Interest Accrual Date: Maturity Date: Initial Accrual Period OID: Total Amount of OID: Original Yield to Maturity: Optional Repayment Date(s): Optional Redemption Date(s): Initial Redemption Date: Initial Redemption Percentage: Annual Redemption Percentage Reduction: Other Terms: The provisions of Sections 1, 2(b) and 2(c) and 3 through 6 and 9 through 13 of the Distribution Agreement and the related definitions are incorporated by reference A-2 31 EXHIBIT A herein and shall be deemed to have the same force and effect as if set forth in full herein. This Agreement is subject to termination on the terms incorporated by reference herein. If this Agreement is so terminated, the provisions of Sections 3(g), 6, 9, 11 and 13 of the Distribution Agreement shall survive for the purposes of this Agreement. The following information, opinions, certifi- cates, letters and documents referred to in Section 4 of the Distribution Agreement will be required: ____________ [ NAME OF AGENT ] By__________________ Title: Accepted: THE DETROIT EDISON COMPANY By________________________ Title: A-3 32 EXHIBIT B THE DETROIT EDISON COMPANY SECURED MEDIUM-TERM NOTES, SERIES _ ADMINISTRATIVE PROCEDURES _________________________ Explained below are the administrative procedures and specific terms of the offering of Secured Medium-Term Notes, ____ Series _ (the "Notes"), on a continuous basis by The Detroit Edison Company (the "Company") pursuant to the Distribution Agreement, dated , (the "Distribution Agreement") between the Company and [names of Agents] (each an "Agent" and collectively the "Agents"). The Notes are to be issued under and secured by the Mortgage and Deed of Trust dated as of October 1, 1924 between the Company and First Chicago Trust Company of New York, as successor trustee (the "Trustee"), as amended and supplemented by various Supplemental Indentures and as to be further amended and supplemented by a Supplemental Indenture dated as of , creating the Notes (the "Mortgage"). Reference is hereby made to the Mortgage for full and complete statements of the provisions thereof, including the definitions of certain terms used, and for other information with respect to the Note. In the Distribution Agreement, the Agent has agreed to use reasonable efforts to solicit purchases of the Notes, and the administrative procedures explained below will govern the issuance and settlement of any Notes sold through the Agent, as agent of the Company. An Agent, as principal, may also purchase Notes for its own account, and if requested by such Agent, the Company and the Agent will enter into a terms agreement (a "Terms Agreement"), as contemplated by the Distribution Agreement. The administrative procedures explained below will govern the issuance and settlement of any Notes purchased by an Agent, as principal, unless otherwise specified in the applicable Terms Agreement. First Chicago Trust Company of New York ("First Chicago") will be the Paying Agent for the Notes and will perform the duties specified herein. Each Note will be represented by a Global Security (as defined below) delivered to First Chicago, as agent for The Depository Trust Company ("DTC"), B-1 33 EXHIBIT B and recorded in the book-entry system maintained by DTC (a "Book-Entry Note"). Book-Entry Notes, which may be payable only in U.S. dollars, will be issued in accordance with the administrative procedures set forth herein as they may subsequently be amended as the result of changes in DTC's operating procedures. Unless otherwise defined herein, terms defined in the Mortgage, the Notes or any Prospectus Supplement relating to the Notes shall be used herein as therein defined. The Company will advise the Agents in writing of the employees of the Company with whom the Agents are to communicate regarding offers to purchase Notes and the related settlement details. In connection with the qualification of the Book-Entry Notes for eligibility in the book-entry system maintained by DTC, First Chicago will perform the custodial, document control and administrative functions described below, in accordance with its respective obligations under a Letter of Representations from the Company and First Chicago to DTC, dated as of , (the "Letter of Representations"), and a Medium-Term Note Certificate Agreement between First Chicago and DTC, dated as of _______________________, and its obligations as a participant in DTC, including DTC's Same-Day Funds Settlement System ("SDFS"). Issuance: On any date of settlement (as defined under "Settlement" below) for one or more Book-Entry Notes, the Company will issue one or more global securities in fully registered form without coupons (collectively the "Global Security"), registered in the name of Cede & Co. representing up to U.S. $400,000,000 principal amount of all such Notes that have the same Original Issue Date, Maturity Date and other terms. Each Global Security will be dated and issued as of the date of its authentication by First Chicago. Each Global Security will bear an B-2 34 EXHIBIT B "Interest Accrual Date," which will be (i) with respect to an original Global Security (or any portion thereof), its original issuance date and (ii) with respect to any Global Security (or any portion thereof) issued subsequently upon exchange of a Global Security, or in lieu of a destroyed, lost or stolen Global Security, the most recent Interest Payment Date to which interest has been paid or duly provided for on the predecessor Global Security or Securities (or if no such payment or provision has been made, the original issuance date of the predecessor Global Security), regardless of the date of authentication of such subsequently issued Global Security. Book-Entry Notes may be payable only in U.S. dollars. Identification The Company has arranged with the Numbers: CUSIP Service Bureau of Standard & Poor's Ratings Services (the "CUSIP Service Bureau") for the reservation of a series of approximately 900 CUSIP numbers (including tranche numbers) for assignment to the Global Securities representing the Book-Entry Notes. The Company has obtained from the CUSIP Service Bureau a written list of each series of reserved CUSIP numbers and has delivered to First Chicago and DTC the written list of 900 CUSIP numbers of such series. First Chicago will assign CUSIP numbers to Global Securities. DTC will notify the CUSIP Service Bureau periodically of the CUSIP numbers that the First Chicago has assigned to Global Securities. At any time when fewer than 100 of B-3 35 EXHIBIT B the reserved CUSIP numbers of either series remain unassigned to Global Securities, First Chicago shall so advise the Company and, if it deems necessary, the Company will reserve additional CUSIP numbers for assignment to Global Securities representing Book-Entry Notes. Upon obtaining such additional CUSIP numbers, the Company shall deliver a list of such additional CUSIP numbers to First Chicago and DTC. Denominations: Book-Entry Notes will be issued in principal amounts of U.S. $1,000 or any amount in excess thereof that is an integral multiple of U.S. $1,000. Global Securities will be denominated in principal amounts not in excess of U.S. $400,000,000. If one or more Book-Entry Notes having an aggregate principal amount in excess of $400,000,000 would, but for the preceding sentence, be represented by a single Global Security, then one Global Security will be issued to represent each U.S. $400,000,000 principal amount of such Book-Entry Note or Notes and an additional Global Security will be issued to represent any remaining principal amount of such Book-Entry Note or Notes. In such a case, each of the Global Securities representing such Book-Entry Note or Notes shall be assigned the same CUSIP number. Manner of Payment: The total amount of any principal and interest due on Global Securities on any Interest Payment Date or at maturity or upon redemption or repayment shall be paid by the Company to First Chicago in funds B-4 36 EXHIBIT B available for immediate use by First Chicago not later than 9:30 A.M. (New York City time) on such date. The Company will make such payment on such Global Securities by instructing First Chicago to withdraw funds from an account maintained by the Company at First Chicago. The Company will confirm such instructions in writing to First Chicago. Payment shall be made prior to 10:00 A.M. (New York City time) or as soon thereafter as practicable, on each Maturity Date or redemption or repayment date or, if either such date is not a Business Day, as soon as possible thereafter, First Chicago will pay by separate wire transfer (using Fedwire message entry instructions in a form previously specified by DTC) to an account at the Federal Reserve Bank of New York previously specified by DTC, in funds available for immediate use by DTC, each payment of principal (together with interest thereon) due on Global Securities or Maturity Date or redemption or repayment date. On each Interest Payment Date or, if any such date is not a Business Day, as soon as possible thereafter, interest payments and, in the case of Amortizing Notes, interest and principal payments shall be made to DTC in same day funds in accordance with existing arrangements between First Chicago and DTC. Thereafter on each such date, DTC will pay, in accordance with its SDFS operating procedures then in effect, such amounts in funds available for immediate use to the respective participants in whose names the Book-Entry Notes B-5 37 EXHIBIT B represented by such Global Securities are recorded in the book-entry system maintained by DTC. Neither the Company nor First Chicago shall have any responsibility or liability for the payment by DTC to such participants of the principal of an interest on the Book-Entry Notes. Withholding Taxes: The amount of any taxes required under applicable law to be withheld from any interest payment on a Book-Entry Note will be determined and withheld by the participant, indirect participant in DTC or other person responsible for forwarding payments directly to the beneficial owner of such Note. Preparation If any order to purchase a of Pricing Book-Entry Note is accepted by or on Supplement: behalf of the Company, the Company will prepare a pricing supplement (a "Pricing Supplement") reflecting the terms of such Note. The Company (i) will arrange to file 10 copies of such Pricing Supplement with the Commission in accordance with the applicable paragraph of Rule 424(b) under the Act and (ii) will, as soon as possible and in any event not later than the date on which such Pricing Supplement is filed with the Commission, deliver the number of copies of such Pricing Supplement to the Agent as the Agent shall request. The Agent will cause such Pricing Supplement to be delivered to the purchaser of the Note. In each instance that a Pricing Supplement is prepared, the Agent will affix the Pricing Supplement B-6 38 EXHIBIT B to Prospectuses prior to their use. Outdated Pricing Supple- ments, and the Prospectuses to which they are attached (other than those retained for files), will be destroyed. Settlement: The receipt by the Company of immediately available funds in payment for a Book-Entry Note and the authentication and issuance of the Global Security representing such Note shall constitute "set- tlement" with respect to such Note. All orders accepted by the Company will be settled on the fifth Business Day pursuant to the timetable for settlement set forth below unless the Company and the purchaser agree to settlement on another day, which shall be no earlier than the next Business Day. Settlement Settlement Procedures with Procedures: regard to each Book-Entry Note sold by the Company to or through the Agent (unless otherwise speci- fied pursuant to a Terms Agree- ment), shall be as follows: A. The Agent will advise the Company by telephone that such Note is a Book-Entry Note and of the following settlement information: 1. Principal amount. 2. Maturity Date. 3. The Interest Rate, whether such Note will pay interest annually or semiannually, the Interest Payment Date or Dates specifying B-7 39 EXHIBIT B the Initial Interest Payment Date and whether such Note is an Amortizing Note, and, if so, the amortization schedule. 4. Redemption or repayment provisions, if any. 5. Settlement date and time (Original Issue Date). 6. Interest Accrual Date. 7. Price. 8. Net proceeds to Company. 9. Agent's commission, if any, determined as provided in the Distribution Agreement. 10. Whether the Note is an Original Issue Discount Note (an "OID Note"), and if it is an OID Note, the total amount of OID, the yield to maturity, the initial accrual period OID and the applicability of Modified Payment upon Acceleration (and, if so, the Issue Price). 11. Any other applicable terms. B. The Company will advise First Chicago by telephone or electronic transmission (confirmed in a written request for authentication and delivery at any time on the same date) of the information set forth in Settlement Procedure B-8 40 EXHIBIT B "A" above. First Chicago will then assign a CUSIP number to the Global Security representing such Note and will notify the Company and the Agent of such CUSIP number by telephone as soon as practicable. C. First Chicago will enter a pending deposit message through DTC's Participant Terminal System, providing the following settlement information to DTC, the Agent and Standard & Poor's Corporation: 1. The information set forth in Settlement Procedure "A." 2. The Initial Interest Payment Date for such Note, the number of days by which such date succeeds the related DTC Record Date which shall be the Record Date as defined in the Note) and the amount of interest payable on such Initial Interest Payment Date. 3. The CUSIP number of the Global Security representing such Note. 4. Whether such Global Security will represent any other Book-Entry Note (to the extent known at such time). 5. Whether such Note is an Amortizing Note (by an appropriate notation in the comments field of B-9 41 EXHIBIT B DTC's participant Terminal System). 6. The number of participant accounts to be maintained by DTC on behalf of the Agent and First Chicago. D. First Chicago will complete and authenticate the Global Security representing such Note and will send a copy by first class mail to the Company. E. DTC will credit such Note to First Chicago's participant account at DTC. F. First Chicago will enter an SDFS deliver order through DTC's Participant Terminal System instructing DTC to (i) debit such Note to First Chicago's participant account and credit such Note to the Agent's participant account and (ii) debit the Agent's settlement account and credit First Chicago's settlement account for an amount equal to the price of such Note less the Agent's commission, if any. The entry of such a deliver order shall constitute a representation and warranty by First Chicago to DTC that (a) the Global Security representing such Book-Entry Note has been issued and authenticated and (b) First Chicago is holding such Global Security pursuant to the Medium Term Note Certificate Agreement between First Chicago and DTC. B-10 42 EXHIBIT B G. Unless the Agent is the end purchaser of such Note, the Agent will enter an SDFS deliver order through DTC's Participant Terminal System instructing DTC (i) to debit such Note to the Agent's participant account and credit such Note to the participant accounts of the Participants with respect to such Note and (ii) to debit the settlement accounts of such Participants and credit the settlement account of the Agent for an amount equal to the price of such Note. H. Transfers of funds in accordance with SDFS deliver orders described in Settlement Procedures "F" and "G" will be settled in accordance with SDFS operating procedures in effect on the settlement date. I. First Chicago will credit to the account of the Company (Account # ___________ at First Chicago Trust Company of New York, New York, New York), in funds available for immediate use in the amount transferred to First Chicago in accordance with Settlement Procedure "F". J. Unless the Agent is the end purchaser of such Note, the Agent will confirm the purchase of such Note to the purchaser either by transmitting to the Participants with respect to such Note a confirmation order or orders through DTC's institutional delivery system or by mailing B-11 43 EXHIBIT B a written confirmation to such purchaser. K. Monthly, First Chicago will send to the Company a statement setting forth the principal amount of Notes outstanding as of that date under the Mortgage and setting forth a brief description of any sales of which the Company has advised First Chicago that have not yet been settled. Settlement For sales by the Company of Procedures Book-Entry Notes to or through the Timetable: Agent (unless otherwise specified pursuant to a Terms Agreement) for settlement on the first Business Day after the sale date, Settlement Procedures "A" through "J" set forth above shall be completed as soon as possible but not later than the respective times in New York City set forth below: Settlement Procedure Time ---------- ---- A 11:00 A.M. on the sale date B 12:00 Noon on the sale date C 2:00 P.M. on the sale date D 9:00 A.M. on settlement date E 10:00 A.M. on settlement date F-G 2:00 P.M. on settlement date H 4:45 P.M. on settlement date I-J 5:00 P.M. on settlement date If a sale is to be settled more than one Business Day after the sale date, Settlement Procedures "A", "B" and "C" shall be completed as soon as practicable but no later than 11:00 A.M., 12 Noon and 2:00 P.M., respectively, on the B-12 44 EXHIBIT B first Business Day after the sale date. If settlement of a Book-Entry Note is rescheduled or cancelled, First Chicago, after receiving notice from the Company or the Agent, will deliver to DTC, through DTC's Participant Terminal System, a cancellation message to such effect by no later than 2:00 P.M. on the Business Day immediately preceding the scheduled settlement date. Failure If First Chicago fails to enter an to Settle: SDFS deliver order with respect to a Book-Entry Note pursuant to Settlement Procedure "F", First Chicago may deliver to DTC, through DTC's Participant Terminal System, as soon as practicable a withdrawal message instructing DTC to debit such Note to First Chicago's participant account, provided that First Chicago's participant account contains a principal amount of the Global Security representing such Note that is at least equal to the principal amount to be debited. If a withdrawal message is processed with respect to all the Book-Entry Notes represented by a Global Security, First Chicago will mark such Global Security "cancelled," make appropriate entries in First Chicago's records and send such cancelled Global Security to the Company. The CUSIP number assigned to such Global Security shall, in accordance with the procedures of the CUSIP Service Bureau of Standard & Poor's Corporation, be cancelled and not immediately reassigned. If a B-13 45 EXHIBIT B withdrawal message is processed with respect to one or more, but not all, of the Book-Entry Notes represented by a Global Security, First Chicago will exchange such Global Security for two Global Securities, one of which shall represent such Book-Entry Note or Notes and shall be cancelled immediately after issuance and the other of which shall represent the remaining Book-Entry Notes previously represented by the surrendered Global Security and shall bear the CUSIP number of the surrendered Global Security. If the purchase price for any Book-Entry Note is not timely paid to the Participants with respect to such Note by the beneficial purchaser thereof (or a person, including an indirect participant in DTC, acting on behalf of such purchaser), such Participants and, in turn, the Agent may enter SDFS deliver orders through DTC's Participant Terminal System reversing the orders entered pursuant to Settlement Procedures "F" and "G," respectively. Thereafter, First Chicago will deliver the withdrawal message and take the related actions described in the preceding paragraph. Notwithstanding the foregoing, upon any failure to settle with respect to a Book-Entry Note, DTC may take any actions in accordance with its SDFS operating procedures then in effect. In the event of a failure to settle with respect to one or more, but not all, of the Book-Entry B-14 46 EXHIBIT B Notes to have been represented by a Global Security, First Chicago will provide, in accordance with Settlement Procedures "D" and "F," for the authentication and issuance of a Global Security representing the Book-Entry Notes to be represented by such Global Security and will make appropriate entries in its records. First Chicago Nothing herein will be deemed to Not to Risk Funds: require First Chicago to risk or expend its own funds in connection with any payment to the Company, the Agents, DTC or any beneficial owner of a Note, it being understood by all parties that payments made by First Chicago to any party will be made only to the extent that funds are provided to First Chicago for such purposes. B-15 47 SCHEDULE I ---------- SECURED MEDIUM-TERM NOTE FEE SCHEDULE -------------------------------------
Maturity Commission -------- ---------- 2 years to < 3 years 3 years to < 4 years 4 years to < 5 years 5 years to < 6 years 6 years to < 7 years 7 years to < 8 years 8 years to < 9 years 9 years to < 10 years 10 years to < 15 years 15 years to < 20 years 20 years to < 30 years