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                                                                 EXHIBIT 10.3

                           THE DETROIT EDISON COMPANY
 
                            LONG-TERM INCENTIVE PLAN
 
SECTION 1. PURPOSE.
 
     The purpose of this Long-Term Incentive Plan is to more closely align the
interests of key employes of The Detroit Edison Company, its Subsidiaries and
any successor corporation with those of shareholders by rewarding long term
growth and profitability. In the emerging competitive environment, placing more
pay at risk will foster the desired results by providing key employes additional
incentives to devote their best efforts to pursue and sustain the Company's
financial success through the achievement of corporate goals. In addition,
ownership of stock assists in the attraction and retention of qualified employes
and Directors. Accordingly, certain key employes may be granted Stock Options,
Stock Appreciation Rights, Restricted Stock, Performance Shares and Performance
Units. Nonemploye Directors will also receive Awards of Common Stock.
 
SECTION 2. DEFINITIONS.
 
     A. "Agreement" shall mean a written Agreement, in a form approved by the
Committee, which sets forth the terms and conditions of an Award. Agreements
shall be subject to the express terms and conditions set forth herein, and to
such other terms and conditions not inconsistent with the Plan as the Committee
shall deem appropriate.
 
     B. "Award" shall mean an Option (which may be designated as a Nonqualified
Stock Option or an Incentive Stock Option), a Stock Appreciation Right (which
may be designated as a Freestanding SAR or a Tandem SAR), Restricted Stock,
Performance Shares or Performance Units, in each case granted under this Plan.
Each such Award shall be evidenced by an Agreement. The term shall also include
non-discretionary awards of Common Stock to Nonemploye Directors pursuant to
Section 10 of the Plan.
 
     C. "Board" shall mean the Board of Directors of the Company.
 
     D. "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
 
     E. "Committee" shall mean the Organization and Compensation Committee of
the Board, or such other Board Committee as may be designated from time to time
by the Board. All Directors serving on the Committee at any given time shall be
"disinterested persons" as that term is used in Rule 16b-3, and the number of
Directors serving on the Committee at any given time shall be no less than the
number then required by Rule 16b-3.
 
     F. "Common Stock" shall mean shares of common stock of the Company, subject
to adjustment as provided in Section 13.
 
     G. "Company" shall mean The Detroit Edison Company, a Michigan corporation,
and any successor corporation.
 
     H. "Date of Grant" means the date specified by the Committee pursuant to
Section 4 hereof on which a grant of Options, SAR's, Restricted Stock,
Performance Shares or Performance Units shall become effective, which shall not
be earlier than the date on which the Committee takes action with respect
thereto.
 
     I. "Employe" shall mean (i) an employe of the Company or a Subsidiary,
whether or not an officer thereof, and shall include any such employe who is
also a Director of the Company or a Subsidiary, and (ii) a director of a
Subsidiary who is not a Nonemploye Director.
 
     J. "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
 
     K. "Exercise Price" shall mean, with respect to each share of Common Stock
subject to an Option, the price fixed by the Committee at which such share may
be purchased pursuant to the exercise of such Option.
 
     L. "Fair Market Value" shall mean the fair market value of the Common Stock
determined by the Committee by whatever method or means the members, in the good
faith exercise of their discretion, at that time shall deem appropriate.
 
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     M. "Freestanding SAR" shall mean a right, granted pursuant to this Plan
without reference or relationship to any Option, of an Employe to receive cash,
shares of Common Stock, or a combination thereof, as the case may be, having an
aggregate value equal to the excess of the Fair Market Value of one share of
Common Stock on the date of exercise of such SAR over the Fair Market Value of
one such share on the Date of Grant of such SAR.
 
     N. "Incentive Stock Option" or "ISO" shall mean an Option that meets the
requirements of Section 422 of the Code, or any successor provision, and that is
intended by the Committee to constitute an ISO. Any ISO granted hereunder must
be granted within ten years from the date of adoption of the Plan by the Board.
If for any reason an Option (or any portion thereof) intended by the Committee
to be an ISO nevertheless does not so qualify as an ISO under the Code, either
at the time of grant or subsequently, such failure to qualify shall not
invalidate the Option (or any portion thereof) and instead the nonqualified
portion (or, if necessary, the entire Option) shall be deemed to have been
granted as a Nonqualified Stock Option irrespective of the manner in which it is
designated in the Option Agreement.
 
     O. "Nonemploye Director" shall mean a Director of the Company who is not an
employe of the Company or any Subsidiary.
 
     P. "Nonqualified Stock Option" or "NQSO" shall mean an Option that is not
an ISO.
 
     Q. "Option" shall mean the right, granted pursuant to this Plan, of a
holder to purchase shares of Common Stock at an Exercise Price and upon terms to
be specified by the Committee. The term shall include a Nonqualified Stock
Option or an Incentive Stock Option.
 
     R. "Optionee" means the person so designated in an Agreement evidencing an
outstanding Option.
 
     S. "Performance Measures" shall mean (1) in the case of Performance Shares
or Performance Units, those criteria and objectives determined by the Committee
the attainment of which during the applicable Performance Period would be a
pre-condition to settlement of such Award, and (2) in the case of Restricted
Stock, those Committee-determined criteria and objectives (if any) which, if not
met during the applicable Restriction Period, would cause a forfeiture of such
Award and/or which, if met during the otherwise applicable Restriction Period,
would cause an early termination of the Restriction Period. The Performance
Measures applicable to any Award to an Employe who is, or is determined by the
Committee to be likely to become, a "covered employe" within the meaning of
Section 162(m) of the Code (or any successor provision) shall be limited to
criteria and objectives related to: (i) shareholder value growth based on stock
price and dividends, (ii) customer price, (iii) customer satisfaction and (iv)
growth based on increasing sales or profitability of one or more business units;
provided, however, that the Committee may impose any other subjective or
objective criteria it may approve from time to time for the purpose of reducing
the amount otherwise payable upon settlement of Performance Shares or
Performance Units or for the purpose of increasing the number of shares of
Restricted Stock that would otherwise be forfeited during the applicable
Restriction Period. Except in the case of such a covered employe, if the
Committee determines that a change in the business, operations, corporate
structure or capital structure of the Company or a Subsidiary, or the manner in
which it conducts its business, or other events or circumstances render the
Performance Measures to be unsuitable, the Committee may modify such Performance
Measures, in whole or in part, as the Committee deems appropriate and equitable.
 
     T. "Performance Period" shall mean the period designated by the Committee
during which the Performance Measures applicable to Performance Shares or
Performance Units shall be measured. The Performance Period shall be established
on the Date of Grant of such Performance Shares or Performance Units, and shall
not be less than one year in duration. The duration of Performance Periods may
vary.
 
     U. "Performance Shares" shall mean the right, contingent upon attainment of
Performance Measures within a Performance Period, to receive a specified number
of shares of Common Stock, which may be Restricted Stock, or, in lieu of all or
any portion of such shares, their Fair Market Value in cash.
 
     V. "Performance Units" shall mean the right, contingent upon attainment of
Performance Measures within a Performance Period, to receive a specified dollar
amount or, in lieu of all or any portion of such amount, shares of Common Stock
having the same Fair Market Value or the same number of shares of Restricted
Stock. Each Performance Unit shall have a face amount of $1.00.
 
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     W. "Plan" shall mean the Long-Term Incentive Plan set forth in this
instrument, as amended from time to time.
 
     X. "Reorganization" shall mean the corporate reorganization of The Detroit
Edison Company pursuant to resolutions adopted by the Board of Directors of The
Detroit Edison Company on December 5, 1994 and January 23, 1995 (as such
resolutions may be amended or supplemented from time to time) whereby it is
proposed that a corporation ("Holding Company") will become the parent holding
company of The Detroit Edison Company.
 
     Y. "Restriction Period" shall mean the period designated by the Committee
during which Restricted Stock shall be subject to a substantial risk of
forfeiture and may not be sold, exchanged, assigned, transferred, pledged,
hypothecated or otherwise encumbered or disposed of, except as otherwise
provided in the Plan.
 
     Z. "Restricted Stock" shall mean any shares of Common Stock issued pursuant
to the Plan subject to a substantial risk of forfeiture pursuant to Section 83
of the Code and to the restriction that they may not be sold, exchanged,
assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed
of, except as otherwise provided in the Plan, prior to termination of a
Restriction Period. Restricted Stock shall constitute issued and outstanding
shares of Common Stock for all corporate purposes.
 
     AA. "Rule 16b-3" means Rule 16b-3 as promulgated and amended from time to
time by the Securities and Exchange Commission under the Exchange Act (or any
successor rule) as in effect with respect to the Company at a given time.
 
     BB. "Stock Appreciation Right" or "SAR" shall mean any Freestanding SAR or
Tandem SAR.
 
     CC. "Subsidiary" means a corporation, partnership, joint venture,
unincorporated association or other entity in which the Company has a direct or
indirect ownership or other equity interest; provided, however, for purposes of
determining whether any person may receive a grant of ISO's, "Subsidiary" means
any corporation in which the Company owns or controls directly or indirectly
more than 50 percent of the total combined voting power represented by all
classes of stock issued by such corporation at the time of the grant.
 
     DD. "Tandem SAR" shall mean a right, granted under this Plan, pursuant to
which a holder may elect to surrender an Option, or any portion thereof, which
is then exercisable, and receive in exchange therefor shares of Common Stock,
cash, or a combination thereof, as the case may be, with an aggregate value
equal to the excess of the Fair Market Value of one share of Common Stock at the
time of exercise over the per share Exercise Price specified in such Option,
multiplied by the number of shares of Common Stock covered by such Option, or
portion thereof, which is so surrendered.
 
     EE. "Tax Withholding Date" shall mean the date the withholding tax
obligation first arises with respect to an Award.
 
SECTION 3. LIMITS ON AVAILABLE SHARES AND FREESTANDING SAR'S
 
     A. Shares of Common Stock used for an Award under the Plan may be either
authorized but unissued shares or authorized, issued and outstanding shares
acquired by or on behalf of the Company in the name of an Award recipient (or
permissible successor thereof) for purposes of granting or settling such Award,
or may be a combination of the foregoing. Subject to adjustment as provided in
Section 13 of the Plan, the aggregate maximum number of shares which may be (i)
issued or transferred upon the exercise of Options or SAR's, (ii) awarded as
Restricted Stock and released from substantial risk of forfeiture thereof or
(iii) issued or transferred in payment of Performance Shares or Performance
Units which have been earned is 7,200,000.
 
     B. Upon the full or partial payment of any Exercise Price by the transfer
to the Company of Common Stock or upon satisfaction of tax withholding
obligations in connection with any such exercise or any other payment made or
benefit realized under the Plan by the transfer or relinquishment of Common
Stock, there shall be deemed to have been issued or transferred under the Plan
only the net number of shares of Common Stock actually issued or transferred by
the Company less the number of shares of Common Stock so transferred or
relinquished; provided, however, that the number of shares of Common Stock
actually issued or transferred by the Company upon the exercise of Incentive
Stock Options shall not exceed the number of shares of Common Stock first
specified above in Section 3(A), subject to adjustment as therein provided.
 
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     C. Upon payment in cash of the benefit provided by any Award granted under
the Plan, any shares of Common Stock that were covered by that Award shall again
be available for issuance or transfer hereunder.
 
     D. The number of Performance Units (which each have a face amount of $1.00)
that may be granted under this Plan shall not in the aggregate exceed
25,000,000. Performance Units that are granted under this Plan and are paid in
shares of Common Stock or are not earned by the Employe at the end of the
Performance Period shall be available for future grants of Performance Units
hereunder.
 
     E. Notwithstanding any other provision of the Plan to the contrary, no
Employe shall be granted Options for more than 300,000 shares of Common Stock or
Stock Appreciation Rights for more than 300,000 shares of Common Stock during
any period of five consecutive calendar years, subject to adjustment as provided
in Section 13 of this Plan.
 
     F. Notwithstanding any other provision of the Plan to the contrary, in no
event shall any Employe receive awards of Restricted Stock, Performance Shares
and Performance Units having an aggregate value as of their respective Dates of
Grant in excess of $750,000 in any calendar year or in excess of $3,500,000 in
any period of five consecutive calendar years.
 
SECTION 4. ADMINISTRATION.
 
     The Plan shall be administered by the Committee. In addition to any implied
powers and duties that may be needed to carry out the provisions of the Plan,
the Committee shall have all the powers vested in it by the terms of the Plan,
including exclusive authority to grant Awards to Employes under the Plan, to
select the Employes to receive such Awards, to determine the type, size and
terms of the Awards to be made to each Employe selected (which Awards need not
be uniform), to determine the time when Awards to Employes will be granted, and
to prescribe the form of the Agreements embodying Awards made under the Plan.
Any Award made to an Employe may provide for acceleration of the period of
exercisability, lapse or alteration of the Restriction Period, or modification
of any Performance Measure in the event of a change in control of the Company or
any Subsidiary or other similar transaction or event. The Committee shall be
authorized to interpret the Plan and the Awards granted under the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, to
make any other determinations which it believes necessary or advisable for the
administration of the Plan, and to correct any defect or supply any omission or
reconcile any inconsistency in the Plan or in any Award in the manner and to the
extent the Committee deems desirable to carry it into effect.
 
     All Committee determinations shall be final, conclusive and binding on the
Company, any Subsidiary, any Employe, any Nonemploye Director, beneficiary,
legal representative, and any other interested parties. The Committee may
authorize any one or more of their number, or any officer of the Company, to
execute and deliver documents on behalf of the Committee. No member of the
Committee shall be liable for any such action taken or determination made in
good faith.
 
SECTION 5. ELIGIBILITY.
 
     All key Employes are eligible for selection by the Committee to receive an
Award, except Employes covered by a collective bargaining Agreement with the
Company or a Subsidiary which does not provide for coverage under this Plan.
Nonemploye Directors shall be eligible only for non-discretionary Awards under
Section 10 of the Plan.
 
SECTION 6. STOCK OPTIONS.
 
     A. Terms and Conditions.
 
          1. Type of Option.  The Committee may make Awards of ISO's and NQSO's.
     Each Option Award shall specify whether the pertinent Option is intended as
     a Nonqualified Stock Option or an Incentive Stock Option.
 
          2. Number of Shares Covered.  Each Option Award shall specify the
     number of shares of Common Stock subject to the pertinent Option.
 
          3. Exercise Period.  Each Option Award shall specify the period (or
     periods) not in excess of 10 years during which the pertinent Option (or
     portions thereof) may be exercised, and the Option
 
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     Agreement shall provide that the Option (or such portion) shall expire at
     the end of such period (or periods), and may be subject to earlier
     termination in the event of a change in control of the Company or any
     Subsidiary or other similar transaction or event, as provided in the Option
     Agreement.
 
          4. Exercise Price.  The Exercise Price shall be determined by the
     Committee at the time any Option is granted, and shall be set forth in the
     Option Agreement. In no event shall the Exercise Price per share of any
     Option be less than 100% of the Fair Market Value per share on the Date of
     Grant.
 
          5. Manner of Exercise.  The specified number of shares with respect to
     which an Option is exercised shall, subject to applicable tax withholding,
     be issued following receipt by the Company of (i) written notice of such
     exercise from the Optionee (in such form as the Committee shall have
     specified in the Option Agreement or otherwise) of an Option delivered to
     the Corporate Secretary or the Vice President and Treasurer of the Company,
     and (ii) payment, as provided herein, of the Exercise Price.
 
          6. Payment for Shares.  (a) The Exercise Price shall be payable, in
     whole or in part, in (i) cash in the form of currency or check or other
     cash equivalent acceptable to the Company, (ii) nonforfeitable,
     unrestricted shares of Common Stock which are already owned by the Optionee
     and have a value at the time of exercise that is equal to the Option Price,
     (iii) any other legal consideration that the Committee may deem
     appropriate, including without limitation any form of consideration
     authorized under Section 6(A)(6)(b) below, on such basis as the Committee
     may determine in accordance with the Plan and (iv) any combination of the
     foregoing.
 
          (b) Any grant of a Nonqualified Stock Option may provide that payment
     of the Exercise Price may also be made in whole or in part in the form of
     shares of Restricted Stock or other Common Stock that are subject to risk
     of forfeiture or restrictions on transfer. Unless otherwise determined by
     the Committee on or after the Date of Grant, whenever any Exercise Price is
     paid in whole or in part by means of any of the forms of consideration
     specified in this paragraph, the Common Stock received by the Optionee upon
     the exercise of the Nonqualified Option shall be subject to the same risks
     of forfeiture or restrictions on transfer as those that applied to the
     consideration surrendered by the Optionee; provided, however, that such
     risks of forfeiture and restrictions on transfer shall apply only to the
     same number of shares of Common Stock received by the Optionee as applied
     to the forfeitable or restricted Common Stock surrendered by the Optionee.
 
          (c) Any grant may provide for deferred payment of the Exercise Price
     from the proceeds of sale through a broker of some or all of the shares of
     Common Stock to which the exercise relates.
 
     B. Effect of Exercise of Option on Tandem SAR.
 
     Upon the exercise of an Option with respect to which a Tandem SAR has been
granted, the number of shares of Common Stock with respect to which the SAR
shall be exercisable shall be reduced by the number of shares with respect to
which the Option has been exercised.
 
SECTION 7.  STOCK APPRECIATION RIGHTS.
 
     A. Terms and Conditions.
 
          1. Type of SAR.  Each SAR Award shall specify whether it relates to a
     Tandem SAR or to Freestanding SAR's.
 
          2. Number of Optioned Shares or Freestanding SAR's.  In the case of
     any Tandem SAR, the SAR Award shall specify the Option and the number of
     shares of Common Stock subject thereto to which the SAR relates. Any SAR
     Award relating to Freestanding SAR's shall specify the number of such SAR's
     to which it relates.
 
          3. Exercise Period.  Each SAR Award shall specify the period during
     which the pertinent SAR(s) may be exercised and the SAR Agreement shall
     provide that the SAR(s) shall expire at the end of each period (or periods)
     and may be subject to earlier termination in the event of a change in
     control of the Company or any Subsidiary or other similar transaction or
     event, as provided in the SAR Agreement. For a Freestanding SAR, such
     expiration date shall be no later than ten years from the Date of Grant
     thereof.
 
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     For Tandem SAR's, such expiration date(s) shall be no later than the
     date(s) of expiration of the related Option, and a Tandem SAR shall be
     exercisable during its term only when and to the extent the related Option
     is exercisable. A Freestanding SAR shall be exercisable only during the
     period of the grantee's employment with the Company or a Subsidiary and for
     such post-termination exercise period as would apply under the Option
     Agreement had the Freestanding SAR Award to the grantee instead been an
     Award of NQSO's.
 
          4. Manner of Exercise.  A SAR granted under the Plan shall be
     exercised by the holder by delivery to the Corporate Secretary or the Vice
     President and Treasurer of the Company of written notice of exercise in
     such form as shall have been specified in the SAR Agreement or otherwise.
 
          5. Payment to Holder.  If the form of consideration to be received
     upon exercise of the SAR is not specified in the SAR Agreement, upon the
     exercise thereof, the holder may request the form of consideration he or
     she wishes to receive in satisfaction of such SAR, which may be in shares
     of Common Stock (valued at Fair Market Value on the date of exercise of the
     SAR), or in cash, or partly in cash and partly in shares of Common Stock,
     as the holder shall request; provided, however, that the Committee, in its
     sole discretion, may consent to or disapprove any request of the Employe to
     receive cash in full or partial settlement of such SAR. Payment shall be
     subject to applicable tax withholding.
 
     B. Effect of Exercise of Tandem SAR on Related Option.
 
     Upon the exercise of a Tandem SAR, the number of shares covered by the
related Option shall be reduced by the number of shares of Common Stock with
respect to which such SAR is exercised.
 
SECTION 8. RESTRICTED STOCK.
 
     A. Terms and Conditions.
 
     The Committee may make Awards of Restricted Stock to Employes without
additional consideration or may offer to sell Restricted Stock to Employes at a
price that is equal to or less than its Fair Market Value. The terms and
conditions of any such Restricted Stock Award shall be as determined by the
Committee and shall be set forth in the Restricted Stock Agreement. The
Restricted Stock Agreement shall specify the number of shares of Common Stock
subject to the Award and the applicable Restriction Period or Periods. Any such
Agreement may provide for forfeiture of shares covered thereby if specified
Performance Measures are not attained during a Restriction Period and/or for
termination of any Restriction Period upon attainment of Performance Measures,
but in no event may any such Agreement permit termination of any Restriction
Period earlier than three years after the Date of Grant of the pertinent Award
except in the case of Awards that are subject to Performance Measures (in which
case the Restriction Period shall be at least one year) or in the case of death,
disability, retirement or in the event of a change in control of the Company or
any Subsidiary or other similar circumstance in accordance with the provisions
of the Restricted Stock Agreement.
 
     B. Certificates Evidencing Ownership of Restricted Stock.
 
     During the Restriction Period, a certificate representing the Restricted
Stock shall be registered in the recipient's name and bear a restrictive legend
to the effect that ownership of such Restricted Stock, and the enjoyment of all
rights appurtenant thereto, are subject to the restrictions, terms, and
conditions provided in the Plan and the applicable Agreement.
 
     Certificates representing Restricted Stock together with stock powers or
other instruments of assignment, each endorsed in blank, which will permit
transfer to the Company of all or any portion of the Restricted Stock evidenced
by such certificate in the event it is forfeited, shall be deposited by the
recipient with the Company. Upon the termination of an applicable Restriction
Period, and subject to remittance of applicable withholding tax, a certificate
or certificates evidencing ownership of the number of shares of Common Stock
theretofore evidenced by the certificate representing Restricted Stock, free of
restrictive legend (other than any relating to a right of first refusal of the
Company or required by any applicable securities laws), shall be issued to the
Employe, his or her beneficiary(ies), or legal representative, promptly after
the expiration of the Restriction Period.
 
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     C. Rights With Respect to Shares During Restriction Period.
 
     Subject to the terms and conditions of the Restricted Stock Agreement, the
Employe, as the owner of the Common Stock issued as Restricted Stock, shall have
all rights of a shareholder including, but not limited to, voting rights, the
right to receive cash or stock dividends thereon, and the right to participate
in any capital adjustment of the Company. Any distributions with respect to
shares of Restricted Stock other than in the form of cash shall be held by the
Company, and shall be subject to the same restrictions as the shares with
respect to which such distributions were made. Any grant or sale may require
that any or all dividends or other distributions paid on the shares of
Restricted Stock during the Restriction Period shall be automatically
sequestered and may be reinvested on an immediate or deferred basis in
additional shares of Common Stock, which may be subject to the same restrictions
as the underlying Award or such other restrictions as the Committee may
determine.
 
SECTION 9. PERFORMANCE SHARES AND PERFORMANCE UNITS.
 
     A. Terms and Conditions.
 
     The Committee may make Awards of Performance Shares and Performance Units.
The terms and conditions of any Performance Share Award or a Performance Unit
Award shall be set forth in the applicable Agreement. Such Agreement shall
specify the number of Performance Shares or Performance Units subject to the
Award, the Performance Period(s), which may be subject to earlier termination in
the event of a change in control of the Company or any Subsidiary or other
similar transaction or event, and the Performance Measures applicable to the
Award.
 
     B. Payment.
 
     Following the end of a Performance Period applicable to a granted Award,
the Committee shall determine the extent (if any) to which Performance Measures
established for the Award were attained and, accordingly, the number, if any, of
shares of Common Stock or the amount of cash that shall then become payable to
the holder of the Award. If the Performance Shares or Performance Units are to
be paid to the Employe in the form of shares of Restricted Stock, the recipient
must execute a Restricted Stock Agreement as a condition of the issuance of such
shares in his or her name.
 
SECTION 10. NON-DISCRETIONARY AWARDS TO NONEMPLOYE DIRECTORS.
 
     On the date of the 1995 annual meeting of Common Stock shareholders of the
Company and on the date of each annual meeting of Common Stock shareholders of
the Company thereafter, each Nonemploye Director shall receive automatically an
Award of 300 shares of Common Stock if he or she is elected at such meeting or
continuing to serve immediately after such meeting as a Nonemploye Director. The
shares of Common Stock awarded pursuant to this Section 10 shall not be subject
to any restriction under the Plan (other than any that may be required pursuant
to Section 16(N)).
 
SECTION 11. WITHHOLDING TAXES.
 
     The Company shall, if required by applicable law, withhold or cause to be
withheld, Federal, state and/or local taxes in connection with the exercise,
vesting or settlement of an Award. Unless otherwise provided in the applicable
Agreement, each Employe may satisfy any such tax withholding obligation by any
of the following means, or by a combination of such means: (i) a cash payment,
(ii) subject to Committee approval, by delivery to the Company of a number of
shares of Common Stock having a Fair Market Value, as of the Tax Withholding
Date, sufficient to satisfy the amount of the withholding tax obligation arising
from an exercise, vesting or settlement of an Award, (iii) subject to Committee
approval, by authorizing the Company to withhold from the shares of Common Stock
otherwise issuable to the Employe pursuant to the exercise or vesting of an
Award, a number of shares having a Fair Market Value, as of the Tax Withholding
Date, which will satisfy the amount of the withholding tax obligation, or (iv)
by a combination of such methods of payment. If the amount requested is not
paid, the Company may refuse to satisfy the Award. The Company and the Employe
may also make similar arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
 
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SECTION 12. TRANSFERABILITY.
 
     A. No Option or other derivative security (as that term is defined in Rule
16b-3) granted under the Plan may be transferred by an Employe except by will or
the laws of descent and distribution. Options and Stock Appreciation Rights
granted under the Plan may not be exercised during an Employe's lifetime except
by the Employe or, in the event of the Employe's legal incapacity, by the
employe's guardian or legal representative acting in a fiduciary capacity on
behalf of the Employe under state law and court supervision. Notwithstanding the
foregoing, the Committee, in its sole discretion, may provide for the
transferability of particular Awards under the Plan so long as such provisions
will not disqualify the exemption for other Awards under Rule 16b-3.
 
     B. Any grant made under the Plan may provide that all or any part of the
shares of Common Stock that are to be issued or transferred by the Company upon
the exercise of Options or Stock Appreciation Rights or in payment of
Performance Shares or Performance Units, or that are no longer subject to the
substantial risk of forfeiture and restrictions on transfer referred to in
Section 8 of this Plan, shall be subject to further restrictions upon transfer.
 
SECTION 13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
 
     In the event of any change in the outstanding Common Stock by reason of any
stock split, stock dividend, recapitalization, merger, consolidation,
reorganization, combination, or exchange of shares, split-up, split-off,
spin-off, spin-away, liquidation or other similar change in capitalization, or
any distribution to common stock shareholders of the Company other than normal
cash dividends, the number or kind of shares that may be issued, transferred or
awarded under the Plan pursuant to Section 3, and the number or kind of shares
subject to any outstanding Award, shall be automatically adjusted, and the
Committee shall be authorized to make such other equitable adjustment of any
Award or shares issuable pursuant thereto, or in any Performance Measures
related to any Award, so that the proportionate interest of the Employe shall be
maintained as before the occurrence of such event. In the event of any such
transaction or event, the Committee may provide in substitution for any or all
outstanding Awards under the Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all Awards so replaced. The Committee
shall also make or provide for such adjustments in the maximum numbers of shares
of Common Stock which may be issued or transferred upon the exercise of Options
or SARs or awarded as Restricted Stock or issued or transferred in payment of
Performance shares or Performance Units, as specified in Section 3(A) of the
Plan, the maximum numbers of shares of Common Stock specified in Section 3(E) of
the Plan and the number of shares to be awarded automatically pursuant to
Section 10 of the Plan as the Committee may in good faith determine to be
appropriate in order to reflect any transaction or event described in this
Section 13. Any such adjustment shall be conclusive and binding for all purposes
of the Plan. If the Reorganization is consummated, (i) the "Common Stock" shall
mean thereafter the common stock of Holding Company for which The Detroit Edison
Company common stock is exchanged in the Reorganization, subject to adjustment
pursuant to this Section 13; (ii) "Company" shall thereafter refer to Holding
Company and any successor corporation, and (iii) "Board" and "Committee" shall
thereafter refer to the board of directors and applicable committee of Holding
Company.
 
SECTION 14. AMENDMENT AND TERMINATION.
 
     The Committee may at any time terminate, modify or amend the Plan in such
respects as it shall deem advisable. However, under no circumstances, without
approval of the Common Stock shareholders, may the Plan be amended or modified
to permit the exercise of an Option at an Exercise Price of less than the Fair
Market Value of a share of Common Stock on the Date of Grant, to increase the
number of shares of stock which may be the subject of Awards under the Plan
under Section 3 (except pursuant to adjustments under
Section 13), or otherwise cause any Award under the Plan to cease to qualify
under Rule 16b-3 or for the performance based exception to Section 162(m) of the
Code. The termination or any modification or amendment of the Plan shall not,
without the consent of the Employe, adversely affect his or her rights under an
Award granted prior thereto.
 
SECTION 15. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE.
 
     Notwithstanding any other provision of the Plan to the contrary, in the
event of termination of employment by reason of death, disability, normal
retirement, early retirement with the consent of the
 
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Company, termination of employment to enter public service with the consent of
the Company or leave of absence approved by the Company, or in the event of
hardship or other special circumstances, of an Employe who holds an Option or
Stock Appreciation Right that is not immediately and fully exercisable, any
shares of Restricted Stock as to which the substantial risk of forfeiture or the
prohibition or restriction on transfer has not lapsed, any Performance Shares or
Performance Units that have not been fully earned, or any Common Shares that are
subject to any transfer restriction pursuant to Section 8 of this Plan, the
Committee may take any action that it deems to be equitable under the
circumstances or in the best interests of the Company or any Subsidiary,
including without limitation waiving or modifying any limitation or requirement
with respect to any Award under this Plan.
 
SECTION 16. MISCELLANEOUS PROVISIONS.
 
     A. Except as provided in Section 10, no Employe or other person shall have
any claim or right to be granted an Award under the Plan.
 
     B. Grant of any Option, SAR or Performance Shares or Performance Units
shall not confer upon the grantee any rights of a shareholder with respect to
any shares subject to such Award.
 
     C. The Plan, the grant, exercise, vesting and/or settlement of Awards
thereunder, and the obligations of the Company to satisfy Awards shall be
subject to all applicable Federal and state laws, rules and regulations and to
such approvals by any government or regulatory agency as may be required, and
the Committee may impose any additional restrictions with respect to Awards in
order to comply with any legal requirements applicable to Awards or to qualify
for any exemption it may deem appropriate.
 
     D. Any expenses of the Plan shall be borne by the Company.
 
     E. By accepting an Award under the Plan, each Employe and his or her legal
representative or beneficiary shall be conclusively deemed to have indicated his
or her acceptance and ratification of, and consent to, any action taken under
the Plan by the Company, the Board or the Committee.
 
     F. Nothing in the Plan, or in any Agreement entered into pursuant to the
Plan, shall confer on an Employe any right to continue in the employ of the
Company or any Subsidiary, or in any way affect the right of the Company or any
Subsidiary to terminate the Employe's employment without prior notice at any
time for any reason or for no reason.
 
     G. Participation in the Plan shall not affect an Employe's eligibility to
participate in any other benefit or incentive plan of the Company or any
Subsidiary. Awards under the Plan shall not be considered earnings for purposes
of the Employe Savings Plan, any Company-sponsored or Subsidiary-sponsored
Retirement Plan, insurance or other employee benefit programs.
 
     H. With respect to shares acquired upon the exercise of Options or Stock
Appreciation Rights and with respect to shares acquired by an individual under a
Restricted Stock Award, Performance Share or Performance Unit Award, or
otherwise under the Plan, the Company may reserve a "right of first refusal" to
purchase from the holder thereof any such shares at Fair Market Value. If such
right is reserved, the holder, prior to any disposition of such shares of Common
Stock, shall be required to first notify the Corporate Secretary or Vice
President and Treasurer of the Company or such other officer as may be
designated by the Committee, in writing in such form as the Committee may
prescribe, of his or her intention to dispose of any such shares, and the
Company will advise the holder within five days whether it intends to purchase
or cause to be purchased such shares, for this purpose. Fair Market Value shall
be determined as of the date next preceding the date that the Company notifies
the holder of its intention to purchase or cause to be purchased such shares.
The Committee will designate an officer to decide whether to accept or reject
such right of first refusal. If the Company does not exercise its right to
purchase or cause to be purchased the shares within such period, the holder may
freely dispose of the shares following expiration of such period.
 
     I. A breach by the Employe, his or her beneficiary(ies), or legal
representative, of any restrictions, terms or conditions provided in the Plan,
the Agreement, or otherwise established by the Committee with respect to any
Award will, unless waived in whole or in part by the Committee, cause a
forfeiture of such Award.
 
     J. The Committee shall not, without the further approval of the Common
Stock shareholders of the Company, authorize the amendment of any outstanding
Option to reduce the Exercise Price or authorize the
 
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amendment of any outstanding Stock Appreciation Right to reduce the base price.
Furthermore, no Option or Stock Appreciation Right shall be cancelled and
replaced with Awards having a lower Exercise Price or base price without the
further approval of the Common Stock shareholders of the Company.
 
     K. The Plan shall be submitted to the Common Stock shareholders of the
Company for their approval on April 24, 1995, or on such other date as may be
fixed for the next annual meeting of Common Stock shareholders, and shall become
effective only upon such approval and thereafter continue until its termination
by the Compensation Committee. No Restricted Stock Awards or Awards to
Nonemploye Directors shall be granted prior to the date the Plan becomes
effective, and any other Awards that may be granted before the Plan becomes
effective shall be granted subject to and shall become effective only upon the
effectiveness of the Plan.
 
     L. The provisions of this Plan shall be interpreted and construed in
accordance with the laws of the State of Michigan.
 
     M. It is the intention that the Plan at all times fully satisfy the
provisions and conditions of Rule 16b-3 applicable to a Plan of this type.
Accordingly, anything herein to the contrary notwithstanding, to the extent that
Rule 16b-3 at any given time would require that decisions concerning the
selection of Employes who are or become subject to reporting requirements of
Section 16 of the Exchange Act ("Section 16 Reporting Persons") to be granted
Awards hereunder, the timing, amounts, and other terms of such Awards, and the
form of settlement of any such Awards be made only by the Committee, all such
decisions by the Committee shall be final and conclusive and not subject to
reversal or modification by the Board. Moreover, irrespective of any rights or
discretionary power which a Section 16 Reporting Person holding a pertinent
Award otherwise would possess hereunder or under the Agreement evidencing such
Award concerning the timing of exercise of a SAR, the manner of paying the
Exercise Price for an exercised Option, a request or election concerning the
form of settlement of a SAR, or the manner of satisfying tax withholding
obligations arising with respect to any Award, the Section 16 Reporting Person
shall be entitled to exercise such rights and discretion only at such times and
manner and under such other conditions as at the time are contemplated by the
applicable provisions of Rule 16b-3 and any attempt otherwise to exercise such
rights or discretion shall be void and of no effect. The Plan is intended to
comply with and be subject to Rule 16b-3 as in effect prior to May 1, 1991. The
Committee may at any time elect that this Plan shall be subject to Rule 16b-3 as
in effect on and after May 1, 1991.
 
     N. Restrictions on Common Stock.  The Company may impose restrictions on
any shares of Common Stock granted pursuant to the Plan as it may deem advisable
including, without limitation, restrictions intended to achieve compliance with
the Securities Act of 1933, as amended, with the requirements of any stock
exchange upon which such shares or shares of the same class are then listed, and
with any blue sky or securities laws applicable to such shares.
 
     O. The Committee may require or permit Employes to elect to defer the
issuance of Common Stock or the settlement of Awards in cash under such rules
and procedures as it may establish under the Plan. It also may provide that
deferred settlements include the payment or crediting of interest on the
deferral amounts, or the payment or crediting of dividend equivalents where the
deferral amounts are denominated in shares.
 
     P. The Committee may condition the grant of any Award or combination of
Awards authorized under this Plan (other than non-discretionary Awards pursuant
to Section 10) on the surrender or deferral by an Employe of his or her right to
receive a cash bonus or other compensation otherwise payable by the Company or a
Subsidiary to the Employe.
 
     Q. If another corporation is merged into the Company or the Company
otherwise acquires another corporation, the Committee may elect to assume under
this Plan any or all outstanding stock options or other awards granted by such
corporation under any stock option or other plan adopted by it prior to such
acquisition. Such assumptions shall be on such terms and conditions as the
Committee may determine; provided, however, that the awards as so assumed do not
contain any terms, conditions or rights that are inconsistent with the terms of
this Plan. Unless otherwise determined by the Committee, such awards shall not
be taken into account for purposes of determining the limitations contained in
Section 3 of this Plan.
 
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