<PAGE>   1
                                                                  EXHIBIT 10-40*


                            INDEMNIFICATION AGREEMENT

         This Indemnification Agreement ("Agreement") is made as of the ____ day
of _______________, _______ by and between The Detroit Edison Company, a
Michigan corporation (the "Company"), and __________________, an officer of the
Company (the "Indemnitee").

         RECITALS

         A.   The Indemnitee is presently serving as an officer of the Company
and the Company desires the Indemnitee to continue in such capacity. The
Indemnitee is willing, subject to certain conditions, including without
limitation the execution and performance of this Agreement by the Company, to
continue in that capacity.

         B.    In addition to the indemnification to which the Indemnitee is
entitled under the Articles of Incorporation (the "Articles") or By-Laws of the
Company in effect from time to time, the Company has obtained at its sole
expense insurance protecting its officers and directors, including the
Indemnitee, against certain losses arising out of actual or threatened actions,
suits or proceedings to which such persons may be made or threatened to be made
parties. However, as a result of circumstances having no relation to, and beyond
the control of, the Company and the Indemnitee, there can be no assurance of the
continuation, renewal or scope of that insurance.

         Accordingly, and in order to induce the Indemnitee to continue to serve
in the Indemnitee's present capacity, the Company and Indemnitee agree as
follows:




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         1.   Continued Service.   The Indemnitee will continue to serve as an
officer of the Company so long as the Indemnitee is duly elected and qualified
in accordance with the By-Laws of the Company in effect from time to time or
until the Indemnitee resigns in writing in accordance with applicable law.

         2.   Initial Indemnity.

              (a)  The Company shall indemnify the Indemnitee when the
Indemnitee was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal, other
than an action by or in the right of the Company, by reason of the fact that the
Indemnitee is or was a director, officer, employee or agent of the Company, or
is or was serving at the request of the Company as a director, officer, employee
or agent of another foreign or domestic corporation, partnership, joint venture,
trust or other enterprise, whether for profit or not, against expenses,
including attorneys' fees, judgments, penalties, fines and amounts paid in
settlement actually and reasonably incurred by the Indemnitee in connection with
such action, suit or proceeding if the Indemnitee acted in good faith and in a
manner the Indemnitee reasonably believed to be in, or not opposed to the best
interests of the Company or its shareholders, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe such conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction or upon a plea of nolo contendere or its equivalent shall
not, of itself, create a presumption that the Indemnitee did not act in good
faith and in a manner which the Indemnitee reasonably believed to be in or not
opposed to the best interests of the




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Company or its shareholders and, with respect to any criminal action or
proceeding, that the Indemnitee had reasonable cause to believe that such
conduct was unlawful.

              (b)  The Company shall indemnify the Indemnitee when the
Indemnitee was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Company to procure a judgment in its favor by reason of the fact that the
Indemnitee is or was a director, officer, employee, or agent of the Company, or
is or was serving or had agreed to serve at the request of the Company as a
director, officer, partner, trustee, employee or agent of another foreign or
domestic corporation, partnership, joint venture, trust or other enterprise,
whether for profit or not, against expenses, including attorneys' fees and
amounts paid in settlement actually and reasonably incurred by the Indemnitee in
connection with the action or suit, if the Indemnitee acted in good faith and in
a manner the Indemnitee reasonably believed to be in, or not opposed to the best
interests of the Company or its shareholders. Indemnification shall not be made
for a claim, issue or matter in which the Indemnitee has been found liable to
the Company except to the extent the Court conducting the proceeding or another
court of competent jurisdiction shall determine upon application that the
Indemnitee is fairly and reasonably entitled to indemnification in view of all
relevant circumstances whether or not the Indemnitee met the standard of conduct
set forth in this paragraph (b) or was so adjudged liable to the Company,
provided that if the Indemnitee was adjudged liable, such indemnification is
limited to reasonable expenses incurred.

              (c)  To the extent that the Indemnitee has been successful, on the
merits or otherwise, in defense of any action, suit or proceeding referred to in
Section 2(a) or 2(b) hereof, or in defense of any claim, issue or matter in the
action, suit or proceeding, the Indemnitee shall



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be indemnified against actual and reasonable expenses, including attorneys' fees
incurred by the Indemnitee in connection with the action, suit or proceeding and
an action suit or proceeding brought to enforce the mandatory indemnification
provided in this Section.

              (d)  Any indemnification under Section 2(a) or 2(b) (unless
ordered by a court) shall be made by the Company only as authorized in the
specific case upon a determination in accordance with Section 4 hereof or any
applicable provision of the Articles of Incorporation of the Company in effect
from time to time, By-Laws, other agreement, resolution or otherwise. Such
determination shall be made (i) by a majority vote of a quorum of the Board of
Directors of the Company (the "Board") consisting of directors who are not
parties or threatened to be made parties to such action, suit or proceeding or
(ii) if such a quorum is not obtainable, by a majority vote of a committee duly
designated by the Board consisting solely of two or more directors not at the
time parties or threatened to be made parties to the suit, action, or proceeding
or (iii) by independent legal counsel (designated in the manner provided below
in this subsection (d)) in a written opinion or (iv) by all independent
directors who are not parties to such action, suit or proceeding or (v) by the
shareholders of the Company (the "Shareholders"), but shares held by directors,
officers, employees or agents who are parties or threatened to be made parties
to the action suit or proceeding may not be voted. Independent legal counsel
shall be designated by the Board or its Committee in the manner prescribed in
Section 2(d)(i) or 2(d)(ii); provided, however, that if the Board is unable or
fails to so designate, such designation shall be made by the Indemnitee subject
to the approval of the Company (which approval shall not be unreasonably
withheld). In the designation of a committee under subsection 2(d)(ii) or the
selection of independent legal counsel by the Board, all directors may
participate. Independent



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legal counsel shall not be any person or firm who, under the applicable
standards of professional conduct then prevailing, would have a conflict of
interest in representing either the Company or the Indemnitee in an action to
determine the Indemnitee's rights under this Agreement. The Company agrees to
pay the reasonable fees and expenses of such independent legal counsel and to
indemnify fully such counsel against costs, charges and expenses (including
attorneys' and others' fees and expenses) actually and reasonably incurred by
such counsel in connection with this Agreement or the opinion of such counsel
pursuant hereto.

              (e) If the Indemnitee is entitled to indemnification under Section
2(a) or 2(b) for a portion of expenses, including reasonable attorneys' fees,
judgments, penalties, fines and amounts paid in settlement, but not for the
total amount, the Company shall indemnify the Indemnitee for the portion of the
expenses, judgments, penalties, fines or amounts paid in settlement for which
the Indemnitee is entitled to be indemnified.

              (f)  The Company shall pay or reimburse the reasonable expenses
(including attorneys' and others' fees and expenses) incurred by the Indemnitee
in the Indemnitee's capacity as a director or officer of the Company who is a
party or threatened to be made a party to an action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding subject to
the provisions of and in the manner prescribed by Section 4(b) hereof.

              (g)  The Company shall not adopt any amendment to the Articles or
By-Laws the effect of which would be to deny, diminish or encumber the
Indemnitee's rights to indemnity pursuant to the Articles, By-Laws, the Business
Corporation Act of the State of Michigan (the "BCA") or any other applicable law
as applied to any act or failure to act occurring in whole or in part prior to
the date (the "Effective Date") upon which the amendment was approved by the




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Board or the Shareholders, as the case may be. In the event that the Company
shall adopt any amendment to the Articles or By-Laws the effect of which is to
so deny, diminish or encumber the Indemnitee's rights to indemnity, such
amendment shall apply only to acts or failures to act occurring entirely after
the Effective Date thereof unless the Indemnitee shall have voted in favor of
such adoption as a officer or holder of record of the Company's voting stock,
as the case may be.

              (b) Upon application to a court by the Indemnitee pursuant to
Section 564c of the BCA, and a determination of such court that the Indemnitee
is fairly and reasonably entitled to indemnification, the Company shall pay to
the Indemnitee the amount so ordered by the court.


         3. Additional Indemnification.

              (a) Pursuant to Section 565 of the BCA, without limiting any right
which the Indemnitee may have pursuant to Section 2 hereof, the Articles, the
By-Laws, the BCA, any policy of insurance or otherwise, but subject to the
limitations on the maximum permissible indemnity which may exist under
applicable law at the time of any request for indemnity hereunder determined as
contemplated by Section 3(a) hereof, the Company shall indemnify the Indemnitee
against any amount which the Indemnitee is or becomes legally obligated to pay
relating to or arising out of any claim made against the Indemnitee because of
any act, failure to act or neglect or breach of duty, including any actual or
alleged error, misstatement or misleading statement, which the Indemnitee
commits, suffers, permits or acquiesces in while acting in such capacity as an
officer or director of the Company, or, at the request of the Company, as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise. The payments which the Company is obligated
to make pursuant to this


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Section 3 shall include without limitation damages, judgments, settlements and
charges, costs, expenses, expenses of investigation and expenses of defense of
legal actions, suits, proceedings or claims and appeals therefrom, and expenses
of appeal, attachment or similar bonds; provided, however, that the Company
shall not be obligated under this Section 3(a) to make any payment in connection
with any claim against the Indemnitee:

         (i) to the extent of any fine or similar governmental imposition which
         the Company is prohibited by applicable law from paying which results
         from a final nonappealable order; or

         (ii) to the extent based upon or attributable to the Indemnitee gaining
         in fact a personal profit to which the Indemnitee was not legally
         entitled, including without limitation profits made from the purchase
         and sale by the Indemnitee of equity securities of the Company which
         are recoverable by the Company pursuant to Section 16(b) of the
         Securities Exchange Act of 1934, as amended, and profits arising from
         transactions in publicly traded securities of the Company which were
         effected by the Indemnitee in violation of Section 10(b) of the
         Securities Exchange Act of 1934, as amended, including Rule 10b-5
         promulgated thereunder.

The determination of whether the Indemnitee shall be entitled to indemnification
under this Section 3(a) may be, but shall not be required to be, made in
accordance with Section 4(a) hereof. If that determination is so made, it shall
be binding upon the Company and the Indemnitee for all purposes.

              (b) Expenses (including without limitation attorneys' and others'
fees and expenses) incurred by Indemnitee in defending any actual or threatened
civil or criminal action,



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suit, proceeding or claim shall be paid by the Company in advance of the final
disposition thereof as authorized in accordance with Section 4(b) hereof.

         4. Certain Procedures Relating to Indemnification and Advancement of
Expenses.

              (a) Except as otherwise permitted or required by the BCA, for
purposes of pursuing the Indemnitee's rights to indemnification under Section
2(a), 2(b) or 3(a) hereof, as the case may be, the Indemnitee may, but shall not
be required to, (i) submit to the Board a sworn statement of request for
indemnification substantially in the form of Exhibit 1 attached hereto and made
a part hereof (the "Indemnification Statement") averring that the Indemnitee is
entitled to indemnification hereunder; and (ii) present to the Company
reasonable evidence of all expenses for which payment is requested. Submission
of an Indemnification Statement to the Board shall create a presumption that the
Indemnitee is entitled to indemnification under Section 2(a), 2(b) or 3(a)
hereof, as the case may be, and the Board shall be deemed to have determined
that the Indemnitee is entitled to such indemnification unless within 30
calendar days after submission of the Indemnification Statement the Board shall
determine by vote of a majority of the directors at a meeting at which a quorum
is present, based upon clear and convincing evidence (sufficient to rebut the
foregoing presumption), and the Indemnitee shall have received notice within
such period in writing of such determination, that the Indemnitee is not so
entitled to indemnification. No such determination shall be effective unless
written notice thereof, disclosing with particularity the evidence in support of
the Board's determination, shall have been given to the Indemnitee within 30
calendar days after submission of the Indemnification Statement. The foregoing
notice shall be sworn to by all persons who participated in the determination
and voted to deny indemnification. The provisions of this


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Section 4(a) are intended to be procedural only and shall not affect the right
of the Indemnitee to indemnification under this Agreement, and any determination
by the Board that the Indemnitee is not entitled to indemnification and any
failure to make the payments requested in the Indemnification Statement shall be
subject to judicial review as provided in Section 6 hereof.

              (b) For purposes of determining whether to authorize advancement
of expenses pursuant to Section 2(e) hereof, the Indemnitee shall submit to the
Board a sworn statement of request for advancement of expenses substantially in
the form of Exhibit 2 attached hereto and made a part hereof (the
"Undertaking"), averring that (i) the Indemnitee, in good faith, believes that
the applicable standards of conduct set forth in Section 2(a), 2(b) or 3(a), as
the case may be, have been met, (ii) the Indemnitee has reasonably incurred or
will reasonably incur actual expenses in defending an actual civil or criminal
action, suit, proceeding or claim and (iii) the Indemnitee undertakes to repay
such amount if it shall ultimately be determined that the Indemnitee did not
meet the applicable standard of conduct or is not entitled to be indemnified by
the Company under this Agreement or otherwise. For purposes of requesting
advancement of expenses pursuant to Section 3(b) hereof, the Indemnitee may, but
shall not be required to, submit an Undertaking or such other form of request as
the Indemnitee determines to be appropriate (an "Expense Request"). Upon receipt
of an Undertaking or Expense Request, as the case may be, such payments shall
immediately be made by the Company provided that a determination is made that
facts then known to those making the determination would not preclude
indemnification under the BCA. Such determination shall be made within 10
calendar days of the date of receipt by the Company of the Expense Request and
shall be made in the manner specified in Section 2(d). No security shall be
required in connection with any


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Undertaking or Expense Request and any Undertaking or Expense Request shall be
accepted without reference to the Indemnitee's ability to make repayment.

         5. Subrogation: Duplication of Payments.

              (a) In the event of payment under this Agreement, the Company
shall be subrogated to the extent of such payment to all of the rights of
recovery of the Indemnitee, who shall execute all papers required and shall do
everything that may be necessary to secure such rights, including the execution
of such documents necessary to enable the Company effectively to bring suit to
enforce such rights.

              (b) The Company shall not be liable under this Agreement to make
any payment in connection with any claim made against the Indemnitee to the
extent the Indemnitee has actually received payment (under any insurance policy,
the Articles, the By-Laws or otherwise) of the amounts otherwise payable
hereunder.

         6. Enforcement.

              (a) If a claim for indemnification made to the Company pursuant to
Section 4 hereof is not paid in full by the Company within 30 calendar days
after a written claim has been received by the Company, the Indemnitee may at
any time thereafter bring suit against the Company to recover the unpaid amount
of the claim.

              (b) In any action brought under Section 6(a) hereof, it shall be a
defense to a claim for indemnification pursuant to Section 2(a) or 2(b) hereof
that the Indemnitee has not met the standards of conduct which make it
permissible under the BCA for the Company to indemnify the Indemnitee for the
amount claimed, but the burden of proving such defense shall be on the Company.
Neither the failure of the Company (including the Board, independent legal


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counsel or the Shareholders) to have made a determination prior to commencement
of such action that indemnification of the Indemnitee is proper in the
circumstances because the Indemnitee has met the applicable standard of conduct
set forth in the BCA, nor an actual determination by the Company (including the
Board, independent legal counsel or the Shareholders) that the Indemnitee has
not met such applicable standard of conduct, shall be a defense to the action or
create a presumption that the Indemnitee has not met the applicable standard of
conduct.

         (c)  It is the intent of the Company that the Indemnitee not be
required to incur the expenses associated with the enforcement of the
Indemnitee's rights under this Agreement by litigation or other legal action
because the cost and expense thereof would substantially detract from the
benefits intended to be extended to the Indemnitee hereunder. Accordingly, if it
should appear to the Indemnitee that the Company has failed to comply with any
of its obligations under the Agreement or in the event that the Company or any
other person takes any action to declare this Agreement void or unenforceable,
or institutes any action, suit or proceeding designed (or having the effect of
being designed) to deny, or to recover from, the Indemnitee the benefits
intended to be provided to the Indemnitee hereunder, the Company irrevocably
authorizes the Indemnitee from time to time to retain counsel of the
Indemnitee's choice, at the expense of the Company as hereafter provided, to
represent the Indemnitee in connection with the initiation or defense of any
litigation or other legal action, whether by or against the Company or any
director, officer, stockholder or other person affiliated with the Company, in
any jurisdiction. Regardless of the outcome thereof, the Company shall pay and
be solely responsible for any and all costs, charges and expenses, including
without limitation attorneys' and others' fees and





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expenses, reasonably incurred by the Indemnitee (i) as a result of the Company's
failure to perform this Agreement or any provision thereof or (ii) as a result
of the Company or any person contesting the validity or enforceability of this
Agreement or any provision thereof as aforesaid.

         7.   Merger or Consolidation. In the event that the Company shall be a
constituent corporation in a consolidation, merger or other reorganization, the
Company, if it shall not be the surviving, resulting or other corporation
therein, shall require as a condition thereto the surviving, resulting or
acquiring corporation to agree to indemnify the Indemnitee to the full extent
provided in this Agreement. Whether or not the Company is the resulting,
surviving or acquiring corporation in any such transaction, the Indemnitee shall
also stand in the same position under this Agreement with respect to the
resulting, surviving or acquiring corporation as the Indemnitee would have with
respect to the Company if its separate existence had continued.

         8.   Nonexclusivity and Severability.

              (a)  The right to indemnification provided by this Agreement shall
not be exclusive of any other rights to which the Indemnitee may be entitled
under the Articles, By-Laws, the BCA, any other statute, insurance policy,
agreement, vote of shareholders or of directors or otherwise, both as to actions
in the Indemnitee's official capacity and as to actions in another capacity
while holding such office, and shall continue after the Indemnitee has ceased to
be a director, officer, employee or agent and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators.

              (b)  If any provision of this Agreement or the application of any
provision hereof to any person or circumstances is held invalid, unenforceable
or otherwise illegal, the remainder of this Agreement and the application of
such provision to other persons or



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circumstances shall not be affected, and the provision so held to be invalid,
unenforceable or otherwise illegal shall be reformed to the extent (and only to
the extent) necessary to make it enforceable, valid and legal.

         9.   Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Michigan, without giving effect to
the principles of conflict of laws thereof.

         10.  Modification: Survival. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof. This Agreement
may be modified only by an instrument in writing signed by both parties hereto.
The provisions of this Agreement shall survive the death, disability, or
incapacity of the Indemnitee or the termination of the Indemnitee's service as a
an officer or director of the Company and shall inure to the benefit of the
Indemnitee's heirs, executors and administrators.

         11.  Certain Terms. For purposes of this Agreement, references to
"other enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on Indemnitee with respect to any
employee benefit plan; and references to "serving at the request of the Company"
shall include any service as a director, officer, employee or agent of the
Company which imposes duties on, or involves services by, the Indemnitee with
respect to an employee benefit plan, its participants or beneficiaries;
references to the masculine shall include the feminine and vice versa;
references to the singular shall include the plural and vice versa; and if the
Indemnitee acted in good faith and in a manner the Indemnitee reasonably
believed to be in the interest of the participants and beneficiaries of an
employee benefit plan the Indemnitee shall


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be deemed to have acted in a manner "not opposed to the best interests of the
"Company" as referred to herein.

         IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.

                           THE DETROIT EDISON COMPANY

                                 --------------------------------------
                           By:   Susan M. Beale
                                 Vice President and Corporate Secretary


                           INDEMNITEE

                                 --------------------------------------









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                                                                       EXHIBIT 1

                           INDEMNIFICATION STATEMENT

STATE OF MICHIGAN        )
                         )SS
COUNTY OF________________)


         I, _____________________________, being first duly sworn, do depose and
say as follows:


         1.   This Indemnification Statement is submitted pursuant to the
Indemnification Agreement, dated as of ___________, ______, between The Detroit
Edison Company, a Michigan corporation (the "Company"), and the undersigned.

         2.   I am requesting indemnification against charges, costs, expenses
(including attorneys' and others' fees and expenses), judgments, fines and
amounts paid in settlement, all of which (collectively, "Liabilities") have been
or will be incurred by me in connection with an actual or threatened action,
suit, proceeding or claim to which I am a party or am threatened to be made a
party.

         3.   With respect to all matters related to any such action, suit,
proceeding or claim, I am entitled to be indemnified as herein contemplated
pursuant to the aforesaid Agreement.

         4.   Without limiting any other rights which I have or may have, I am
requesting indemnification against Liabilities which have arisen or may arise
out of



                                               _________________________________




         Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ___ day of __________, 19___.



                                                    ____________________________

[Seal]
         My commission expires the ____ day of _______________________, 19___.






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<PAGE>   16



                                                                       EXHIBIT 2

                                  UNDERTAKING


STATE OF MICHIGAN        )
                         )SS
COUNTY OF________________)


         I, _____________________, being first duly sworn do depose and say as
follows:

         1.   This Undertaking is submitted pursuant to the Indemnification
Agreement (the "Agreement"), dated as of ___________, ______, between The
Detroit Edison Company, a Michigan corporation (the "Company"), and the
undersigned.

         2.   I am requesting advancement of certain costs, charges and expenses
which I have incurred or will incur in defending an actual or pending civil or
criminal action, suit, proceeding or claim.

         3.   I affirm my good faith belief that I meet the applicable standard
of conduct set forth in Section 2(a), 2(b) or 3(a) of the Agreement.

         4.   I hereby undertake to repay this advancement of expenses if it
shall ultimately be determined that I did not meet the applicable standard of
conduct or am not entitled to be indemnified by the Company under the aforesaid
Agreement or otherwise.

         5.   My undertaking to repay is my unlimited general obligation.

         6.   The costs, charges and expenses for which advancement is requested
are, in general, all expenses related to _______________________________.





                                               _________________________________




         Subscribed and sworn to before me, a Notary Public in and for said
County and State, this ___ day of __________, 19___.

[Seal]

                                                    ____________________________


         My commission expires the ____ day of _______________________, 19___.





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