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                                  ESELCO, INC.

                           DIRECTOR'S RETIREMENT PLAN





                            Effective January 1, 1993

                           As Amended January 1, 1995








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                                  ESELCO, INC.

                           DIRECTOR'S RETIREMENT PLAN


                                TABLE OF CONTENTS
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                                                                        Page    

ARTICLE I      DEFINITIONS                                                 
               A.   Purpose                                               1
               B.   Definitions                                           1

ARTICLE II     PARTICIPATION AND CREDITED SERVICE                          
               A.   Purpose                                               3
               B.   Eligibility to Participate                            3
               C.   Credited Service                                      3
               
ARTICLE III    BENEFIT PAYMENTS
               A.   Purpose                                               4
               B.   Payment of Benefits                                   5
               C.   Amount and Duration of Benefits                       5
               D.   Conditions to Receipt of Benefits                     5
               
ARTICLE IV     ADMINISTRATION OF PLAN
               A.   Purpose                                               7
               B.   Administrator                                         7
               C.   Committee                                             7

ARTICLE V      AMENDMENT AND TERMINATION
               A.   Purpose                                               8
               B.   Amendment                                             8
               C.   Termination                                           8

ARTICLE VI     MISCELLANEOUS
               A.   Purpose                                               9
               B.   Creditor Status                                       9
               C.   Non-alienation                                        9
               D.   Facility of Payment                                   9
               E.   No Guarantee of Retention                            10
               F.   Cooperation                                          10
               G.   Governing Law                                        10
               H.   Merger                                               10

                                         

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                                  ESELCO, INC.

                           DIRECTOR'S RETIREMENT PLAN



               I.   Limited Assignment                                   10


                                         

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                                  ESELCO, INC.

                           DIRECTOR'S RETIREMENT PLAN

ARTICLE I     DEFINITIONS
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     A.   PURPOSE

          Throughout this Plan, certain words are used frequently.  Whenever a
          word is capitalized, it will have the meaning defined in this Article
          of the Plan unless the context clearly indicates otherwise.


     B.   DEFINITIONS

          (1)  "ACCRUED BENEFIT" means with respect to any date of determination
               on or after January 1, 1995, the amount of the Fee then in
               effect.

          (2)  "BENEFICIARY"  means the person(s) so designated in writing by
               the participant, or the participant's lawful spouse in the event
               that a proper designation is not made by the participant.  In the
               event the participant is not survived by a lawful spouse and no
               other Beneficiary has been designated, the participant's estate
               shall be the Beneficiary.

          (3)  "BOARD" means the Board of Directors of ESELCO, Inc.

          (4)  "COMMITTEE" means the administrative committee, appointed by the
               Board.

          (5)  "COMPANY" means ESELCO, Inc., and any subsidiary or affiliate of
               ESELCO, Inc. which has adopted the Plan with the consent of the
               Board.

          (6)  "CREDITED SERVICE" means the total period of time an individual
               has served as a Director, determined in accordance with Article
               II.

          (7)  "DIRECTOR" means any member of the Board who receives a fee for
               service on the Board.

          (8)  "EARLY RETIREMENT DATE" means the date of the Director's actual
               retirement after age fifty-five (55) and prior to his Normal
               Retirement Date, provided the Director has at least fifteen (15)
               years of Credited Service.

          (9)  "EFFECTIVE DATE" means January 1, 1993.

                                        -1-

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ARTICLE I     DEFINITIONS (cont'd)
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          (10) "FEE" means the established level of annual fee paid to a
               Director for services rendered to the Company as a Director,
               excluding expense reimbursements.


          (11) "NORMAL RETIREMENT DATE" means the later of

               (a)  the date the Director completes five (5) years of Credited
                    Service,

               (b)  the Director's sixty-fifth (65th) birthday, or

               (c)  the date of the Director's actual retirement after age
                    sixty-five (65).


          (12) "PLAN" means the ESELCO, Inc. Director's Retirement Plan as set
               forth herein.

          (13) "PLAN ADMINISTRATOR" means the Vice President - Finance of
               ESELCO, Inc., or his designee.


                                        -2-

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ARTICLE II     PARTICIPATION AND CREDITED SERVICE
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     A.   PURPOSE

          This Article describes when a Director becomes eligible to participate
          in the Plan and presents issues related to the determination of
          Credited Service.


     B.   ELIGIBILITY TO PARTICIPATE

          Any Director is automatically eligible to participate in the Plan upon
          the later of the Effective Date and the date he first becomes a
          Director.  


     C.   CREDITED SERVICE

          Each eligible Director will receive one-twelfth (1/12) of a year of
          Credited Service for each month during which he serves as a Director
          for at least fifteen (15) days, including service prior to the
          Effective Date.

          In the event a Director incurs a break in service as a Director and
          again resumes such service, his prior period of Credited Service shall
          be added to his subsequent period of Credited Service for all Plan
          purposes.


                                         -3-

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ARTICLE III    BENEFIT PAYMENTS
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     A.   PURPOSE

          This Article describes the conditions under which benefits will be
          paid under the Plan, and the amount and form of benefit payments.


     B.   PAYMENT OF BENEFITS

          (1)  RETIREMENT

               Upon the Director's attainment of his Normal or Early Retirement
               Date, the Plan Administrator will take steps to provide for the
               payment of benefits in accordance with the provisions of Section
               C of this Article III.

          (2)  DEATH

               (a)  PRIOR TO RETIREMENT:

                    In the event of the death of a Director prior to his Normal
                    or Early Retirement Date, his Beneficiary shall be entitled
                    to benefits hereunder, determined as if the Director had
                    retired on his date of death.

               (b)  AFTER RETIREMENT:

                    In the event of the death of a Director after his Normal or
                    Early Retirement Date, Plan benefits will continue to be
                    paid to his Beneficiary pursuant to Section C of this
                    Article III.


          (3)  TERMINATION OF SERVICE

               A participant whose service as a Director is terminated for any
               reason prior to becoming eligible for a Normal or Early
               Retirement Benefit shall not be eligible to receive Plan
               benefits.

                                        -4-

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ARTICLE III    BENEFIT PAYMENTS (cont'd)


     C.   AMOUNT AND DURATION OF BENEFITS

          (1)  BENEFIT AMOUNT:

               Subject to paragraph (3) below, upon reaching his Normal or Early
               Retirement Date and terminating service as a Director, a
               participant shall be eligible to receive an annual retirement
               benefit (payable monthly) equal to his Accrued Benefit.

          (2)  DURATION OF BENEFITS: 

               Such monthly retirement benefits shall continue to be paid up to
               and including the earlier of:

               (a)  the receipt of one hundred and twenty (120) monthly
                    payments, or

               (b)  the receipt of monthly payments for a period of time equal
                    to the retired Director's months of Credited Service, if
                    less than one hundred and twenty (120).

          (3)  OPTIONAL FORMS OF PAYMENT

               Subject to the approval of the Board of Directors upon
               recommendation of the Plan Administrator, benefits payable
               hereunder may be made in any other form of equivalent actuarial
               value, determined in accordance with Section 1.16 of the Pension
               Plan for Management Employees of Edison Sault Electric Company in
               effect at the date of commencement.


     D.   CONDITIONS TO RECEIPT OF BENEFITS

          Payments of benefits under this Plan are subject to the following
          conditions:

          (1)  The retired Director shall not engage directly or indirectly in
               any business which is competitive with the Company, unless such
               condition is specifically waived by the Company.  Breach of the
               condition contained herein shall be deemed to occur immediately
               upon a retired Director's engaging in competitive activity. 
               Payments suspended for breach of the condition shall not
               thereafter be resumed whether or not the competitive activity
               ceases.  A retired Director shall be deemed to be engaged in such
               a business indirectly if he is an employee, officer, director,
               trustee, agent or partner of, or a consultant or advisor to or
               for, a person, firm, corporation, association, trust or other
               entity which is engaged in such a business or if he owns,
               directly or indirectly, in excess of 5% of any such firm,
               corporation, association, trust or other entity.

                                         -5-

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ARTICLE III    BENEFIT PAYMENTS (cont'd)
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          (2)  In the event that a retired Director shall commit any wrongful
               act, either directly or indirectly, against, and to the detriment
               of, the Company, the Company shall have no further obligation to
               make payments to the retired Director under this Plan.


                                         -6-

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ARTICLE IV     ADMINISTRATION OF PLAN
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     A.   PURPOSE

          This Article defines the responsibilities of the parties involved in
          the administration of the Plan and establishes a claims and appeals
          procedure to resolve disputes with Plan participants.

     B.   ADMINISTRATOR

          The Company will be the administrator of the Plan.  The Company may
          delegate administrative responsibilities to others by action of its
          Board of Directors and with notice to the persons or persons to whom
          the delegation is made.


     C.   COMMITTEE

          The Board may, but need not, appoint a Committee of not less than one
          member to serve at the pleasure of the Board.  Any member of the
          Committee may resign upon written notice to the Board and the Board
          may remove any member of the Committee for any reason.

          (1)  The Committee will act by a majority of its members by vote at a
               meeting, or in writing without a meeting.  If the Committee
               cannot reach a decision on an issue, a temporary Committee member
               will be appointed by unanimous vote of all Committee members to
               decide the issue.  In the event the Committee fails to agree on
               the selection of a temporary Committee member, an arbitrator will
               be selected by the American Arbitration Association in accordance
               with its rules.

          (2)  The Committee may appoint from its members a chairman to preside
               over meetings and a secretary (who need not be a member) to keep
               records of meetings and activities of the Committee.  The
               Committee may also appoint one or more of its members to execute
               any document on its behalf.

          (3)  The Committee will have all powers and authority to make rules
               and regulations with respect to the Plan and to determine all
               questions as to interpretation of the Plan provisions and/or the
               rights or status of participants. 

          (4)  The Committee will establish a reasonable procedure for the
               filing of claims and the appeal by participants of any decision
               of the Committee.

          (5)  If a Committee is not appointed by the Board, the duties and
               responsibilities of the Committee will be carried out by the
               Company.

                                         -7-

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ARTICLE V    AMENDMENT AND TERMINATION
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     A.   PURPOSE

          This Article establishes the circumstances under which the Plan can be
          amended or terminated and how benefits will be distributed if the Plan
          is terminated.


     B.   AMENDMENT

          The Board reserves the right to amend the Plan at any time and for any
          reason.  No amendment will decrease or place further restrictions on a
          Director's Accrued Benefit at the time of such amendment.


     C.   TERMINATION

          (1)  The Board reserves the right to terminate the Plan.

          (2)  The Plan will be automatically terminated upon the Company's
               legal dissolution, adjudication as bankrupt or insolvent, upon a
               general assignment for the benefit of creditors, or upon a
               receiver being appointed.

          (3)  In the event of the termination of the Plan, any Director with
               five (5) or more years of Credited Service will receive a benefit
               at the earlier of his Normal or Early Retirement Date as provided
               in Article III based on his Accrued Benefit immediately prior to
               such termination.  Any benefits in pay status at the time of Plan
               termination to a retired Director will be continued in accordance
               with the terms of the Plan.

                                         -8-

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ARTICLE VI    MISCELLANEOUS
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     A.   PURPOSE

          This Article describes the creditor status of participants, discusses
          assignability of benefits, and other miscellaneous items.


     B.   CREDITOR STATUS

          Plan participants will have no legal or equitable rights, interest or
          claims in any property or asset of the Company, nor will they be
          beneficiaries of, or have any rights, claims or interests in any life
          insurance policies, annuity contract policies, or the proceeds
          therefrom owned by or which may be acquired by the Company.  Such
          policies or other assets of the Company will not be held in trust for
          the benefit of participants or held in any way as collateral security
          for the fulfilling of the obligations of the Company under this Plan. 
          Any and all of the Company's assets and policies will be, and remain,
          the general, unpledged, unrestricted assets of the Company.  The
          Company's obligation under the Plan will be merely that of an unfunded
          and unsecured promise of the Company to pay money in the future.


     C.   NON-ALIENATION

          Except as may be required by federal tax withholding rules and Section
          I of this Article VI, benefits hereunder may not be assigned,
          alienated, commuted, sold, transferred, mortgaged, hypothecated, or in
          any other way encumbered.


     D.   FACILITY OF PAYMENT

          If any individual entitled to a distribution under the Plan is
          adjudged mentally incompetent, the Committee may in its discretion
          make payments to such individual or to his legal representative or to
          a relative or friend of the individual for his  benefit.  Any payment
          of a benefit under this paragraph will be a complete discharge of any
          liability for the making of such payment under the provisions of the
          Plan.

                                         -9-

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ARTICLE VI     MISCELLANEOUS (cont'd) 
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     E.   NO GUARANTEE OF RETENTION

          Nothing contained in this Plan will be construed to be a contract of
          service between the Company and any Director, or as a guarantee of
          continued retention of a Director by the Company.


     F.   COOPERATION

          A participant will cooperate with the Committee by furnishing any and
          all information requested by the Committee in order to facilitate
          benefit payments and by taking any other action requested by the
          Committee.


     G.   GOVERNING LAW

          The Plan shall be construed in accordance with and governed by the
          laws of the State of Michigan.


     H.   MERGER

          The Company will not merge, consolidate, or combine with any other
          business entity unless and until the obligations of the Company under
          the terms of this Plan are provided for adequately.

     I.   LIMITED ASSIGNMENT

          Each Participant shall have the right to assign benefits hereunder,
          provided such assignment shall be limited to
               (1)  a trust of which only immediate members of the Participant's
                    family are beneficiaries, or

               (2)  a family limited partnership of which only immediate members
                    of the Participant's family are partners.

                                         -10-