Looks to me like it is wired correctly. Term 1 is the "excite" term, fed from key through diode, resister, or indicater light. These prevent backfeed from alt to coil. Without them in line, backfeed would be enough to keep the motor running even after turning the key off. Term 2 is the "sense" term, tells the regulator how much voltage is actually being generated. If term 2 is not connected to battery, it will allow regulator to run wild. In automotive use, General Motors ran this wire directly to battery, reading net voltage at battery after on board accessories take what they need. Clear as mud, but it covers the ground. Willie
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