EXHIBIT N-1.2
FORM OF
NON-UTILITY MONEY POOL AGREEMENT
This Non-Utility Money Pool Agreement (the "Agreement"), dated as of
___________, 2000, is made and entered into by and among LG&E Energy Corporation
("LG&E Energy"), a Kentucky corporation and a registered holding company under
the Public Utility Holding Company Act of 1935, as amended (the "Act"), LG&E
Services Company ("LG&E Services") (solely in the role as administrator of the
money pool), a subsidiary service company of LG&E Energy, and each of the non-
utility subsidiaries of LG&E Energy whose name appears on the signature pages
hereof (each a "Party" and collectively, the "Parties").
WITNESSETH:
WHEREAS, the Parties desire to establish a Money Pool (the "Non-Utility
Money Pool") to coordinate and provide for certain of their short-term cash and
working capital requirements; and
WHEREAS, the non-utility subsidiaries that will participate in the Non-
Utility Money Pool (each a "Subsidiary" and collectively, the "Subsidiaries")
will from time to time have need to borrow funds on a short-term basis, and
certain of the Parties will from time to time have funds available to loan on a
short-term basis;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants and provisions contained herein, the Parties hereto agree
as follows:
ARTICLE I
CONTRIBUTIONS AND BORROWINGS
Section 1.01 Contributions to Non-Utility Money Pool.
Each Party will determine each day, on the basis of cash flow projections
and other relevant factors, in such Party's sole discretion, the amount of funds
it has available for contribution to the Non-Utility Money Pool, and will
contribute such funds to the Non-Utility Money Pool. The determination of
whether a Party at any time has surplus funds to lend to the Non-Utility Money
Pool or shall lend funds to the Non-Utility
Money Pool will be made by an appropriate officer of such Party, or by a
designee thereof, on the basis of cash flow projections and other relevant
factors, in such Party's sole discretion. Each Party may withdraw any of its
funds at any time upon notice to LG&E Services as administrative agent of the
Non-Utility Money Pool.
Section 1.02 Rights to Borrow.
Subject to the provisions of Section 1.04(c) of this Agreement, all short-
term borrowing needs of the Parties, with the exception of LG&E Energy, will be
met by funds in the Non-Utility Money Pool to the extent such funds are
available. Each Party (other than LG&E Energy) shall have the right to make
short-term borrowings from the Non-Utility Money Pool from time to time, subject
to the availability of funds and the limitations and conditions set forth herein
and in the applicable orders of the Securities and Exchange Commission. Each
Party (other than LG&E Energy) may request loans from the Non-Utility Money Pool
from time to time during the period from the date hereof until this Agreement is
terminated by written agreement of the Parties; provided, however, that the
aggregate amount of all loans requested by any Party hereunder shall not exceed
the applicable borrowing limits set forth in applicable orders of the Securities
and Exchange Commission and other regulatory authorities, resolutions of such
Party's Board of Directors or similar governing body, such Party's governing
corporate documents, and agreements binding upon such Party.
Section 1.03 Source of Funds.
(a) Funds will be available through the Non-Utility Money Pool from the
following sources for use by the Parties from time to time: (i) surplus funds in
the treasuries of Parties other than LG&E Energy, (ii) surplus funds in the
treasury of LG&E Energy, and (iii) proceeds from bank borrowings by Parties and
the sale of commercial paper or debt securities by Parties ("External Sources").
Funds will be made available from such sources in such order as LG&E Services,
as administrator of the Non-Utility Money Pool, may determine will result in a
lower cost of borrowing to companies borrowing from the Non-Utility Money Pool,
consistent with the individual borrowing needs and financial standing of the
Parties providing funds to the Non- Utility Money Pool.
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(b) Borrowing Parties will borrow pro rata from each lending Party in the
proportion that the total amount loaned by such lending Party bears to the total
amount then loaned through the Non-Utility Money Pool. On any day when more than
one fund source (e.g., surplus treasury funds of LG&E Energy and other Non-
Utility Money Pool participants ("Internal Sources") and funds from External
Sources), with different rates of interest, is used to fund loans through the
Non-Utility Money Pool, each borrowing Party will borrow pro rata from each such
fund source in the Non-Utility Money Pool in the same proportion that the amount
of funds provided by that fund source bears to the total amount of short-term
funds available to the Non-Utility Money Pool.
Section 1.04 Authorization.
(a) Each loan shall be authorized by the lending Party's chief financial
officer or treasurer, or by a designee thereof.
(b) LG&E Services, as administrator of the Non-Utility Money Pool, will
provide each Party with periodic activity and cash accounting reports that
include, among other things, reports of cash activity, the daily balance of
loans outstanding and the calculation of interest charged.
(c) All borrowings from the Non-Utility Money Pool shall be authorized by
the borrowing Party's chief financial officer or treasurer, or by a designee
thereof. No Party shall be required to effect a borrowing-through the Non-
Utility Money Pool if such Party determines that it can (and is authorized to)
effect such borrowing at lower cost directly from banks or through the sale of
its own commercial paper.
Section 1.05 Interest.
The daily outstanding balance of all loans to any Subsidiary shall accrue
interest as follows:
(a) If only Internal Funds comprise the daily outstanding balance of all
loans outstanding during a calendar month, the interest rate applicable to such
daily balances shall be the rates for high-grade unsecured 30-day commercial
paper of major corporations sold through dealers as quoted in The Wall Street
Journal (the "Average Composite").
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(b) If only External Funds comprise the daily outstanding balance of all
loans outstanding during a calendar month, the interest rate applicable to such
daily outstanding balances shall be the lender's cost for such External Funds
or, if more than one Party had made available External Funds at any time during
the month, the applicable interest rate shall be a composite rate, equal to the
weighted average of the costs incurred by the respective Parties for such
External Funds.
(c) In cases where the daily outstanding balances of all loans outstanding
at any time during the month include both Internal Funds and External Funds, the
interest rate applicable to the daily outstanding balances for the month shall
be equal to the weighted average of (i) the cost of all Internal Funds
contributed by Parties, as determined pursuant to Section 1.05(a) of this
Agreement, and (ii) the cost of all such External Funds, as determined pursuant
to Section 1.05(b) of this Agreement.
(d) The interest rate applicable to Loans made by a Subsidiary to the Non-
Utility Money Pool under Section 1.01 of this Agreement shall be the Average
Composite as determined pursuant to Section 1.05(a) of this Agreement.
Section 1.06 Certain Costs.
The cost of compensating balances and fees paid to banks to maintain credit
lines by Parties lending External Funds to the Non-Utility Money Pool shall
initially be paid by the Party maintaining such line. A portion of such costs
shall be retroactively allocated every month to the Subsidiaries borrowing such
External Funds through the Non-Utility Money Pool in proportion to their
respective daily outstanding borrowings of such External Funds.
Section 1.07 Repayment.
Each Subsidiary receiving a loan from the Non-Utility Money Pool hereunder
shall repay the principal amount of such loan, together with all interest
accrued thereon, on demand and in any event within 365 days of the date on which
such loan was made. All loans made through the Non-Utility Money Pool may be
prepaid by the borrower without premium or penalty.
Section 1.08 Form of Loans to Subsidiaries.
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Loans to the Subsidiaries from the Non-Utility Money Pool shall be made as
open-account advances, pursuant to the terms of this Agreement. A separate
promissory note will not be required for each individual transaction. Instead, a
promissory grid note evidencing the terms of the transactions shall be signed by
the Parties to the transaction. Any such note shall: (a) be in substantially the
form attached hereto as Exhibit A; (b) be dated as of the date of the initial
borrowing; (c) be payable on demand; and (d) be repayable in whole at any time
or in part from time to time, without premium or penalty.
ARTICLE II
OPERATION OF NON-UTILITY MONEY POOL
Section 2.01 Operation.
Operation of the Non-Utility Money Pool, including record keeping and
coordination of loans, will be handled by LG&E Services under the authority of
the appropriate officers of the Parties. LG&E Services shall be responsible for
the determination of all applicable interest rates and charges to be applied to
advances outstanding at any time hereunder, shall maintain records of all
advances, interest charges and accruals and interest and principal payments for
purposes hereof, and shall prepare periodic reports thereof for the Parties.
LG&E Services will administer the Non-Utility Money Pool on either an "at cost"
basis or, in its sole discretion, on a different basis. Separate records shall
be kept by LG&E Services for the Non-Utility Money Pool established by this
Agreement and any other money pool administered by LG&E Services.
Section 2.02 Investment of Surplus Funds in the Non-Utility Money Pool.
Funds not required for the Non-Utility Money Pool loans (with the exception
of funds required to satisfy the Non-Utility Money Pool's liquidity
requirements) will ordinarily be invested in one or more short-term investments,
including (i) interest-bearing accounts with banks; (ii) obligations issued or
guaranteed by the U.S. government and/or its agencies and instrumentalities,
including obligations under repurchase agreements; (iii) obligations issued or
guaranteed by any state or political subdivision thereof, provided that such
obligations are rated not less than A by a nationally recognized rating agency;
(iv) commercial paper rated not less than A-1 by S&P or P-1 by Moody's, or their
equivalent by a nationally recognized
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rating agency; (v) money market funds; (vi) bank certificates of deposit; (vii)
Eurodollar funds; and (viii) such other investments as are permitted by Section
9(c) of the Act and Rule 40 thereunder.
Section 2.03 Allocation of Investment Earnings.
The interest income and other investment income earned by the Non-Utility
Money Pool on loans and on investment of surplus funds will be allocated among
the Parties in accordance with the proportion each Party's contribution of funds
in the Non-Utility Money Pool bears to the total amount of funds in the Non-
Utility Money Pool and the cost of any External Sources provided to the Non-
Utility Money Pool by such Party. Interest and other investment earnings will
be computed on a daily basis and settled once per month.
Section 2.04 Event of Default.
If any Subsidiary shall generally not pay its debts as such debts become
due, or shall admit in writing its inability to pay its debts generally, or
shall make a general assignment for the benefit of creditors, or any proceeding
shall be instituted by or against any Party seeking to adjudicate it bankrupt or
insolvent, then LG&E Services, on behalf of the Non-Utility Money Pool, may, by
notice to the Subsidiary, terminate the Non-Utility Money Pool's commitment to
the Subsidiary and/or declare the principal amount then outstanding of, and the
accrued interest on, the loans and all other amounts payable to the Non-Utility
Money Pool by the Subsidiary hereunder to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Subsidiary.
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments.
No amendment to this Agreement shall be adopted except in a writing
executed by a duly authorized officer of each Party.
Section 3.02 Legal Responsibility.
Nothing herein contained shall render any Party liable for
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the obligations of any other Party hereunder and the rights, obligations and
liabilities of the Parties are several in accordance with their respective
obligations, and not joint.
Section 3.03 Rules for Implementation.
The Parties may develop a set of guidelines for implementing the
provisions of this Agreement, provided that the guidelines are consistent with
all of the provisions of this Agreement.
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Section 3.04 Governing Law.
This Agreement shall be governed by, and construed in accordance with,
the laws of the Commonwealth of Kentucky.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered
by the duly authorized officer of each Party hereto as of the date first above
written.
LG&E ENERGY CORP.
By: __________________________
Name:__________________
Title:_________________
LG&E CAPITAL CORP.
By: ___________________________
Name:___________________
Title:__________________
LG&E POWER INC.
By: ___________________________
Name:___________________
Title:__________________
LG&E SERVICES COMPANY
By: ___________________________
Name:___________________
Title:__________________
[ADD OTHERS]
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EXHIBIT A
To Non-Utility Money Pool Agreement
FORM OF NOTE
FOR VALUE RECEIVED, the undersigned, __________ 9 the "Borrower"), hereby
promises to pay to the order of LG&E Services Company, as administrator of the
Non-Utility Money Pool as defined in the Money Pool Agreement (as defined
below), at its principal office in Louisville, Kentucky, on demand, the
principal amount outstanding from time to time under that certain Non-Utility
Money Pool Agreement dated as of _________, 2000 by and among LG&E Energy Corp.,
LG&E Services Company, as administrator, the undersigned, and each of the other
non-utility subsidiaries whose name appears on the signature pages thereof (the
"Money Pool Agreement"). The principal amount outstanding under this note shall
bear interest, calculated daily, at a rate determined in accordance with the
Money Pool Agreement. The undersigned hereby authorizes the administrator to
record on the grid on the reverse side hereof or attached hereto the date and
amount of each advance under the Money Pool Agreement and each payment made on
account of the principal thereof. The principal amount outstanding as set forth
on the grid on the reverse side hereof or attached hereto shall be rebuttable
presumptive evidence of the principal amount owing and unpaid on this note.
This note may be prepaid in full at any time or in part from time to time,
without premium or penalty.
Date: ______________________
______________________
By: _________________
Name: ________________
Title: _______________
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Amount of Loan Principal
Date Loan Repayment Amount
Outstanding
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