EXHIBIT B-3
SERVICES AND FACILITIES AGREEMENT
Dated as of _______________
Among
The AES Corporation,
Central Illinois Light Company
and
Each of the Entities Identified on Exhibit A Hereto
ARTICLE I
Definitions and Interpretation..................... 1
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Section 1.1 Definitions................................................... 1
Section 1.2 Purpose and Intent; Interpretation............................ 2
ARTICLE II
Use of Facilities and Services..................... 2
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Section 2.1 Facilities.................................................... 2
Section 2.2 Services...................................................... 4
Section 2.3 Joint Purchasing.............................................. 4
Section 2.4 Cash Management............................................... 4
Section 2.5 Tax Sharing................................................... 5
Section 2.6 Agreements, Etc............................................... 5
ARTICLE III
Asset Sales.............................. 5
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Section 3.1 Real Property Transfers....................................... 5
Section 3.2 Tangible Personal Property.................................... 5
Section 3.3 Intangible Assets............................................. 5
Section 3.4 AES Stock..................................................... 5
Section 3.5 Agreements, Etc............................................... 6
ARTICLE IV
Charges: Payment......................... 6
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Section 4.1 Charges....................................................... 6
Section 4.2 Accounting.................................................... 6
Section 4.3 Invoicing, Payment............................................ 7
ARTICLE V
Cost Apportionment Methodology..................... 8
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Section 5.1 General Principles............................................ 8
Section 5.2 Fully Distributed Costs....................................... 9
Section 5.3 Costs Charged to/from CILCORP................................. 11
ARTICLE VI
Limitations of Liability........................ 12
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Section 6.1 No Warranties For Facilities or Services...................... 12
Section 6.2 Limited Warranties For Asset Sales............................ 13
Section 6.3 No Partnership................................................ 13
Section 6.4 No Third Party Beneficiaries.................................. 13
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ARTICLE VII
Term.................................. 13
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Section 7.1 Term.......................................................... 13
Section 7.2 Termination................................................... 14
Section 7.3 Tax Sharing Agreement......................................... 14
ARTICLE VIII
Confidential Information........................ 14
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ARTICLE IX
Miscellaneous............................. 14
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Section 9.1 Entire Agreement; Amendments................................... 14
Section 9.2 New Parties.................................................... 15
Section 9.3 Assignment..................................................... 15
Section 9.4 Access to Records.............................................. 15
Section 9.5 Partial Invalidity............................................. 15
Section 9.6 Waiver......................................................... 15
Section 9.7 Governing Law.................................................. 16
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SERVICES AND FACILITIES AGREEMENT
THIS SERVICES AND FACILITIES AGREEMENT (this "Agreement") is made and
entered into as of the _______________, 2002, among The AES Corporation, a
Delaware corporation ("AES"), CILCORP Inc., an Illinois corporation ("CILCORP"),
Central Illinois Light Company, an Illinois corporation ("CILCO"), and each of
the entities identified on Exhibit A hereto, as such Exhibit A may be amended
from time to time in accordance with the provisions of this Agreement.
W I T N E S S E T H:
WHEREAS, the parties are related by virtue of common ownership,
directly or indirectly, of their equity securities by AES; and
WHEREAS, the parties believe that the central management of certain
services, the provision to each other of certain services and facilities, and
the transfer of certain property are or may be efficient and cost-effective, and
the parties desire to make provision for these and other transactions as between
CILCO and an AES Entity or Entities;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants contained herein, the parties hereby agree as follows:
ARTICLE I
Definitions and Interpretation
------------------------------
Section 1.1. Definitions. As used in this Agreement, the following
terms shall have the respective meanings set forth below unless the context
otherwise requires:
"Acquiring Party" means a Party who desires to acquire real property,
interests in real property, tangible personal property or Intangible Assets
from a Selling Party.
"AES Entity" means any of AES and the entities identified on Exhibit
A.
"ICC" means the Illinois Commerce Commission.
"Intangible Assets" mean, for the purposes of this Agreement, items
for which costs have been incurred to create future economic benefits that
have not been recorded as assets on the Selling Party's financial
statements. Intangible Assets include, but are not limited to, operational
activities or intellectual property derived from internal research and
development efforts.
"Investment Guidelines" means the investment guidelines attached
hereto as Exhibit B, as such Exhibit may be amended from time to time with
the approval of the ICC.
"Party" means each, and "Parties" means all, of the entities who are
from time to time a party to this Agreement.
"Provider" means a Party who has been requested to, and who is able
and willing to, furnish facilities, provide services or both to a Requestor
under the terms of this Agreement.
"Requestor" means a Party who desires to use facilities, receive
services or both, and has requested another Party to furnish such
facilities, provide such services or both.
"Selling Party" means a Party who is willing to sell and transfer real
property, interests in real property, tangible personal property or
Intangible Assets to an Acquiring Party.
"Tax Sharing Agreement" means the AES Group Income Tax Allocation
Agreement.
Section 1.2. Purpose and Intent; Interpretation. (a) The purposes and
intent of this Agreement are to set forth procedures and policies to govern (i)
transactions between an AES Entity and CILCO, whether such transactions occur
directly or indirectly as the end result of a series of related transactions and
(ii) the allocation of certain joint service costs. It is not intended to govern
transactions between AES Entities, although such entities may elect to apply the
provisions of this Agreement to specific transactions, or to govern transactions
between CILCO and its subsidiaries. This Agreement shall be interpreted in
accordance with such purposes and intent.
(b) The headings of Articles and Sections contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections and Exhibits
refer to articles, sections and exhibits of this Agreement unless otherwise
stated. Words such as "herein", "hereinafter", "hereof", "hereto", "hereby" and
"hereunder", and words of like import, unless the context requires otherwise,
refer to this Agreement (including the Exhibits hereto).
ARTICLE II
Use of Facilities and Services
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Section 2.1. Facilities. Upon the terms and subject to the conditions
of this Agreement, a Requestor may request a Provider or Providers to make
available or provide, and, subject to the provisos at the end of this Section,
such Provider or Providers shall make available or provide to such Requestor,
the use of:
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(a) facilities, including, without limitation, office space, warehouse
and storage space, transportation facilities, repair facilities,
manufacturing and production facilities, fixtures and office furniture and
equipment;
(b) computer equipment (both stand-alone and mainframe) and networks,
peripheral devices, storage media, and software;
(c) communications equipment, including, without limitation, audio and
video equipment, radio equipment, telecommunications equipment and
networks, and transmission and switching capability;
(d) vehicles, including, without limitation, automobiles, trucks,
vans, trailers, railcars, marine vessels, transport equipment, material
handling equipment and construction equipment; and
(e) machinery, equipment, tools, parts and supplies;
provided, however, that a Provider shall have no obligation to provide any of
the foregoing to the extent that such item or items are not available (either
because such Provider does not possess the item or the item is otherwise being
used); and provided further, it is understood that a Provider has sole
discretion in scheduling the use by a Requestor of facilities, equipment or
capabilities so as to avoid interference with such Provider's operations.
Section 2.2. Services. Upon the terms and subject to the conditions of
this Agreement, a Requestor may request a Provider or Providers to provide, and,
subject to the provisos at the end of this Section, such Provider or Providers
shall provide to such Requestor:
(a) Administrative and management services, including, without
limitation, accounting (including, without limitation, bookkeeping,
billing, accounts receivable administration and accounts payable
administration, and financial reporting); audit; executive; finance;
insurance; information systems services; investment advisory services;
legal; record keeping; secretarial and other general office support; real
estate management; security holder services; tax; treasury; and other
administrative and management services;
(b) personnel services, including, without limitation, recruiting;
training and evaluation services; payroll processing; employee benefits
administration and processing; labor negotiations and management; and
related services;
(c) purchasing services, including, without limitation, preparation
and analysis of product specifications, requests for proposals and similar
solicitations; vendor and vendor-product evaluations; purchase order
processing; receipt, handling, warehousing and disbursement of purchased
items; contract negotiation and administration; inventory management and
disbursement; and similar services; and
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(d) operational services, including, without limitation, drafting and
technical specification development and evaluation; consulting;
engineering; environmental; nuclear; construction; design; resource
planning; economic and strategic analysis; research; testing; training;
customer solicitation, support and other marketing related services; public
and governmental relations; and other operational services;
provided, however, that a Provider shall have no obligation to provide any of
the foregoing to the extent that it is not capable of providing such service
(either because such Provider does not have personnel capable of providing the
requested service or the service is otherwise being used); and provided further,
it is understood that a Provider has sole discretion in scheduling the use by a
Requestor of services so as to avoid interference with such Provider's
operations.
Section 2.3. Joint Purchasing. A Party may also request that another
Party or Parties enter into arrangements to effect the joint purchase of goods
or services from third parties; provided, however, that if CILCO is so requested
to enter into or to participate in such arrangements, it shall do so only if its
fully distributed cost for such goods or services is not thereby increased; and
provided further, that no Party shall be required to purchase a service which it
is otherwise capable of providing or obtaining. In the event that any such
arrangements are established, one Party may be designated as, or serve as, agent
for the other Parties to the arrangement and may administer the arrangement
(including billing and collecting amounts due the vendor(s)) for the other
Parties.
Section 2.4. Cash Management. The Parties may enter into one or more
arrangements providing for the central collection, management, investment and
disbursement of cash by a Party. If such an arrangement is established, then:
(a) the Parties participating in such arrangement shall establish
appropriate intercompany accounts to track the amount of cash transferred
and/or received by each Party to such arrangement and the pro rata portion
of the earnings received by each such Party from the investment of cash;
(b) the Party responsible under the arrangement for the management and
investment of such cash shall establish a separate account or accounts for
such purpose, which account(s) and the records associated therewith shall
clearly indicate that other Parties have an interest in said account(s) and
the proceeds thereof and shall not be subject to set-off by the bank or
other institution holding the same except to the limited extent of expenses
arising from the management, handling and investment of the account(s); and
(c) if and to the extent that an account contains cash received from
CILCO, such account may be invested, and reinvested, in the investments
described in the Investment Guidelines, subject, however, to the need to
maintain suitable liquidity in such account in order to meet the cash needs
of the Parties participating in the arrangement; it being understood that
the Investment Guidelines shall not be the exclusive means by which cash of
Parties other than CILCO may be invested.
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Section 2.5. Tax Sharing. Each Party who is eligible to be included in
a consolidated tax return filing by AES shall, by virtue of this Section 2.5, be
deemed a party to, and shall observe and comply with the provisions of, the Tax
Sharing Agreement.
Section 2.6. Agreements, Etc. A Provider and Requestor may evidence
their agreement with respect to the availability, provision or use of the
facilities, services and activities described in this Article II by entering
into an agreement, lease, license or other written memorandum or evidence;
provided such agreement, lease, license or other written memorandum or evidence
shall not contain terms inconsistent with this Agreement; and further provided
that this Section 2.6 shall not be deemed to require any such agreement, lease,
license or other written memorandum or evidence.
ARTICLE III
Asset Sales
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Section 3.1. Real Property Transfers. Upon the terms and subject to the
conditions of this Agreement, an Acquiring Party may purchase from a Selling
Party, and the Selling Party may sell to the Acquiring Party, real property or
interests in real property; provided, however, that the value of the real
property or interests in the real property proposed to be transferred (as such
value is determined in accordance with Section 5.1(a)) shall not exceed
$5,000,000 without approval of the specific agreement by the ICC.
Section 3.2. Tangible Personal Property. Upon the terms and subject to
the conditions of this Agreement, an Acquiring Party may purchase from a Selling
Party, and the Selling Party may sell to the Acquiring Party, tangible personal
property; provided, however, that the value of the tangible personal property
proposed to be transferred (as such value is determined in accordance with
Section 5.1(a)) shall not exceed $5,000,000 without approval of the specific
agreement by the ICC (it being understood that the foregoing limitation shall
not apply to the transfer of tangible personal property by CILCO which is not
necessary or useful to CILCO in the performance of its duties to the public);
and provided further, that this Section 3.2 shall not apply to joint purchasing
arrangements (and the transactions thereunder) entered into pursuant to Section
2.3 of this Agreement.
Section 3.3. Intangible Assets. Subject to approval by the ICC of the
specific agreement, an Acquiring Party may enter into an agreement with a
Selling Party to purchase, and the Acquiring Party may purchase from the Selling
Party and the Selling Party may sell to the Acquiring Party pursuant to such
agreement, Intangible Assets. Any such Intangible Assets shall be valued in
accordance with Section 5.1(c).
Section 3.4. AES Stock. Upon the terms and subject to the conditions of
this Agreement, AES may issue and sell to CILCO shares of AES's Common Stock for
the sole purpose of enabling CILCO to meet its obligations to its directors and
employees in respect of compensation (it being understood that CILCO would cause
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any shares so purchased and received to be reissued to such directors or
employees in payment of such compensation obligations).
Section 3.5. Agreements, Etc. An Acquiring Party and a Selling Party
may evidence their agreement with respect to the sale of real property and/or
tangible personal property described in Sections 3.1 or 3.2 by entering into an
agreement or other written memorandum or evidence; provided such agreement or
other written memorandum or evidence shall not contain terms inconsistent with
this Agreement; and further provided that this Section 3.5 shall not be deemed
to require any such agreement or other written memorandum or evidence.
ARTICLE IV
Charges: Payment
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Section 4.1. Charges. (a) Charges for the use of facilities, equipment,
capabilities or services under Sections 2.1 and 2.2 shall be determined in
accordance with Section 5.1(b); charges for assets sold and transferred under
Sections 3.1, 3.2 and 3.4 shall be determined in accordance with the provisions
of Section 5.1(a); and charges for assets sold and transferred under Section 3.3
shall be determined in accordance with the provisions of Section 5.1(c). By
requesting the use of facilities, equipment, capabilities and/or services, a
Requestor shall be deemed to have agreed to pay, and shall pay, to the Provider
or Providers the charge determined therefor in accordance with Section 5.1(b).
By acquiring real property, interests therein, tangible personal property or
Intangible Assets in accordance with the provisions of Article III, an Acquiring
Party shall be deemed to have agreed to pay, and shall pay, to the Selling Party
the charge determined therefor in accordance with Section 5.1(a) or, in the case
of Intangible Assets, Section 5.1(c).
(b) Charges related to arrangements under Section 2.3 for the joint
purchase of goods or services shall be determined in accordance with Section
5.1(a), in the case of asset transfers, and Section 5.1(b), in the case of
services and overhead, administrative and other costs.
(c) Charges of third parties related to the establishment and operation
of any account or accounts established under Section 2.4 and the investment of
the proceeds, and the earning resulting from the investment thereof, shall be
allocated to the Parties participating therein based upon the daily balance of
cash maintained by each Party in such account or accounts. Charges related to
the administration of the account by a Party's personnel shall be determined in
accordance with Section 5.1(b).
Section 4.2. Accounting. Each Party shall maintain adequate books and
records with respect to the transactions subject to this Agreement and shall
establish unique account numbers in its general ledger system which shall be
used to record the costs to be apportioned to the other Parties. Each Party
shall be responsible for maintaining internal controls to ensure the costs
associated with transactions covered by this Agreement are properly and
consistently allocated and billed in accordance with the terms and provisions of
this Agreement.
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Section 4.3. Invoicing, Payment. Invoicing and payment for the
facilities and services specified in Article II, the asset sales specified in
Article III or the joint services costs specified in Section 5.3(a) shall be as
follows:
(a) for the use of facilities, equipment or capabilities specified in
Section 2.1 or the provision of services specified in Section 2.2, a
Provider shall invoice the Requestor on a monthly basis for the charges
therefor as provided in Section 4.1(a), and such invoices shall be payable
within thirty days of receipt;
(b) for joint purchasing arrangements specified in Section 2.3, a
Party participating in any such arrangement shall be invoiced for charges
as provided in Section 4.1(b), which invoices will be payable according to
the terms set by the vendor(s) providing the purchased goods or services,
or if a Party has been selected to administer such arrangement, pursuant to
invoices rendered by such Party or the vendor of the goods or services,
which invoices will be payable no later than thirty days after receipt;
(c) for cash management activities under Section 2.4, (i) the Party
responsible for administering the activities shall invoice the other
participating Parties for the charges therefor as provided in Section
4.1(c), which invoices shall be payable within thirty days of receipt, or
(ii) the charges for such activities may be offset against the cash amounts
held thereunder, provided a written statement of such charges and the
amount of the offset is provided to the participating Parties monthly;
(d) for the tax sharing arrangement specified in Section 2.5, charges
and payments shall be made as provided in the Tax Sharing Agreement;
(e) for the sale of real property or interests in real property
specified in Section 3.1, the Acquiring Party shall pay the charges
therefor as provided in Section 4.1(a) to the Selling Party upon the
closing of the sale and transfer of such real property or interests
therein;
(f) for the sale of tangible personal property specified in Section
3.2, the Selling Party shall invoice the Acquiring Party for the charges
therefor as provided in Section 4.1(a), and such invoices shall be payable
within thirty days of receipt;
(g) for the transfer of AES Common Stock specified in Section 3.4,
CILCO shall pay the charges therefor as provided in Section 4.1(a) and such
payment shall be made to AES concurrently with the issuance and delivery of
the shares of such stock; and
(h) for joint service costs under Section 5.3(a), CILCORP shall
invoice the other Parties for such costs as provided in Section 5.3(c), and
such invoices shall be payable within thirty days of receipt.
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Late payments shall bear interest at a rate per annum equal to the sum of the
prime rate of interest as published in the Wall Street Journal, plus 2% per
annum, and such interest shall be based on the period of time that the payment
is late.
ARTICLE V
Cost Apportionment Methodology
------------------------------
Section 5.1. General Principles. The following general principles shall
be used in setting charges for transactions between CILCO and AES Entities:
(a) Sales of Assets. Asset sales between CILCO and an AES Entity shall
be charged by the Selling Party to the Acquiring Party at: (i) the fair
market value of the transferred asset, as evidenced by (1) the prevailing
price for which the same or similar assets are offered for sale to the
general public by the Selling Party (e.g., for CILCO, the tariffed charge
or other pricing mechanism approved by the ICC) or, if no such prevailing
price exists, (2) the price at which nonaffiliated vendors offer the same
or similar assets for sale by reference to quoted market prices,
independent appraisals or other objectively determinable evidence or, if no
such fair market value is objectively or practicably determinable, (ii) the
historical cost of the asset to the Selling Party, less all applicable
valuation reserves.
(b) Use of Facilities or Services.
(i) Facilities or services provided by CILCO to an AES Entity
shall be charged by the Provider to the Requestor at: (1) the
prevailing price for which the facility or service is provided for
sale to the general public by the Provider (i.e., the tariffed rate or
other pricing mechanism approved by the ICC) or, if no such prevailing
price exists, (2) the fully distributed cost (determined as provided
in Section 5.2) incurred by the Provider in providing such facility or
service to the Requestor.
(ii) Facilities or services provided by an AES Entity to CILCO
shall be charged by the Provider to the Requestor at: (1) the
prevailing price for which the facility or service is provided for
sale to the general public by the Provider (i.e., the price charged to
nonaffiliates if such transactions with nonaffiliates constitute a
substantial portion of such AES Entity's total revenues from such
transactions) or, if no such prevailing price exists, (2) an amount
not to exceed the fully distributed cost (determined as provided in
Section 5.2) incurred in providing such facility or service.
(c) Sales of Intangible Assets. Intangible Asset sales between CILCO
and an AES Entity shall be charged by the Selling Party to the Acquiring
Party (i) under a mechanism to reflect the fair market value of the asset
as determined by an appraisal or other fair market value study or, if no
such fair market value is objectively or practicably determinable, (ii) at
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the fully distributed cost incurred to purchase or develop the asset,
adjusted to reflect imputed depreciation of, if applicable, and carrying
costs on the unrecorded asset.
Costs shall be charged to a Party in accordance with these general principles
using either a direct charge or an allocation methodology. Costs of assets or
services specifically attributable to a Party should be charged directly to such
Party. Joint and common costs not specifically attributable to a Party should be
charged to the appropriate Parties based on specific allocation methodologies.
The Parties intend to develop and implement a set of guidelines to address
applications of the foregoing general principles.
Section 5.2. Fully Distributed Costs. Costs charged on a fully
distributed cost basis shall reflect the amounts of direct labor, direct
materials and direct purchased services associated with the related asset or
service as provided in subsections (a) and (b). These amounts shall be increased
by a portion of indirect costs to reflect labor, administrative and general and
other overhead amounts as provided in subsection (c).
(a) Direct Costs. Costs incurred that are specifically attributable to
a Party shall be directly charged to the appropriate account based on that
Party's usage of the provided resource.
(i) Direct Labor. Amounts of direct labor charged to a Party
shall be based on an employee's actual direct labor rate, reflecting
the effects of overtime and nonproductive time.
For most employees, direct labor shall be charged to a Party
under a positive time reporting methodology under which an employee
shall report each pay period the number of hours incurred in
performing activities for such Party. Based on the time reported each
pay period, the regular, predetermined account distribution for the
employee shall be adjusted to reflect the distribution of direct labor
charges to the appropriate affiliate account.
Some departments or organizations are expected to provide a
recurring, predictable level of services to a Party or Parties. For
these departments or organizations, annual reviews shall be performed
to determine a normal distribution of time to such Party or Parties.
The distribution percentages derived from such reviews shall then be
used to allocate time with respect to each pay period. For these
departments or organizations, direct labor shall be charged to a Party
or Parties under an exception time reporting methodology. That is,
significant deviations of actual activity from these predetermined
percentages shall be reported and shall result in adjustments to the
predetermined distribution of direct labor charges to the affiliate
accounts.
Officers of each Party shall also utilize an exception time
reporting methodology. Distribution percentages derived from an annual
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review for each Officer shall be used to allocate time with respect to
each pay period. Significant deviations of actual activity from the
predetermined percentages shall be reported and shall result in
adjustments to the predetermined distribution of direct labor charges
to the affiliate accounts.
Overtime shall be reflected in the direct labor rates charged to
a Party. For bargaining unit employees, direct labor shall be charged
based on the base and overtime pay amounts actually incurred under a
Party's collective bargaining agreements. Likewise, for management
employees who are compensated for overtime, direct labor shall be
charged based on the actual pay amounts incurred for such employees,
including overtime.
All direct labor charges shall be increased by a factor to
reflect nonproductive time. The nonproductive time factor shall be
developed annually based on a review of actual nonproductive time
incurred for the previous year. The nonproductive time factor reflects
time incurred for such items as vacations, holidays, disability, jury
duty and other paid absences.
(ii) Direct Materials and Purchased Services. Amounts incurred
for materials or purchased services directly attributable to a Party
shall be charged directly to the appropriate account for that Party
using standard voucher account distribution procedures.
(iii) Costs of Facilities, Equipment, Machinery, Furniture, and
Fixtures. The costs allocated to any Party for the use of a Party's
facilities, equipment, machinery, furniture or fixtures shall include
an amount to reflect the cost of such assets (e.g., depreciation,
operations, maintenance, etc.) and, for owned assets or assets leased
under capital leases, a return equal to the rate of return on rate
base most recently allowed to CILCO by the ICC.
(b) Allocated Costs. Costs incurred that are not specifically
attributable to a Party but that have joint benefit to two or more Parties
shall be charged to the appropriate functions based on specified allocation
methodologies. The allocation methodologies used shall be reasonably based
on cost causative measures to ensure an equitable allocation among such
Parties.
(c) Indirect Costs. The direct and allocated costs apportioned to a
Party or Parties shall be increased to reflect indirect labor,
administrative and general and other overhead amounts. The indirect costs
are not specifically identifiable or attributable to the direct costs
incurred on behalf of a Party.
(i) Labor Loading. All direct labor charges apportioned to a
Party (either apportioned directly or using an allocation methodology)
shall be increased by a loading factor to reflect indirect
labor-driven costs. For each Party, this loading factor shall be
determined annually based on an estimate of indirect labor-driven
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charges to be incurred for the coming year (adjusted to reflect
differences between the estimated and actual amounts incurred in the
prior year) as a percentage of total direct labor charges incurred.
The labor loading rate pool shall include payroll taxes; medical and
dental insurance costs; pension and other postretirement health care
benefits costs; incentive compensation plan costs; and employee
savings plans' costs.
(ii) Information Systems Loading. All direct labor costs
apportioned to a Party shall be increased by a loading factor to
reflect information systems related costs that benefit all Parties
associated with mainframe and local area network usage and operations,
hardware and software costs and telecommunications services. For each
Party, this loading factor shall be based on the actual costs incurred
during the prior year as a percentage of the corresponding actual
total direct labor charges incurred in that year.
(iii) Common Costs Loading. All direct labor, direct materials,
direct purchased services and indirect labor costs (including the
information systems loading amounts) apportioned to a Party shall be
increased by a loading factor to reflect administrative and general
and other overhead amounts, including the overhead costs of each
Party's information systems function. For each Party, this loading
factor shall be determined annually based on actual administrative and
general and other overhead expenses incurred during the prior year as
a percentage of actual total operations and maintenance expense
incurred in that year. The common costs loading rate pool shall
include costs for departments that support other departments that
provide services directly to a Party. In addition to the general and
administrative costs of the information systems function,
representative costs in the common costs pool shall include printing
and duplicating services, forms and office supplies, communications
services and other similar costs.
Section 5.3. Costs Charged to/from CILCORP. CILCORP shall maintain
unique account numbers in its general ledger system: Consolidated Pool accounts
(as described in Section 5.3(a)) and Unallocated Pool accounts (as described in
Section 5.3(b)). All costs incurred by CILCORP and not directly charged to
another Party and all costs apportioned and billed to CILCORP by other Parties
shall be charged to one of these two types of accounts.
(a) Consolidated Pool. The Consolidated Pool shall be charged with
applicable costs related to activities that jointly benefit all of the
Parties. Each month, the costs accumulated in the Consolidated Pool shall
be apportioned and billed to the Parties (other than CILCORP) using a three
factor formula methodology. A representative listing of the types of
services for which costs may be charged to the Consolidated Pool is as
follows:
Corporate Services
Mail
Office and Building
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Financial and Accounting Services
Information Systems
Investor Relations
Legal
Procurement
Regulatory
Risk Management
Secretary's Office
Shareholder Services
(b) Unallocated Pool. The Unallocated Pool shall be charged with costs
that have been determined as not appropriate for apportionment by CILCORP
to the other Parties. These costs primarily relate to CILCORP's
diversification, political and philanthropic activities. A representative
listing of the types of services for which costs may be charged to the
Unallocated Pool is as follows:
Advertising
Corporate Contributions, Public Relations and Lobbying
Diversification Efforts (i.e., new business development)
Marketing
Research and Development
Strategic Analysis
(c) Three Factor Formula Methodology. Monthly, costs charged to the
Consolidated Pool shall be apportioned and billed by CILCORP to the other
Parties based on a three factor formula methodology. Under this approach,
each such Party is allocated and billed for a portion of the total costs in
the Consolidated Pool based on an average of such Party's gross payroll,
operating revenues and capital asset amounts relative to the corresponding
averages for the other Parties. The gross payroll, operating revenues and
capital asset amounts used in this allocation shall be for the twelve-month
period ending with the last day of the calendar year prior to the month
being allocated. Capital assets shall include, without limitation, the net
book value of property, plant and equipment, coal and material and supplies
inventories, as applicable.
ARTICLE VI
Limitations of Liability
------------------------
Section 6.1. No Warranties For Facilities or Services. Each Party
acknowledges and agrees that any facilities, equipment or capabilities made
available, and any services provided, by a Provider to a Requestor hereunder,
are so made available or provided WITHOUT ANY WARRANTY (WHETHER EXPRESS, IMPLIED
OR STATUTORY AND NOTWITHSTANDING ANY ORAL OR WRITTEN STATEMENT BY A PARTY'S
EMPLOYEES, REPRESENTATIVES OR AGENTS TO THE CONTRARY) WHATSOEVER. ALL SUCH
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WARRANTIES (INCLUDING, WITHOUT LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE) ARE HEREBY DISCLAIMED AND EXCLUDED.
Section 6.2. Limited Warranties For Asset Sales. (a) Except as provided
in Section 6.2(b), each Party acknowledges and agrees that any real property,
interests in real property, tangible personal property or Intangible Assets sold
and transferred in accordance with Article III is so sold and transferred
WITHOUT ANY WARRANTY (WHETHER EXPRESS, IMPLIED OR STATUTORY AND NOTWITHSTANDING
ANY ORAL OR WRITTEN STATEMENT BY A SELLING PARTY'S EMPLOYEES, REPRESENTATIVES OR
AGENTS TO THE CONTRARY) WHATSOEVER. ALL SUCH WARRANTIES (INCLUDING, WITHOUT
LIMITATION, THE WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR
PURPOSE) ARE HEREBY DISCLAIMED AND EXCLUDED.
(b) In connection with a sale and transfer of real property, interests
in real property, tangible personal property or Intangible Assets pursuant to
Article III, the Selling Party shall be deemed to have represented and warranted
to the Acquiring Party that: (i) title conveyed is good, (ii) conveyance of such
title is authorized and rightful, and (iii) the title so conveyed is free and
clear of all liens, claims, encumbrances or security interests of persons or
entities claiming by or through the Selling Party, except, in the case of this
clause (iv), as the Acquiring Party and the Selling Party may otherwise agree.
Section 6.3. No Partnership. The Parties acknowledge and agree that
this Agreement does not create a partnership between, or a joint venture of, a
Party and any other Party. Each party is an independent contractor and nothing
contained in this Agreement shall be construed to constitute any Party as the
agent of any other Party except as expressly set forth in Sections 2.3 and 2.4.
Section 6.4. No Third Party Beneficiaries. This Agreement is intended
for the exclusive benefit of the Parties hereto and is not intended, and shall
not be deemed or construed, to create any rights in, or responsibilities or
obligations to, third parties.
ARTICLE VII
Term
----
Section 7.1. Term. This Agreement will be effective within 60 days of
the date it is approved by the ICC and shall continue, unless terminated as
provided in Section 7.2 or renewed as hereinafter provided, until the tenth
anniversary of such date (the "Initial Term"). Unless written notice that this
Agreement shall terminate on the last day of the Initial Term or any then
current renewal term is provided by a Party at least 30 days prior to the
expiration of the Initial Term or such renewal term, this Agreement shall
continue for successive renewal terms of five years as to such Party and any
other Parties not providing any such termination notice.
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Section 7.2. Termination. Any Party may terminate this Agreement as to
it by providing at least 30 days prior written notice to the other Parties of
the effective date of such termination. In addition, this Agreement shall
terminate as to a Party upon the date that AES determines that such Party shall
no longer be a party to this Agreement and shall automatically terminate as to a
Party upon the date that AES ceases, directly or indirectly, to own equity
securities in such Party. Any such termination shall not affect the terminating
Party's accrued rights and obligations under this Agreement arising prior to the
effective date of termination or its obligations under Section 9.4.
Section 7.3. Tax Sharing Agreement. Notwithstanding anything to the
contrary in Sections 7.1 or 7.2, a Party shall continue to be bound by the
provisions of the Tax Sharing Agreement until the earlier of (i) the termination
of the Tax Sharing Agreement, as provided in the Tax Sharing Agreement or (ii)
the time at which such Party is not permitted, under applicable law, to be a
"Member" or an "Included Member", as those terms are defined in the Tax Sharing
Agreement.
ARTICLE VIII
Confidential Information
------------------------
Each Party shall treat in confidence all information which it shall
have obtained regarding the other Parties and their respective businesses during
the course of the performance of this Agreement. Such information shall not be
communicated to any person other than the Parties to this Agreement, except to
the extent disclosure of such information is required by a governmental
authority. If a Party is required to disclose confidential information to a
governmental authority, such Party shall take reasonable steps to make such
disclosure confidential under the rules of such governmental authority.
Information provided hereunder shall remain the sole property of the Party
providing such information. The obligation of a Party to treat such information
in confidence shall not apply to any information which (i) is or becomes
available to such Party from a source other than the Party providing such
information, or (ii) is or becomes available to the public other than as a
result of disclosure by such Party or its agents.
ARTICLE IX
Miscellaneous
-------------
Section 9.1. Entire Agreement; Amendments. Upon its effectiveness as
provided in Section 7.1, this Agreement shall constitute the sole and entire
agreement among the Parties with respect to the subject matter hereof and shall
supersede all previous agreements, proposals, oral or written, negotiations,
representations, commitments and all other communications between some or all of
the Parties. Except as provided in Section 9.2 with respect to new Parties and
except that AES may amend Exhibit A to this Agreement to delete any terminated
Party, this Agreement shall not be amended, modified or supplemented except by a
written instrument signed by an authorized representative of each of the Parties
hereto.
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Section 9.2. New Parties. Any other entity which is or may become an
affiliate of AES or any of the other Parties to this Agreement may become a
party to this Agreement by executing an agreement adopting all of the terms and
conditions of this Agreement. Such agreement must be signed by AES in order to
become effective, but need not be signed by any other Party to this Agreement.
Upon such execution by AES, such entity shall be deemed to be a Party and shall
be included within the definition of "Party" for all purposes hereof, and
Exhibit A shall be amended to add such entity. Before such execution by AES,
CILCO shall provide the staff of the ICC with thirty days' notice that another
Party will be added to this Agreement.
Section 9.3. Assignment. This Agreement may not be assigned by any
Party without the prior written consent of AES.
Section 9.4. Access to Records. During the term of this Agreement and
for a period of seven years after the expiration or termination of this
Agreement as to a Party, such Party shall have reasonable access to and the
right to examine any and all books, documents, papers and records which pertain
to services and facilities provided by the other Parties under this Agreement to
such Party, and such Party shall provide access to, and the opportunity to
examine, all such records which pertain to services and facilities provided to
the other Parties under this Agreement by such Party. Each Party shall maintain
all such records for a period of seven years after expiration or termination of
this Agreement as to such Party. In addition, during the term of this Agreement
and for a period of seven years after the expiration or termination of this
Agreement as to an AES Entity, the ICC shall have access to the books and
records of such AES Entity in accordance with the provisions contained in
Section 7-101 of the Illinois Public Utilities Act, amended by the Electric
Service Customer Choice and Rate Relief Law of 1997 and subject to Section 5-108
of the Illinois Public Utilities Act.
Section 9.5. Partial Invalidity. Wherever possible, each provision
hereof shall be interpreted in such manner as to be effective and valid under
applicable law, but in case any one or more of the provisions contained herein
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such provision shall be ineffective to the extent, but only to the
extent, of such invalidity, illegality or unenforceability without invalidating
the remainder of such invalid, illegal or unenforceable provision or provisions
or any other provisions hereof, unless such a construction would be
unreasonable. In the event that it is determined that the charges for a
particular transaction covered by this Agreement were not determined properly
for any reason, such determination and/or finding shall not affect the validity
of such transaction; provided, however, that if the transaction involved CILCO
and an AES Entity, AES (or, if AES so determines, such AES Entity) shall pay to
or reimburse CILCO, or CILCO shall pay to or reimburse such AES Entity, as the
case may be, for the difference between the amount that was charged in
connection with the transaction and the charge that is determined to be proper
under the provisions of Article V.
Section 9.6. Waiver. Failure by any Party to insist upon strict
performance of any term or condition herein shall not be deemed a waiver of any
rights or remedies that such Party may have against any other Party nor in any
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way to affect the validity of this Agreement or any part hereof or the right of
such Party thereafter to enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a waiver of any other or
subsequent breach.
Section 9.7. Governing Law. This Agreement shall be governed by,
construed and interpreted pursuant to, the laws of the State of Illinois.
*** NEXT PAGE IS SIGNATURE PAGE ***
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IN WITNESS WHEREOF, the Parties have each caused this Agreement to be
executed by a duly authorized representative as of the day and year first above
written.
THE AES CORPORATION
By: ________________________
Name:
Title:
CILCORP INC.
By: ________________________
Name:
Title:
CENTRAL ILLINOIS LIGHT COMPANY
By: ________________________
Name:
Title:
CENTRAL ILLINOIS GENERATION, INC.
By: ________________________
Name:
Title:
CILCORP INVESTMENT MANAGEMENT INC.
By: ________________________
Name:
Title:
CILCORP VENTURES INC.
By: ________________________
Name:
Title:
CILCORP ENERGY SERVICES INC.
By: ________________________
Name:
Title:
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QST ENTERPRISES INC.
By: ________________________
Name:
Title:
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EXHIBIT A
AES Entities
(in addition to AES)
--------------------
The AES Corporation
CILCORP Inc.
Central Illinois Light Company
Central Illinois Generation, Inc.
CILCORP Investment Management Inc.
CILCORP Ventures Inc.
CILCORP Energy Services Inc.
QST Enterprises Inc.
A-1
EXHIBIT B
Investment Guidelines
---------------------
A Party or Parties may invest cash in any one or more of the following
investments:
(a) Direct obligations of, or obligations the timely payment of the
principal of and interest on which is fully guaranteed by, the United
States of America;
(b) Direct obligations of any agency or instrumentality of the United
States of America and obligations on which the timely payment of principal
and interest is fully guaranteed by any such agency or instrumentality;
(c) Certificates of deposit or time deposits of any bank, trust
company or savings and loan association if all of the direct, unsecured
debt obligations of such bank, trust company or savings and loan
association at the time of purchase of such certificates of deposit or time
deposits, which are rated by a Rating Agency are rated in one of the four
highest rating categories assigned by such Rating Agency (without regard to
any refinement or gradation of rating category by numerical modifier or
otherwise), or which certificates of deposit or time deposits are fully
secured by obligations described in clauses (a), (b) or (g) of these
Guidelines; provided, however, that if such certificates of deposit or time
deposits are so secured (1) the Party or Parties for whose benefit such
investments have been acquired shall have a perfected first security
interest in the obligations securing such certificates of deposit or time
deposits, (2) such Party or Parties shall hold or shall have the option to
appoint an intermediary bank, trust company or savings and loan association
as its agent to hold the obligations securing such certificates of deposit
or time deposits, and (3) such Party or Parties shall hold such obligations
free and clear of the liens or claims of third parties;
(d) Certificates of deposit or time deposits of any bank, trust
company or savings and loan association which certificates of deposit or
time deposits are fully insured by the Federal Deposit Insurance
Corporation or the Federal Savings & Loan Insurance Corporation or any
other similar United States governmental deposit insurance program;
(e) Securities of the type described in clauses (a) or (b) above
purchased under agreements to resell such securities to any registered
broker/dealer subject to the Securities Investors Protection Corporation
jurisdiction or any commercial bank, if such broker/dealer or bank's
uninsured, unsecured and unguaranteed obligations which are
B-1
rated by a Rating Agency are rated by such Agency at the time of entrance
into such agreement in one of the four highest rating categories assigned
by such Agency (without regard to any refinement or gradation of rating
category by numerical modifier or otherwise) provided: (i) a master
repurchase agreement or specific written repurchase agreement governs the
transaction; (ii) the repurchase agreement has a term of 45 days or less;
(iii) the fair market value of the securities in relation to the amount of
the repurchase obligation, including principal and interest, is equal to at
least 100%; and (iv) the securities are held free and clear of any lien or
claims of a third party by an independent third party acting solely as
agent for the Party or Parties, such agent is a Federal Reserve Bank, or a
bank which is a member of the Federal Deposit Insurance Corporation and
which bank has combined capital, surplus and undivided profits of not less
than $50,000,000, the Party or Parties shall have received written
confirmation from such agent that it holds such securities, free and clear
of any lien or claim, as agent for such Party or Parties, and a perfected
first security interest under the Uniform Commercial Code, or book entry
procedures prescribed at 31 CFR 306.1 et seq. or 31 CFR 350.0 et seq. in
such securities is created for the benefit of such Party or Parties;
(f) Investment agreements with banks which meet the rating criteria
set forth in (c) above or investment agreements with non-bank financial
institutions provided: (i) all of the unsecured, direct long-term debt of
such non-bank financial institutions or all of the unsecured, direct
long-term debt of such non-bank financial institutions which is guaranteed
by the guarantor of the investment agreement involved, which is rated by a
Rating Agency is rated at time of entrance into such agreement in one of
the four highest rating categories (without regard to any refinement or
gradation of rating category by numerical modifier or otherwise) for
obligations of that nature; or (ii) if such non-bank financial institutions
have no such outstanding long-term debt which is rated, all of the
short-term debt of such non-bank financial institutions or all of the
short-term debt of such non-bank financial institutions which is guaranteed
by the guarantor of the investment agreement involved, which is rated by a
Rating Agency is rated at the time of entrance into such agreement in the
highest rating category (without regard to any refinement or gradation of
rating category by numerical modifier or otherwise) assigned to short-term
indebtedness by such Agency, all of which agreements referred to in this
subsection (f) provide that if such banks or non-bank financial
institutions' debt no longer satisfies such rating criteria such banks or
institutions will secure such agreements as soon as reasonably practicable
to the extent and in the manner provided in subsection (c) above;
(g) Shares of a fund registered under the Investment Company Act of
1940, as amended, whose shares are registered under the Securities Act of
1933, as amended, having assets of at least $100,000,000, whose only assets
are obligations described in subsections (a), (b), (c), (e), (h), (i), (j),
(k), (l), (m) or (n) of these Investment Guidelines;
(h) Commercial paper which, at the time of purchase, is rated by a
Rating Agency in one of the two highest categories (without regard to any
refinements or gradation of rating category by numerical modifier or
otherwise) assigned by such Agency for obligations of that nature;
B-2
(i) Obligations of, or obligations fully guaranteed by, any state of
the United States of America or any political subdivision thereof which
obligations, at the time of purchase, are rated by a Rating Agency in one
of the four highest rating categories (without regard to any refinement or
gradation of rating category by numerical modifier or otherwise) assigned
by such Agency to obligations of that nature;
(j) Obligations of, or obligations fully guaranteed by, and foreign
government or any political subdivision thereof which obligations, at the
time of purchase, are rated by a Rating Agency in one of the four highest
rating categories (without regard to any refinement or gradation of rating
category by numerical modifier or otherwise) assigned by such Agency to
obligations of that nature;
(k) Debt securities of any corporation organized under the laws of any
state of the United States of America which securities, at the time of
purchase, are rated by a Rating Agency in one of the four highest rating
categories (without regard to any refinements or gradation of rating
category by numerical modifier or otherwise) assigned by such Agency for
obligations of that nature;
(l) Debt securities of any corporation organized under the laws of any
jurisdiction outside of the United States of America which securities, at
the time of purchase, are rated by a Rating Agency in one of the four
highest rating categories (without regard to any refinements or gradation
of rating category by numerical modifier or otherwise) assigned by such
Agency for obligations of that nature;
(m) Obligations which are rated "AAA" by Standard & Poor's and "Aaa"
by Moody's and which are not subject to redemption prior to maturity
(except as provided in the security agreement described below) and are
issued or incurred by any state, commonwealth or territory of the United
States of America or any political subdivision, public instrumentality or
public authority of any state, commonwealth or territory of the United
States of America, which obligations are fully secured by and payable
solely from an escrow fund consisting of direct obligations of, or
obligations the timely payment of principal and interest on which are fully
guaranteed by, the United States of America, which is held by a corporate
fiduciary pursuant to a security agreement (which may not be amended to
provide for redemption on a date earlier than that originally contemplated
by the parties on the date such security agreement was first executed);
(n) Bankers acceptances of any bank, if all of the direct, unsecured
debt obligations of such institution at the time of purchase of such
acceptances which are rated by a Rating Agency are rated by such Agency in
one of the three highest rating categories (without regard to any
refinement or gradation of rating category by numerical modifier or
otherwise) by such Agency; and
(o) Money market mutual funds managed for the purpose of investing
substantially all of the assets of such fund in short-term obligations
B-3
having a stated maturity date of one year or less or having a maturity date
of one year or less from the date of purchase by such fund, including but
not necessarily limited to (i) corporate or governmental obligations or
related repurchase agreements, (ii) tax-exempt obligations, (iii) domestic,
yankee and eurodollar certificates of deposit, (iv) domestic, yankee and
eurodollar bankers' acceptances, or (v) variable amount notes of borrowers
of prime credit, provided that any such money market mutual fund shall be
classified at the time of purchase as "Aaa" by βββββ'β Investors Service
Inc. or "AAA" by Standard & Poor's Ratings Group; provided, however, that
the total cost of investments in any such money market mutual fund shall
not exceed at any one time 5% of the total of all assets of such money
market mutual fund.
For purposes of the foregoing, the term "Rating Agency" means any one of βββββ'β
Investors Service Inc. or Standard & Poor's Ratings Group or any other
nationally recognized securities rating organization, or any successor to any of
the foregoing.
B-4