EXHIBIT 10.4
Form of Administration Agreement
Page 1 of 6
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT ("Agreement"), dated as of
__________, 1998, is entered into among Illinois Power Company, an Illinois
corporation ("IPC" or the "Administrator") and Illinois Power Securitization,
LLC, a limited liability company ("IPS").
WHEREAS, pursuant to Article XVIII of the Illinois Public Utilities
Act (the "Act"), the Administrator has formed IPS as a limited liability
company of which the Administrator is the sole member in order for IPS to
become a "grantee" of "intangible transition property" in accordance with the
Act; and
WHEREAS, the IP Special Purpose Trust ("Trust") has been created in
order to accept the assignment of all of IPS' right, title and interest in
and to the intangible transition property and certain other property so that
the Trust shall be an "assignee" as defined in Article XVIII of the Act and
will issue "transitional funding instruments" (the "Notes") pursuant to that
certain Note Indenture dated ____,1998 the net proceeds of which will be paid
by the Trust to IPS and by IPS to IPC; and
WHEREAS, IPS requires certain facilities, including, without
limitation, office space, office furniture and equipment, computer equipment
and communications equipment, to carry on its business activities; and
WHEREAS, IPS requires certain services including, without
limitation, administrative, personnel, purchasing and operational services,
in order to carry on its business activities; and
WHEREAS, IPS desires to engage IPC as Administrator hereunder in
order to provide such facilities and services to IPS and to administer the
day to day operations of IPS; and
WHEREAS, IPC is willing to provide such facilities and services and
to act as Administrator hereunder; and
WHEREAS, the parties hereto believe that the Administrator's
provision of such facilities and services will be efficient and
cost-effective for all parties involved; and
WHEREAS, the parties hereto wish to incorporate certain terms and
provisions of that certain Services and Facilities Agreement (the "SAFA")
dated as of May 27, 1994 between Illinova Corporation ("Illinova") and IPC,
as amended, a copy of which SAFA is attached hereto as EXHIBIT A;
Page 2 of 6
NOW, THEREFORE, in consideration of the mutual promises set forth
below, the parties hereby agree as follows:
1. DEFINITIONS. Capitalized terms used in this Agreement without
definition shall have the meaning set forth in the SAFA. For the purposes of
this Agreement, the term "Illinova" as used in the SAFA shall mean "IPS".
Non-capitalized terms used herein which are defined in Article XVIII of the
Act shall have the meanings as so defined therein.
2. PROVISIONS OF FACILITIES AND SERVICES. During the term of
this Agreement, IPC hereby agrees to act as Administrator hereunder on behalf
of IPS. The Administrator shall make available or provide to IPS upon its
request, such facilities (collectively, "Facilities") as are described in
Section 1.B of the SAFA and such services (collectively, "Services") as are
described in Section 1.A of the SAFA, with the exception of those services
described in Sections 3.G and 16 of the SAFA; PROVIDED that (i) the
Administrator shall have no obligation to provide any such Facilities or
Services to the extent that IPC, under the SAFA, would not be obligated to
provide such Facilities or Services thereunder and (ii) such Services shall
be administrative and ministerial in nature and are not intended to provide
the Administrator with the right to manage and control IPS, it being
understood that the management and control of IPS and its ongoing
responsibilities shall be governed by separate agreements relating to such
matters, including without limitation IPS's certificate of formation and
limited liability company agreement. The parties hereto further acknowledge
that IPS has been formed as a special purpose entity whose business
activities will be limited to the perfection and maintenance of rights in the
intangible transition property created under an order from the Illinois
Commerce Commission and under the assignment transactions contemplated
thereby, the entry into such documents as may be required to evidence and
consummate the foregoing transactions and any other matters relating or
incidental thereto. Accordingly, the Administrator shall have no obligation
hereunder to provide or perform Facilities or Services to IPS if such
Services or Facilities are not reasonably related to the business activities
recited above. Notwithstanding the foregoing, the Administrator shall
provide all Facilities and Services which IPS has reasonably demonstrated are
necessary for it to comply with the terms of, and perform its obligations
under, all documents, agreements or instruments entered into in connection
with the issuance of the Notes, with the exception of those services to be
provided under that certain Servicing Agreement between IPC and IPS entered
into as of______ 1998. All Facilities and Services shall, except as
otherwise specifically set forth in this Agreement, be provided without
warranty of any kind as provided in the SAFA.
3. INSTRUCTIONS TO EMPLOYEES. The Administrator shall advise all
of its employees requested to perform Services that IPS is a separate legal
entity from IPC and from IPC's subsidiaries and affiliates, other than IPS,
and shall instruct such employees not to represent IPC or its affiliates as
having agreed to pay or as being liable for the debts of IPS and not to
represent IPS as having agreed to pay or as being liable for the debts of IPC
or IPC's affiliates. The Administrator further agrees to advise all
employees performing Services on behalf of IPS that, in performing such
Services, such employees must follow any directions given them by the
officers of IPS and to act in the best interests of IPS, as applicable.
Page 3 of 6
4. EMPLOYEES. The Administrator shall at all times during the
term of this Agreement provide the following services to all of its personnel
who provide Services to IPS from time to time (such personnel, the
"Employees"), whether or not such Employees are also officers of IPS: (i) any
and all compensation and benefits (including, but not limited to, vacation,
holiday and sick pay, life and health insurance, and pension benefits)
comparable to those maintained for the Administrator's employees not engaged
in rendering Services or as required by any applicable employment practices,
policies and contracts, and (ii) the payment of all required federal, state,
and local taxes, social security contributions and federal and state
unemployment compensation insurance taxes. The Administrator shall also
maintain workmen's compensation and liability insurance covering Employees in
compliance with applicable law on a basis comparable to such insurance
maintained for the Administrator's employees not engaged in rendering
Services.
5. CHARGES AND INVOICING. Charges for the use of the Facilities
and Services shall be determined in accordance with Section 3 and other
applicable cost allocation provisions of the SAFA and all invoicing and
payment for such Facilities and Services shall be in accordance with Section
4 of the SAFA; PROVIDED, HOWEVER, that the Administrator acknowledges that
payments owed under this Agreement, to the extend paid out of collections of
instrument funding charges or other intangible transition property, shall be
subject to the priority of payment set forth in the Note Indenture. All
charges owed hereunder shall, unless otherwise expressly agreed by the
parties, be deemed to be operating expenses, and not fees, for purposes of
the Note Indenture.
6. SERVICING AGREEMENT. Notwithstanding anything to the contrary
in this Agreement, so long as the Administrator is also acting as "Servicer"
under that certain Servicing Agreement entered into as of____, 1998, the
Administrator hereby acknowledges and agrees that all out-of-pocket expenses
and all other costs and expenses incurred by the Administrator in performing
its role as Servicer are being separately compensated through payment of the
"Servicing Fee" payable thereunder and shall not constitute costs and
expenses payable to the Administrator under this Agreement.
7. TERM. The term of this Agreement shall begin as of the date
of issuance of the Notes, and, unless terminated earlier in accordance with
the provisions hereof, shall end on June 30, 2009; PROVIDED, that, if the
Notes issued by the Trust have not been paid in full by such time, then the
IPS shall have the option, by providing thirty days' prior written notice, to
renew this Agreement for successive one-year terms. Notwithstanding the
foregoing, any party hereunder may terminate this Agreement upon written
notice to the other parties hereto; PROVIDED that the Administrator shall not
cease to perform its obligations hereunder unless a successor administrator
reasonably acceptable to IPS shall have been appointed.
8. INDEPENDENT CONTRACTOR. The relationship of the Administrator
to IPS under this Agreement shall be solely that of an independent contractor
entering into a services agreement. No representations or assertions shall
be made or actions taken by either party which could imply or establish any
agency, joint venture, partnership, employment or trust relationship between
the parties with respect to the subject matter of this Agreement. The
Administrator shall have no authority or power whatsoever to enter into any
agreement, contract or commitment on behalf of the
Page 4 of 6
other party hereto or create any liability or obligation whatsoever on behalf
of such other party to any person or entity. Conversely, IPS shall not have
any authority or power whatsoever to enter into any agreement, contract or
commitment on behalf of the Administrator or create any liability or
obligation whatsoever on behalf of the Administrator to any person or entity.
9. ADMINISTRATOR'S STANDARD OF CARE. IPC's sole and exclusive
duty of care in discharge of its duties as Administrator to IPS is limited to
refraining from engaging in (i) any act with the express purpose and intent
of causing injury or damage to IPS or (ii) a knowing violation of law. IPC
and IPS specifically recognize and agree that the standard of care provided
for in this Section 9 shall be in lieu of any other standard of care that
might be argued to apply in connection with IPC's discharge of its
administrative duties under this Agreement. It is further recognized and
agreed that IPC, in discharging its duties under this Agreement, does not
have any fiduciary or other obligation to IPS solely as a result of agreeing
to act as Administrator under this Agreement (other than as set forth in this
Section 9).
10. CONFIDENTIALITY. The parties hereto agree to abide by the
confidentiality provisions set forth in the SAFA.
11. RECORDS. The Administrator shall maintain appropriate books
of account and records relating to services performed hereunder, which books
of account and records shall be accessible for inspection by IPS at any time
during normal business hours.
12. OTHER ACTIVITIES OF ADMINISTRATOR. Nothing herein shall
prevent the Administrator or its affiliates from engaging in other businesses
or, in its sole discretion, from acting in a similar capacity as an
administrator for any other person or entity even though such person or
entity may engage in business activities similar to those of IPS.
13. NOT APPLICABLE TO IPC IN OTHER CAPACITIES. Nothing in this
Agreement shall affect any obligation IPC may have in any other capacity.
14. NO PETITION. Administrator hereby covenants and agrees that,
prior to the date which is one year and one day after the payment in full of
all Notes, it will not institute against, or join any other person in
instituting against, IPS any bankruptcy, reorganization, arrangement,
insolvency or liquidation proceedings or other similar proceeding under the
laws of the United States or any state of the United States.
15. MISCELLANEOUS.
(a) All provisions of this Agreement shall be binding upon the
parties hereto, their respective successors, legal representatives and
assigns. Neither party shall have the right to assign all or any portion of
its obligations under or interest in this Agreement, except monies which may
be due pursuant hereto, without the prior written consent of the other party;
PROVIDED, HOWEVER, that Administrator may subcontract or assign all or any
portion of its obligations under or interest in this
Page 5 of 6
Agreement to any affiliate of Administrator upon written notice to IPS so
long as any subcontracting will not relieve the Administrator from liability
for its duties hereunder.
(b) No waiver by any party hereto of any of its rights under this
Agreement shall be effective unless in writing and signed by an officer or
other duly authorized representative of the party waiving such right. No
waiver of any breach of this Agreement shall constitute a waiver of any
subsequent breach, whether or not of the same nature. This Agreement may not
be modified except by a writing signed by officers or other duly authorized
representatives of each of the parties hereto.
(c) This Agreement constitutes the entire agreement of the parties
hereto with respect to the subject matter hereof, and cancels and supersedes
any and all prior written or oral contracts or negotiations between the
parties hereto with respect to the subject matter hereof. All exhibits
referenced herein are hereby incorporated into this Agreement and made an
integral part thereof.
(d) This Agreement and the rights and obligations of the parties
under this Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of Illinois.
(e) The descriptive headings of the several sections hereof are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.
(f) Wherever possible each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be prohibited by or invalid
under applicable law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Page 6 of 6
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first shown above.
ILLINOIS POWER COMPANY
By:_________________________________
Title:______________________________
ILLINOIS POWER SECURITIZATION
LIMITED LIABILITY COMPANY
By:_________________________________
Title:______________________________
Exhibit A
Page 1 of 6
SERVICES AND FACILITIES AGREEMENT
THIS AGREEMENT is made and entered into this 27th day of May, 1994 by
and between Illinois Power Company, an Illinois corporation ("IP") and
Illinova Corporation, an Illinois corporation ("Illinova").
WHEREAS, IP has been ordered by the Illinois Commerce Commission
("ICC"), in Docket 92-0404, to form a holding company in which IP and IP
Group, Inc. ("IP Group") are subsidiaries and Illinova is such holding
company;
WHEREAS, IP desires to provide Illinova and Illinova's other
subsidiaries (hereinafter collectively "Illinova") with the use of
facilities, equipment and/or administrative and management services
reasonably necessary for the management of the businesses of Illinova subject
to the terms and conditions of this Agreement; and
WHEREAS, Illinova shall pay IP's fully loaded costs for the provision of
any and all such services and facilities all as provided in this Agreement;
NOW, THEREFORE in consideration of the terms and conditions hereinafter
set forth, IP and Illinova agree as follows:
1. IP may provide Illinova from time to time, as reasonably requested
by Illinova, with the use of the following services and/or facilities as
provided herein:
A. General management and administrative services, including, but
not limited to (i) executive management, legal, accounting, tax services and
employee benefits participation/processing, and (ii) treasury and finance
services, including, but not limited to, cash management, processing of
receipts and disbursements, arranging for short-term and long-term financing,
making and managing short-term investments.
B. Physical facilities, including, but not limited to, office
space, fixtures, furniture, equipment, supplies and other machinery/equipment
(collectively "Facilities") used by IP in the provision of Services to
Illinova or used by Illinova in its businesses.
2. IP reserves the right, in its exclusive discretion, to schedule the
provision of all such Services and Facilities so as not to interfere with its
utility operations, which shall have first priority.
3. lllinova agrees to pay IP for such Services and Facilities at IP's
fully loaded cost which includes direct labor expense, labor overheads,
employee benefits participation/processing expenses, other administrative and
general overheads and costs, and interest on cash advances, as set forth
below:
Exhibit A
Page 2 of 6
A. Direct labor expense is the cost of the actual time spent by
IP employees on work performed for Illinova.
B. Labor overheads consist of costs directly associated with
labor such as payroll taxes, paid absence, insurance, pension and other
benefits.
C. Employee benefits participation/processing expenses consist of
the full cost (i.e., contributions to the plans, direct labor, labor
overheads and administrative and general overheads) to IP of Illinova's
employees participating in IP's employee benefit plans and all costs incurred
by IP in processing any benefits for Illinova's employees under the plans,
which include, but are not limited to, the Health Insurance Plan, Pension
Plan, Incentive Savings Plan, Long-Term Disability Plan and Life Insurance
Plan.
D. Supplies used by Illinova and paid for by IP shall be
reimbursed by Illinova at IP's full cost including handling costs.
E. (i) Administrative and general overheads will be determined
in a cost study to be performed by the parties.
(ii) Office space use, if any, shall also be determined in
the cost study on a rental basis and rent shall be
based upon, inter alia, the total cost to IP for use of
the office space in any building occupied by Illinova
using a comparison of the square footage occupied by
Illinova in relation to the total square footage
occupied by Illinova and IP and the total cost of the
use of such space. A similar determination will be
made for use of fixtures, furniture, equipment and
other Facilities.
(iii) The cost study shall also consist of a review of
employee time and data entries, interviews with
Illinova and IP personnel, records review and other
activities necessary for making a fair and reasonable
allocation of direct and indirect support to Illinova.
This study shall be conducted at the conclusion of a
six month period for purposes of determining and then
billing the administrative and general management
overheads as well as determining and billing a monthly
amount to cover the costs of employee benefits
participation/ processing expenses and all other
Services and Facilities provided hereunder. The cost
study shall be performed periodically thereafter, but
no less than annually, for determining costs to be
billed to Illinova for continuing Services and
Facilities use.
F. Reimbursement (or credit) of any taxes due to operations of
Illinova as a result of filing consolidated income tax returns.
Exhibit A
Page 3 of 6
G. Interest on cash advances from IP to Illinova shall be
calculated at the higher of (i) the interest rate at which Illinova could
have borrowed the funds pursuant to an existing bank credit agreement(s) or
commercial paper facility(ies) entered into between Illinova and an
unaffiliated third party or parties, or (ii) IP's actual interest cost for
the funds obtained or used to provide the cash advance to Illinova.
4. IP shall invoice Illinova for all Services and Facilities, if used,
monthly. Invoices will be payable by Illinova 30 days after receipt of
invoice.
5. Whenever IP provides Services or Facilities to Illinova, each IP
employee providing such Services shall maintain a record of all time spent in
performing any Services for Illinova and the use of all Facilities used in
the provision of such Services. Executive officers of IP shall provide a
written estimate of the percentage of business time spent (on a monthly
basis) on behalf of Illinova and shall be included in the cost study.
6. This Agreement shall take effect upon Illinova and IP having
received all necessary federal, state and shareholder approvals for the
reorganization and for the execution and performance of this Agreement. This
Agreement shall remain in effect for an initial term of five (5) years from
the date of ICC approval and from year to year thereafter until either party
terminates this Agreement by 90 day prior written notice given to the other
party before the end of any such term.
7. This Agreement constitutes the sole and entire agreement between
the parties with respect to the subject matter herein and supersedes all
previous proposals, oral or written, negotiations, representations,
commitments and all other communications between the parties. No other terms
or conditions shall be binding upon the parties unless accepted by them in
writing.
8. This Agreement may not be assigned by either party without the
prior written consent of the other party.
9. This Agreement shall be governed by, construed and interpreted
pursuant to the laws of the State of Illinois.
10. Every part, term or provision of this Agreement is severable from
all others. Notwithstanding any possible future finding by duly constituted
authority that a particular part, term or provision is invalid, void or
unenforceable, this Agreement has been made with the clear intention that the
validity and enforceability of the remaining parts, terms and provisions
shall not be affected thereby.
11. The parties agree to comply with all provisions of all laws
applicable to this Agreement or the work to be performed hereunder and with
all applicable rules, regulations, orders and directives of all governmental
bodies having jurisdiction.
Exhibit A
Page 4 of 6
12. Failure by either party to insist upon strict performance of any
term or condition herein shall not be deemed a waiver of any rights or
remedies that either party may have against the other and shall not be deemed
a waiver of any subsequent default of any term and condition hereof.
13. In the performance of the work hereunder, IP shall be an
independent contractor with authority to control and direct the performance
of the work hereunder except as limited herein.
14. lllinova shall have access to and the right to examine any and all
books, documents, papers and records which pertain to the work hereunder. IP
shall maintain all such records for a period of seven years after completion
or termination of this Agreement. Such examination may be conducted within
five business days after notice to IP. IP shall produce all such records at
the headquarters of IP.
15. The parties agree to keep confidential all information coming to
its knowledge in the course of the performance of the work hereunder relating
to the business of either IP or Illinova except that which is required to be
disclosed to any governmental body having jurisdiction over either party. If
either party is required to make disclosure, such party shall provide 14 days
prior written notice to the other party and take all steps necessary to make
such disclosure confidential under the rules of the governing body. All such
information shall remain the sole property of the party who provided such
information in the first instance. The foregoing restrictions on disclosure
shall survive the termination or completion of this Agreement.
16. Any cash advances made by IP to Illinova pursuant to this Agreement
shall be in accordance with the following terms:
A. The balance of cash advances at any time shall not exceed the
amount of funds which Illinova could borrow directly pursuant to
an existing bank credit agreement(s) or commercial paper
facility(ies) entered into between Illinova and an unaffiliated
third party or parties.
B. The duration of each cash advance shall not be more than three
months.
All outstanding cash advances shall be repaid by Illinova as of
the end of each calendar quarter.
C. Finding No. (5) of the Illinois Commerce Commission order in
Docket 94-0005 dated October 3, 1995 provided approval for cash
advances subject to the conditions that:
(1) the cash advances to Illinova shall not at any time exceed
the unused balance of funds actually available to Illinova
under Illinova's existing bank credit agreements;
Exhibit A
Page 5 of 6
(2) the cash advances to Illinova shall not at any time exceed
the amount of Fifty Million Dollars ($50,000,000.00);
(3) the financial institution with whom Illinova has a bank
credit agreement has a bond rating of at least A- by
Standard and Poors and A3 by Moodys at the time the
institution enters into said agreement with Illinova;
(4) the term of the Addendum shall be limited to three years
from the date of this Order (October 3,1995), subject to
extension, if deemed appropriate by further order of the
Commission, upon application by IP.
17. Illinois Power agreed to the following provisions in obtaining
initial approval of this agreement by the Illinois Commerce Commission on May
13, 1994:
A. Illinois Power will develop written guidelines for charging time,
materials, services and facilities to Illinova within sixty days
after completion of the first cost study. IP will inform all
departments which may provide services to Illinova or its
subsidiaries of said guidelines, and will provide the Director of
Accounting of the Commission's Public Utility Division with a
copy of said guidelines, within sixty days after the adoption
thereof.
B. Illinois Power will submit to the Commission Staff certain
information related to its allocation of costs between the
Company and its affiliates. This information will be submitted
for each calendar year until the Company files its next general
rate case; and will consist of a description of each service
provided by the Company to its affiliates; the Company's monthly
billing to Illinova; the costs allocated to Illinova from
Illinois Power; and backup for each allocation.
C. Illinois Power will allow the Commission's Staff access to all
books, accounts and records of the Company, and, to the extent
that the Company has or may obtain possession or control of the
books, accounts and records of, Illinova and its non-utility
subsidiaries which in any way impact on Illinois Power or in
order to determine whether there has been any transaction with or
impact on Illinois Power.
D. Illinois Power will perform periodic audits of the transactions
performed under the Agreement to ensure compliance with the
Commission's order, the Agreement, the current cost studies, and
the written guidelines. These written audit reports shall be
retained by the Company and will be available for Commission
Staff review.
Exhibit A
Page 6 of 6
18. Nothing in this Agreement shall be construed as requiring Illinova
to use the Services or Facilities of IP and Illinova is free to obtain any
such Services or Facilities from third parties.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
effective the day and year first above written.
ILLINOVA CORPORATION ILLINOIS POWER COMPANY
By: /s/ Xxxxx X. Xxxx By: /s/ Xxxxx X. Xxxxxxxxxxx
------------------------ -----------------------------
Xxxxx X. Xxxx Xxxxx X. Xxxxxxxxxxx
Chairman, President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
