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EXHIBIT N-2
FORM OF
UTILITY MONEY POOL AGREEMENT
This Utility Money Pool Agreement (the "Agreement"), dated as of
______, 2001, is made and entered into by and among FirstEnergy Corp.
("FirstEnergy"), an Ohio corporation and a registered holding company under the
Public Utility Holding Company Act of 1935, as amended (the "Act"), FirstEnergy
Corporate Group, Inc. ("FirstEnergy Corporate"), an Ohio corporation and a
non-utility subsidiary of FirstEnergy (in its role as administrator of the money
pool and as a participant in the money pool), and the FirstEnergy Utility
Subsidiaries identified on the signature page hereto (each a "Party" and
collectively, the "Parties").
WITNESSETH:
WHEREAS, the Parties desire to establish a Money Pool (the "Utility
Money Pool") to coordinate and provide for certain of their short-term cash and
working capital requirements; and
WHEREAS, the utility subsidiaries that will participate in the 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, and intending to be
legally bound hereby, the Parties hereto agree as follows:
ARTICLE I
CONTRIBUTIONS AND BORROWINGS
Section 1.01 Contributions to 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 Utility Money Pool, and
will contribute such funds to the Utility Money Pool. The determination of
whether a Party at any time has surplus funds to lend to the Utility Money Pool
or shall lend funds to the Utility Money Pool will be made by such Party's chief
financial officer or treasurer, 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 FirstEnergy
Corporate as administrative agent of the Utility Money Pool.
Section 1.02 Rights to Borrow.
Subject to the provisions of Section 1.04(c) of this Agreement,
short-term borrowing needs of the Parties, with the exception of FirstEnergy,
will be met by funds in the Utility Money Pool to the extent such funds are
available. Each Party (other than FirstEnergy) shall have the right to make
short-term borrowings from the Utility Money Pool from time to time, subject to
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the availability of funds and the limitations and conditions set forth herein
and in the applicable orders of the Securities and Exchange Commission ("SEC").
Each Party (other than FirstEnergy) may request loans from the 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
SEC and other regulatory authorities, resolutions of such Party's Board of
Directors, such Party's governing corporate documents, and agreements binding
upon such Party. No loans through the Utility Money Pool will be made to, and no
borrowings through the Utility Money Pool will be made by, FirstEnergy.
Section 1.03 Source of Funds.
(a) Funds will be available through the Utility Money Pool
from the following sources for use by the Parties from time to time: (1) surplus
funds in the treasuries of Parties other than FirstEnergy, (2) surplus funds in
the treasury of FirstEnergy (such funds in clauses (1) and (2) being referred to
as "Internal Funds"), and (3) proceeds from bank borrowings by Parties and the
sale of commercial paper by FirstEnergy and each other Party ("External Funds"),
in each case to the extent permitted by applicable laws and regulatory orders.
Funds will be made available from such sources in such other order as
FirstEnergy Corporate, as administrator of the Utility Money Pool, may determine
will result in a lower cost of borrowing to companies borrowing from the Utility
Money Pool, consistent with the individual borrowing needs and financial
standing of the Parties providing funds to the Utility Money Pool.
(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 Utility Money Pool. On any day when
more than one fund source (e.g., Internal Funds and External Funds), with
different rates of interest, is used to fund loans through the Utility Money
Pool, each borrowing Party will borrow pro rata from each fund source 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 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) FirstEnergy Corporate, as administrator of the 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 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
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.
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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 greater of the 30 day LIBOR rate
as quoted in The Wall Street Journal or the money market rate that a lending
Subsidiary could have obtained if it placed its excess cash in such an
investment (as calculated monthly, the "Average Composite").
(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 balance shall be the lender's cost for such
External Funds calculated monthly 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 calculated monthly.
(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 the (i) 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 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.
(e) Loans may be made solely from Internal Funds or solely
from External Funds, rather than pursuant to Section 1.05(c), if such practice
would result in a lower cost of borrowing.
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 Utility Money Pool shall
initially be paid by the Party maintaining such line. A portion of such costs,
or all of such costs if a Party establishes a line of credit solely to lend
funds to the Utility Money Pool, shall be retroactively allocated every quarter
to the Subsidiaries borrowing such External Funds through the 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 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 364 days of the date on which
such loan was made. All loans made through the Utility Money Pool may be prepaid
by the borrower without premium or penalty.
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Section 1.08 Form of Loans to Subsidiaries.
Loans to the Subsidiaries from the 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. If the
Parties deem it necessary or appropriate, a master promissory note evidencing
the terms of the transactions may be signed by each borrowing Party. Any such
note shall: (a) be dated as of the date of the initial borrowing; (b) mature on
demand or on a date agreed by the Parties to the transaction, but in any event
not later than one year after the date of the applicable borrowing; and (d) be
repayable in whole at any time or in part from time to time, without premium or
penalty.
ARTICLE II
OPERATION OF UTILITY MONEY POOL
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Section 2.01 Operation.
Operation of the Utility Money Pool, including record keeping and
coordination of loans, will be handled by FirstEnergy Corporate under the
authority of the appropriate officers of the Parties. FirstEnergy Corporate
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. FirstEnergy Corporate will administer the Utility Money
Pool on an "at cost" basis. Separate records shall be kept by FirstEnergy
Corporate for the Utility Money Pool established by this Agreement and any other
money pool administered by FirstEnergy Corporate.
Section 2.02 Investment of Surplus Funds in the Utility Money Pool.
Funds not required for the Utility Money Pool loans (with the exception
of funds required to satisfy the 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 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 Interest Income and Investment Earnings.
The interest income and other investment income earned by the Utility
Money Pool on loans and investment of surplus funds will be allocated among the
Parties in accordance with the proportion each Party's contribution of funds in
the Utility Money Pool bears to the total amount of funds in the Utility Money
Pool and the cost of any External Funds provided to the Utility
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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 FirstEnergy Corporate, on behalf of the Utility
Money Pool, may, by notice to the Subsidiary, terminate the 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 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.
Any such amendment to this Agreement shall be adopted except in a
writing executed by Parties and subject to all applicable approvals by the SEC
and the applicable state utility regulatory commission.
Section 3.02 Legal Responsibility.
Nothing herein contained shall render any Party liable for 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.
Section 3.04 Governing Law.
This Agreement shall be governed by and construed in accordance with,
the laws of the State of Ohio.
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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.
FirstEnergy Corp.
By:
---------------------------------
Name:
Title:
FirstEnergy Corporate Group, Inc.
By:
---------------------------------
Name:
Title:
Ohio Edison Company
By:
---------------------------------
Name:
Title:
The Cleveland Electric Illuminating
Company
By:
---------------------------------
Name:
Title:
The Toledo Edison Company
By:
---------------------------------
Name:
Title:
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Pennsylvania Power Company
By:
---------------------------------
Name:
Title:
Northeast Ohio Natural Gas Corp.
By:
---------------------------------
Name:
Title:
American Transmission Systems,
Incorporated
By:
---------------------------------
Name:
Title:
Jersey Central Power & Light Company
By:
---------------------------------
Name:
Title:
Pennsylvania Electric Company
By:
---------------------------------
Name:
Title:
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Metropolitan Edison Company
By:
---------------------------------
Name:
Title:
York Haven Power Company
By:
---------------------------------
Name:
Title:
Waverly Electric Power & Light
Company
By:
---------------------------------
Name:
Title:
Date: _________, 2001
