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EXHIBIT N-3
FORM OF
NON-UTILITY MONEY POOL AGREEMENT
This Non-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") (solely in the role as
administrator of the money pool), a subsidiary service company of FirstEnergy,
and each of the non-utility subsidiaries of FirstEnergy whose name appears on
the signature pages hereof including those entities which may be added as
parties hereto after the date hereof (each a "Party" and collectively, the
"Parties").
WITNESSETH:
WHEREAS, the Parties desire to establish a Money Pool (the "Non-Utility
Money Pool") to coordinate and provide for certain of their short-term cash and
working capital requirements; and
WHEREAS, the non-utility subsidiaries that will participate in the
Non-Utility Money Pool (each a "Subsidiary" and collectively, the
"Subsidiaries") will from time to time have need to borrow funds on a short-term
basis, and certain of the Parties will from time to time have funds available to
loan on a short-term basis;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants and provisions contained herein, and intending to be
legally bound hereby the Parties hereto agree as follows:
ARTICLE I
CONTRIBUTIONS AND BORROWINGS
Section 1.01 Contributions to Non-Utility Money Pool.
Each Party will determine each day, on the basis of cash flow
projections and other relevant factors, in such Party's sole discretion, the
amount of funds it has available for contribution to the Non-Utility Money Pool,
and will contribute such funds to the Non-Utility Money Pool. The determination
of whether a Party at any time has surplus funds to lend to the Non-Utility
Money Pool or shall lend funds to the Non-Utility Money Pool will be made by an
appropriate officer of such Party, or by a designee thereof, on the basis of
cash flow projections and other relevant factors, in such Party's sole
discretion. Each Party may withdraw any of its funds at any time upon notice to
FirstEnergy Corporate as administrative agent of the Non-Utility Money Pool.
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Section 1.02 Rights to Borrow.
Subject to the provisions of Section 1.04(c) of this Agreement, all
short-term borrowing needs of the Parties, with the exception of FirstEnergy,
may be met by funds in the Non-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 Non-Utility Money Pool from time to time, subject
to the availability of funds and the limitations and conditions set forth herein
and in the applicable orders of the Securities and Exchange Commission. Each
Party (other than FirstEnergy) may request loans from the Non-Utility Money Pool
from time to time during the period from the date hereof until this Agreement is
terminated by written agreement of the Parties; provided, however, that the
aggregate amount of all loans requested by any Party hereunder shall not exceed
the applicable borrowing limits, if any, set forth in applicable orders of the
Securities and Exchange Commission and other regulatory authorities, resolutions
of such Party's Board of Directors or similar governing body, such Party's
governing corporate documents, and agreements binding upon such Party. No loans
through the Non- Utility Money Pool will be made to, and no borrowings through
the Non-Utility Money Pool will be made by, FirstEnergy.
Section 1.03 Source of Funds.
(a) Funds will be available through the Non-Utility Money Pool
from the following sources for use by the Parties from time to time: (i) surplus
funds in the treasuries of Parties other than FirstEnergy, (ii) surplus funds in
the treasury of FirstEnergy (such funds in clauses (1) and (2) being referred to
as "Internal Funds"), and (iii) proceeds from bank borrowings by Parties and the
sale by FirstEnergy of commercial paper or other sources ("External Sources").
Funds will be made available from such sources in such order as FirstEnergy
Corporate, as administrator of the Non-Utility Money Pool, may determine will
result in a lower cost of borrowing to companies borrowing from the Non-Utility
Money Pool, consistent with the individual borrowing needs and financial
standing of the Parties providing funds to the Non- Utility Money Pool.
(b) Borrowing Parties will borrow pro rata from each lending
Party in the proportion that the total amount loaned by such lending Party bears
to the total amount then loaned through the Non-Utility Money Pool. On any day
when more than one fund source (e.g., Internal Sources and External Sources),
with different rates of interest, is used to fund loans through the Non-Utility
Money Pool, each borrowing Party will borrow pro rata from each such fund source
in the Non-Utility Money Pool in the same proportion that the amount of funds
provided by that fund source bears to the total amount of short-term funds
available to the Non-Utility Money Pool.
Section 1.04 Authorization.
(a) Each loan shall be authorized by the lending Party's chief
financial officer or treasurer, or by a designee thereof.
(b) FirstEnergy Corporate, as administrator of the Non-Utility
Money Pool, will provide each Party with periodic activity and cash accounting
reports that include, among other
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things, reports of cash activity, the daily balance of loans outstanding and the
calculation of interest charged.
(c) All borrowings from the Non-Utility Money Pool shall be
authorized by the borrowing Party's chief financial officer or treasurer, or by
a designee thereof. No Party shall be required to effect a borrowing-through the
Non-Utility Money Pool if such Party determines that it can (and is authorized
to) effect such borrowing at lower cost directly from banks or through the sale
of its own commercial paper.
Section 1.05 Interest.
The daily outstanding balance of all loans to any Subsidiary shall
accrue interest as follows:
(a) If only Internal Funds comprise the daily outstanding
balance of all loans outstanding during a calendar month, the interest rate
applicable to such daily balances shall be the 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 balances 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 (i) the cost of all
Internal Funds contributed by Parties, as determined pursuant to Section 1.05(a)
of this Agreement, and (ii) the cost of all such External Funds, as determined
pursuant to Section 1.05(b) of this Agreement.
(d) The interest rate applicable to Loans made by a Subsidiary
to the Non-Utility Money Pool under Section 1.01 of this Agreement shall be the
Average Composite as determined pursuant to Section 1.05(a) of this Agreement.
(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
Non-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 Non-Utility Money Pool, shall be
retroactively allocated every quarter to the Subsidiaries borrowing such
External Funds through
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the Non-Utility Money Pool in proportion to their respective daily outstanding
borrowings of such External Funds.
Section 1.07 Repayment.
Each Subsidiary receiving a loan from the Non-Utility Money Pool
hereunder shall repay the principal amount of such loan, together with all
interest accrued thereon, on demand and in any event within 364 days of the date
on which such loan was made. All loans made through the Non-Utility Money Pool
may be prepaid by the borrower without premium or penalty.
Section 1.08 Form of Loans to Subsidiaries.
Loans to the Subsidiaries from the Non-Utility Money Pool shall be made
as open-account advances, pursuant to the terms of this Agreement. A separate
promissory note will not be required for each individual transaction. 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 NON-UTILITY MONEY POOL
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Section 2.01 Operation. Operation of the Non-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 Non-Utility Money Pool on either an "at cost" basis or, in its
sole discretion, on a different basis. Separate records shall be kept by
FirstEnergy Corporate for the Non-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 Non-Utility Money Pool.
Funds not required for the Non-Utility Money Pool loans (with the
exception of funds required to satisfy the Non-Utility Money Pool's liquidity
requirements) will ordinarily be invested in one or more short-term investments,
including (i) interest-bearing accounts with banks; (ii) obligations issued or
guaranteed by the U.S. government and/or its agencies and instrumentalities,
including obligations under repurchase agreements; (iii) obligations issued or
guaranteed by any state or political subdivision thereof, provided that such
obligations are rated not less than A by a nationally recognized rating agency;
(iv) commercial paper rated not less than A-1 by S&P or P-1 by Moody's, or their
equivalent by a nationally recognized rating
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agency; (v) money market funds; (vi) bank certificates of deposit; (vii)
Eurodollar funds; and (viii) such other investments as are permitted by Section
9(c) of the Act and Rule 40 thereunder.
Section 2.03 Allocation of Investment Earnings.
The interest income and other investment income earned by the
Non-Utility Money Pool on loans and on investment of surplus funds will be
allocated among the Parties in accordance with the proportion each Party's
contribution of funds in the Non-Utility Money Pool bears to the total amount of
funds in the Non-Utility Money Pool and the cost of any External Sources
provided to the Non-Utility Money Pool by such Party. Interest and other
investment earnings will be computed on a daily basis and settled once per
month.
Section 2.04 Event of Default.
If any Subsidiary shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors, or any
proceeding shall be instituted by or against any Party seeking to adjudicate it
bankrupt or insolvent, then FirstEnergy Corporate, on behalf of the Non-Utility
Money Pool, may, by notice to the Subsidiary, terminate the Non-Utility Money
Pool's commitment to the Subsidiary and/or declare the principal amount then
outstanding of, and the accrued interest on, the loans and all other amounts
payable to the Non-Utility Money Pool by the Subsidiary hereunder to be
forthwith due and payable, whereupon such amounts shall be immediately due and
payable without presentment, demand, protest or other formalities of any kind,
all of which are hereby expressly waived by each Subsidiary.
ARTICLE III
MISCELLANEOUS
Section 3.01 Amendments.
No amendment to this Agreement shall be adopted except in a writing
executed by a duly authorized officer of each Party. Any direct or indirect
non-utility subsidiary of FirstEnergy may be added as a Party hereto upon
execution by FirstEnergy Corporate and such subsidiary of an instrument whereby
such subsidiary will agree to be bound by the terms hereof.
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.
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Section 3.04 Governing Law.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of Ohio.
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:
[INCLUDE SIGNATURES FOR MAJOR
NON-UTILITY SUBSIDIARIES.]
Date: _________, 2001
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