EXHIBIT B-3
INTERIM SERVICES AGREEMENT
THIS AGREEMENT (this "Agreement") is dated as of [ ], 2000 and is
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entered into by and between [ ] ("Client
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Company"), a [ ] corporation, and NiSource Corporate Services Company
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(formerly NIPSCO Industries Management Services Company) ("Corporate Services"),
an Indiana corporation; hereinafter sometimes referred to collectively as the
"Parties" and each singularly as a "Party."
WITNESSETH:
WHEREAS, Corporate Services is organized, staffed and equipped to render
services and provide resources to Client Company and to its associate companies
in the NiSource Inc. system as herein provided; and
WHEREAS, Client Company has a need for certain managerial, administrative,
marketing, technical and other services, and certain resources; and
WHEREAS, Corporate Services desires to provide such services and resources
to Client Company subject to the terms and conditions described herein; and
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein, the parties agree as follows:
1. Term and Termination.
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A. This agreement is effective as of [ ], 2000.
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B. Either Party may terminate this Agreement upon thirty (30)
days' prior written notice to the other Party.
2. Description of Services.
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Upon its receipt of Client Company's request therefor, Corporate Services
will furnish to Client Company, upon the terms and conditions hereinafter set
forth, such services, at such times, for such periods and in such manner as
Client Company may from time to time request. The services which may be provided
to Client Company hereunder are described as follows:
A. Executive Services.
Advise and assist Client Company concerning its overall operations and
general administrative functions and strategic planning. General and
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administrative management costs are allocated using the Global Allocation
Factor. For strategic planning services, those costs directly associated
with Client Company will be directly charged to Client Company. Other
costs, associated with the existing portfolio of companies are allocated
using the Global Allocation Factor.
B. Financial.
Advise and assist Client Company with the establishment and
maintenance of banking relationships, including accounts and account
reconciliation, and preparation of financial reports. Costs directly
associated with Client Company are directly charged to Client Company.
Other costs, such as monitoring capital markets, investing activities, etc.
will be allocated using the Global Allocation Factor.
C. Accounting.
Advise and assist Client Company with the installation and maintenance
of accounting systems, requirements of regulatory bodies with respect to
accounting, studies of accounting procedures and practices to improve
efficiency, book entries resulting from financial transactions, internal
audits, employment of independent auditors, preparation and analysis of
financial and operating reports and other statistical matters relating to
customers of Client Company, preparation of annual reports, standardization
of accounting and statistical forms in the interest of economy, and other
accounting and statistical services. Costs directly associated with Client
Company, such as the maintenance of the books and records, preparation of
financial and statistical reports, tax filings, internal audit costs, etc.
are charged directly to Client Company. Accounts payable processing will be
charged using the Accounts Payable Ratio. Accounting costs associated with
the preparation of consolidated financial reporting, consolidated tax
matters, and other compliance matters will be allocated using the Global
Allocation Factor.
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D. General Administrative.
Advise and assist Client Company with regard to legal, payroll,
personnel, human resources and benefits, tax and insurance matters. Legal,
tax and insurance costs directly associated with Client Company will be
charged directly to Client Company. Supervision and general and
administrative costs associated with these costs will be allocated using
the Global Allocation Factor. Payroll, personnel, human resources and
benefits costs will be allocated using the Number of Employees Ratio.
E. Budgeting.
Advise and assist Client Company in matters involving the preparation
and development of construction and operating budgets, cash and cost
forecasts, and budgetary controls. Costs directly associated with Client
Company will be charged directly to Client Company. Other administrative
and general costs will be allocated using the Global Allocation Factor.
F. Business Promotion and Public Relations.
Advise and assist Client Company in the development of marketing and
sales, public relations and corporate communications programs, in the
preparation and use of advertising and sales materials, and in the
determination, execution and evaluation of such programs. Costs directly
associated with Client Company will be charged directly to Client Company.
Other costs, such as administrative and general costs, will be allocated
using the Global Allocation Factor.
G. Systems and Procedures.
Advise and assist Client Company in the formation of good operating
practices and procedures, the standardization of forms, the purchase,
rental, installation, maintenance and use of mechanical and electronic data
processing, computing and communications equipment, in conducting economic
research and planning, and in the development of special economic studies.
Costs directly associated with Client Company will be charged directly to
Client Company. Other costs, such as administrative and general costs, will
be allocated using the Global Allocation Factor.
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H. Access to and Use of Facilities.
Make available to Client Company access to, use of, or rights in
facilities, products, processes, techniques, computer hardware and
software, technical information, training aids and properties, intellectual
property, vehicles, equipment, machines and other property, whether owned,
leased, or licensed by Corporate Services. Costs directly associated with
Client Company will be charged directly to Client Company. Other costs,
such as administrative and general costs, will be allocated using the
Global Allocation Factor.
I. Training.
Assist Client Company in providing training to Client Company
personnel, develop and make available training procedures, materials and
facilities, and provide instructors. Costs directly associated with Client
Company will be charged directly to Client Company. Other costs, including
administrative and general costs, will be allocated using the Number of
Employees Ratio.
J. Gas Supply Services.
Provide gas supply procurement services and other related services,
including those related to price risk management activities. Supervision
and other administrative and general costs will be allocated using the Gas
Supply Ratio.
K. Other Services.
Advise and assist in connection with such other matters as Client
Company may request and Corporate Services may be able to perform.
Requested services will be directly charged to Client Company.
3. Provision of Personnel.
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Where requested by Client Company, Corporate Services will loan its
employees to Client Company. Loaned employees will be under the sole supervision
and control of Client Company for such period or periods of time as are
necessary to complete the work to be performed by such employees. Client Company
will be responsible for the actions and activities of such employees while
engaged in the performance of the work to the same degree as though such persons
were employees of Client Company.
4. Compensation of Corporate Services.
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As compensation for services rendered to Client Company by Corporate
Services, Client Company hereby agrees to reimburse Corporate Services for all
costs properly chargeable or allocable thereto. Such costs shall be determined
in accordance with Appendix A attached hereto.
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5. Limitation of Liability and Indemnification.
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A. In performing the services hereunder (except to the extent such services
are being performed by employees loaned to and under the supervision of Client
Company), Corporate Services will exercise due care to assure that the services
are performed in a workmanlike manner, meet the standards and specifications set
forth in the applicable request with respect to such services, and comply with
applicable standards of law and regulation. However, failure to meet these
obligations shall in no event subject Corporate Services to any claims or
liabilities other than to re-perform the work at cost such that the work fully
complies with the request or standard. CORPORATE SERVICES MAKES NO OTHER
WARRANTY WITH RESPECT TO ITS PERFORMANCE OF THE SERVICES, AND CLIENT COMPANY
AGREES TO ACCEPT SUCH SERVICES WITHOUT FURTHER WARRANTY OF ANY NATURE. Client
Company shall and does hereby indemnify and agree to save harmless and defend
Corporate Services from the payment of any sum or sums of money on account of,
or resulting from, claims or suits growing out of (I) injuries to or the death
of any person, (ii) damage to or loss of any property and/or (iii) other damages
in any way attributable to or arising out of the performance and prosecution of
any project or work performed by or on behalf of Client Company for others,
whether or not the same results or allegedly results from the claimed or actual
negligence or breach of warranty of, or breach of contract or willful conduct
by, Client Company or its employees, agents or subcontractors or any combination
thereof. Further, Client Company shall and does hereby indemnify and agree to
save harmless and defend Corporate Services (a) from any and all liens,
garnishments, attachments, claims, suits, costs, attorneys' fees, cost of
investigation and of defense resulting from, incurred in connection with, or
relating to any such claims, (b) from the payment of any such sum or sums of
money, and (c) from the payment of any penalties, fines, damages, suits or
claims (and any liens or attachments asserted in connection therewith) arising
out of (I) any alleged or actual violation of law, court order, or governmental
agency rule or regulation committed by or existing with respect to Client
Company or its employees, agents or subcontractors (except Corporate Services
when not performing services hereunder), or (ii) any alleged or actual breaches
of contract by Client Company, or (iii) any claims made by or on account of any
employee, agent or subcontractor (except Corporate Services when not performing
services hereunder or any employee or agent of Corporate Services where such
claim does not arise specifically in connection with the performance of services
hereunder) of Client Company, or (iv) services or labor performed, materials,
provisions or supplies furnished or which have been purchased or contracted for
by or on behalf of Client Company, its employees, agents or subcontractors
(except Corporate Services when not performing services hereunder).
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B. Corporate Services shall within a reasonable time after it
receives notice of any claims, action, damages or liability against which
it will expect to be indemnified pursuant to Article 5A, notify Client
Company of such claims, actions, damages or liabilities. Thereafter, Client
Company may at its own expense, upon notice to Corporate Services, defend
or participate in the defense of such action or claim or any negotiation
for settlement of such action or claim, provided that unless Client Company
proceeds promptly and in good faith to pay or defend such action or claim,
then Corporate Services shall have the right (but not the obligation), in
good faith, upon ten days' notice to Client Company, to pay, settle,
compromise or proceed to defend any such action or claim without the
further participation by Client Company. Client Company will immediately
pay (or reimburse Corporate Services, as the case may be) any payments,
settlements, compromises, judgments, costs or expenses made or incurred by
Corporate Services in or resulting from the pursuit by Corporate Services
of such right. If any judgment is rendered against Corporate Services and
any such action defended by Client Company or from which Corporate Services
is otherwise entitled to indemnification under Article 5A, or any lien
attaches to the assets of Corporate Services in connection therewith,
Client Company immediately upon such entry or attachment shall pay the
judgment in full or discharge any such lien unless, at its expense and
direction, appeal shall be taken under which the execution of the judgment
and/or satisfaction of the lien is stayed. If and when a final and
unappealable judgment is rendered against Corporate Services in any such
action, Client Company shall forthwith pay such judgment or discharge such
lien prior to the time that Corporate Services would be legally held to do
so.
C. Client Company shall maintain at all times adequate levels of
insurance to discharge financially its obligations under this Article 5.
6. Miscellaneous.
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A. This Agreement shall be binding upon the successors and assigns
of the Parties, provided that Corporate Services shall not be entitled to
assign or subcontract out any of its obligations under this Agreement or
under any request issued hereunder without the prior written approval of
Client Company. This Agreement may not be modified or amended in any
respect except in writing executed by the parties hereto. This Agreement
shall be construed and enforced under and in accordance with the laws of
the State of Indiana (without regard to conflicts of law principles). This
Agreement may be executed in counterparts, each one of which when fully
executed shall be deemed to have the same force and effect as if the
original. No provision of this Agreement shall be deemed waived nor breach
of this Agreement consented to unless such waiver or consent is set forth
in writing and executed by the party hereto making such waiver or consent.
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B. The provision of services by Corporate Services pursuant to this
Agreement shall be subject to any limitation contained in any
authorizations, rules or regulations of those governmental agencies, if
any, having jurisdiction over the Parties, or such provision of services.
7. Confidential Information.
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A. Confidential Information shall include all market information
concerning the retail natural gas market and the retail electric market,
and any other information designated as confidential by Client Company.
B. Confidential Information shall not include:
1. Information lawfully known to Corporate Services prior to
the performance of such services other than through other work with or
for Client Company; or
2. Information that is publicly disclosed through no act of
Corporate Services or any of Corporate Services' employees, either
prior or subsequent to Client Company's disclosures of such
information to Corporate Services.
C. During the term of the Agreement and thereafter, except as Client
Company may authorize in writing, Corporate Services shall and shall cause
its employees to:
1. Treat and cause to be treated as confidential all
Confidential Information;
2. Grant access to Confidential Information only to Corporate
Services' employees performing services pursuant to this Agreement and
Corporate Services' supervisory personnel needing access to
Confidential Information;
3. Use confidential information only in connection with the
performance of services pursuant to this Agreement;
4. Make copies of any tangible embodiment of Confidential
Information only as necessary for the performance of such services;
5. Remove any tangible embodiment of Confidential Information
from the premises of Client Company only with the express permission
of Client Company; and
6. Return any or all tangible embodiments of Confidential
Information to Client Company promptly following the request of Client
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Company, and in any event upon completion of work pursuant to the
Agreement.
D. Notwithstanding the foregoing, Corporate Services may disclose
Confidential Information to the extent that disclosure is required by a
court or other governmental agency of competent jurisdiction, provided that
Corporate Services shall provide notice to Client Company of the request
for such disclosure promptly upon receiving such notice.
IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed
in their respective corporate names by their respective Presidents or one of
their respective Vice Presidents as of the day and year first above written.
[CLIENT COMPANY] NISOURCE CORPORATE SERVICES COMPANY
By: By:
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Appendix A
This Appendix sets forth the methodologies used to accumulate the costs of
services performed by NiSource Corporate Services Company ("Corporate Services")
and to assign or allocate such costs to its associate companies within the
NiSource System ("Client Companies").
COST ASSIGNMENT
Corporate Services maintains an accounting system that enables costs to be
identified by Work Request (W/R) number. These W/R numbers used in combination
with Accounts, Resource Codes, Product/Service Codes and Client Company numbers
will indicate whether the cost is a direct charge or the result of an allocated
charge. The primary inputs to the accounting system are time reports, accounts
payable invoices and journal entries. Charges for labor are calculated using the
employees' hourly rate. All Corporate Services employees will maintain a record
of their time. Those employees who provide services directly to Client Companies
will charge their time on a daily basis using designated increments: (1) based
on actual time records or (2) based on a fixed distribution that will be
adjusted for exceptions. The fixed distribution percentages will be reviewed on
a quarterly basis. The wages of those employees, such as administrative
assistants and secretaries, who generally assist employees who provide services
directly to Client Companies, will be allocated based on the allocation of the
wages of the employees they assist. Time records will be maintained for three
years. Indirect attributable costs are charged to the services performed in
proportion to the directly assigned costs or other appropriate cost allocators.
Cost will be accumulated by work request number and assigned as follows:
1. Costs accumulated in a work request number for services specifically
performed for a single Client Company will be directly assigned or billed to
such Client Company.
2. Costs accumulated in a work request number for services specifically
performed for two or more Client Companies will be distributed among such Client
Companies using methods determined on a case-by-case basis consistent with the
nature of the work performed and on one of the allocation methods described
below.
3. Costs accumulated in a work request number for services of a general
nature which are applicable to all Client Companies will be allocated among all
Client Companies, including NiSource Inc., and billed to them using the Global
Allocator factor described below.
Cost Allocation
Corporate Services uses cost allocation methods designed to fully
distribute costs. Corporate Services' cost allocation methodology is comprised
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of the following three steps:
1. To "direct charge" all labor, materials and other expenses to Client
Companies whenever feasible.
2. To allocate directly attributable costs to Client Companies based upon
a measurable cost causing relationship, i.e., payroll department costs are
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allocated on the number of employees for each Client Company.
3. To allocate indirectly attributable costs that are common to all
Client Companies, including NiSource Inc., using the Global Allocator Factor
taking into consideration the relative size of each entity with regards to gross
revenues, gross payroll expense and plant.
Costs that can be directly attributed to direct charges are allocated in
proportion to the direct charges or other appropriate cost allocations. For
example, direct labor charged to prepare financial statements for a specific
Client Company not only includes the direct payroll charge (the hourly rate
times the hours reported) but also includes a proportional share of that
individual's payroll overhead cost, and such other overheads as common asset
usage, occupancy charges and management overhead charges (commonly referred in
aggregate as an Administrative and General Overhead).
General and administrative costs that are not associated with a specific,
identifiable, causal relationship are pooled and allocated to all Client
Companies, including NiSource Inc.
ALLOCATION METHODS
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ALLOCATIONS RELATED TO DIRECT LABOR CHARGES
The following allocations will be applied to the Direct Labor Charges:
Payroll Overhead Charge will be calculated to recover costs associated with
labor, such as pension, benefits, lost time and payroll taxes. The payroll
overhead costs will be charged to Client Companies based on direct labor
charges. The rate is computed by dividing the annual payroll overhead expenses
by the annual base labor dollars.
Other Allocations applied to Direct Labor Charges will consist of the following:
1. Common Asset Usage Overhead:
The Common Asset Usage Overhead allocates the cost of furniture and desktop
equipment (including PC's) used by Corporate Services. The rate is
calculated by dividing the economic carrying costs of the assets by the
total actual labor dollars of employees using those assets. This overhead
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is directly applied to all Corporate Services labor charged or allocated to
Client Companies.
2. Occupancy Overhead:
The Occupancy Overhead allocates costs related to the workspace occupied by
Corporate Services employees. The rate is calculated by dividing the
economic carrying costs for the buildings by the total actual labor dollars
of employees working in those buildings. This overhead is directly applied
to all Corporate Services labor charged or allocated to Client Companies.
3. Management Overhead:
This overhead represents the management cost of a function within Corporate
Services. It is based on the ratio of Corporate Services supervisory wages
to all other wages. This fixed rate is applied to all direct labor charged
to Client Companies.
AN ALTERNATIVE ALLOCATION APPLIED TO DIRECT LABOR CHARGES OR OTHER DIRECT
CHARGES
An alternative allocation applied to direct labor charges or other direct
charges is commonly referred to as an Administrative and General Support Adder.
This overhead is a general overhead used in place of other specific
administrative and general support overheads and is added to total costs of
services. The purpose is to recover indirect administrative and general expenses
incurred and not otherwise charged directly to specific Client Companies for
certain activities. The adder also includes expenses associated with office
facilities, including furniture and office equipment, used in performing these
administrative functions.
ALLOCATIONS RELATED TO DISTRIBUTED SERVICES
The following ratios will be used to allocate costs for services not
directly assigned but pooled and allocated based on a causal measurement:
Number of Employees Ratio - Based on the number of employees benefiting from the
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performance of a service. This ratio will be determined annually based on actual
count of applicable employees at the end of the previous calendar year and may
be adjusted periodically due to a significant change.
Accounts Payable Ratio - Based on the number of invoices processed for each of
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the specific Client Companies. This ratio is determined annually based on the
actual count of invoices at the end of the previous calendar year and may be
adjusted periodically due to a significant change.
Gas Supply Ratio: Based on the number of decatherms purchased for a
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specific Client Company at the end of the previous year and may be adjusted
periodically due to a significant change.
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Global Allocation Factor - This formula will be determined annually based on the
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average of gross plant (original plant in service), gross payroll charges
(salaries and wages, including overtime, shift premium and lost time, but
excluding pension, payroll taxes and other employee benefits) and gross revenues
during the pervious calendar year and may be adjusted for any known and
reasonable quantifiable events or at such time as may be required due to
significant changes. This formula is commonly referred to as the "Massachusetts
Formula."
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