EXHIBIT 10.2 As Executed
SERVICE AGREEMENT
(Non-Utility Companies)
This Service Agreement is made and entered into as of the 22nd
day of May, 1998 by and among ALLIANT INDUSTRIES, INC., IPC DEVELOPMENT
COMPANY, INC. (individually, a "Client Company" and collectively, the
"Client Companies") and ALLIANT SERVICES COMPANY (the "Service Company"),
a service company subsidiary of Interstate Energy Corporation.
WITNESSETH
WHEREAS, the Securities and Exchange Commission (hereinafter
referred to as the "SEC") has approved and authorized as meeting the
requirements of Section 13(b) of the Public Utility Holding Company Act of
1935 (hereinafter referred to as the "Act"), the organization and conduct
of the business of the Service Company in accordance herewith, as a wholly
owned subsidiary service company of Interstate Energy Corporation; and
WHEREAS, the Service Company and the Client Companies desire to
enter into this Service Agreement whereby the Service Company agrees to
provide, and the Client Companies agree to accept and pay for, various
services as provided herein in accordance with applicable rules and
regulations under the Act, which require the Service Company to fairly and
equitably allocate costs among all associate companies to which it renders
services, including the Client Companies and other associate companies
which are not a party to this Service Agreement; and
WHEREAS, economies and efficiencies benefiting the Client
Companies will result from the performance by the Service Company of
services as herein provided;
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties to this Service Agreement
covenant and agree as follows:
ARTICLE I - SERVICES
Section 1.1 The Service Company shall furnish to a Client
Company, if requested by such Client Company, upon the terms and
conditions hereinafter set forth, such of the services described in
Appendix A hereto, at such times, for such periods and in such manner as
the Client Company may from time to time request and which the Service
Company concludes it is able to perform. The Service Company shall also
provide a Client Company with such special services, in addition to those
services described in Appendix A hereto, as may be requested by such
Client Company and which the Service Company concludes it is able to
perform. In supplying such services, the Service Company may arrange,
where it deems appropriate, for the services of such experts, consultants,
advisers and other persons with necessary qualifications as are required
for or pertinent to the performance of such services.
Section 1.2 Each Client Company shall take from the
Service Company such of the services described in Section 1.1, and such
additional general or special services, whether or not now contemplated,
as are requested from time to time by such Client Company and which the
Service Company concludes it is able to perform.
Section 1.3 The services described herein shall be
directly assigned or allocated by activity, project, program, work order
or other appropriate basis. A Client Company shall have the right from
time to time to amend, alter or rescind any activity, project, program or
work order provided that (i) any such amendment or alteration which
results in a material change in the scope of the services to be performed
or equipment to be provided is agreed to by the Services Company, (ii) the
cost for the services covered by the activity, project, program or work
order shall include any expense incurred by the Service Company as a
direct result of such amendment, alteration or rescission of the activity,
project, program or work order, and (iii) no amendment, alteration or
rescission of an activity, project, program or work order shall release
a Client Company from liability for all costs already incurred by or
contracted for by the Service Company pursuant to the activity, project,
program or work order, regardless of whether the services associated
with such costs have been completed.
ARTICLE II - COMPENSATION
Section 2.1 As compensation for the services to be
rendered hereunder, each Client Company shall pay to the Service Company
all costs which reasonably can be identified and related to particular
services performed by the Service Company for or on behalf of such Client
Company; provided that in respect to services performed for an associate
company which is a foreign utility company ("FUCO") that qualifies for
exemption under section 33 of the Act, such FUCO shall pay the fair market
value of such services, but in any event no less than the cost thereof.
Where more than one Client Company is involved in or has received benefits
from a service performed, the costs of such service will be directly
assigned or allocated, as set forth in Appendix A hereto, between or among
such Client Companies on a basis reasonably related to the service
performed to the extent reasonably practicable.
Section 2.2 It is the intent of this Agreement that charges for
services shall be distributed among the Client Companies, to the extent
possible, based upon direct assignment. The amounts remaining after
direct assignment shall be allocated among the Client Companies (and other
affiliates of Interstate Energy Corporation for which services are
rendered by the Service Company, where applicable) using the method
identified in Appendix A. The method of assignment or allocation of costs
shall be subject to review annually, or more frequently if appropriate.
Such method of assignment or allocation of costs may be modified or
changed by the Service Company without the necessity of an amendment to
this Service Agreement; provided that, in each instance, all services
rendered hereunder shall be at actual cost thereof, fairly and equitably
assigned or allocated, all in accordance with the requirements of the Act
and any orders promulgated thereunder; provided further that services
rendered to foreign affiliates which qualify for exemption under Rule
83(a) under the Act may be furnished by the Service Company at the fair
market value thereof (but not less than the cost thereof). The Service
Company shall review with the Client Companies any proposed material
change in the method of assignment or allocation of costs hereunder and
the parties must both agree to any changes before they are implemented.
In addition, no such agreed upon material change shall be made unless and
until the Service Company shall have first given written notice to the
Illinois Commerce Commission, the Minnesota Public Utilities Commission,
the Public Service Commission of Wisconsin, the Iowa Utilities Board
(collectively, the "State Commissions") and the SEC not less than 60 days
prior to the proposed effective date thereof.
Section 2.3 The Service Company shall render a monthly bill to
each Client Company which shall reflect the billing information necessary
to identify the costs charged for the preceding month.
Section 2.4 It is the intent of this Service Agreement that the
payment for services rendered by the Service Company to the Client
Companies under this Service Agreement shall cover all of the costs of its
doing business (less the costs of services provided to affiliated
companies not a party to this Service Agreement and to other
non-affiliated companies, and credits for miscellaneous income items),
including, but not limited to, salaries and wages, office supplies and
expenses, outside services employed, property insurance, injuries and
damages, employee pensions and benefits, miscellaneous general expenses,
rents, maintenance of structures and equipment, depreciation and
amortization, and compensation for use of capital as permitted by Rule 91
of the SEC under the Act.
ARTICLE III - TERM
Section 3.1 This Service Agreement shall become effective on
the date hereof, subject to the receipt of required regulatory approvals,
and shall continue in force with respect to a Client Company until
terminated by the Client Company, or by the Service Company with respect
to such Client Company, or until terminated by unanimous agreement of all
Client Companies, in each case upon not less than one year's prior written
notice to all other parties unless otherwise mutually agreed. This
Service Agreement may also be subject to termination or modification at
any time, without notice, if and to the extent performance under this
Service Agreement may conflict with the Act or with any rule, regulation
or order of the SEC adopted before or after the date of this Service
Agreement.
ARTICLE IV - MISCELLANEOUS
Section 4.1 All accounts and records of the Service Company
shall be kept in accordance with the General Rules and Regulations
promulgated by the SEC pursuant to the Act, in particular, the Uniform
System of Accounts for Mutual Service Companies and Subsidiary Services
Companies in effect from and after the date hereof.
Section 4.2 Each client company shall cause each of its direct
or indirect non-utility subsidiaries which may come into existence after
the effective date of this Service Agreement to become an additional
Client Company (collectively, the "New Client Companies") subject to this
Service Agreement. In addition, the parties hereto shall make such
changes in the scope and character of the services to be rendered and the
method of assigning or allocating costs of such services among the Client
Companies and the New Client Companies under this Service Agreement as may
become necessary or appropriate.
Section 4.3 The Service Company shall permit each Client
Company, and others as required under applicable rule or regulation, such
reasonable access to its accounts and records, including the basis and
computation of allocations, as shall be necessary for such persons to
review such Client Company's operating results.
Section 4.4 This Service Agreement shall be governed by and
construed in accordance with the internal laws of the State of Wisconsin,
may be executed in any number of counterparts with the same effect as if
the signatures thereto and hereto were on the same instrument, and may not
be amended except by written instrument executed by all parties hereto.
ARTICLE V - AMENDMENTS
Section 5.1. Prior to filing any amendment to this Service
Agreement with the SEC, the parties will file with the applicable State
Commissions, as provided by law or stipulation, a copy of such amendment.
In the event that a State Commission, within forty-five days of filing
with such State Commission, does not object to an amendment, or issue a
letter requiring that the amendment be held in abeyance until such State
Commission completes its review, the parties may file the proposed
amendment with the SEC.
Section 5.2. In the event that an amendment is finally
rejected or disapproved or found to be unreasonable by one or more of the
State Commissions prior to filing with the SEC, the amendment will not
become effective and the parties will not request SEC approval of the
amendment.
Section 5.3. In the event that an amendment is rejected or
disapproved or found to be unreasonable by one or more of the State
Commissions after it has been filed with the SEC but before it as been
approved by the SEC, the amendment will be terminated and the parties
agree to request withdrawal of the filing.
Section 5.4. In the event that an amendment is rejected,
disapproved or found to be unreasonable by one or more of the State
Commissions before it has been approved by the SEC, the parties shall have
the right to request further revisions of the amendment in order to cure
or remove the cause of the State Commission's rejection, disapproval or
finding of unreasonableness. Upon request by a party, the other parties
agree promptly to negotiate in good faith to revise the amendment, and
thereafter to file for any necessary regulatory authorization of the
renegotiated amendment. If the parties are unable to reach agreement
satisfactory to each of them and to each affected State Commission after
good faith negotiations, then Section 5.2 or 5.3 above, as applicable,
will apply.
Section 5.5. In the event that all the State Commissions have
previously approved an amendment prior to SEC approval, Section 5.6 below
shall not apply.
Section 5.6. In the event that an amendment has become
effective and is subsequently rejected, disapproved or found to be
unreasonable by one or more of the State Commissions, the parties will
make a good faith effort to terminate, amend or modify the amendment in a
manner which remedies the State Commission's adverse findings without
adverse impact on any of the parties. The parties will request to meet
with representatives of the State Commissions and make a good faith
attempt to resolve any differences in the affected states regarding the
subject amendment. If agreement can be reached to terminate, amend or
modify the amendment in a manner satisfactory to the contracting parties
and to the representatives of each State Commission, the parties shall
file such amended contract with the appropriate state and federal
regulatory agencies, seeking all necessary regulatory authorizations. If
the parties are unable to reach agreement satisfactory to each of them and
to each affected State Commission, after good faith negotiations, then
they shall be under no obligation to further amend the amendment.
IN WITNESS WHEREOF, the parties hereto have caused this Service
Agreement to be executed as of the date and year first above written.
ALLIANT SERVICES COMPANY
By:___________________________
Title:
ALLIANT INDUSTRIES INC.
By:____________________________
Title:
IPC DEVELOPMENT COMPANY, INC.
By:____________________________
Title:
Appendix A
Description of Services and Determination
of Charges for Services
I. The Service Company will maintain an accounting system for
accumulating all costs on an activity, project, program, work order,
or other appropriate basis. To the extent practicable, time records
of hours worked by Service Company employees will be kept by
activity, project, program or work order. Charges for salaries will
be determined from such time records and will be computed on the
basis of employees, effective hourly rates, including the cost of
fringe benefits and payroll taxes. Records of employee-related
expenses and other costs will be maintained for each functional group
within the Service Company (hereinafter referred to as "Function").
Where identifiable to a particular activity, project, program or work
order, such costs will be directly assigned to such activity,
project, program or work order. Any costs not directly assigned by
the Service Company will be allocated monthly in accordance with this
Appendix A.
The Service Company will develop and maintain written guidelines to
govern the methods and procedures for charging and allocating costs
among the affiliated companies of the Service Company and among
Functions within the Service Company. The Service Company will
subject the affiliate transactions to internal auditing procedures on
a periodic basis for compliance with the Service Agreement, written
guidelines and orders and rules of regulatory agencies.
II. Service Company costs accumulated for each activity, project, program
or work order will be directly assigned where possible. The amounts
that cannot be directly assigned shall be allocated to the Client
Companies or other Functions within the Service Company as described
in this Appendix A. To the extent possible, such allocations shall
be based on cost-causal relationships. The overall process of
determining responsibility for Service Company costs shall be as
follows:
1. Direct assignment. Costs accumulated in an activity, project,
program, or work order for services performed specifically for a
single Client Company or Function will be directly assigned and
charged to such Client Company or Function.
2. Allocation based on cost-causal relationship. Costs accumulated
in an activity, project, program or work order for services
performed specifically for two or more (but not all) Client
Companies or Functions and which cannot be directly assigned
will be allocated among and charged to such Client Companies or
Functions by application of one or more of the allocation ratios
described in paragraphs III and IV of this Appendix A; provided
that the denominator used in determining each such ratio shall
include only the Client Companies or Functions for which the
services are specifically performed.
3. Allocation for services of a general nature. Costs accumulated
in an activity, project, program, or work order for services of
a general nature which are applicable to all Client Companies or
Functions or to a class or classes of Client Companies or
Functions will be allocated among and charged to such Client
Companies or Functions by application of one or more of the
allocation ratios described in paragraphs III and IV of this
Appendix A.
III. The following ratios will be applied, as specified in paragraph IV of
this Appendix A, to allocate costs (a) for services of a general
nature and (b) subject to modification of the denominator as
described in paragraph II, number 2 above, for services performed
specifically for two or more (but not all) Client Companies or
Functions. These ratios will be determined annually, or at such
other time as may be required due to a significant change.
1. Materials, Supplies and Services Ratio
A ratio, based on the sum of materials, supplies and services,
either issued from inventory or directly purchased, for the
immediately preceding twelve consecutive calendar months, the
numerator of which is for a Client Company or Function and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates for which the Service Company provides services,
where applicable) and/or the Service Company.
2. Number of Employees Ratio
A ratio, based on the sum of the number of employees at the end
of each month for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
or Service Company Function and the denominator of which is for
all Client Companies (and Interstate Energy Corporation's non-
utility and non-domestic utility affiliates for which the
Service Company provides services, where applicable) and/or the
Service Company.
3. Total Assets Ratio
A ratio, based on the sum of the total assets at the end of each
month for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates for which the Service Company provides services,
where applicable).
4. Number of Central Processing Unit Seconds Ratio
A ratio, based on the number of central processing unit seconds
expended to execute mainframe computer software applications for
the immediately preceding twelve consecutive calendar months,
the numerator of which is for a Client Company or Service
Company Function, and the denominator of which is for all Client
Companies (and Interstate Energy Corporation's non-utility and
non-domestic utility affiliates, where applicable) and/or the
Service Company.
5. Gross Plant Ratio
A ratio, based on the sum of direct plant at the end of each
month for the immediately preceding twelve consecutive calendar
months, the numerator of which is for a Client Company and the
denominator of which is for all Client Companies (and Interstate
Energy Corporation's non-utility and non-domestic utility
affiliates, where applicable).
6. General Ratio
A ratio, based on the sum of all Service Company expenses
directly assigned or allocated, based on allocators other than
this "General Ratio," to Client Companies (excluding fuel, gas,
purchased power and the cost of goods sold) for the immediately
preceding twelve consecutive calendar months, the numerator of
which is for a Client Company or Function and the denominator of
which is for all Client Companies (and Interstate Energy
Corporation's non-utility and non-domestic utility affiliates,
where applicable) and/or the Service Company. As used herein,
cost of goods sold represents materials that are resold to the
ultimate consumer.
7. Units Sold or Transported Ratio
A ratio, based on appropriate Client Company electric, gas,
steam or water units of sale and/or transport, excluding intra-
system sales, for the immediately preceding twelve consecutive
calendar months, the numerator of which is for a Client Company
and the denominator of which is for all Client Companies (and
Interstate Energy Corporation's non-utility and foreign utility
companies for which the Service Company provides energy-related
services, where applicable). The product-specific units of
sales are domestic kilowatt-hour electric sales, dekatherms of
gas sold or transported, units of water, or units of steam. A
separate ratio will be calculated and used for each utility type
(electric, gas, water and steam).
IV. A description of each Function's activities, which may be modified
from time to time by the Service Company, is set forth below. As
described in paragraph II, number 1 of this Appendix A, where
identifiable, costs will be directly assigned to the Client Companies
or to other Functions of the Service Company. For costs accumulated
in activities, projects, programs, or work orders which are for
services of a general nature or for services performed specifically
for two or more (but not all) Client Companies or Functions which
cannot be directly assigned, as described in paragraph II, numbers 2
and 3 of this Appendix A, the method or methods of allocation will be
based upon the applicable allocation ratios (modified as described in
paragraph II, number 2, if applicable) set forth below in brackets
[Allocator] for each Function.
1. Information Systems
Provides communications and electronic data processing services
such as:
(1) Development and support of mainframe computer software
applications. [Number of Central Processing Unit Seconds
Ratio, #4]
(2) Procurement and support of personal computers and related
network and software applications. [Number of Employees
Ratio, #2]
(3) Operation of data center. [Number of Central Processing
Unit Seconds Ratio, #4]
(4) Installation and operation of communications systems.
[Number of Employees Ratio, #2]
2. Transportation
Procures and maintains transportation vehicles and equipment.
[Number of Employees Ratio, #2]
3. Human Resources
Establishes and administers policies and supervises compliance
with legal requirements in the areas of employment,
compensation, benefits and employee health and safety.
Processes payroll and employee benefit payments. Supervises
contract negotiations and relations with labor unions. [Number
of Employees Ratio, #2]
4. Materials Management
Provides services in connection with the procurement of
materials and contract services and management of material and
supplies inventories. [Material, Supplies and Services Ratio,
#1]
5. Facilities
Operates and maintains office and service buildings. Provides
security and housekeeping services for such buildings and
procures office furniture and equipment. [Gross Plant Ratio,
#5]
6. Accounting
Maintains corporate books and records, prepares financial and
statistical reports, processes payments to vendors, prepares tax
filings and supervises compliance with tax laws and regulations.
[General Ratio, #6]
7. Environmental Affairs
Establishes policies and procedures for compliance with
environmental laws and regulations. Studies emerging
environmental issues, monitors compliance with environmental
requirements and provides training to the Client Companies'
personnel. [Units Sold or Transported Ratio, #7]
8. Public Affairs
Prepares and disseminates information to employees, customers,
government officials, communities and the media. Provides
graphics, reproduction lithography, photography and video
services. [General Ratio, #8]
9. Legal
Renders services relating to labor and employment law,
litigation, contracts, rates and regulatory affairs,
environmental matters, financing, financial reporting, real
estate and other legal matters. [General Ratio, #8]
10. Finance
Renders services to Client Companies with respect to
investments, financing, cash management, risk management, claims
and fire prevention. Prepares reports to the SEC, budgets,
financial forecast and economic analyses. [General Ratio, #8]
11. Land and Right of Way
Purchases, surveys, records, and sells real estate interests for
Client Companies. [Gross Plant Ratio, #5]
12. Internal Auditing
Reviews internal controls and procedures to ensure that assets
are safeguarded and that transactions are properly authorized
and recorded. [General Ratio, #8]
13. Investor Relations
Provides communications to investors and the financial
community, performs transfer agent and shareholder record
keeping functions, administers stock plans and performs stock-
related regulatory reporting. [Total Assets Ratio, #3]
14. Planning
Facilitates preparation of strategic and operating plans,
monitors trends and evaluates business opportunities. [General
Ratio, #8]
15. Executive
Provides general administrative and executive management
services. [General Ratio, #8]