Document:

Nicor Inc Exhibit 10.11

    Nicor
      Inc.

    Form
      10-Q

    Exhibit
      10.11

     

    

      INTERIM
        COOPERATIVE AGREEMENT

      

      This
        agreement is made this 28th
        day of
        October 1993 by and between Commonwealth Edison Company (“Edison”), an Illinois
        corporation, and Northern Illinois Gas Company (“NI-Gas”), an Illinois
        corporation, (collectively, “Utilities”) to provide an interim cooperative
        arrangement for the Utilities to address certain issues at certain former
        manufactured gas plant (“MGP”) sites in Illinois.

      

      WHEREAS,
        without admitting any liability, Edison and NI-Gas currently believe that
        certain actions should be taken with regard to particular MGP sites;
        and

      

      WHEREAS,
        without admitting any liability, Edison and NI-Gas may agree in the future
        that
        certain actions should be taken with regard to other MGP sites; and

      

      WHEREAS,
        Edison and NI-Gas have determined that it is in the public interest and in
        their
        mutual best interest to work together on an interim basis to perform mutually
        acceptable actions with regard to certain MGP sites; and

      

      WHEREAS,
        Edison and NI-Gas have determined that it is in their mutual best interest
        to
        pursue negotiation, and binding arbitration to the extent set forth in this
        Agreement, to attempt to resolve issues regarding payment of the cost of
        performing actions at certain MGP sites;

      

      NOW
        THEREFORE, based on the covenants and mutual promises contained herein, Edison
        and NI-Gas agree as follows.

      

      
        	 	
                1.

              	
                Interim
                  Cost Allocation.

              

      

      
        	 	
                1.1

              	
                If
                  either of the Utilities believes that costs should be incurred
                  at one or
                  more MGP sites listed on Attachment A (“Site List”), it shall contact the
                  other and the Utilities shall meet as soon as reasonably possible
                  to
                  discuss whether they agree that costs should be incurred and, if
                  so, the
                  nature of those costs. If the Utilities reach agreement on those
                  issues,
                  each of the Utilities shall pay 50% of the agreed upon costs (“Interim
                  Cost Allocation”), subject to the final allocation of costs between the
                  Utilities pursuant to Sections 4, 5 and 6 of this Agreement (“Final Cost
                  Allocation”). If either of the Utilities believes that an MGP site should
                  be added to the Site List, it shall contact the other and the Utilities
                  shall meet as soon as reasonably possible to discuss whether they
                  agree
                  that the site should be added.

              

      

      
        	 	
                1.2

              	
                If,
                  after discussion, the Utilities do not agree that costs should
                  be incurred
                  for a particular site listed on Attachment A, they may pursue or
                  continue
                  to pursue any and all rights which they would otherwise have under
                  applicable law; provided, however, that neither of the Utilities
                  may
                  commence litigation against the other regarding any site on the
                  Site List
                  unless this Agreement has been terminated in accordance with Section
                  14
                  or
                  unless ninety (90) days before the Utility intends to commence
                  such
                  litigation it sends the other Utility, by telecopy and U.S. mail,
                  written
                  notice of such intent (“Initial Litigation Notice”). The Initial
                  Litigation Notice shall specify the MGP site or sites that would
                  be the
                  subject of the litigation, and the Utility sending such notice
                  may
                  commence litigation on the ninetieth (90th)
                  day after the date of the Initial Litigation Notice (said 90th
                  day being hereinafter called the “Litigation Date”). On the Litigation
                  Date, the Utility that received the Initial Litigation Notice may
                  commence
                  litigation against the other Utility regarding any MGP site or
                  sites on
                  the Site List, provided that within forty (40) days of the date
                  of the
                  Initial Litigation Notice the Utility receiving such notice sent
                  the other
                  Utility written notice (“Responsive Litigation Notice”), by telecopy and
                  U.S. main, of its intent to commence litigation, including an
                  identification of the site or sites that would be the subject of
                  the
                  litigation to be initiated by it. If a Utility commences litigation
                  in
                  accordance with this Section 1 without terminating this Agreement
                  in
                  accordance with Section 14, this Agreement shall be terminated
                  with regard
                  to the site or sites subject to the litigation (“Termination of Agreement
                  for Litigated Sites”), and the provisions of Section 14 (b) and (c) shall
                  be applicable to such termination. A Utility may not commence litigation
                  in accordance with this Section 1 for a site for which any arbitration
                  proceeding has begun under this
                  Agreement.

              

      

      
        	 	
                2.

              	
                Shared
                  Costs.

              

      

      
        	 	
                2.1

              	
                The
                  Utilities in the Interim and Final Cost Allocation under this Agreement
                  shall seek recovery from each other solely for Shared Costs, which
                  shall
                  be defined as third party costs of investigation and/or remediation
                  of a
                  particular MGP site (which investigation and/or remediation has
                  been
                  agreed to by both Utilities in accordance with Section 1 of this
                  Agreement) and any expenditures incurred by the Coordinator/Utility
                  for
                  audits under Section 17(b) or in prosecuting, defending, compromising,
                  settling or paying suits or claims pursuant to Section 2.4 of Attachment
                  C. Examples of Shared Costs are the costs of third party investigation
                  and/or remediation of an MGP site (which the Utilities have agreed
                  to
                  perform in accordance with Section 1 of this Agreement) pursuant
                  to:

              

      

      
        	 	
                a)

              	
                a
                  work plan agreed upon by the Utilities in accordance with Attachment
                  C;

              

      

      b)   
a
        work
        plan ordered by a federal or state regulatory agency; 

      or

      
        	 	
                c)

              	
                a
                  work plan ordered by a court with appropriate jurisdiction, involving
                  litigation with a third party.

              

      

      
        	 	
                2.2

              	
                Examples
                  of costs that are not Shared Costs under this Agreement
                  are:

              

      

      
        	 	
                a)

              	
                a
                  Utility’s payroll costs, overhead or internal or external legal costs
                  (except for external legal costs that the Defending Utility may
                  incur in
                  accordance with Section 2.4 of Attachment
                  C);

              

      

      
        	 	
                b)

              	
                a
                  Utility’s ordinary costs of owning a particular former MGP site
                  (including, but not limited to, taxes, insurance, maintenance and
                  other
                  similar costs);

              

      

      
        	 	
                c)

              	
                costs
                  incurred by a Utility in pursuit of recovery of insurance proceeds
                  from
                  insurance carriers; 

              

      

      
        	 	
                d)

              	
                costs
                  of prosecuting, defending, compromising or settling third party
                  litigation
                  relating to an MGP site, except to the extent allowed by Section
                  2.4 of
                  Attachment C; and 

              

      

      
        	 	
                e)

              	
                costs
                  incurred by either Utility prior to the date of this Agreement,
                  unless the
                  Utilities have agreed pursuant to Section 3 to incur such
                  costs.

              

      

      
        	 	
                2.3

              	
                Nothing
                  in this Agreement shall limit the types of costs associated with
                  MGP sites
                  that one Utility can recover from the other in
                  litigation.

              

      

      
        	 	
                3.

              	
                Costs
                  Currently Subject to Interim Cost
                  Allocation.

              

      

      
        	 	
                3.1

              	
                Edison
                  and NI-Gas have incurred and/or agree to incur the following costs
                  as
                  Shared Costs, subject to the terms of this Agreement, including,
                  but not
                  limited to, the Final Cost Allocation procedures set forth in Sections
                  4,
                  5 and 6 of this Agreement:

              

      

      
        	 	
                a)

              	
                the
                  cost of any settlement - acceptable to both Edison and NI-Gas --
                  and the
                  cost of any judgment entered against either or both Utilities in
                  Alcan-Toyo
                  America, Inc. v. Northern Illinois Gas Co.,
                  No. 92C 7142 (N.D. Ill. filed 10/27/92);

              

      

      
        	 	
                b)

              	
                the
                  cost of air monitoring - - and any other related activities acceptable
                  to
                  both NI-Gas and Edison - - at the Oak Park site; and
                  

              

      

      
        	 	
                c)

              	
                the
                  cost of response activities - - acceptable to both NI-Gas and Edison
                  - -
                  at the Streator site.

              

      

      
        	 	
                3.2

              	
                The
                  following costs shall be subject to audit and final allocation
                  as Shared
                  Costs in accordance with Sections 4, 5 and 6 of this
                  Agreement:

              

      

      
        	 	
                a)

              	
                with
                  regard to the Streator site, approximately $700,000 of costs that
                  Edison
                  has incurred at the site prior to the date of this Agreement; and
                  

              

      

      
        	 	
                b)

              	
                with
                  regard to the Alcan site, approximately $45,000 of costs that NI-Gas
                  has
                  incurred at the Alcan site prior to the date of this
                  Agreement.

              

      

      
        	 	
                4.

              	
                Final
                  Cost Allocation.

              

      

      4.1 The
        final
        allocation of Shared Costs shall be determined on a site-by-site basis through
        negotiation or arbitration as set forth in this Agreement, although the
        Utilities may, if they so agree, aggregate individual sites for Final Cost
        Allocation. If a Utility, pursuant to the Interim Cost Allocation, has paid
        a
        greater percentage of Shared Costs for an MGP site or group of sites than
        is
        allocated to it by the Final Cost Allocation, the other Utility shall pay
        it the
        difference between the amount it actually paid pursuant to the Interim Cost
        Allocation and the amount allocated to it by the Final Cost Allocation. The
        time
        for Final Cost Allocation shall be determined as follows:

      
        	 	
                a)

              	
                During
                  the twelve months following the completion of both a Phase I and
                  a Phase
                  II investigation at a particular site, the Utilities shall attempt
                  to
                  negotiate the final allocation of the Shared Costs already incurred
                  and
                  the estimated future costs to be incurred in any Phase III remediation.
                  If
                  the Utilities are unable to agree within such twelve months, either
                  Utility may seek binding arbitration as provided for in Section
                  5 after
                  the conclusion of such twelve months; or

              

      

      
        	 	
                b)

              	
                If
                  the Utilities have completed a Phase I investigation, either Utility
                  may
                  seek binding arbitration as provided for in Section 5 no earlier
                  than
                  three years following the completion of the Phase I investigation
                  at a
                  particular site; or

              

      

      
        	 	
                c)

              	
                If
                  the Utilities are unable to agree to continue to fund work at a
                  particular
                  site on a 50/50 interim allocation basis at anytime during Phase
                  I, Phase
                  II or Phase III, and for any reason (including, but not limited
                  to, an
                  inability to agree on a consultant or the type of remediation to
                  be
                  performed in Phase III), either Utility may commence arbitration
                  in
                  accordance with Section 5; but in no event prior to two years after
                  the
                  date of this Agreement; or 

              

      

      
        	 	
                d)

              	
                By
                  Section 4.4 of Attachment C to this
                  Agreement.

              

      

      
        	 	
                4.2

              	
                For
                  purposes of this Section, Phase I, Phase II and Phase III are defined
                  as
                  follows:

              

      

      
        	 	
                a)

              	
                A
                  Phase I investigation is an investigation to collect data needed
                  to
                  adequately characterize an MGP site for the purpose of developing
                  and
                  evaluating effective response action alternatives. This investigation
                  may
                  be conducted in one or more stages.

              

      

      
        	 	
                b)

              	
                A
                  Phase II investigation is the process of evaluating the data from
                  the
                  Phase I investigation in order to select a response action. A Phase
                  II
                  investigation is complete when the Utilities have agreed upon a
                  response
                  action that will be implemented for MGP
                  site.

              

      

      
        	 	
                c)

              	
                A
                  Phase III remediation is the implementation of a response action
                  for a
                  site.

              

      

      
        	 	
                5.

              	
                Initiation
                  of Arbitration and Selection of
                  Arbitrators.

              

      

      
        	 	
                5.1

              	
                Subject
                  to Section 4, one Utility shall initiate the arbitration (“Initiating
                  Utility”) by requesting the Center For Public Resources, Inc. to send to
                  it and the other Utility a list of nine (9) potential arbitrators
                  (“List
                  of Potential Arbitrators”). The initiating Utility shall inform the Center
                  for Public Resources, Inc. that:

              

      

      
        	 	
                a)

              	
                Before
                  an arbitrator is included on the List of Potential Arbitrators,
                  the Center
                  for Public Resources, Inc. should confirm with the arbitrator that
                  he/she
                  (i) is interested in performing the arbitration and could do so
                  in
                  accordance with the schedule set forth in this Agreement, and (ii)
                  does
                  not have any conflict of interest that would interfere with impartial
                  decision making;

              

      

      
        	 	
                b)

              	
                Each
                  potential arbitrator must have legal training and experience in
                  environmental matters and contract dispute resolution; and
                  

              

      

      
        	 	
                c)

              	
                The
                  List of Potential Arbitrators must be accompanied by a curriculum
                  vitae
                  for each arbitrator.

              

      

      
        	 	
                5.2

              	
                Within
                  thirty (30) days of receipt of the List of Potential Arbitrators
                  by both
                  Utilities, the Initiating Utility shall select an arbitrator from
                  it and
                  mail to the other Utility notice of the selection. Within forty-five
                  (45)
                  days of the receipt of the List of Potential Arbitrators the other
                  Utility
                  shall select an arbitrator from it and mail to the initiating Utility
                  notice of the selection. Within sixty (60) days of the receipt
                  of the List
                  of Potential Arbitrators, the Utilities shall meet to select a
                  third
                  arbitrator from the List of Potential Arbitrators. If the Utilities
                  cannot
                  agree on a third arbitrator during their meeting, before concluding
                  such
                  meeting they shall select an arbitrator by having each Utility—beginning
                  with the Initiating Utility—alternate in deleting one name from the List
                  of Potential Arbitrators until only one name remains (other than
                  the names
                  of the two (2) arbitrators previously selected by the Utilities).
                  That
                  name shall be the third arbitrator. The date such arbitrator is
                  selected
                  shall be the Commencement Date for purposes of
                  arbitration.

              

      

      
        	 	
                5.3

              	
                Each
                  party shall pay the costs of the arbitrator it has selected and
                  one-half
                  the costs of the third arbitrator together with its own costs of
                  arbitration. Such costs shall not be Shared Costs within the meaning
                  of
                  Section 2.

              

      

      
        	 	
                6.

              	
                Arbitration
                  Procedure.

              

      

      
        	 	
                6.1

              	
                Within
                  ten (10) days of the Commencement Date, the Utilities shall provide
                  the
                  arbitrators a copy of this Section 6 and a copy of all publicly
                  available
                  documents or portions of such documents, including those obtained
                  from the
                  U.S. Environmental Protection Agency or the Illinois Environmental
                  Protection Agency, which the Utilities believe will provide the
                  arbitrators with useful background information about the site (or
                  sites)
                  that is the subject of the arbitration. If the Utilities disagree
                  regarding which documents should be provided to the arbitrators,
                  each
                  Utility may provide whatever documents it
                  chooses.

              

      

      
        	 	
                6.2

              	
                Within
                  thirty (30) days (“Document Production Date”) of the Commencement Date,
                  each Utility shall submit to the other all non-privileged documents
                  that
                  it has regarding the site (or sites) that is the subject of the
                  arbitration, as well as a certification—from its Vice President with
                  responsibility for environmental affairs—stating that the Utility is
                  providing all such documents.

              

      

      
        	 	
                6.3

              	
                Within
                  thirty (30) days after the Document Production Date, the Utilities
                  and the
                  arbitrators shall have a Scheduling Conference. At this conference,
                  the
                  Utilities and the arbitrators
                  shall:

              

      

      
        	 	
                a)

              	
                decide
                  what, if any, additional discovery shall be conducted and establish
                  a
                  schedule for such discovery;

              

      

      
        	 	
                b)

              	
                schedule
                  the filing of written testimony by the Utilities, a hearing for
                  cross-examination, the filing of memoranda by the Utilities prior
                  to oral
                  argument, the oral argument, the filing of a brief by each Utility
                  after
                  the oral argument, and the provision to the Utilities by the arbitrators
                  of the Final Cost Allocation Report (“FCAR”) which shall be binding on the
                  Utilities; and

              

      

      
        	 	
                c)

              	
                decide
                  any other issues that the Utilities and the arbitrators agree should
                  be
                  decided during the Scheduling Conference to facilitate the
                  arbitration.

              

      

      If
        the
        Utilities disagree about any matter discussed during the Scheduling Conference,
        the arbitrators shall resolve such matter. The Utilities and the arbitrators
        shall take all steps reasonably possible to ensure that the arbitration process
        will be cost-effective, efficient and fair.

      
        	 	
                6.4

              	
                Notwithstanding
                  any other provision of this Agreement, no Utility shall be required
                  to
                  disclose to the other Utility or to the arbitrators any communications
                  with, or work product of, its
                  attorneys.

              

      

      
        	 	
                6.5

              	
                The
                  arbitrators may, in their sole discretion, communicate in writing
                  with any
                  Utility to inquire about any gaps in the records, or to request
                  further
                  information on any matter relevant to the development of an allocation,
                  and shall provide a copy of such inquiry to the other Utility.
                  Each
                  Utility shall use its best efforts to comply in writing with an
                  inquiry by
                  the arbitrators pursuant to this paragraph and shall provide a
                  copy of its
                  response to the other Utility.

              

      

      
        	 	
                6.6

              	
                The
                  provisions of this Agreement shall govern arbitration performed
                  pursuant
                  to this Agreement; provided that the Center for Public Resources’ Rules
                  for Non-Administered arbitration of Business Disputes (1990) (“CPR’s
                  Rules”), shall govern the procedural issues, if any, that are not
                  addressed by this Agreement, although CPR’s Rules shall not govern any
                  action that Edison or NI-Gas may have against CPR or any arbitrator
                  in
                  connection with any arbitration performed under this Agreement.
                  In the
                  event of any conflict between the provisions of this Agreement
                  and the
                  procedural provisions of CPR’s Rules, this Agreement’s provisions shall
                  govern. CPR’s Rules are set forth in Attachment
                  B.

              

      

      
        	 	
                6.7

              	
                The
                  arbitrators shall be responsible for developing the Final Cost
                  Allocation
                  in accordance with the procedures set forth in this Agreement.
                  In
                  developing the Final Cost Allocation, the arbitrators shall consider
                  all
                  documents, information and comments or other evidence submitted
                  to or
                  solicited by the arbitrators pursuant to this
                  Agreement.

              

      

      
        	 	
                6.8

              	
                The
                  parties agree that notwithstanding the determination by the arbitrators
                  in
                  accordance with this Agreement, neither party shall be allocated
                  less than
                  20% or more than 80% of the Shared Costs in the Final Cost Allocation
                  and
                  the Final Cost Allocation Report. For
                  instance,

              

      

      
        	 	
                a)

              	
                a
                  determination by the arbitrators that one party should pay only
                  10% of the
                  total Shared Costs would mean that the party would be allocated
                  20% in the
                  Final Cost Allocation and FCAR, and the remaining party would be
                  allocated
                  80%; and

              

      

      
        	 	
                b)

              	
                a
                  determination that one party should be allocated 40% of the total
                  Shared
                  Costs would mean that the party would pay 40% and the remaining
                  party 60%
                  as the Final Costs Allocation. The arbitrators shall be informed
                  that in
                  no event shall the Final Cost Allocation of FCAR assign to either
                  party
                  less than 20% or more than 80% of the Shared
                  Costs.

              

      

      
        	 	
                6.9

              	
                The
                  agreement of a majority of the arbitrators shall be the judgment
                  of the
                  arbitrators.

              

      

      
        	 	
                6.10

              	
                The
                  FCAR tendered by the arbitrators shall be final and binding. If
                  one
                  Utility does not comply with the FCAR, the other Utility may have
                  judgment
                  entered thereon and the FCAR shall be enforced in or by any court
                  having
                  jurisdiction thereof. Such judgment shall be the judgment refered
                  to in
                  Section 7.1 and 7.4.

              

      

      
        	 	
                6.11

              	
                The
                  arbitrators’ sole responsibility shall be to determine an allocation of
                  the Shared Cost for the site or sites subject to the arbitration.
                  After a
                  Final Cost Allocation has been determined for a site, that allocation
                  shall binding upon the Utilities for all past or future Shared
                  Costs for
                  that site (incurred after the date of this Agreement or specified
                  in
                  Section 3) that the Utilities agree to incur, and/or for which
                  the
                  Utilities are legally liable. If one Utility decides that Shared
                  Costs
                  should be incurred at a site for which a FCAR has been issued,
                  but the
                  other Utility refuses to contribute to those costs, the former
                  Utility may
                  commence litigation against the latter Utility to establish the
                  latter’s
                  liability; provided, however, that if the latter Utility is found
                  liable,
                  the Shared Costs will be allocated among the Utilities pursuant
                  to the
                  FCAR. The arbitrators shall not have the right
                  to:

              

      

      
        	 	
                a)

              	
                enforce
                  an allocation;

              

      

      
        	 	
                b)

              	
                award
                  damages or punitive damages;

              

      

      
        	 	
                c)

              	
                grant
                  injunctive relief or specific performance;
                  or

              

      

      
        	 	
                d)

              	
                require
                  any Utility to follow a specific work plan or course of remediation
                  for a
                  particular site.

              

      

      
        	 	
                6.12

              	
                It
                  is the hope and intention of the parties that common questions
                  of fact and
                  law will not need to be arbitrated at each site and that after
                  one or two
                  arbitrations the parties will be able to stipulate as to such common
                  questions. Notwithstanding the foregoing, the doctrines of collateral
                  estoppel and res judicata shall not be applicable to any
                  arbitration.

              

      

      
        	 	
                7.

              	
                Interest.

              

      

      
        	 	
                7.1

              	
                The
                  parties agree that prejudgment interest shall be available to the
                  Utility
                  which is finally determined to have paid as its Interim Cost Allocation
                  more than its proportionate share of the final allocated Shared
                  Costs. For
                  example, if a Utility pay 50% of the interim allocated costs and
                  the final
                  Shared Costs allocated to that Utility represent 40% of that total,
                  the
                  Utility would be entitled to interest on 10% of the interim allocated
                  costs from the date of payment of such
                  costs.

              

      

      
        	 	
                7.2

              	
                Interest
                  shall be based on the U.S. Treasury rate for three year notes in
                  effect
                  from time to time from the date of this Agreement, plus 50 basis
                  points.

              

      

      
        	 	
                7.3

              	
                Interest
                  shall not be paid on amounts already incurred prior to the date
                  of this
                  Agreement by both parties as set forth in small subparagraphs a)
                  and b) of
                  Section 3.2 of this Agreement.

              

      

      
        	 	
                7.4

              	
                The
                  interest rate set forth in Section 7.2 shall also apply as post
                  judgment
                  until the judgment is paid.

              

      

      
        	 	
                8.

              	
                Performance
                  of Activities at a Site. 

              

      

      If
        the
        Utilities decide to incur costs at a site pursuant to the terms of this
        Agreement, they shall:

      
        	 	
                a)

              	
                select
                  mutually acceptable consultants for the performance of services
                  agreed to
                  by the Utilities;

              

      

      
        	 	
                b)

              	
                decide
                  whether one Utility will act as the coordinator of agreed upon
                  activities
                  involving the site (referred to as the Coordinator/Utility in Attachment
                  C) provided, however, that if a coordinator is selected, both Utilities
                  will participate in any significant decision making as more fully
                  set
                  forth in Attachment C;

              

      

      
        	 	
                c)

              	
                exchange
                  their technical information regarding that
                  site;

              

      

      
        	 	
                d)

              	
                cooperate
                  reasonably with each other regarding agreed upon activities involving
                  the
                  site as more fully set forth in Attachment
                  C;

              

      

      
        	 	
                e)

              	
                each
                  Utility will sign as a cogenerator of any manifests needed involving
                  the
                  removal of waste;

              

      

      
        	 	
                f)

              	
                cooperate
                  reasonably with each other in any proceedings (including prudence
                  reviews), regarding the recovery from ratepayer, insurance carriers,
                  or
                  other third parties of costs incurred pursuant to this Agreement,
                  which
                  cooperation shall include: (i) providing documents and information
                  regarding costs incurred and activities performed under this Agreement;
                  and (ii) allowing employees to testify regarding such costs and
                  activities; provided, however, that no Utility shall be required
                  to
                  disclose work product of or communications with the Utility’s legal
                  counsel.

              

      

      
        	 	
                9.

              	
                Reservation
                  of Rights. 

              

      

      This
        Agreement shall not constitute, nor be interpreted, construed or used as
        evidence of any admission of liability, law or fact, or a waiver of any right
        or
        defense, provided, however, that:

      
        	 	
                a)

              	
                except
                  as provided in Section 1 above, during the term of this Agreement,
                  neither
                  of the Utilities may commence litigation against the other regarding
                  claims associated with manufactured gas plants that arise from,
                  or are
                  related to, any of the sites on the Site List unless suit is brought
                  by a
                  third party or government agency against a Utility concerning a
                  site on
                  the Site List, in which case all claims, cross claims or third-party
                  claims may be brought by each Utility against the other; provided,
                  however, that to the maximum extent possible the Utilities shall
                  attempt
                  to resolve their differences under the terms of this
                  Agreement;

              

      

      
        	 	
                b)

              	
                neither
                  Edison nor NI-Gas will assert in any proceeding any challenges
                  to costs
                  that the Utilities agreed to incur after the date of this Agreement
                  or for
                  costs identified under Section 3 of this Agreement, including,
                  but not
                  limited to, challenges to the reasonableness of the costs or assertions
                  that the costs were not consistent with the National Contingency
                  Plan;

              

      

      
        	 	
                c)

              	
                during
                  the term of the Agreement, this Agreement tolls the statute of
                  limitations
                  for any cause of action that Edison or NI-Gas may have against
                  each other
                  regarding possible remediation arising from or relating to any
                  of the
                  sites on the Site List.

              

      

      
        	 	
                10.

              	
                Settlement
                  Negotiations. 

              

      

      The
        Utilities agree that all activities undertaken pursuant to this Agreement
        constitute negotiations for the purpose of compromise and settlement. Neither
        the fact of participation of either Utility in the Agreement, nor any documents
        or other information generated by either Utility or by the arbitrators pursuant
        to this Agreement, may be introduced as evidence in any other proceeding,
        except
        in proceedings regarding a request for regulatory approval of the Agreement,
        or
        the recovery from ratepayers, insurance carriers or other third parties
        (collectively, “Third Party Proceeding”) of costs incurred pursuant to this
        Agreement and except for those documents or such information which is in
        the
        public domain or obtainable in accordance with the following provisions of
        this
        section. The arbitrators shall be prohibited from testifying on matters related
        to an MGP site subject to arbitration under this Agreement or to this Agreement,
        in any judicial or administrative proceeding, except for Third Party Proceedings
        and except in proceedings to enforce the arbitration judgment. No Utility
        may
        call as a witness, or seek discovery from, the arbitrators, or any of the
        arbitrators’ partners, agents, employees, or representatives, in any judicial or
        administrative proceeding, except for Third Party Proceedings related to
        an MGP
        site subject to arbitration under this Agreement, or to this Agreement. Nothing
        in this Agreement shall be construed to prohibit a Utility from using that
        Utility’s own documents, publicly available documents or documents otherwise
        available to the Utility other than from activities conducted under this
        Agreement, in any judicial or administrative proceeding. Nothing in this
        Agreement shall be construed to limit or otherwise affect the discovery rights
        of any Utility to the Agreement against the other in any other proceeding
        with
        respect to documents or information not generated by the
        arbitrators.

      
        	 	
                11.

              	
                Confidentiality.

              

      

      
        	 	
                a)

              	
                Except
                  as provided to the contrary in Section 10, each Utility agrees
                  that all
                  documents and information marked confidential and received from
                  the other
                  Utility or its counsel, pursuant to the Agreement, and all reports
                  and
                  communications from the arbitrator, shall be held in strict confidence
                  by
                  the receiving Utility.

              

      

      
        	 	
                b)

              	
                Each
                  Utility shall take all necessary and appropriate measures to ensure
                  that
                  any person who is granted access to any documents or information
                  received
                  pursuant to this Agreement is familiar with the confidentiality
                  terms of
                  this Agreement and complies with the confidentiality
                  obligation.

              

      

      
        	 	
                c)

              	
                The
                  confidentiality obligations of the Utility shall remain in full
                  force and
                  effect, without regard to whether a Utility terminates the Agreement,
                  or
                  this Agreement results in a final allocation among the parties.
                  The
                  provisions of this section shall not apply to information which
                  is now or
                  hereafter becomes public knowledge without violation of the Agreement,
                  which is sought and obtained from a Utility pursuant to applicable
                  discovery procedures and not otherwise protected from disclosure,
                  which is
                  available to a Utility other than from activities conducted under
                  this
                  Agreement, or which a Utility is required by law to disclose (provided
                  that the disclosing Utility notifies the other Utility of such
                  disclosure).

              

      

      
        	 	
                d)

              	
                The
                  submission of document or information to the arbitrators does not
                  constitute a waiver of any Utility’s right to argue that such documents or
                  information are not discoverable in another
                  proceeding.

              

      

      
        	 	
                12.

              	
                Preservation
                  of Privilege. 

              

      

      Each
        Utility agrees that the disclosure of any documents or information to the
        arbitrators or to another Utility shall not be deemed a waiver of the
        attorney-client privilege, work product, joint defense or self-evaluation
        or any
        other privilege by the Utility providing the documents or
        information.

      
        	 	
                13.

              	
                New
                  Parties. 

              

      

      The
        Utilities may make provision for the addition of new parties after the effective
        date of this Agreement. The Utilities may impose such additional terms and
        conditions upon prospective new parties as may be agreed to by the
        Utilities.

      
        	 	
                14.

              	
                Termination. 

              

      

      Either
        of
        the Utilities may terminate this Agreement upon sixty (60) days written notice
        to the other, provided that:

      
        	 	
                a)

              	
                any
                  arbitration proceeding begun prior to the termination of this Agreement
                  shall be concluded in accordance with this Agreement, notwithstanding
                  the
                  intervening termination;

              

      

      
        	 	
                b)

              	
                any
                  obligations the Utilities have incurred to third parties (e.g.,
                  contractors, government agencies) in accordance with this Agreement
                  will
                  not be terminated, and such obligations will be fulfilled in accordance
                  with the terms of this Agreement, unless both Edison and NI-Gas
                  agree to
                  such termination;

              

      

      
        	 	
                c)

              	
                The
                  following sections of this Agreement shall survive termination:
                  Section
                  6.10, 6.11, 7, 8(f), 9, 10, 11, 12, 15, 17, 19 through 23, and
                  Sections
                  2.5 and 4.5 of Attachment C.

              

      

      
        	 	
                15.

              	
                Nature
                  of Agreement. 

              

      

      Nothing
        herein shall be deemed to create a partnership, joint venture or principal/agent
        relationship between Edison and NI-Gas.

      
        	 	
                16.

              	
                Entire
                  Agreement. 

              

      

      This
        Agreement and Attachments hereto (which Attachments are part of this Agreement)
        constitute the entire understanding of Edison and NI-Gas with respect to
        the
        Agreement’s subject matter. No modification may be made to this Agreement except
        one signed by both Utilities which expressly states that it is a modification
        of
        the Agreement.

      
        	 	
                17.

              	
                Audit. 

              

      

      
        	 	
                a)

              	
                The
                  Non-Coordinator/Utility, upon written notice to Coordinator/Utility
                  thirty
                  days in advance, shall have the right to audit the accounts and
                  records of
                  Coordinator/Utility and/or its contractors relating to the accounting
                  hereunder for any calendar year, within the twenty-four month period
                  following the end of such calendar year. Provided, however, that
                  the
                  Non-Coordinator/Utility must take written exception to and make
                  claim upon
                  the Coordinator/Utility for all discrepancies disclosed by said
                  audit
                  within said twenty-four month period. Where there are two or more
                  Non-Coordinators/Utilities, the Non-Coordinators/Utilities shall
                  make
                  every reasonable effort to conduct joint or simultaneous audits
                  in a
                  manner which will result in a minimum of inconvenience to the
                  Coordinator/Utility.

              

      

      
        	 	
                b)

              	
                In
                  the event that the Coordinator/Utility is required by law or under
                  the
                  Agreement to employ a public accounting firm to audit the records
                  of the
                  activities for which the Utility is the Coordinator/Utility, the
                  cost
                  thereof shall be a Shared Cost, and a copy of the audit shall be
                  furnished
                  to each Utility.

              

      

      
        	 	
                c)

              	
                Except
                  in the event that an audit is conducted under subparagraph b above,
                  the
                  cost shall be borne by the
                  Non-Coordinator/Utility.

              

      

      
        	 	
                d)

              	
                If
                  the Coordinator/Utility is subject to an audit required by the
                  Illinois
                  Commerce Commission, it shall notify the other Utility prior to
                  the
                  commencement of such audit.

              

      

      
        	 	
                18.

              	
                Alternative
                  Dispute Resolution. 

              

      

      If
        the
        Utilities cannot reach agreement on any issue arising in connection with
        this
        Agreement, they will consider using alternative dispute resolution- -including,
        but not limited to, mediation, arbitration, or reliance upon the decision
        of a
        mutually acceptable environmental consultant- -to resolve such
        dispute.

      
        	 	
                19.

              	
                Successors
                  and Assigns. 

              

      

      This
        Agreement shall be binding upon the successors and assigns of the Utilities;
        provided that no Utility can assign its rights under the Agreement without
        the
        other Utility’s consent.

      
        	 	
                20.

              	
                Law. 

              

      

      This
        Agreement shall be interpreted under the laws of the State of
        Illinois.

      
        	 	
                21.

              	
                Severability. 

              

      

      If
        any
        provision of this Agreement is deemed invalid or unenforceable, the balance
        of
        this Agreement shall remain in full force and effect.

      
        	 	
                22.

              	
                Effective
                  Date, Method of Execution. 

              

      

      The
        effective date of this Agreement shall be October 28, 1993. This Agreement
        may
        be executed in multiple counterparts, each of which shall be deemed an original,
        but all of which together shall constitute one and the same
        instrument.

      
        	 	
                23.

              	
                Nonwaiver. 

              

      

      Nothing
        in this Agreement shall be construed to waive any rights, claims, privileges,
        or
        defenses which any Utility shall have against any other Utility or any other
        person or entity.

      
        	 	
                24.

              	
                Exchange
                  of Insurance Policies.
                  If
                  one Utility learns of the existence of a general liability insurance
                  policy which it believes may provide coverage to the other Utility
                  with
                  regard to an MGP Site, the former shall notify the latter of such
                  a
                  policy.

              

      

      
        	 	
                25.

              	
                Captions. 

              

      

      The
        captions in this Agreement are for convenience only and shall not affect
        the
        construction or interpretation of any term or provision hereof.

      
        	 	
                26.

              	
                Certain
                  Costs. 

              

      

      If
        the
        Utilities incur Shared Costs that they agree that they need to incur prior
        to
        the approval or disapproval of this Agreement by the Illinois Commerce
        Commission (to the extent such approval is required by Section 7-102 of the
        Public Utilities Act), the Utilities shall act in accordance with this Agreement
        with regard to such Shared Costs, including, but not limited to, the condition
        that each Utility will pay, on an interim basis, 50% of the costs that it
        agrees
        to incur for a site.

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      

      IN
        WITNESS WHEREOF, each Utility designated below enters into this Agreement.
        Each
        person signing this Agreement represents and warrants that he or she has
        been
        duly authorized to enter into this Agreement by the company or entity on
        whose
        behalf it is indicated that the person is signing.

      

      

      Dated
        October
        25, 1993                       Party:
        Northern Illinois Gas Company_ 

      

      

      By:_/s/
        RICHARD J. LANNON     Richard
        J. Lannon, Vice President       

      (Name
        and
        Title)

      

      Designated
        Representative for Receipt of Notice and Invoices

      

      Name:
        David
        L. Cyranoski, Secretery       

      

      Address:
        1844
        Ferry Road, Naperville, IL 60563-9600     

      

      Telephone
        Number: (708)
        983-8676       

      

      Facsimile
        Machine Number: (708)
        983-8966      

      

      

      

      

      Dated
        10/28/93                    Party:
        Commonwealth
        Edison Company 

      

      

      By:
        /s/ ROBERT J. MANNING     Robert
        J. Manning, Senior Vice President      

      (Name
        and
        Title)

       

      Designated
        Representative for Receipt of Notice and Invoices

      Name:
        Thomas
        E. Hemminger        

      

      Address:
        Commonwealth
        Edison Company, One First National Plaza, 35th
        Floor, 
        Chicago, Illinois 60603         

      

      Telephone
        Number: (312)
        394-4433       

      

      Facsimile
        Machine Number: (312)
        394-4466      

      

      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    Attachment
      A

    

    

    Former
      MGP/Site Address

    

    
      	
              1.

            	
              Aurora
                Gas Light Company

            	 
	 	
              River
                St. at North Avenue Bridge

            	
              Aurora

            
	 	 	 
	
              2.

            	
              Belvidere
                Gas, Light & Fuel

            	 
	 	
              Locust
                Street

            	
              Belvidere

            
	 	 	 
	
              3.

            	
              Chicago
                Heights Gas Company

            	 
	 	
              17th&
                State Street

            	
              Chicago
                Heights

            
	 	 	 
	
              4.

            	
              Cicero
                Gas Company

            	 
	 	
              Lombard
                & Garfield

            	
              Oak
                Park

            
	 	 	 
	
              5.

            	
              Coal
                Products Manufacturing Company

            	 
	 	
              North
                Broadway

            	
              Lockport

            
	 	 	 
	
              6.

            	
              Freeport
                Gas, Light & Coke Company

            	 
	 	
              Liberty
                & Jackson St.

            	
              Freeport

            
	 	 	 
	
              7.

            	
              Geneseo
                Electric Light & Gas Company

            	 
	 	
              Oakwood
                & First St.

            	
              Geneseo

            
	 	 	 
	
              8.

            	
              Illinois
                Northern Utility Company

            	 
	 	
              Market
                & 14th

            	
              DeKalb

            
	 	 	 
	
              9.

            	
              Illinois
                Northern Utilities Company

            	 
	 	
              227
                Miller

            	
              Sterling

            
	 	 	 
	
              10.

            	
              Joliet
                Gaslight Company, Station B

            	 
	 	
              North
                Broadway & Ingalls St.

            	
              Joliet

            
	 	 	 
	
              11.

            	
              Kankakee
                Gas Company

            	 
	 	
              Birch
                & Harrison St.

            	
              Kankakee

            
	 	 	 
	
              12.

            	
              LaGrange
                Gas Company

            	 
	 	
              47th&
                Bluff St.

            	
              LaGrange

            
	 	 	 
	
              13.

            	
              Lemont
                Gas, Light Company

            	 
	 	
              Main
                & Lockport Rd.

            	
              Lemont

            
	 	 	 
	
              14.

            	
              Lincoln
                Water, Light & Gas Company

            	 
	 	
              Sangamon
                & Dacatur St.

            	
              Lincoln

            
	 	 	 
	
              15.

            	
              Lockport
                Gas Company

            	 
	 	
              17th&
                I & M Canal

            	
              Lockport

            

    

    

    

    NOTE:
      Edison and NI-Gas are not admitting liability at any of these sites, or waiving
      any rights or defenses.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Former
      MGP/Site Address (cont’d)

    

    
      	
              16.

            	
              Mendota
                Gas Company

            	 
	 	
              Fifth
                St. & Ninth Ave.

            	
              Mendota

            
	 	 	 
	
              17.

            	
              Morris
                Gas Company

            	 
	 	
              Nettle
                & Jackson St.

            	
              Morris

            
	 	 	 
	
              18.

            	
              Morrison
                Gas & Electric

            	 
	 	
              Market
                & S. Orange

            	
              Morrison

            
	 	 	 
	
              19.

            	
              Northwestern
                Gas, Light & Coke Company

            	 
	 	
              912
                Clark St.

            	
              Evanston

            
	 	 	 
	
              20.

            	
              Northwestern
                Gas, Light & Coke Company

            	 
	 	
              Maple
                & Vermont

            	
              Blue
                Island

            
	 	 	 
	
              21.

            	
              Northwestern
                Gas, Light & Coke Co./

            	 
	 	
              Niles
                Center Station

            	 
	 	
              Oakton
                St. & McCormick Blvd.

            	
              Skokie

            
	 	 	 
	
              22.

            	
              Ottawa
                Gas, Light & Coke Company

            	 
	 	
              Illinois
                & Walker St.

            	
              Ottawa

            
	 	 	 
	
              23.

            	
              Pontiac
                Light & Water Company

            	 
	 	
              Vermillion
                & Water St.

            	
              Pontiac

            
	 	 	 
	
              24.

            	
              Streator
                Gas, Light & Coke Co.

            	 
	 	
              Water
                St. & Vermillion Rr.

            	
              Streator

            

    

    

     

    

    

     

    

    

    

    

    

    

    

    NOTE:
      Edison and NI-Gas are not admitting liability at any of these sites, or waiving
      any rights or defenses.

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    CPR
      LEGAL
      PROGRAM

    TO
      DEVELOP ALTERNATIVES TO LITIGATION

    

    

    

    

    

    

    

    RULES
      AND
      COMMENTARY FOR NON-ADMINISTERED

    ARBITRATION
      OF BUSINESS DISPUTES

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    CENTER
      FOR PUBLIC RESOURCES, INC.

    366
      Madison Avenue New York, N.Y. 10017 Tel (212) 949 6490 Fax (212) 949
      8859

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    CPR
      COMMITTEE ON PRIVATE ADJUDICATION

    

    

    GERALD
      AKSEN, CHAIRMAN

    Reid
      & Priest

    

    GEOFFRY
      D.C. BEST

    LeBoeuf,
      Lamb, Leiby & MacRae

    

    RICHARD
      CHERNICK

    Gibson,
      Dunn & Crutcher

    

    WINSLOW
      CHRISTIAN

    Senior
      Vice President and Director of Litigation

    Bank
      of
      America

    

    MARTIN
      GLENN

    O’Melveny
      & Myers

    

    ROBERT
      GORSKE

    Vice
      President and General Counsel

    Wisconsin
      Electric Power Company

    

    JAMES
      P. GROTON

    Sutherland,
      Asbill & Brennan

    

    BERTHOLD
      H. HOENIGER

    Bailey,
      Marshall & Hoeniger

    

    STEPHEN
      D. HOUCK

    Donovan
      Leisure Newton & Irvine

    

    THE
      HONORABLE JOSEPH W. MORRIS

    Gable
      & Gotwals

    

    MICHAEL
      J. PLISHNER

    McCutchen,
      Doyle, Brown & Enersen

    

    PROFESSOR
      MAURICE ROSENBERG

    Columbia
      Law School

    

    JOHN
      M. TOWNSEND

    Hughes
      Hubbard & Reed

    

    ROBERT
      VON MEHREN

    Debevoise
      & Plimpton

    

    CLIFFORD
      L. WHITEHILL

    Vice
      President and General Counsel

    General
      Mills, Inc.

    

    

    CPR
      STAFF

    

    PETER
      H. KASKELL

    Senior
      Vice President

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    TABLE
      OF CONTENTS

    

    

    INTRODUCTION

    

    STANDARD
      PROVISIONS

    

    
      	 	
              A.

            	
              Pre-dispute
                Clause

            

    

    
      	 	
              B.

            	
              Existing
                Dispute Submission Agreement

            

    

    

    THE
      RULES

    

    
      	 	
              A.

            	
              General
                and Introductory Rules

            

    

    

    Rule
      1.  Scope
      of
      Application

    Rule
      2.  Notices

    Rule
      3.  Commencement

    Rule
      4.  Representation

    

    
      	 	
              B.

            	
              Rules
                with Respect to the Tribunal

            

    

    

    Rule
      5.  Selection
      of Arbitrators by the Parties

    Rule
      6.  Selection
      of Arbitrators by CPR

    Rule
      7.  Qualifications,
      Challenges and Replacement of Arbitrators

    Rule
      8.  Challenges
      to the Jurisdiction of the Panel

    

    
      	 	
              C.

            	
              Rules
                with Respect to the Conduct of the Arbitral
                Proceedings

            

    

    

    Rule
      9.     General
      Provisions

    Rule
      10.    Discovery

    Rule
      11.    Evidence
      and Hearings

    Rule
      12.    Interim
      Measures of Protection

    Rule
      13.    The
      Award

    

    
      	 	
              D.

            	
              Miscellaneous
                Rules

            

    

    

    Rule
      14.    Failure
      to Comply with Rules

    Rule
      15.    Costs

    Rule
      16.    Confidentiality

    Rule
      17.    Settlement
      and Mediation

    Rule
      18.    Actions
      against CPR or Arbitrators

    Rule
      19.    Waiver

    

    

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    CENTER
      FOR PUBLIC RESOURCES

    

    RULES
      FOR NON-ADMINISTERED

    ARBITRATION
      OF BUSINESS DISPUTES

    

    

    INTRODUCTION

    

    

    These
      Rules for Non-Administered Arbitration of Business Disputes (the “Rules”) have
      been developed by a committee of leading arbitrators and practitioners convened
      by the Center for Public Resources (“CPR”) and have been adopted by CPR. CPR
      itself will not undertake to function as an administrative body with respect
      to
      the Rules. Under the Rules, CPR’s responsibilities are limited to acting as the
      appointing authority in certain circumstances (see Rule 6) and deciding
      challenges to an arbitrator (see Rule 7.7).

    

    

    STANDARD
      PROVISIONS

    

    

    The
      Rules, which are intended in particular for use in complex commercial
      arbitrations, may be adopted by parties wishing to do so by using one of the
      following standard provisions:

    

    

    A.
      Pre-dispute Clause

    

    

    “Any
      controversy or claim arising out of or relating to this contract, or the breach,
      termination or validity thereof, shall be settled by arbitration in accordance
      with the Center for Public Resources Rules for Non-Administered Arbitration
      of
      Business Disputes, by (a sole arbitrator) (three arbitrators, of whom each
      party
      shall appoint one) (three arbitrators, none of whom shall be appointed by either
      party). The arbitration shall be governed by the United States Arbitration
      Act,
      9 U.S.C. § 1-16, and judgment upon the award rendered by the Arbitrator(s) may
      be entered by any court having jurisdiction thereof.”

    

    

    B.
      Existing Dispute Submission Agreement

    

    

    “We,
      the
      undersigned parties, hereby agree to submit to arbitration in accordance with
      the Center for Public Resources Rules for Non-Administered Arbitration of
      Business Disputes (the “Rules”) the following controversy:

    [Describe
      briefly]

    We
      further agree that the above controversy shall be submitted to (a sole
      arbitrator) (three arbitrators, of whom each party shall appoint one) (three
      arbitrators, none of whom shall be appointed by either party). We further agree
      that we shall faithfully observe this agreement and the Rules and that we shall
      abide by and perform any award rendered by the arbitrator(s). The arbitration
      shall be governed by the United States Arbitration Act, 9 U.S.C. § 1-16, and
      judgment upon the award may be entered by any court having jurisdiction
      thereof.”

    

    The
      Rules
      are designed to provide a procedural basis for the settling of disputes. They
      are not intended to change substantive provisions of applicable law. Therefore,
      it is recommended that parties consider the inclusion in their agreement of
      specific clauses as to the place of arbitration and as to the law governing
      the
      contract and the arbitration.

    

    

    

    RULES
      FOR ARBITRATION

    

    

     A.GENERAL
      AND INTRODUCTORY RULES

    

    Rule
      1. Scope of Application

    

    1.1
      Where
      the parties to a contract have provided for arbitration under the Rules, they
      shall be deemed to have made these Rules a part of their arbitration agreement,
      except to the extent that they have agreed in writing, or on the record during
      the course of the arbitral proceeding, to modify these Rules. These Rules,
      and
      any amendment thereof adopted by CPR, shall apply in the form obtaining at
      the
      time the arbitration is commenced.

    

    1.2
      These
      Rules shall govern the arbitration except that where any of these Rules is
      in
      conflict with a mandatory provision of applicable law, that provision of law
      shall prevail.

    

    

    Rule
      2. Notices

    

    

    2.1
      Notices
      shall be given in writing at the address specified in writing by the recipient
      or, if no address has been specified, to the then business or residence address
      of the recipient. Notices may be given by mail, telex or facsimile transmission.
      Notices shall be deemed to have been received on the date of
      delivery.

    

    2.2
      Time
      periods specified by these Rules or established by the Arbitral Tribunal (the
      “Tribunal”) shall start to run on the day a notice is received, unless the
      Tribunal shall specifically provide otherwise.

    

    

    

    Rule
      3. Commencement of Arbitration

    

    

    3.1
      The
      party commencing arbitration (the “Claimant”) shall address to the other party
      (the “Respondent”) a notice of arbitration.

    

    3.2
      The
      arbitration shall be deemed commenced on the date on which the notice of
      arbitration is received by the Respondent.

    

    3.3
      The
      notice of arbitration shall include in the text or in attachments
      thereto:

    

    (a)
      The full
      names, descriptions and addresses of the parties;

    

    (b)
      A demand
      that the dispute be referred to arbitration pursuant to the Rules;

    

    (c)
      The
      verbatim text of the arbitration clause or the separate arbitration agreement
      that is involved;

    

    (d)
      A
      statement of the general nature of the claimant’s claim;

    

    (e)
      The
      relief or remedy sought; and

    

    (f)
      The name
      and address of the arbitrator appointed by the Claimant, unless the parties
      have
      agreed that neither shall appoint an arbitrator.

    

    3.4
      Within
      twenty days after receipt of the notice of arbitration, the Respondent shall
      deliver to the Claimant a notice of defense. Failure to deliver a notice of
      defense shall not delay the arbitration; in the event of such failure, all
      claims set forth in the demand shall be deemed denied.

    

    3.5
      The
      notice of defense shall include:

    

    (a)
      Any
      comment on items (a), (b), and (c) of the notice of arbitration that the
      Respondent may deem appropriate;

    

    (b)
      A
      statement of the general nature of the Respondent’s defense; and

    

    (c)
      The name
      and address of the arbitrator appointed by the Respondent, unless the parties
      have agreed that neither shall appoint an arbitrator.

    

    3.6
      The
      Respondent may include in it’s notice of defense any counterclaim within the
      scope of the arbitration clause. If it does so, the counterclaim in the notice
      of defense shall include items (a), (b), (c), (d) and (e) of Rule
      3.3.

    

    3.7
      If a
      counterclaim is asserted, within twenty days after receipt of the notice of
      defense, the Claimant shall deliver to the Respondent a reply to counterclaim
      which shall have the same elements as provided in Rule 3.5 for the notice of
      defense.

    

    3.8
      Claims
      or counterclaims may be freely added or amended prior to the establishment
      of
      the Tribunal and thereafter with the consent of the Tribunal. Notices of defense
      or replies to amended claims or counterclaims shall be delivered within twenty
      days after the addition or amendment.

    

    3.9
      If a
      dispute is submitted to arbitration pursuant to a submission agreement, Rule
      3
      shall apply to the extent that it is not inconsistent with the submission
      agreement.

    

    

    

    Rule
      4. Representation

    

    4.1
      The
      parties may be represented or assisted by persons of their choice.

    

    4.2
      Each
      party shall communicate the name, address and function of such persons in
      writing to the other party and to the Tribunal.

     

    

    B.
      RULES WITH RESPECT TO THE TRIBUNAL

    

    

    Rule
      5. Selection of Arbitrators by the Parties

    

    

    5.1
      Unless
      the parties have agreed in writing on a Tribunal consisting of a sole arbitrator
      or of three arbitrators not appointed by the parties, the Tribunal shall consist
      of two arbitrators appointed by the parties and a third arbitrator, who shall
      chair the Tribunal, selected as provided in Rule 5.2.

    

    5.2
      As soon
      as possible after the appointment of two party-appointed arbitrators and
      delivery of the notice of defense provided for in Rule 3.4 and in any event
      within fifteen days thereafter, the party-appointed arbitrators shall discuss
      potential candidates for the third arbitrator and shall proceed to select the
      third arbitrator. They shall attempt to make their selection within twenty
      days
      of their initial discussion, but they may extend their selection process until
      one or both of them have concluded, and have so advised the appointing parties,
      that a deadlock has been reached. In this event, the third arbitrator shall
      be
      selected as provided in Rule 6.

    

    

    

    Rule
      6. Selection of Arbitrator(s) by CPR

    

    

    6.1
      Whenever
      (i) a party has failed to appoint the arbitrator to be appointed by it; (ii)
      the
      parties have failed to appoint the arbitrators to be appointed by them acting
      jointly; (iii) the party appointed arbitrators have failed to appoint the third
      arbitrator; or (iv) the parties have provided that one or more arbitrators
      shall
      be appointed by CPR, the arbitrator(s) required to complete the Tribunal shall
      be selected as provided in Rule 6, and either party may request CPR in writing,
      with copy to the other party, to proceed pursuant to Rule 6.

    

    6.2
      The
      written request may be made as follows:

    

    (a)
      If a
      party has failed to appoint the arbitrator to be appointed by it, or the parties
      have failed to appoint the arbitrator(s) to be appointed by them through
      agreement, at any time after such failure has occurred.

    

    (b)
      If the
      party-appointed arbitrators have failed to appoint the third arbitrator, as
      soon
      as the procedure contemplated by Rule 5.2 has been completed.

    

    (c)
      If the
      arbitrator(s) are to be appointed by CPR, as soon as the arbitration has been
      commenced.

    

    6.3
      The
      written request shall include complete copies of the notice of arbitration
      and
      the notice of defense or, if the dispute is submitted under a submission
      agreement, a copy of the agreement supplemented by the notice of arbitration
      and
      notice of defense if they are not part of the agreement.

    

    6.4
      CPR
      shall then proceed as follows:

    

    (a)
      Promptly
      following receipt by it of the request provided for in Rule 6.3, CPR shall
      convene the parties in person or by telephone one or more times to attempt
      to
      select the arbitrator(s) by agreement of the parties.

    

    (b)
      If the
      procedure provided for in (a) does not result in the selection of the required
      number of arbitrators, CPR shall submit to the parties a list of not less than
      five candidates if one arbitrator remains to be selected, and of not less than
      seven candidates if two or three arbitrators are to be selected. Such list
      shall
      include a brief statement of each candidate’s qualifications. Each party shall
      number the candidates in order of preference, shall note any objection it may
      have to any candidate, and shall deliver the list so marked to CPR. Any party
      failing without good cause to return the candidate list so marked within ten
      days after receipt shall be deemed to have assented to all candidates listed
      thereon. CPR shall designate as arbitrator(s) the nominee(s) willing to serve
      for whom the parties collectively have indicated the highest preference and
      who
      does not appear to have a conflict of interest. If a tie should result between
      two candidates, CPR may designate either candidate. If this procedure for any
      reason should fail to result in designation of the required number of
      arbitrators, CPR shall appoint a person or persons whom it deems qualified
      to
      fill any remaining vacancy.

    

    

    

    Rule
      7. Qualifications, Challenges and Replacement of
      Arbitrators

    

    

    7.1
      Each
      arbitrator shall be independent and impartial.

    

    7.2
      By
      accepting appointment, each arbitrator shall be deemed to be bound by these
      Rules and any modification agreed to by the parties.

    

    7.3
      Each
      arbitrator shall promptly disclose in writing to the Tribunal and the parties
      any circumstances that might cause doubt regarding the arbitrator’s independence
      or impartiality. Such circumstances include bias, interest in the result of
      the
      arbitration, and past or present relations with a party or its
      counsel.

    

    7.4
      Any
      arbitrator may be challenged if circumstances exist or arise that give rise
      to
      justifiable doubt regarding that arbitrator’s independence or impartiality,
provided,
      that a
      party may challenge an arbitrator whom it has appointed only for reasons of
      which it becomes aware after the appointment has been made.

    

    7.5
      A party
      may challenge an arbitrator only by a notice in writing to the Tribunal, with
      copy to the other party, given no later than fifteen days after (i) the parties
      have been notified that the Tribunal has been constituted, or (ii) the
      challenging party has become aware of the circumstances specified in Rule 7.4,
      whichever shall last occur. The notice shall state the reasons for the challenge
      with specificity.

    

    7.6
      When an
      arbitrator has been challenged by a party, the other party may agree to the
      challenge or the arbitrator may voluntarily withdraw. Neither of these actions
      implies acceptance of the validity of the challenge.

    

    7.7
      If
      neither agreed disqualification nor voluntary withdrawal occurs, the challenge
      shall be decided as follows:

    

    (a)
      By
      unanimous vote of the remaining members of the Tribunal;

    

    (b)
      If the
      Tribunal consists of a sole Arbitrator or fails or refuses to decide the
      challenge, by the President of CPR.

    

    7.8
      In the
      event of death, resignation or successful challenge of an arbitrator, a
      substitute arbitrator shall be selected pursuant to the procedure by which
      the
      arbitrator being replaced was selected.

    

    7.9
      In the
      event that an arbitrator fails to act, or in the event the Tribunal determines
      that an arbitrator is de jure
      or
de facto
      prevented from duly performing the functions of an arbitrator, the procedures
      provided in Rule 7.8 shall apply to the selection of a replacement.

    

    7.10
      If the
      sole arbitrator or the chairman of the Tribunal is replaced, the successor
      shall
      decide the extent to which any hearings held previously shall be repeated.
      If
      any other arbitrator is replaced, the Tribunal in its discretion may require
      that some or all prior hearings be repeated.

    

    Rule
      8. Challenges to the Jurisdiction of the Tribunal

    

    

    8.1
      The
      Tribunal shall have the power to hear and determine challenges to its
      jurisdiction.

    

    8.2
      The
      Tribunal shall have the power to determine the existence, validity or scope
      of
      the contract of which an arbitration clause forms a part, and/or of the
      arbitration clause itself. For the purposes of challenges to the jurisdiction
      of
      the Tribunal, the arbitration clause shall be considered as separable from
      any
      contract of which it forms a part.

    

    8.3
      Any
      challenges to the jurisdiction of the Tribunal, except challenges based on
      the
      award itself, shall be made not later than the notice of defense, or with
      respect to a counterclaim, the reply to the counterclaim.

    

    

    

    C.
      RULES WITH RESPECT TO THE CONDUCT

    OF
      THE ARBITRAL PROCEEDINGS

    

    

    

    Rule
      9. General Provisions

    

    9.1
      Subject
      to these Rules, the Tribunal may conduct the arbitration in such manner as
      it
      shall deem appropriate. The chairman shall be responsible for the organization
      of arbitral conferences and hearings and arrangements with respect to the
      functioning of the Tribunal.

    

    9.2
      The
      proceedings shall be conducted in an expeditious manner. The Tribunal is
      empowered to impose time limits it considers reasonable on each phase of the
      proceeding, including without limitation the time allotted to each party for
      presentation of its case and for rebuttal.

    

    9.3
      Except
      as otherwise provided in these Rules or permitted by the Tribunal, no party
      or
      anyone acting on its behalf shall have any ex
      parte
      communication with any arbitrator with respect to any matter of substance
      relating to the proceeding, or on any matter with the arbitrator it appointed,
      except that a party and the arbitrator it appointed may confer regarding the
      selection of the chairman of the Tribunal.

    

    9.4
      As
      promptly as possible after the selection of the Tribunal, the Tribunal shall
      hold an initial pre-hearing conference for the planning and scheduling of the
      proceeding. The objective of this conference shall be to discuss all elements
      of
      the arbitration with a view to planning for its future conduct. Matters to
      be
      considered in the initial pre-hearing conference may include, inter alia,
      the
      following:

    

    (a)
      Procedural matters such as the timing and manner of any required discovery;
      the
      desirability of bifurcation or other separation of the issues in the
      arbitration; the scheduling of conferences and hearings; the scheduling of
      pre-hearing memoranda; the need for and type of record of conferences and
      hearings, including the need for transcripts; the amount of time allotted to
      each party for presentation of its case and for rebuttal; the mode, manner
      and
      order for presenting proof; the need for expert witnesses and how expert
      testimony should be presented; and the necessity for any on-site inspection
      by
      the Tribunal;

    

    (b)
      The
      early identification and narrowing of the issues in the
      arbitration;

    

    (c)
      The
      possibility of stipulations of fact and admissions by the parties solely for
      purposes of the arbitration, as well as simplification of document
      authentication; and

    

    (d)
      The
      possibility of the parties engaging in settlement negotiations, with or without
      the assistance of a mediator.

    

    After
      the
      initial conference, further pre-hearing or other conferences may be held as
      the
      Tribunal deems appropriate.

    

    9.5
      In order
      to define the issues to be heard and determined, the Tribunal may inter alia
      make
      pre-hearing orders for the arbitration and instruct the parties to file more
      detailed statements of claim and of defense and pre-hearing
      memoranda.

    

    9.6
      Unless
      the parties have agreed upon the place of arbitration, the Tribunal shall fix
      the place of arbitration. The award shall be deemed made at such place. Hearings
      may be held and the Tribunal may schedule meetings, including telephone
      meetings, wherever it deems appropriate.

    

    Rule
      10. Discovery

    

    

    The
      Tribunal shall permit and facilitate such discovery as it shall determine is
      appropriate in the circumstances, taking into account the needs of the parties
      and the desirability of making discovery expeditious and cost-effective. The
      Tribunal may issue orders to protect the confidentiality of proprietary
      information, trade secrets and other sensitive information disclosed in
      discovery.

    

    

    

    Rule
      11. Evidence and Hearings

    

    

    11.1
      The
      Tribunal shall determine the manner in which the parties shall present their
      cases. Unless otherwise determined by the Tribunal, the presentation of a
      party’s case shall include the submission of a pre-hearing memorandum including
      the following elements:

    

    (a)
      A
      statement of facts;

    

    (b)
      A
      statement of each claim being asserted;

    

    (c)
      A
      statement of the applicable law upon which the party relies;

    

    (d)
      A
      statement of the relief requested, including the basis for any damages claimed;
      and

    

    (e)
      A
      statement of the evidence to be presented, including the name, capacity and
      subject of testimony of any witnesses to be called and an estimate of the amount
      of time required for the witness’ direct testimony.

    

    11.2
      Evidence
      may be presented in written or oral form as the Tribunal may determine is
      appropriate. The Tribunal is not required to apply the rules of evidence used
      in
      judicial proceedings, provided,
      however,
      that
      the Tribunal shall apply the lawyer-client privilege and the work product
      immunity. The Tribunal shall determine the applicability of any privilege or
      immunity and the admissibility, relevance, materiality and weight of the
      evidence offered.

    

    11.3
      The
      Tribunal, in its discretion, may require the parties to produce evidence in
      addition to that initially offered. It may also appoint experts whose testimony
      shall be subject to cross examination and rebuttal.

    

    11.4
      The
      Tribunal shall determine the manner in which witnesses are to be examined.
      The
      Tribunal shall have the right to exclude witnesses from hearings during the
      testimony of other witnesses.

    

    

    

    Rule
      12. Interim Measures of Protection

    

    

    12.1
      At the
      request of a party, the Tribunal may take such interim measures as it deems
      necessary in respect of the subject matter of the dispute, including measures
      for the preservation of assets, the conservation of goods or the sale of
      perishable goods. The Tribunal may require security for the costs of such
      measures.

    

    12.2
      A
      request for interim measures by a party to a court shall not be deemed
      incompatible with the agreement to arbitrate or as a waiver of that
      agreement.

    

    

    

    Rule
      13. The Award

    

    

    13.1
      The
      Tribunal may make final, interim, interlocutory and partial awards. An award
      may
      grant any remedy or relief which the Tribunal deems just and equitable and
      within the scope of the agreement of the parties, including but not limited
      to
      specific performance of a contract. With respect to any interim, interlocutory
      or partial award, the Tribunal may state in its award whether or not it views
      the award as final, for purposes of any judicial proceedings in connection
      therewith.

    

    13.2
      All
      awards shall be in writing and shall state the reasoning on which the award
      rests unless the parties agree otherwise. When there are three arbitrators,
      the
      award shall be made and signed by at least a majority of the arbitrators; and
      if
      the award decides a number of issues, the part of the award relating to each
      issue shall be made and signed by at least a majority of the
      arbitrators.

    

    13.3
      A member
      of the Tribunal who does not join in an award may file a dissenting opinion.
      Such opinion shall not constitute part of the award.

    

    13.4
      Executed
      copies of awards and of any dissenting opinion shall be delivered by the
      Tribunal to the parties.

    

    13.5
      Within
      fifteen days after receipt of the award, either party, with notice to the other
      party, may request the Tribunal to correct in an award any errors in
      computation, any clerical or typographical errors, or any errors of a similar
      nature.

    

    Within
      thirty days after the delivery of an award to the parties, the Tribunal may
      make
      corrections on its own initiative and corrections requested by either party.
      All
      such corrections shall be in writing, and the provisions of Rule 13 shall apply
      to them.

    

    13.6
      After
      expiration of the thirty-day period provided in Rule 13.5, awards shall be
      final
      and binding on the parties, and the parties undertake to carry out awards
      without delay.

    

    13.7
      The
      dispute should in most circumstances be submitted to the Tribunal for decision
      within six months after the initial pre-hearing conference required by Rule
      9.4.
      The final award should in most circumstances be rendered within one month
      thereafter. The parties and the arbitrators shall use their best efforts to
      comply with this schedule.

    

    

    

    D.
      MISCELLANEOUS RULES

    

    

    

    Rule
      14. Failure to Comply with Rules

    

    

    Whenever
      a party fails to comply with these Rules in a manner deemed material by the
      Tribunal, the Tribunal shall fix a reasonable period of time for compliance
      and,
      if the party does not comply within said period, the Tribunal may impose a
      remedy it deems just, including an award on default. Prior to entering an award
      on default the Tribunal may require the non-defaulting party to produce evidence
      and legal argument in support of its contentions, which the Tribunal may receive
      without the defaulting party’s presence or participation.

    

    

    

    Rule
      15. Costs

    

    

    15.1
      Each
      arbitrator shall be compensated at an hourly rate determined at the time of
      appointment for all time spent in connection with the proceeding and shall
      be
      reimbursed for any travel and other expenses.

    

    15.2
      The
      Tribunal shall fix the costs of arbitration. The costs of arbitration
      include:

    

    (a)
      The fees
      and expenses of member of the Tribunal;

    

    (b)
      The
      costs of expert advice and other assistance engaged by the
      Tribunal;

    

    (c)
      The
      travel and other expenses of witnesses to such extent as the Tribunal may deem
      appropriate;

    

    (d)
      The
      costs for legal representation and assistance and experts of the successful
      party to such extent as the Tribunal may deem appropriate;

    

    (e)
      The
      charges and expenses of CPR with respect to the arbitration.

    

    (f)
      The
      costs of transcript; and

    

    (g)
      The
      costs of meeting and hearing facilities.

    

    15.3
      Subject
      to any agreement between the parties to the contrary, the Tribunal may apportion
      the costs of arbitration between or among the parties in such manner as it
      deems
      reasonable taking into account the circumstances of the case, the conduct of
      the
      parties during the proceeding, and the result of the arbitration.

    

    15.4
      The
      Tribunal may request each party to deposit an equal amount as an advance for
      the
      costs referred to in Rule 15.2, except those specified in subparagraph (d),
      and,
      during the course of the proceeding, it may request supplementary deposits
      from
      the parties. Any such funds shall be held and disbursed in such a manner as
      the
      Tribunal may deem appropriate.

    

    15.5
      If the
      requested deposits are not paid in full within twenty days after receipt of
      the
      request, the Tribunal shall so inform the parties in order that jointly or
      severally they may make the required payment. If such payment is not made,
      the
      Tribunal may suspend or terminate the proceedings.

    

    15.6
      After
      the award has been rendered, the Tribunal shall return any unexpended balance
      from deposits made to the parties as may be appropriate.

    

    

    Rule
      16. Confidentiality

    

    

    The
      parties and the arbitrators shall treat the proceedings, any related discovery
      and the decisions of the Tribunal, as confidential, except in connection with
      a
      judicial challenge to, or enforcement of, an award, and unless otherwise
      required by law.

    

    

    

    Rule
      17. Settlement and Mediation

    

    

    17.1
      Either
      party may propose settlement negotiations to the other party at any time. The
      Tribunal may suggest that the parties explore settlement at such times as the
      Tribunal may deem appropriate and shall suggest that they do so at or before
      conclusion of the hearing. The Tribunal shall give such assistance in settlement
      negotiations as the parties may request and the Tribunal may deem
      appropriate.

    

    17.2
      With the
      consent of the parties, the Tribunal at any stage of the proceeding may arrange
      for mediation of the claims asserted in the arbitration by a mediator acceptable
      to the parties. The Mediator shall be a person other than a member of the
      Tribunal, unless the parties request and the Tribunal agrees that a member
      of
      the Tribunal designated by the parties may serve as Mediator. The Tribunal
      may
      provide the Mediator with whatever factual and legal material developed in
      the
      arbitration it deems appropriate and may permit the Mediator to attend
      conferences and hearings held in connection with the arbitration. Unless the
      parties agree otherwise, any such mediation shall be conducted under the CPR
      Model Procedure for Mediation of Business Disputes.

    

    

    

    

    Rule
      18. Actions against CPR or Arbitrators

    

    

    Neither
      CPR nor any arbitrator shall be liable to any party for any act or omission
      in
      connection with any arbitration conducted under these Rules.

    

    

    

    Rule
      19. Waiver

    

    

    A
      party
      knowing of a failure to comply with any provision of these Rules and neglecting
      to state its objections promptly waives any objection thereto.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    COMMENTARY
      ON CENTER FOR PUBLIC RESOURCES RULES

    

    FOR
      NON-ADMINISTERED ARBITRATION OF BUSINESS DISPUTES

    

    

    

    INTRODUCTION

    

    

    The
      Center for Public Resources, Inc. (“CPR”) brings a distinct viewpoint to the
      field of business dispute resolution. Its tenets:

    

    1.     Most
      business disputes are best resolved privately and by agreement.

    

    
      	 	
              2.

            	
              Executives
                should play a key role in business dispute resolution and should
                approach
                a dispute as a problem to be solved, not a contest to be
                won.

            

    

    

    
      	 	
              3.

            	
              A
                skilled and respected neutral third party can play a critical role
                in
                bringing about agreement.

            

    

    

    4.     Efforts
      should first be made to reach agreement by unaided negotiation.

    

    
      	 	
              5.

            	
              If
                such efforts are unsuccessful, resolution by a non-adjudicative procedure
                such as mediation or the minitrial should next be pursued. These
                procedures remain available even while litigation or arbitration
                is
                pending.

            

    

    

    
      	 	
              6.

            	
              If
                adjudication by a neutral third party is required, a well conducted
                arbitration proceeding usually is preferable to
                litigation.

            

    

    

    
      	 	
              7.

            	
              During
                an arbitration proceeding the door to settlement should remain open;
                arbitrators should encourage the parties to discuss settlement, if
                appropriate employing a mediator.

            

    

    

    
      	 	
              8.

            	
              Arbitration
                proceedings often can be conducted efficiently by the arbitral tribunal
                without administration by a neutral organization, or limiting the
                role of
                such an organization to assistance in arbitrator selection, if
                required.

            

    

    

    FEATURES
      OF WELL MANAGED ARBITRATION PROCEEDINGS

    

    

    Primary
      objectives of arbitration are to arrive at a just and enforceable result, based
      on a private procedure that is

    

    
      	 	
              ·

            	
              fair,

            

    

    
      	 	
              ·

            	
              expeditious,

            

    

    
      	 	
              ·

            	
              economical,
                and

            

    

    
      	 	
              ·

            	
              less
                burdensome or adversarial than
                litigation.

            

    

    

    

    The
      above
      objectives are most likely to be achieved if the parties and their
      attorneys

    

    
      	 	
              ·

            	
              adopt
                well designed rules of procedure;

            

    

    
      	 	
              ·

            	
              select
                skilled arbitrators who are able and willing to actively manage the
                process;

            

    

    
      	 	
              ·

            	
              limit
                the issues to focus on the core of the dispute;
                and

            

    

    
      	 	
              ·

            	
              cooperate
                on procedural matters even while acting as effective advocates on
                substantive issues.

            

    

    

    

    

    GENERAL
      COMMENTARY ON THE RULES

    

    

    The
      CPR
      Rules for Non-Administered Arbitration of Business Disputes (the “Rules”) were
      developed by a committee (the “Committee”) of leading arbitrators and
      practitioners convened by CPR to develop procedures to facilitate the conduct
      of
      arbitration fairly, expeditiously and economically. The Rules are designed
      to be
      easily comprehended. The Rules are intended in particular for the complex case
      but are suitable regardless of the complexity of the case or the amount in
      dispute.

    

    The
      Rules
      reflect CPR’s view that disputants should make all reasonable efforts to resolve
      their dispute by agreement. Rule 16 requires the Arbitral Tribunal (the
“Tribunal”) to suggest at or before conclusion of the hearing that the parties
      engage in settlement negotiations, and authorizes the Tribunal to arrange
      mediation with the consent of the parties.

    

    The
      standard arbitration clauses in the Rules have been drafted to make proceedings
      under the Rules subject to the United States Arbitration Act, 9 U.S.C. § 1 et
      seq. If parties desire a different law, or if the federal law does not apply
      (where, for example, the underlying transaction is not “in commerce”), another
      law should be specified. [See reference to Volt
      v.
Stanford
      below at
      page 8.]

    

    

    Every
      disputant wants to have a reasonable opportunity to develop and present its
      case. Parties that choose arbitration over litigation do so in large part out
      of
      a need or desire for a proceeding that is also speedy and economical - factors
      which tend to go hand in hand. The rules were designed with each of these
      objectives in mind.

    

    The
      complexity of cases will vary greatly. In rules of general application it is
      not
      appropriate to fix hard and fast deadlines. Rule 13.7 commits the parties and
      the arbitrator(s) to use their best efforts to assure that the dispute will
      be
      submitted to the Tribunal for decision within six months after the initial
      pre-hearing conference, and that the final award will be rendered within one
      month thereafter. Rule 9.2 empowers the arbitrator(s) to establish time limits
      for each phase of the proceeding, including specifically the time allotted
      to
      each party for presentation of its case and for rebuttal.

    

    Counsel
      are expected to cooperate fully with the Tribunal and with each other to assure
      that the proceeding will be conducted with civility in an efficient, expeditious
      and economical manner. Rule 15 empowers the arbitrators in apportioning costs
      to
      take into account “the circumstances of the case.” This broad power is intended
      to permit the arbitrators to apportion a greater share of costs than they
      otherwise might to a party which has employed tactics the arbitrators consider
      dilatory, or in other ways has failed to cooperate in assuring the efficient
      conduct of the proceeding.

    

    The
      Rules
      may be modified by written agreement. The Rules are designed for an arbitration
      between two parties but may be amended to provide for a proceeding among three
      or more parties.

    

    

    

    TYPES
      OF DISPUTES

    

    

    The
      Rules
      are designed for “business disputes”. This term is intended to encompass
      disputes of any nature between business enterprises, including not only
“commercial” disputes but also, by way of example, intellectual property
      disputes, construction disputes, disputes between manufacturers and distributors
      or franchisees, and disputes between joint venturers. The Rules may be adopted
      by parties which did not have a contractual or other business relationship,
      e.g.
      for a patent infringement dispute. The Rules may even be employed to adjudicate
      a dispute between a government agency and a contractor, subject to any legal
      restraints on that government’s submission to arbitration. The parties may find
      it appropriate to modify the Rules to adapt them to a specific type of
      dispute.

    

    

    ADMINISTERED
      VS. NON-ADMINISTERED ARBITRATION

    

    

    The
      principal functions normally performed by an organization administering
      arbitration proceedings are to:

    

    
      	 	
              ·

            	
              provide
                a set of rules which the parties can adopt in a pre-dispute agreement
                or
                for an existing dispute;

            

    

    

    
      	 	
              ·

            	
              provide
                administrative staff to render impartial services required for smooth
                case
                handling and to insulate arbitrators from
                parties.

            

    

    

    
      	 	
              ·

            	
              provide
                lists of persons from which arbitrators may be
                chosen;

            

    

    

    
      	 	
              ·

            	
              appoint
                the arbitrator(s) if necessary;

            

    

    

    
      	 	
              ·

            	
              decide
                arbitrator conflict of interest challenges if
                necessary;

            

    

    

    
      	 	
              ·

            	
              determine
                arbitrator fees and bill the parties for such
                fees.

            

    

    

    
      	 	
              ·

            	
              schedule
                hearings and send notices of
                hearings;

            

    

    

    
      	 	
              ·

            	
              provide
                hearing rooms;

            

    

    

    
      	 	
              ·

            	
              distribute
                documents;

            

    

    

    
      	 	
              ·

            	
              review
                awards for procedural comments.

            

    

    

    The
      charges of administering organizations typically are related to the amount
      in
      dispute, but rates vary.

    

    Many
      arbitration practitioners and arbitrators see a need for administered
      arbitration, but others favor non-administered or “ad hoc” arbitration,
      particularly for large or complex cases. They believe that the arbitrator(s)
      and
      the parties’ advocates are capable of performing most of the functions general
      performed by the administering organization, and that the arbitrator(s) and
      advocates often may be better able to control the conduct of the proceeding
      than
      such an organization. The fees charged by an administering organization also
      may
      be a factor. The assistance of a neutral third party may be needed in selecting
      the tribunal or deciding a conflict of interest challenge to an arbitrator.
      Under the Rules, CPR is available to perform these limited
      functions.

    

    

    Over
      ninety percent of arbitrations take place pursuant to the parties’ binding
      commitment in their business agreement to submit possible futures disputes
      to
      arbitration in accordance with specified rules. Once a dispute has arisen,
      it is
      usually much more difficult for the parties to agree on any alternative to
      litigation. Our committee recommends the inclusion of a dispute resolution
      clause in most business agreements. The parties should also consider whether
      to
      provide for administered or non-administered arbitration. Rules for administered
      arbitration have long been available for incorporation by reference. The
      availability of rules well designed for the efficient conduct of a
      non-administered proceeding will facilitate the choice between these alternative
      procedures.

    

    The
      Rules
      are intended primarily for disputes between responsible parties which will
      not
      attempt to obstruct the process. However, the Rules do permit the process to
      go
      forward even if a respondent fails to deliver a notice of defense, fails to
      participate in selection of the Tribunal, or ultimately fails to appear at
      a
      hearing.

    

    

    

    SALIENT
      FEATURES OF THE RULES

    

    

    The
      Rules
      differ in numerous respects from arbitration rules promulgated by other
      organizations. Features which our Committee considers particularly significant
      are:

    

    
      	 	
              1.

            	
              The
                Rules call for non-administered
                arbitration.

            

    

    

    
      	 	
              2.

            	
              The
                Rules require the expeditious conduct of the proceeding, empowering
                the
                arbitrator(s) to establish time limits for each phase of the proceeding
                (Rule 9.2), and to penalize a party engaging in dilatory tactics
                (Rule
                15.3).

            

    

    

    
      	 	
              3.

            	
              All
                arbitrators, including those appointed by either party, are required
                to be
                independent and impartial (Rule 7.1). Such a requirement enhances
                the
                acceptability of the arbitration process, albeit a departure from
                existing
                U.S. practice.

            

    

    

    
      	 	
              4.

            	
              The
                parties are given ample opportunity to select a sole arbitrator or
                a panel
                of three arbitrators without intervention of CPR. If they fail, either
                party may request CPR’s assistance (Rule
                5).

            

    

    

    
      	 	
              5.

            	
              CPR
                will first convene the parties to attempt to select the arbitrator(s)
                by
                agreement of the parties. Only if that attempt fails will CPR submit
                a
                list of candidates to the parties for ranking (Rule
                6.4).

            

    

    

    
      	 	
              6.

            	
              The
                Tribunal may decide challenges to its jurisdiction (Rule 8). This
                should
                allow arbitrators to decide all issues, including arbitrability questions,
                without the necessity for court
                intervention.

            

    

    

    
      	 	
              7.

            	
              The
                chairman of the Tribunal is assigned responsibility for the organization
                of conferences and hearings and arrangements with respect to the
                functioning of the Tribunal (Rule
                9.1).

            

    

    

    
      	 	
              8.

            	
              The
                Tribunal is required to hold at least one pre-hearing conference
                to plan
                and schedule the proceeding (Rule 9.4). Such conference should result
                in
                the smooth scheduling of the case, and may aid possible
                settlement.

            

    

    

    
      	 	
              9.

            	
              The
                Tribunal is given great leeway in matters of procedure. The Tribunal
                is
                specifically empowered, for instance,
                to

            

    

    

    
      	 	
              ·

            	
              establish
                time limits for each phase of the proceeding (Rule
                9.2);

            

    

    

    
      	 	
              ·

            	
              limit
                the time allotted to each party for presentation of its case (Rule
                9.2);

            

    

    

    
      	 	
              ·

            	
              make
                pre-hearing orders (Rule 9.5);

            

    

    

    
      	 	
              ·

            	
              permit
                such discovery as it deems appropriate (Rule
                10);

            

    

    

    
      	 	
              ·

            	
              require
                the submission of pre-hearing memoranda (Rule
                11.1);

            

    

    

    
      	 	
              ·

            	
              require
                evidence to be presented in written form (Rule
                11.2).

            

    

    

    
      	 	
              10.

            	
              The
                Tribunal is empowered to appoint neutral experts (Rule
                11.3).

            

    

    

    
      	 	
              11.

            	
              The
                Tribunal may take interim measures for the preservation of assets
                or other
                interim measures (Rule 12.1).

            

    

    

    
      	 	
              12.

            	
              The
                Tribunal is required to state the reasoning on which its award rests
                unless the parties agree otherwise (Rule 13.2). Our committee believes
                the
                parties are entitled to know how the decision was
                reached.

            

    

    

    
      	 	
              13.

            	
              Each
                arbitrator is to be fully compensated at an hourly rate determined
                at the
                time of appointment for all time spent in connection with the proceeding
                (Rule 15.1).

            

    

    

    
      	 	
              14.

            	
              The
                Tribunal is empowered to apportion costs, including attorneys’ fees and
                other costs incurred by the successful party, between the parties,
                taking
                into account the circumstances of the case, the conduct of the parties
                during the proceeding and the result (Rule
                15.3).

            

    

    

    
      	 	
              15.

            	
              the
                proceedings are confidential (Rule
                16).

            

    

    

    
      	 	
              16.

            	
              The
                Tribunal may suggest at any time that the parties engage in settlement
                negotiations and shall make that suggestion at or before conclusion
                of the
                hearing (Rule 17.1).

            

    

    

    
      	 	
              17.

            	
              The
                Tribunal may arrange for mediation of the dispute at any time with
                the
                consent of the parties (Rule 17.2).

            

    

    

    

    

    INTERNATIONAL
      ARBITRATION

    

    

    The
      Rules
      were designed in the first instance for disputes between parties located in
      the
      United States; however, the Rules also are suitable for disputes involving
      parties located in different countries. In the transnational context it may
      be
      advisable to specify in the pre-dispute clause or the submission
      agreement:

    

    
      	 	
              ·

            	
              the
                place of arbitration;

            

    

    
      	 	
              ·

            	
              the
                language(s) in which the proceedings are to be
                conducted;

            

    

    
      	 	
              ·

            	
              the
                substantive law governing the merits of the
                dispute;

            

    

    
      	 	
              ·

            	
              the
                nationality of the arbitrator(s);
                and

            

    

    
      	 	
              ·

            	
              the
                arbitration law which will govern.

            

    

    

    The
      parties also may consider certain modifications of the Rules when adopting
      them
      for transnational disputes. For instance, if the parties prefer that the
      functions assigned to CPR under Rule 6 and Rule 7.7 (b) be performed by another
      neutral organization or official, they may so provide.

    

    

    STANDARD
      CONTRACTUAL PROVISIONS

    

    

    The
      suggested standard pre-dispute clause and submission agreement which precede
      the
      Rules may be modified and may be supplemented. It is desirable that the parties
      specify the place of arbitration and the law governing the contract and the
      arbitration. If a governing law is specified it may be advisable to state
      whether or not the conflict of laws rules of that law are included.

    

    In
      light
      of the decision of the United States Supreme Court in Volt
      Information Sciences, Inc. v Board of Trustees of Leland Stanford Junior
      University,
      109 S.
      Ct. 1248, _______ U.S. ________, No. 87-1318 (March 6, 1989), our Committee
      has
      inserted language in the standard pre-dispute clause and submission agreement
      to
      the effect that the governing law for the arbitration shall be the United States
      Arbitration Act.

    

    The
      laws
      of various jurisdictions differ on the question of whether arbitrators are
      empowered to award punitive damages. If
      the parties wish to preclude the arbitrators from awarding punitive or trebled
      damages, it would be advisable to include a provision to that effect in the
      pre-dispute clause or the submission agreement.

    

    As
      stated
      above, CPR as a rule considers it highly desirable for disputants to attempt
      to
      resolve their dispute without adjudication. Attached to this commentary as
      Appendix A are suggested contract clauses calling for negotiations or mediation
      before
      a
      dispute is submitted to arbitration.

    

    The
      pre-dispute clause and the submission agreement call for an election as to
      whether the Tribunal will be composed of

    

    
      	 	
              ·

            	
              three
                arbitrators, of whom each party appoints one, and the two arbitrators
                thus
                appointed attempt to select the
                third,

            

    

    

    
      	 	
              ·

            	
              three
                arbitrators, none of whom are appointed by the parties,
                or

            

    

    

    
      	 	
              ·

            	
              a
                sole arbitrator.

            

    

    

    Such
      an
      election made in a pre-dispute clause may be changed by further agreement once
      a
      specific dispute has arisen. If the parties fail to make an election, the first
      mentioned procedure will apply in accordance with Rule 5.1.

    

    Rules
      5
      and 6 govern the selection of arbitrators not appointed by either
      party.

    

    It
      is
      essential for the parties to stipulate that judgment may be entered upon the
      award, in order to comply with the requirement of the United States Arbitration
      Act, 9 U.S.C. § 9.

    

    

    COMMENTARY
      ON INDIVIDUAL RULES

    

    

    

    A. General
      and Introductory Rules

    

    

    Rule
      3. Commencement of Arbitration

    

    

    Rule
      3
      sets forth the procedure to be followed when a proceeding is commenced pursuant
      to a pre-dispute arbitration clause. Under Rule 3.4, the arbitration will
      proceed even if the respondent should fail to file a timely notice of defense.
      If the pre-dispute clause required each party to appoint an arbitrator, and
      either party fails to do so, the other party may request CPR to step in pursuant
      to Rule 6.

    

    A
      submission agreement entered into after a dispute has arisen may include all
      or
      some of the material called for by Rules 3.3 and 3.5 and may eliminate the
      need
      for a notice of arbitration and a notice of defense. Rule 3.9 provides that
      “Rule 3 shall apply to the extent that it is not inconsistent with the
      submission agreement.” If the parties so desire, the submission agreement can
      provide that Rule 3 notices will not be required or will be
      modified.

    

    

    

    Rule
      4. Representation

    

    

    It
      is
      assumed that parties normally would be represented by a law firm or an
      individual attorney; however, the Rules permit parties to be represented or
      assisted by any persons of their choice.

    

    Under
      the
      laws of certain jurisdictions, representation of a party in an arbitration
      proceeding may constitute the practice of law, in which case representation
      by
      an attorney would be required.

    

    

    B. Rules
      with Respect to the Tribunal

    

    

    Rule
      5. Selection of Arbitrators by the Parties

    

    

    Most
      practitioners, when confronted with a large or complex dispute, have greater
      confidence in a panel of three arbitrators than in a single arbitrator.
      Moreover, they usually

    prefer
      to
      permit each party to appoint an arbitrator. Rule 5.1 provides, therefore, that
      the Tribunal shall consist of two arbitrators appointed by the parties and
      a
      third arbitrator who shall chair the Tribunal, unless the parties have agreed
      on
      a Tribunal consisting of a sole arbitrator or three arbitrators not appointed
      by
      the parties.

    

    For
      many
      companies the ability to select a tribunal well qualified to hear and decide
      their dispute is a primary motivation to opt for arbitration. The selection
      of
      highly qualified, experienced arbitrators is critical, the more so if the amount
      in dispute is large and the issues are complex. Our Committee believes that
      at
      least the chairman of the Tribunal usually should be a respected attorney
      experienced in arbitration.

    

    The
      arbitrators should be persons able and willing to control the course of the
      proceeding and to make definitive rulings on substantive and procedural
      matters.

    

    Sophisticated
      counsel representing the parties are likely to know of the individuals,
      especially of attorneys, who are well qualified and who meet the “independent
      and impartial” standard of Rule 7.1. CPR has established Panels of leading
      members of the bar, including former judges, who are highly qualified to serve
      as arbitrators. CPR’s lists of panelists are available on request, and panel
      members may be contacted directly.

    

    Tribunals
      of two arbitrators have been used on occasion, typically in complex
      technological disputes in which the objective was to structure a modus vivendi
      rather
      than only to arrive at conclusions as to liability and damages. The Rules may
      be
      modified to provide for a two arbitrator Tribunal.

    

    

    

    Rule
      6. Selection of Arbitrator(s) by CPR

    

    

    Selection
      of arbitrators by the parties is the preferred course, and the parties are
      given
      ample opportunity to select a Tribunal without CPR’s assistance. However, if
      they fail, either party may request CPR’s assistance at the time and in the
      manner specified in Rules 6.2 and 6.3.

    

    In
      accordance with Rule 6.4(a), CPR then will convene the parties and will propose
      candidates in an attempt to complete the Tribunal in this informal and speedy
      manner. If this procedure is not wholly successful, CPR will submit a list
      of
      candidates to the parties in writing. The parties are required to rank the
      nominees in order of preference. The nominee(s) willing to serve for whom the
      parties collectively have indicated the highest preference will be
      selected.

    

    The
      parties will be encouraged to inform CPR of the qualifications they seek in
      an
      arbitrator. Individuals nominated by CPR are likely to be members of CPR’s
      Panels.

    

    

    Rule
      7. Qualifications, Challenges and Replacement of
      Arbitrators

    

    

    The
      degree of independence expected of a party-appointed arbitrator in the United
      States is not always clear. Parties often expect the arbitrator they appoint
      to
      act as their advocate on the panel. Our Committee does not favor this approach.
      The Committee believes that the advocacy role should be performed exclusively
      by
      each party’s counsel or other representative, and that permitting arbitrators to
      play such a role is prejudicial to the disinterested and candid deliberations
      in
      which the panel should engage. Consequently, Rule 7.1 states that “Each
      arbitrator shall be independent and impartial.”

    

    The
      rationale for party appointment is to enable each party to select an individual
      it considers well qualified and whom it expects in turn to select a capable
      chairman of the Tribunal. A party may discuss the case in general terms with
      an
      individual before appointment, and the appointee may discuss the selection
      of
      the chairman with that party. Once the Tribunal has been constituted, no further
      ex
      parte
      communication is permitted between a party and the arbitrator it appointed
      (Rule
      9.3).

    

    Rules
      7.3
      - 7.7 set forth a formal procedure for disclosure of “circumstances that might
      cause doubt regarding the arbitrator’s independence or impartiality,” and for a
      challenge for “justifiable doubt,” after the Tribunal has been constituted. It
      is anticipated that normally an individual’s possible conflicts of interest
      would be disclosed and resolved informally before selection, and that it would
      rarely become necessary to invoke the formal procedure. In general, we believe
      all the arbitrators should be held to the standards for independent arbitrators
      promulgated in the ABA-AAA Code of Ethics for Arbitrators in Commercial
      Disputes.

    

    

    

    Rule
      8. Challenges to the Jurisdiction of the Tribunal

    

    

    This
      Rule
      expresses the generally accepted principle that arbitrator(s) have the
      competence initially to determine their own jurisdiction. The arbitrator(s)
      will
      decide whether the arbitration proceeds in the face of a jurisdictional
      challenge.

    

    

    

    C.
      Rules with Respect to the Conduct of the Arbitral
      Proceedings

    

    

    Rule
      9. General Provisions

    

    

    Under
      Rule 9.1 the chairman is “responsible for the organization of the arbitral
      conferences and hearings and arrangements with respect to the functioning of
      the
      Tribunal.”

    

    The
      efficiency of the proceeding will depend in large part on the chairman’s taking
      the lead in asserting the Tribunal’s control over critical aspects of the
      procedure, including the setting of time limits as authorized by Rule
      9.2.

    

    The
      Rules
      give the Tribunal wide latitude as to the manner in which the proceeding will
      be
      conducted. It is expected that the procedure will be determined in large part
      during the pre-hearing conference(s) held pursuant to Rule 9.4 and that
      following the conference(s) the Tribunal will issue one or more orders on
      procedural matters.

    

    Narrowing
      issues to those central to the controversy, fact stipulations and admissions
      should be strongly encouraged by the Tribunal in the interest of focusing on
      core issues and simplifying the proceeding.

    

    Some
      controversies hinge on one or two key issues of law which in litigation may
      be
      decided early on motion for partial summary judgment. At the pre-hearing
      conference, the desirability of the Tribunal’s ruling on such issues before the
      hearings can be considered.

    

    Other
      controversies hinge on a key issue of a technical nature on which a neutral
      expert can be helpful in bringing about a resolution. The appointment by the
      Tribunal of such an expert is authorized by Rule 11.3 and also can be discussed
      at the pre-hearing conference.

    

    The
      Tribunal may bifurcate the proceeding. If the proceeding is bifurcated to first
      decide the issue of liability, the parties then may well be able to agree on
      the
      remedy. Often parties have options not available to a judge or to
      arbitrators.

    

    A
      pre-hearing conference may well give the arbitrators an opportunity to encourage
      settlement discussions or mediation, as contemplated by Rule 17. Simply bringing
      the attorneys together for purposes of a conference may lead to such
      discussions.

    

    

    Rule
      10. Discovery

    

    

    These
      Rules, unlike most other arbitration rules, specifically empower the
      Tribunal

    

    “to
      permit and facilitate such discovery as it shall determine is appropriate in
      the
      circumstances taking into account the needs of the parties and the desirability
      of making discovery expeditious and cost-effective.”

    

    Arbitration
      is not for the litigator who will “leave no stone unturned.” Unlimited discovery
      is incompatible with the goals of efficiency and economy. The Federal Rules
      of
      Civil Procedure are not applicable. Discovery should be limited to that for
      which a party has a substantial, demonstrable need. Rule 11.2 provides for
      the
      application of the attorney-client privilege and the work product immunity.
      That
      protection is intended to apply to discovery as well as to
      hearings.

    

    It
      is
      desirable for the parties’ counsel to agree, preferably before the initial
      pre-hearing conference, on a discovery plan and schedule and to submit the
      same
      to the Tribunal for its approval.

    

    A
      party
      may encounter difficulties if it needs to secure documents or testimony from
      an
      uncooperative third party. The arbitrators may well be of assistance in such
      a
      situation through the exercise of their subpoena power or in other ways. If
      the
      third party’s location is beyond subpoena range, holding a hearing at that
      location may be an option.

    

    

    

    Rule
      11. Evidence and Hearings

    

    

    The
      Rules
      do not establish a detailed mandatory hearing procedure but permit the Tribunal
      to determine the procedure. At least the main features should be established
      during the pre-hearing conference(s). The Tribunal need not apply rules of
      evidence used in judicial proceedings, except that the Tribunal is required
      to
      apply the attorney-client privilege and the work product immunity when it
      determines that the same are applicable (Rule 11.2).

    

    Self-authentication
      of documentary exhibits the authenticity of which is not disputed is a widely
      used practice which reduces hearing time. In cases in which voluminous testimony
      is expected the hearings will be expedited considerably if the Tribunal requires
      the direct testimony of all or most witnesses to be submitted in written form
      before the witness is to appear. This procedure also enables opposing counsel
      to
      better prepare for cross-examination. Depositions and affidavits would be
      admissible in evidence unless the Tribunal rules otherwise.

    

    The
      Tribunal should consider at the pre-hearing conference the imposition of time
      limits on case presentation, as authorized by Rule 9.2. If necessary, any such
      limits can be extended.

    

    The
      Rules
      do not provide specifically for the notice the parties are to be given of
      hearing dates and times. It is assumed that the Tribunal will give notice in
      such form and with such lead time as is reasonable under the
      circumstances.

    

    The
      efficiency of the proceeding will be enhanced substantially if hearings are
      held
      consecutively. If the Tribunal heeds every schedule conflict claim and
      adjournment request by either counsel, the hearings may drag on quite
      unnecessarily.

    

    The
      Tribunal and/or the parties are likely to request a hearing
      transcript.

    

    Rule
      11.3
      empowers the Tribunal to appoint neutral experts. We would expect this power
      to
      be exercised sparingly, and usually upon consultation with the parties as to
      the
      need for a neutral expert, the scope of the assignment, and identification
      of
      well qualified candidates. It is not intended that the expert give advice to
      the
      Tribunal ex parte;
      indeed,
      the Rule entitles the parties to cross examine and to rebut the expert. The
      conflicting views of partisan experts can lead to confusion rather than
      elightenment of arbitrators. In appropriate cases the arbitrators might
      encourage the parties early on, e.g. at the pre-hearing conference, to agree
      on
      the joint appointment of a neutral expert.

    

    The
      Rules
      do not automatically require the submission of post-hearing briefs, but it
      is
      likely that the Tribunal will order the submission of such briefs. Final oral
      argument also may be scheduled.

    

    The
      Tribunal’s powers with respect to subpoenas are determined by applicable law and
      are not dealt with specifically in the Rules.

    

    

    

    

    Rule
      13. The Award

    

    

    Rule
      13.2
      provides:

    

    “All
      awards shall be in writing and shall state the reasoning on which the award
      rests unless the parties agree otherwise. When there are three arbitrators,
      the
      award and any part thereof shall be made and signed by at least a majority
      of
      the arbitrators; ...”

    

    Most
      parties engaging in arbitration want to know the basis on which the
      arbitrator(s) reached their decision. Our Committee, moreover, considers it
      good
      discipline for arbitrators to require them to spell out their reasoning.
      Sometimes this process gives rise to second thoughts as to the soundness of
      the
      result. The Rule 13.2 mandate gives the arbitrator(s) greater leeway than would
      a requirement to state “conclusions of law and findings of fact.”

    

    Some
      parties hesitate to arbitrate out of a concern that arbitrators are prone to
      “split the baby”, i.e. to make compromise awards. Any tendency on the part of
      the arbitrators to reach compromise awards should be restrained by the
      requirement of a reasoned award.

    

    Certain
      administering organizations and practitioners favor “bare” awards without
      explanation of any sort, in the belief that such awards are the least likely
      to
      be challenged and overturned by a court. In the Committee’s view the risk that a
      reasoned award will be successfully challenged normally is small and is
      outweighed by the other considerations mentioned above.

    

    If
      an
      award consists of two or more parts, it is sufficient if any two out of three
      arbitrators approve each part, even if the same two arbitrators do not approve
      each part.

    

    Unless
      the parties shall have agreed in their business agreement or otherwise as to
      which law shall govern, the Tribunal is free to determine the law which is
      to
      govern the award.

    

    Rule
      13.7
      requires the parties and the arbitrators to use their best efforts to submit
      the
      dispute to the Tribunal for decision within six months of the initial
      pre-hearing conference, and to render the final award within one month following
      such submission.

    

    The
      Rules
      do not deal expressly with confirmation of an award, as the matter is covered
      by
      the United States Arbitration Act, 9 U.S.C. § 9 and its state
      counterparts.

    

    

    

    Rule
      14. Failure to Comply with Rules

    

    

    Rule
      14
      empowers the Tribunal to impose a remedy it deems just whenever a party
      materially fails to comply with the Rules. The power to make an award on default
      is specifically included. Pursuant to Rule 15.3 the Tribunal also may take
      a
      party’s conduct during the proceeding into account in assessing
      costs.

    

    

    

    Rule
      15. Costs

    

    

    Our
      Committee believes that highly qualified arbitrators are entitled to be fully
      compensated for all time devoted to the arbitration. If an arbitrator is a
      member of a law firm, he is likely to expect compensation at approximately
      the
      hourly rates normally charged for his services. The rates payable to
      party-appointed arbitrators should be agreed to between the appointee and the
      appointing party. The rates of other arbitrators should be established by
      agreement with both parties. The members of a three member Tribunal are likely
      to be compensated at different rates, but gross variations may present
      problems.

    

    Normally,
      the parties are expected to make advances for costs to a fund pursuant to Rule
      15.4, and the arbitrators’ fees, as well as other expenses, would be paid from
      such a fund.

    

    The
      “costs of arbitration” enumerated in Rule 15.2 include the costs for legal
      representation and assistance and experts of the successful party to such extent
      as the Tribunal may deem appropriate,

    

    In
      accordance with Rule 15.3, unless the parties otherwise agreed, the Tribunal
      may
      apportion the costs of arbitration between the parties “in such manner as it
      deems reasonable taking into account the circumstances of the case, the conduct
      of the parties during the proceeding, and the result of the arbitration.” As
      stated above, the arbitrator(s) may take into account tactics by either party
      which unreasonably interfered with the expeditious conduct of the
      proceeding.

    

    

    

    Rule
      17. Settlement and Mediation

    

    

    Over
      ninety percent of civil lawsuits and a high percentage of business arbitration
      proceedings are disposed of before a trial or hearings take place, most by
      settlement. Yet often each party is reluctant to propose settlement
      negotiations, if only out of concern that the proposal will be seen as a sign
      of
      weakness. A proposal to that effect by the Tribunal at one or more appropriate
      junctures in the proceeding should launch negotiations, without either party’s
      bearing the onus of being the proposer.

    

    A
      skilled
      mediator can play a critical role in brining about agreement between
      adversaries, even if bilateral negotiations did not bring them within reach
      of
      agreement. If the Tribunal believes that mediation may result in a settlement,
      the Tribunal is encouraged to urge the parties to engage in such a process
      and
      to assist in arranging the same. As a rule, arbitration proceedings should
      be
      suspended while mediation is in progress, at least for a limited
      time.

    

    It
      may
      well be desirable for senior executives to play an active role in a mediation
      proceeding. Often, the parties have settlement options that are business
      oriented and less onerous than the payment of money. Business executives are
      likely to be best able to explore such options.

    

    The
      members of the Tribunal will be thoroughly familiar with the case, and an
      arbitrator not appointed by either party may well be able to serve as mediator.
      However, the parties may hesitate to confide in an arbitrator, and an arbitrator
      would be inhibited in making settlement proposals or giving advice to the
      parties. As a rule, therefore, it would be preferable for an individual not
      an
      arbitrator in the case to serve as mediator. The Tribunal can be helpful by
      proposing well qualified candidates and by familiarizing the mediator with
      the
      case.

    

    It
      is
      assumed that if a settlement does not come about, the terms of any settlement
      offers will not be admitted into evidence at the hearings. If the parties enter
      into a settlement agreement, they may wish to request the Tribunal to issue
      an
      award incorporating the settlement terms.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    

    Appendix
      A-1

    

    

    SAMPLE
      BUSINESS AGREEMENT DISPUTE RESOLUTION CLAUSE

    (Mediation
      - Arbitration)

    

    

    The
      parties will attempt in good faith to resolve any controversy or claim arising
      out of or relating to this agreement by mediation in accordance with the Center
      for Public Resources Model Procedure for Mediation of Business Disputes.
      *

    

    If
      the
      matter has not been resolved pursuant to the aforesaid mediation procedure
      within sixty days of the commencement of such procedure (which period may be
      extended by mutual agreement), the controversy shall be settled by arbitration
      in accordance with the Center for Public Resources Rules for Non-Administered
      Arbitration of Business Disputes, by (a sole arbitrator) (three arbitrators,
      or
      whom each party shall appoint one) (three arbitrators, none of whom shall be
      appointed by either party). The arbitration shall be governed by the United
      States Arbitration Act, 9 U.S.C. § 1-16, and judgment upon the award rendered by
      the Arbitrator(s) may be entered by any court having jurisdiction thereof.
      The
      place of arbitration shall be ___________.

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    _________________________

    
      	 	
              *

            	
              The
                Center for Public Resources Model Minitrial Procedures may be substituted
                for the mediation procedure.

            

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    Appendix
      A-2

    

    

    SAMPLE
      BUSINESS AGREEMENT DISPUTE RESOLUTION CLAUSE

    

    (Two
      Step
      Negotiation - Mediation - Arbitration)

    

    

    The
      parties will attempt in good faith to resolve any controversy or claim arising
      out of or relating to this agreement promptly by negotiations between executives
      of the parties.

    

    If
      a
      controversy or claim should arise, ____________________________ of X Co. and
      _________________________ of Y Co., or their respective successors in the
      positions they now hold (herein called the “project managers”), will meet at
      least once and will attempt to resolve the matter. Either project manager may
      request the other to meet within fourteen days, at a mutually agreed time.
      

    

    If
      the
      matter has not been resolved within twenty days of their first meeting, the
      project managers shall refer the matter to senior executives, who shall have
      authority to settle the dispute (herein called “the senior executives”).
      Thereupon, the project managers shall promptly prepare and exchange memoranda
      stating the issues in dispute and their positions, summarizing the negotiations
      which have taken place, and attaching relevant documents. The senior executives
      will meet for negotiations within fourteen days of the end of the twenty-day
      period referred to above, at a mutually agreed time.

    

    The
      first
      meeting shall be held at the offices of the project manager receiving the
      request to meet. If more than one meeting is held, the meetings shall be held
      in
      rotation at the offices of X Co. and Y Co.

    

    If
      the
      matter has not been resolved within thirty days of the meeting of the senior
      executives (which period may be extended by mutual agreement), the parties
      will
      attempt in good faith to resolve the controversy or claim in accordance the
      Center for Public Resources Model Procedure for Mediation of Business
      Disputes.*

    

    If
      the
      matter has not been resolved pursuant to the aforesaid mediation procedure
      within sixty days of the commencement of such procedure (which period may be
      extended by mutual agreement), the controversy shall be settled by arbitration
      in accordance with the Center for Public Resources rules for Non-Administered
      Arbitration of Business Disputes, by (a sole arbitrator) (three arbitrators,
      of
      whom each party shall appoint one) (three arbitrators, none of whom shall be
      appointed by either party). The arbitration shall be governed by the United
      States Arbitration Act, 9 U.S.C § 1-16, and judgment upon the award rendered by
      the Arbitrator(s) may be entered by any court having jurisdiction thereof.
      The
      place of arbitration shall be ____________________.

    ____________________

    * The
      Center for Public Resources Model Minitrial Procedure may be substituted for
      mediation procedures.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    

      Attachment
        C

      

      MANAGEMENT
        COMMITTEE

      

      
        	
                1.1

              	
                To
                  provide for the orderly supervision of operations to be carried
                  out under
                  this Agreement at MGP sites, there will be a Management Committee
                  for each
                  site for which the Utilities agree to incur costs under this Agreement.
                  Upon the designation of a site as one as to which the Utilities
                  agree to
                  incur costs under this Agreement, each Utility shall designate
                  a
                  representative to such Management Committee who shall be authorized
                  to act
                  for such Utility by which designated, and an alternate representative
                  who
                  shall be authorized to act for such Utility in the absence of its
                  representative. Such designation shall be made by notice given
                  to the
                  other Utility, stating the names and addresses of the representative
                  and
                  alternate representative designated by such Utility for such Management
                  Committee for a particular MGP site. Any Utility may change its
                  representative at any time by giving written notice to the other
                  Utility.
                  In addition, any Utility may designate a special representative
                  for a
                  particular Management Committee meeting by delivering to the other
                  Utility’s representative notice of such designation at or before such
                  meeting. Any special representative shall be authorized to act
                  for the
                  Utility by which designated only at such meeting. In any matter
                  arising
                  under this Agreement, a representative or alternate or special
                  representative shall represent only the Utility which appointed
                  him. Such
                  representative (or, in his absence the alternate or special
                  representative) shall have full power and authority to represent
                  and bind
                  such Utility in all matters, and all acts done by him or his alternate
                  or
                  special representative pursuant to the authority conferred on him
                  shall be
                  deemed to be the acts of the Utility which appointed him. The
                  representative or his alternate or special representative of the
                  Utility/Coordinator (as defined in Section 2 below) shall be Chairman
                  at
                  all meetings of the Management Committee. If neither the representative,
                  alternate representative, nor a special representative of a Utility
                  is
                  able to attend any meeting held pursuant to this Agreement, the
                  vote of
                  such Utility on any matter to be considered at such meeting may
                  be cast by
                  written notice delivered to the other Utility representative at
                  or before
                  the meeting but not thereafter.

              

      

      
        	
                1.2

              	
                The
                  Management Committee may appoint such subcommittees, to be composed
                  of
                  representatives of the Utilities as it deems advisable, for the
                  study of
                  any problem in connection with operations
                  hereunder.

              

      

      
        	
                1.3

              	
                The
                  members of the Management Committee shall be fully empowered by
                  the
                  Utility which they, respectively, represent to make all determinations
                  required hereunder to be made by the
                  Utilities.

              

      

      
        	
                1.4

              	
                The
                  Coordinator/Utility shall prepare and furnish to each Utility
                  representative and alternate representative a copy of the agenda
                  and such
                  supplementary information as may be appropriate for each meeting
                  of the
                  Management Committee, together with notice of the date, time and
                  place of
                  such meeting, to be received at least fifteen (15) days in advance
                  of the
                  date of such meeting. The Coordinator/Utility shall work with the
                  representatives and alternate representatives to select meeting
                  dates,
                  times and places that are acceptable to all representatives and
                  alternate
                  representatives. All meetings of the Management Committee shall
                  be held in
                  either Chicago or Naperville, Illinois, or at such other place
                  as is
                  mutually agreed to by the Utilities. Each representative or alternate
                  or
                  special representative shall be entitled to have present at any
                  meeting
                  such agents and employees of his principal as he may desire. The
                  expenses
                  incurred by a representative, alternates or special representatives
                  and
                  agents and employees of any Utility attending a meeting shall be
                  borne
                  solely by such Utility.

              

      

      
        	
                1.5

              	
                At
                  all meetings of the Management Committee, only such matters as
                  may be on
                  the agenda shall be considered, but at any such meeting, the agenda
                  may be
                  amended, by unanimous consent, to include additional matters raised
                  by any
                  representative. The Coordinator/Utility may call a meeting of the
                  Management Committee at any time it shall deem appropriate and
                  shall do so
                  upon the request of any Utility by giving each Utility written
                  notice
                  thereof (pursuant to Paragraph 1.4) with the agenda reflecting
                  the matters
                  requested by the Utility or Utilities requesting the meeting. Written
                  minutes of each meeting shall be prepared by the Coordinator/Utility
                  and
                  copies thereof shall be made available promptly to the Utilities.
                  Each
                  representative or alternate shall notify the other representatives
                  in
                  writing of its approval or objection to said minutes within fifteen
                  (15)
                  days after receipt thereof, and if a representative fails to so
                  notify the
                  other representatives, it shall be deemed to have approved said
                  minutes.
                  The determinations of the Management Committee made in accordance
                  with the
                  voting procedure in Section 1.8 shall be binding on the
                  Utilities.

              

      

      
        	
                1.6

              	
                Any
                  matter arising under the Agreement may be submitted to the Management
                  Committee for consideration and to a vote without holding a meeting,
                  provided that such matter is submitted by notice in writing to
                  all
                  Utilities. Within fifteen (15) days after receipt of such notice,
                  each
                  Utility shall give to each other Utility notice in writing of its
                  vote.
                  Any proposal which thus receives the affirmative vote provided
                  for in
                  Section 1.8 shall be deemed to be a proposal decided upon by the
                  Utilities, and the determination thus made shall be binding upon
                  them to
                  the same extent as votes cast at a meeting of the Management Committee.
                  Coordinator/Utility shall keep a record of the vote open to inspection
                  by
                  the Utilities at all reasonable
                  times.

              

      

      
        	
                1.7

              	
                The
                  Management Committee shall meet at least once each Calendar Year
                  prior to
                  August 1 to consider the program of activities and budget for the
                  relevant
                  MGP site that is proposed by the Coordinator/Utility for the succeeding
                  Calendar Year, and such other matters as may be on the agenda;
                  provided,
                  however, that any such meeting may be waived by the unanimous consent
                  of
                  the Utilities and any matters on the agenda may be submitted to
                  the
                  Management Committee as provided in Section 1.6. No program of
                  activities
                  or budget may be implemented unless approved unanimously by the
                  Utilities.

              

      

      
        	
                1.8

              	
                Each
                  Utility shall be entitled to one vote on any matter or proposal
                  submitted
                  to the Management Committee in accordance with this Agreement and
                  all
                  decisions of the Management Committee must be
                  unanimous.

              

      

      

      COORDINATOR/UTILITY

      
        	
                2.1

              	
                The
                  Coordinator/Utility shall facilitate the performance of all operations
                  conducted by the Utilities under this Agreement for the MGP site.
                  There
                  shall be a separate Coordinator/Utility for each
                  site.

              

      

      
        	 	
                2.1.1

              	
                Any
                  Coordinator/Utility at any time may resign as Coordinator/Utility
                  hereunder by giving to the other Utility notice in writing of such
                  resignation. Such resignation shall be effective one hundred eighty
                  (180)
                  days after the date of notice thereof as provided above, or on
                  the date on
                  which a successor Coordinator/Utility appointed by the Utilities
                  as
                  provided herein shall be ready and able to assume the obligations
                  of
                  Coordinator/Utility hereunder, whichever shall first
                  occur.

              

      

      
        	 	
                2.1.2

              	
                The
                  Coordinator/Utility may be removed at any time upon ninety (90)
                  days’
                  notice by determination of the Management Committee. The Utilities
                  shall
                  promptly give to Coordinator/Utility notice in writing of such
                  removal.

              

      

      
        	 	
                2.1.3

              	
                Removal
                  or resignation of any Coordinator/Utility shall not in any way
                  affect its
                  right, title or interest or obligations under this Agreement. On
                  the
                  effective date of removal or resignation, Coordinator/Utility shall
                  deliver to the successor Coordinator/Utility possession of all
                  funds,
                  equipment, materials, appurtenances, books, records, reports, data
                  and
                  rights acquired by or in the custody of Coordinator/Utility for
                  the joint
                  account of the Utilities and shall make an accounting to the Utilities
                  for
                  such items mentioned herein as shall not be so
                  delivered.

              

      

      
        	
                2.2

              	
                In
                  accordance with agreed programs and budgets and the terms of the
                  Agreement
                  and subject to such instructions as may be given from time to time
                  by the
                  Management Committee, Coordinator/Utility shall on behalf of the
                  other
                  Utility conduct all operations for its applicable site under this
                  Agreement, and in connection therewith, shall have the following
                  rights,
                  duties and obligations; provided, however, that Coordinator/Utility
                  shall
                  consult with the other Utilities when it deems
                  necessary.

              

      

      
        	 	
                2.2.1

              	
                All
                  such operations shall be conducted by Coordinator/Utility or by
                  its duly
                  authorized agents or by such independent contractors as may be
                  engaged by
                  it with the approval of the other
                  Utility.

              

      

      
        	 	
                2.2.2

              	
                Coordinator/Utility,
                  its agents or contractors, shall secure and furnish all supervision,
                  labor, services, materials, equipment, permits and rights necessary
                  or
                  appropriate to operations hereunder and shall have custody of all
                  materials and equipment owned by the Utilities pursuant to this
                  Agreement.
                  The selection of employees, the number thereof, their hours of
                  labor and
                  their compensation shall be determined by Coordinator/Utility,
                  its agents
                  or contractors, exclusively. However, only those items which are
                  designated Shared Costs in Section 2 of the Agreement are
                  recoverable.

              

      

      
        	 	
                2.2.3

              	
                Coordinator/Utility
                  shall conduct diligently all operations in accordance with practices
                  generally followed in remediation operations for manufactured gas
                  plant
                  sites and shall perform such operations in an efficient and economical
                  manner. All operations shall be conducted in compliance with the
                  terms of
                  this Agreement and all applicable laws and
                  regulations.

              

      

      
        	 	
                2.2.4

              	
                Coordinator/Utility
                  shall proceed with due diligence to secure or cause to be secured
                  such
                  permits, easements, and other rights to the use of land as may
                  be
                  requisite or appropriate to the conduct of operations and in accordance
                  with all applicable laws and
                  regulations.

              

      

      
        	 	
                2.2.5

              	
                Coordinator/Utility
                  shall permit, upon receipt of request in writing by any Utility,
                  employees
                  and representatives of such Utility to have full access to the
                  area of
                  operations (for the relevant MGP site) at all reasonable times
                  and at
                  their own risk and expense, for the purpose of observing any and
                  all
                  operations being conducted for the joint benefit of the Utilities
                  and
                  inspecting all materials, equipment and property. Such inspecting
                  Utility
                  shall observe all established safety rules and procedures for the
                  site.
                  Each Utility, through its representatives, employees or agents
                  duly
                  authorized in writing for such purposes, shall be permitted at
                  reasonable
                  intervals and during usual business hours to examine and make copies
                  of
                  any and all data and interpretations thereof, including but not
                  limited to
                  cores, samples, logs and surveys concerning operations conducted
                  hereunder
                  at said Utility’s sole cost. Coordinator/Utility shall furnish drafts of
                  all reports (including, but not limited to plans and proposals)
                  to the
                  other Utility and all the Utilities shall have the right to make
                  comments
                  prior to the preparation of the final report or any report submitted
                  to
                  the government. Coordinator/Utility shall furnish an accurate monthly
                  report to each Utility’s representative and alternate representative on
                  the Management Committee showing expenditures at the site.
                  Coordinator/Utility shall also furnish to any Utility any additional
                  information pertaining to operations at the site when a special
                  request
                  therefor is made; provided, however, that the cost of gathering
                  and
                  furnishing any additional information not ordinarily furnished
                  by
                  Coordinator/Utility shall be charged to the Utility who requests
                  the
                  information.

              

      

      
        	 	
                2.2.6

              	
                Coordinator/Utility
                  shall use its best efforts to keep the site free from liens, charges
                  and
                  encumbrances arising out of the operations
                  hereunder.

              

      

      
        	 	
                2.2.7

              	
                Coordinator/Utility
                  shall promptly pay all costs, expenses and taxes other than corporate
                  income taxes incurred by its operations as Coordinator/Utility
                  hereunder
                  and, with such cooperation of the other Utility as may be necessary
                  or
                  appropriate, take such action as may at any time be necessary to
                  protect
                  the site.

              

      

      
        	 	
                2.2.8

              	
                With
                  regard to operations for a particular MGP site, Coordinator/Utility
                  shall
                  procure and maintain in force for the Utilities any and all insurance
                  authorized by the Management Committee, without prejudice to each
                  Utility’s right to provide independently for its own additional insurance
                  coverage with respect to its interest in the
                  site.

              

      

      
        	 	
                2.2.9

              	
                Coordinator/Utility
                  shall keep full and complete records of accounts and of technical
                  operations hereunder and prepare and furnish to the Management
                  Committee
                  and shall furnish, or cause to be furnished, to government agencies
                  (with
                  opportunity for comment and input on drafts by the other Utilities)
                  such
                  reports, statements, data and information as may be required (by
                  law or
                  the Management Committee) from time to time for the operations
                  conducted
                  hereunder, except such reports, statements, data and information
                  to
                  government agencies as the Utilities may respectively and individually
                  be
                  required to prepare and submit.

              

      

      
        	 	
                2.2.10

              	
                Unless
                  otherwise directed by the Management Committee, notwithstanding
                  prior
                  approval of the program of activities and budget set forth in Section
                  1.7
                  of this Attachment, Coordinator/Utility shall submit to the other
                  Utility,
                  for its review and comments, all contracts which exceed US$50,000. 
                  The other Utility shall have the right of prior approval of any
                  contract
                  which exceeds US$50,000 or ten percent of the total amount in the
                  approved
                  program of activities and budget set forth in Section 1.7, whichever
                  is
                  less.

              

      

      
        	 	
                2.2.11

              	
                Notwithstanding
                  Section 2.2.10, no contract containing term provisions which exceed
                  two
                  years shall be executed prior to review and approval by both
                  Utilities.

              

      

      
        	
                2.3

              	
                Coordinator/Utility
                  shall undertake to carry out each program of activities adopted
                  by the
                  Utilities within the limits of the approved budget therefor.
                  Coordinator/Utility shall submit for approval to the Utilities
                  a copy of
                  Authority for Expenditure (“A.F.E.”), for any expenditure in excess of
                  US$100,000.00, or its equivalent, for the site. Such approval of
                  the
                  A.F.E. shall not be required if the expenditure in question has
                  been
                  included in an approved program of activities and budget.
                  Coordinator/Utility shall not undertake any operations not included
                  in any
                  approved program of activities or make any expenditures in excess
                  of the
                  approved budget and an approved A.F.E., if required, except as
                  follows:

              

      

      
        	 	
                2.3.1

              	
                If
                  necessary to carry out an approved program of activities for a
                  calendar
                  year, the Coordinator/Utility is hereby authorized to make, during
                  such
                  year, expenditures in excess of the budget adopted therefor, in
                  an amount
                  not to exceed ten percent (10%) of such budget. Any such expenditures
                  in
                  excess of the budget shall be reported promptly in writing to the
                  Utilities by Coordinator/Utility.

              

      

      
        	 	
                2.3.2

              	
                In
                  case of an emergency, Coordinator/Utility may make such immediate
                  expenditures as it may deem reasonably necessary for the protection
                  of
                  life or property, and such expenditures shall be reported promptly
                  to the
                  Utilities by Coordinator/Utility.

              

      

      2.4   Any
        and
        all claims and suits by third parties arising out of operations conducted
        hereunder and brought against the Coordinator/Utility or the Utilities, or
        any
        of them and/or any of their officers, directors, shareholders, employees,
        agents
        or representatives (collectively, “Utility Representatives”), shall, to the
        extent not covered by insurance, be compromised and settled or defended by
        Coordinator/Utility; provided, however, that if the claim or suit is brought
        against the Utility (and/or its Utility Representatives) that is not the
        Coordinator/Utility, that Utility shall compromise and settle or defend the
        claim or suit in accordance with this Section 2.4. The Utility that  compromises
        and settles or defends a claim or suit pursuant to this Section 2.4 is
        hereinafter called the “Defending Utility.” Defending Utility shall promptly
        seek the advice of the Management Committee and shall comply with any decisions
        of said Committee with respect thereto. Each Utility shall have the right
        to
        participate through its own counsel, at its own expense, in the settlement,
        compromise or defense of any claims and suits hereunder; however, all
        expenditures incurred by Defending Utility in prosecuting, defending,
        compromising, settling or paying any such claims or suits as directed by
        decisions of the Management Committee shall be borne by the Utilities and
        charged as a Shared Cost. Defending Utility shall have authority to settle
        a
        suit for property damage or personal injury, brought against the Defending
        Utility or the Utilities, or any of them or any Utility Representatives,
        without
        the approval of the Management Committee, for an amount not to exceed
        $50,000.

      
        	
                2.5

              	
                Neither
                  Utility nor any Utility Representative shall be liable to the other
                  Utility for any acts done or omitted to be done including negligence,
                  in
                  the performance of operations hereunder including, but not limited
                  to,
                  functions as Coordinator/Utility, provided that such acts or omissions
                  shall not have resulted from the gross negligence or willful misconduct
                  of
                  the Utility or its Utility
                  Representatives.

              

      

      
        	
                2.6

              	
                Coordinator/Utility
                  will maintain on behalf of the Utilities such offices as may be
                  necessary
                  or appropriate and approved by the Management
                  Committee.

              

      

      

      OPERATING
        PROGRAMS AND BUDGETS

      
        	
                3.1

              	
                After
                  Coordinator/Utility shall have submitted its proposed program of
                  activities and budget for approval pursuant to Section 1.7 hereof,
                  the
                  Management Committee shall, prior to October 20 of each calendar
                  year,
                  consider, agree upon and adopt a program of activities and budget
                  for the
                  next succeeding calendar year. Upon adopting a program of activities
                  and
                  budget as provided herein, the Management Committee shall provisionally
                  consider but not act upon, adopt or agree to, a program of activities
                  and
                  budget for the calendar year next following that for which the
                  program of
                  activities and budget shall have been
                  adopted.

              

      

      
        	
                3.2

              	
                Each
                  proposed budget shall contain a properly itemized estimate of the
                  cost of
                  the operations provided for in the respective program of activities
                  and of
                  all other expenditures proposed to be made by Coordinator/Utility
                  for each
                  relevant site during the calendar year. Each program of activities
                  and
                  budget adopted shall be subject to review and revision by the Management
                  Committee from time to time; provided, however, that no revision
                  shall be
                  made which would prejudice commitments previously made by the
                  Coordinator/Utility within the limits of an existing approved program
                  of
                  activities and budget.

              

      

      
        	
                3.3

              	
                As
                  soon as reasonably possible after the adoption of a program of
                  activities
                  and budget, Coordinator/Utility shall deliver or send a copy thereof
                  to
                  each Utility.

              

      

      

      COSTS,
        EXPENSES, AND DEFAULT

      
        	
                4.1

              	
                All
                  Shared Costs incurred in the conduct of operations under this Agreement
                  shall be borne on an interim basis by the Utilities in proportion
                  to their
                  respective percentages shown in Section 1 of the Interim Cooperative
                  Agreement except as otherwise herein provided. Such costs and expenses
                  shall be determined and settled in accordance with generally accepted
                  accounting principles (“Accounting Principles”) and Coordinator/Utility
                  shall keep its records of costs and expenses in accordance with
                  such
                  Accounting Principles. In the event of conflict between this Agreement
                  and
                  said Accounting Principles the provisions of this Agreement shall
                  control.

              

      

      
        	
                4.2

              	
                At
                  least thirty (30) days prior to the beginning of each calendar
                  quarter,
                  Coordinator/Utility shall submit to each Utility an estimate of
                  cash
                  expenditures to be made per month of operation during such quarter
                  to
                  carry out the approved program of activities in accordance with
                  the budget
                  approved therefor. Coordinator/Utility may require each Utility
                  to advance
                  its share of estimated expenditures to be made each month in accordance
                  with the terms of the Accounting Principles (such advance not to
                  be more
                  than two weeks prior to the start of the
                  month).

              

      

      
        	
                4.3

              	
                In
                  the event the other Utility fails to pay any invoice submitted,
                  or cash
                  call made by the Coordinator/Utility, or if the Coordinator/Utility
                  fails
                  to pay its share of costs and expenses hereunder, such non-paying
                  Utility
                  shall be in default. Any non-defaulting Utility shall proportionately
                  contribute to the payment of the share of costs and expenses which
                  the
                  defaulting Utility has failed to pay. Any defaulting Utility shall
                  thereafter owe and be indebted to each non-defaulting Utility for
                  the
                  proportionate contribution made by each such non-defaulting Utility
                  along
                  with interest at the rate set out in Section 7 of the
                  Agreement.

              

      

      
        	
                4.4

              	
                In
                  addition to the other remedies available to them, each non-defaulting
                  Utility shall have the option (but only after consultation with
                  the
                  defaulting Utility) exercisable by notice in writing within thirty
                  (30)
                  days after the expiration of ninety (90) days after a Utility first
                  goes
                  into default, to bring a request for a final allocation of costs
                  within
                  the meaning of and subject to the limitations of Sections 4, 5
                  and 6 of
                  the Agreement for the site or sites in
                  default.

              

      

      
        	
                4.5

              	
                The
                  remedies contained in Section 4.1 through 4.4 above against a defaulting
                  or non-defaulting Utility are not exclusive and are without prejudice
                  to
                  any remedies or actions at law or equity that are or may be available
                  to
                  any non-defaulting Utility for the enforcement of its rights and
                  collection of all sums due and owing from any defaulting Utility.
                  The
                  failure to exercise any right or remedy at any time shall not constitute
                  a
                  waiver of such right or remedy or estop the future exercise of
                  such right
                  or remedy with respect to any default or subsequent defaults in
                  the
                  performance by any Utility of its obligations hereunder (including
                  but not
                  limited to the obligation to advance
                  funds).

              

      

      

      MATERIALS
        AND EQUIPMENT

      
        	
                5.1

              	
                Except
                  as may be specifically provided in this Agreement, all materials
                  and
                  equipment acquired by Coordinator/Utility for operations hereunder
                  shall
                  be owned by the Utilities in undivided shares in their proportion
                  of the
                  Interim Allocation of Costs, or, if determined, the Final Allocation
                  of
                  Costs.

              

      

      
        	
                5.2

              	
                Except
                  as may be otherwise approved by the Management Committee and subject
                  to
                  the provisions of the Agreement, Coordinator/Utility shall purchase
                  only
                  such materials and equipment as are reasonably required in the
                  conduct of
                  operations provided for in the approved programs of activities
                  or
                  revisions thereof. Coordinator/Utility shall not stockpile materials
                  or
                  equipment for future use without the approval of the Management
                  Committee.

              

      

      
        	
                5.3

              	
                Subject
                  to the provisions of this Agreement, materials or equipment declared
                  by
                  Coordinator/Utility to be surplus shall be disposed of in such
                  manner as
                  the Management Committee may direct; or if the fair market value
                  of an
                  item does not exceed US$10,000.00, Coordinator/Utility, upon giving
                  to the
                  Utilities twenty (20) days’ written notice of intention so to do, shall
                  dispose of said item in such manner as Coordinator/Utility shall
                  deem
                  appropriate; provided however, that each Utility may, if practicable,
                  separately sell and dispose of its interest in such materials or
                  equipment
                  or may purchase, at the prevailing market price in the area, materials
                  or
                  equipment which Coordinator/Utility has declared to be surplus
                  and which
                  Coordinator/Utility intends to dispose of on the open
                  market.

              

      

      
        	
                5.4

              	
                Upon
                  termination of this Agreement, Coordinator/Utility shall salvage
                  for the
                  joint account all jointly-owned materials and equipment which can
                  reasonably be salvaged, to be disposed of as provided in Section
                  5.3
                  hereof.

              

      

      

      FORCE
        MAJEURE

      
        	
                6.1

              	
                The
                  obligations hereunder of each Utility shall be suspended while
                  and to the
                  extent that such Utility is prevented from complying with such
                  obligations
                  by force majeure, including, without limitation, strikes, lockouts,
                  labor
                  and civil disturbances, acts of God, unavoidable accidents, laws,
                  rules,
                  regulations or orders of any government or agent or instrumentality
                  thereof having at any time de facto or de jure control over any
                  of the
                  Utilities, acts of war or conditions arising out of or attributable
                  to
                  war, whether declared or undeclared, shortage of essential equipment,
                  materials or labor, or restrictions thereof or limitations upon
                  the use
                  thereof, delays in transportation or communication, adverse weather
                  conditions or other causes reasonably beyond the control of any
                  Utility
                  claiming force majeure hereunder, whether similar or dissimilar
                  to the
                  causes herein specified. If force majeure should result in suspension
                  of
                  performance of any of the obligations of any utility hereunder,
                  such
                  Utility shall give to the other Utility notice in writing of such
                  suspension of performance as soon as reasonably possible, stating
                  therein
                  the date and extent of such suspension and whether in whole or
                  in part,
                  and specifying in reasonable detail the nature of the force majeure
                  causing such suspension. Any Utility, the performance of whose
                  obligation
                  has been suspended as aforesaid, shall resume performance thereof
                  as soon
                  as reasonably possible after the circumstances preventing such
                  performance
                  as provided above shall have terminated or ceased to have such
                  effect, and
                  shall so notify the other Utility as herein provided. The provisions
                  of
                  this Article shall not suspend the obligation of a Utility to make
                  timely
                  payment of its share of costs and expenses hereunder or to provide
                  access
                  to the site to the other
                  Utility.Nicor Inc Exhibit 10.12

            Nicor
      Inc.

    Form
      10-Q

    Exhibit
      10.12

     

    AMENDMENT
      NO. 1 TO THE INTERIM COOPERATIVE AGREEMENT

    

    

    Commonwealth
      Edison Company (“Edison”), an Illinois corporation, and Northern Illinois Gas
      Company (“NI-Gas”), an Illinois corporation, (collectively, “Utilities”) hereby
      modify their Interim Cooperative Agreement of October 28, 1993 (“Agreement”) by
      entering into this Amendment No. 1 (“Amendment”) to the Agreement.

    

    WHEREAS,
      without admitting any liability, the Utilities entered into the Agreement to
      provide an interim cooperative arrangement for the Utilities to address certain
      issues at certain former manufactured gas plant (“MGP”) sites in
      Illinois;

    

    WHEREAS,
      the Utilities have decided that four sites should be added to the list of MGP
      sites on Attachment A to the Agreement (“Site List”);

    

    WHEREAS,
      the Utilities have decided that other amendments should be made to the
      Agreement;

    

    NOW
      THEREFORE, based on the covenants and mutual promises contained herein, Edison
      and NI-Gas agree that, pursuant to Section 16 of the Agreement, the Agreement
      is
      modified as follows.

    

    1. The
      Site
      List in Attachment A of the Agreement is amended to include the following MGP
      sites (collectively, “Four Sites”):

    

    
      	 	
              25.

            	
              MGP
                Site on Coal Gas Road

            

    

    DuQuoin,
      Illinois (“DuQuoin MGP Site”)

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    
      	 	
              26.

            	
              MGP
                site on Bluff Street

            

    

    Joliet,
      Illinois (“Bluff Street MGP Site”)

    

    
      	 	
              27.

            	
              MGP
                site on Center Street

            

    

    Geneseo,
      Illinois (“Geneseo I MGP Site”)

    

    
      	 	
              28.

            	
              MGP
                site at Clinton and Jackson

            

    

    Ottawa,
      Illinois (“Ottawa II MGP Site”)

    

    The
      Four
      Sites are subject to all of the terms of the Agreement, except as otherwise
      provided in this Amendment. If there is any conflict between the terms of the
      Agreement and the terms of this Amendment, the terms of this Amendment shall
      govern.

    

    2. By
      way of
      clarification, the Note on the bottom of each page of Attachment A to the
      Agreement is deleted and is replaced by the following:

    

    NOTE:
      Edison and NI-Gas are not admitting liability at any of these sites or, except
      as otherwise provided in the Agreement, waiving any rights or
      defenses.

    

    3. The
      first
      sentence of Section 2.1 is amended by deleting the period at the end of the
      sentence and replacing it with:

    

    and
      any
      other costs associated with investigation and/or remediation of a particular
      MGP
      site that the Utilities agree to incur as Shared Costs for that
      site.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    4. Section
      2.2 (b) is amended by deleting the semi-colon and replacing it
      with:

    

    ,
      except
      as other expressly agreed to by the Utilities with regard to a particular MGP
      site.

    

    5. The
      title
      of Section 3 of the Agreement is deleted and replaced with the
      following:

    

    
      	 	
              3.

            	
              Previously
                Agreed Upon Costs Subject to Interim or Final Cost
                Allocation.

            

    

    

    6. Section
      3.1 of the Agreement is amended by: (i) deleting the period at the end of
      Section 3.1(c) and replacing it with a semi-colon and the word “and”; and (ii)
      adding the following after Section 3.1(c):

    

    
      	 	
              d)

            	
              the
                portion of the costs for the DuQuoin MGP Site (“DuQuoin Response Costs”)
                allocated to Edison during the arbitration of the allocation of the
                DuQuoin Response Costs between Edison and Central Illinois Public
                Service
                Company (“CIPS”), pursuant to the Arbitration Agreement between Edison and
                CIPS (effective January 5, 1995) (“ComEd/CIPS Agreement”), and that are
                incurred after the Effective Date of Amendment No. 1 to the Interim
                Cooperative Agreement, which DuQuoin Response Costs shall include:
                (i) the
                DuQuoin Response Costs that will be incurred to pay environmental
                consultants and contractors to implement
                remedial

            

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    and/or
      removal action at the DuQuoin MGP Site that is acceptable to IEPA, Edison and
      CIPS (“DuQuoin Remedial Action”); (ii) the oversight costs that will be paid to
      IEPA in connection with the DuQuoin Remedial Action; (iii) any costs that CIPS
      and Edison agree to incur, or for which Edison is legally liable, to have a
      third party investigate and/or otherwise perform remedial or removal action
      at
      the Southtowne Shopping Center or any property that has been impacted by
      manufactured gas plant operations at the DuQuoin MGP Site; (iv) any costs for
      which CIPS and Edison may be liable under the terms of an indemnification
      agreement that they may enter into with Mutual of New York regarding potential
      manufactured gas plant materials at the Southtowne Shopping Center; and (v)
      any
      costs and liabilities incurred by CIPS and Edison to purchase and own portions
      of the DuQuoin MGP Site to minimize the cost of remedial or removal action
      at
      the DuQuoin MGP Site (including, but not limited to, the amounts paid to the
      sellers of portions of the DuQuoin MGP Site, taxes, insurance, maintenance
      and
      other similar costs of owning those portions; provide, however, that the total
      amount paid by CIPS and Edison to 

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    the
      sellers of portions of the DuQuoin MGP Site shall not exceed
      $160,000).

    

    7. Section
      3.2 of the Agreement is amended by: (i) inserting the phrase “Notwithstanding
      the provisions of Section 1.1” at the beginning of the first sentence of Section
      3.2; (ii) inserting the phrase “, but not interim,” between the words “final”
and “allocation” in the first line of Section 3.2; (iii) deleting the period at
      the end of Section 3.2(b) and replacing it with a semi-colon and the work “and”;
      and (iv) adding the following after Section 3.2(b):

    

    c) the
      portion of the DuQuoin Response Costs allocated to Edison pursuant to the
      ComEd/CIPS Agreement for costs incurred by Edison and CIPS before the Effective
      Date of Amendment No. 1 to the Interim Cooperative Agreement (which total
      approximately $800,000) for payments to environmental consultants and
      contractors, and payments of response and oversight costs to the Illinois
      Environmental Protection Agency (“IEPA”); and

    

    d) the
      costs
      for investigation of the Bluff Street MGP Site by third parties, and the IEPA
      oversight costs for such investigation, that Edison incurred before the
      Effective Date of Amendment No. 1 to the Interim Cooperative Agreement (which
      costs total approximately $243,000).

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    8. Section
      4.1 of the Agreement is amended by: (i) deleting the period at the end of
      Section 4.1(d) and replacing it with the word “and”; and (ii) adding the
      following after Section 4.1(d):

    

    e) Notwithstanding
      any other provision of this Section 4.1, the time for Final Cost Allocation
      for
      the Shared Costs for the DuQuoin MGP Site shall be as follows. During the twelve
      (12) months following the second anniversary of the Effective Date of Amendment
      No. 1 to the Interim Cooperative Agreement, the Utilities shall attempt to
      negotiate the final allocation of the DuQuoin Response Costs. If the Utilities
      are unable to agree with such twelve (12) months, either Utility may seek
      binding arbitration as provided for in Section 5 of the Interim Cooperative
      Agreement after the conclusion of such twelve (12) months.

    

    9. The
      period at the end of the first sentence in Section 6.8 is deleted and replaced
      with the following:

    

    ;
      provided, however, that such condition shall not apply to the Final Cost
      Allocation for the Shared Costs for the Four Sites. The allocation of Shared
      Costs for each of the Four Sites may range from 0% to 100% for either
      Utility.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    

    10. Section
      6.8(a) of the Agreement shall be amended by inserting at the beginning of the
      first line the phrase: “Except with respect to the Four Sites”.

    

    11. The
      fourth line of Section 6.8(b) shall be amended by inserting “except with respect
      to the Four Sites” after the words “informed that.”

    

    12. Section
      7
      of the Agreement shall be amended to include the following provision after
      Section 7.4:

    

    7.5
      Notwithstanding any other provision of the Interim Cooperative Agreement,
      prejudgment interest shall not be paid on Shared Costs for the DuQuoin MGP
      Site
      or the Bluff Street MGP Site that were incurred by ComEd prior to the Effective
      Date of Amendment No. 1 to the Interim Cooperative Agreement.

    

    13. Section
      9(c) of the Agreement is amended by inserting the phrase “or investigation
      (including a cause of action regarding the Utilities’ respective potential
      liability for Shared Costs for a site or sites on the Site List or the
      allocation of Shared Costs between the Utilities for a site or sites on the
      Site
      List)” between the words “remediation” and “arising”, and by adding the
      following sentence after the phrase “the Site List” at the end of Section
      9(c):

    

    If,
      in
      accordance with the terms of this Agreement governing litigation between the
      Utilities involving a site on the Site List, the Utilities litigate any issues
      concerning their respective potential liability

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    for
      Shared Costs for a site or sites on the Site List, or the allocation of Shared
      Costs for a site or sites on the Site List, Edison and NI-Gas each agree to
      waive any defense that they may have based on a statute of limitations
      applicable to events before the Effective Date of this Agreement. This waiver
      shall apply only to sites on the Site List for which the Utilities have agreed
      to allocate Shared Costs within the meaning of Section 1.1 or Section 3 of
      the
      Agreement.

    

    14. Section
      23 of the Agreement is amended by inserting at the beginning of Section 23
      the
      following phrase: “Except as provided in Section 9,”.

    

    15. Section
      26 of the Agreement is amended by inserting the following after the first
      sentence in Section 26:

    

    If
      the
      Utilities incur Shared Costs that they agree that they need to incur prior
      to
      the approval or disapproval of Amendment No. 1 to the Interim Cooperative
      Agreement by the Illinois Commerce Commission (to the extent such approval
      is
      required by Section 7-102 of the Public Utilities Act), the Utilities shall
      act
      in accordance with Amendment No. 1 to the Interim Cooperative Agreement with
      regard to such Shared Costs, including, but not limited to, the condition that
      each Utility will pay, on an interim basis, 50% of the costs that it agrees
      to
      incur for a site.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    16. The
      Agreement is amended by adding the following Section 27 after Section
      26.

    27. Coordinator
      Utility for DuQuoin MGP Site and Bluff Street MGP Site.

    

    27.1 Edison
      will be the Coordinator/Utility for the DuQuoin MGP Site. To the extent
      reasonably possible and consistent with the implementation of the DuQuoin
      Remedial Action as soon as possible, Edison and NI-Gas will comply with the
      requirements of Section 8(a) though (f) and Attachment C of the Interim
      Cooperative Agreement in connection with DuQuoin Response Costs that are
      incurred after the Effective Date of Amendment No. 1 to the Interim Cooperative
      Agreement; provided, however, that NI-Gas agrees to the implementation of the
      DuQuoin Remedial Action, and agrees to waive any requirements of Section 8(a)
      through (f) and Attachment C of the Interim Cooperative Agreement with regard
      to
      the DuQuoin Remedial Action if compliance with such requirements would, in
      Edison’s judgment, cause an unreasonable delay in the implementation of the
      DuQuoin Remedial Action.

    

    27.2 Edison
      will be the Coordinator/Utility for the Bluff Street MGP Site.

    

    17. The
      effective date (“Effective Date”) of this Amendment shall be the date of the
      last party to execute this Amendment. This Amendment may be executed in multiple
      counterparts, each of

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    which
      shall be deemed an original, but all of which together shall constitute one
      and
      the same instrument.

    

    
      	 	
              18.

            	
              As
                hereinabove amended, the Agreement will remain in full force and
                effect.

            

    

    

    IN
      WITNESS WHEREOF, each Utility designed below enters into this Amendment. Each
      person signing this Amendment represents and warrants that he or she has been
      duly authorized to enter into this Amendment by the company or entity on whose
      behalf it is indicated that the person is signing.

    

    

    Dated:__________________      Party:
      Northern
      Illinois Gas Company

    

    By: /s/
      RICHARD J. LANNON

    Vice
      President Administration

    

    Dated:
      June
      20, 1996            Party:
      Commonwealth
      Edison Company

    

    By: /s/
      MARY
      F. O’TOOLE

    Environmental
      Services Manager

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