EXHIBIT 10.3
TRANSITION SERVICES AGREEMENT
between
CENTERPOINT ENERGY, INC.
and
TEXAS GENCO HOLDINGS, INC.
TRANSITION SERVICES AGREEMENT
TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS............................................................................... 1
1.1 Additional Services........................................................... 1
1.2 Ancillary Agreements.......................................................... 1
1.3 CenterPoint Group............................................................. 1
1.4 Corporate Center Services..................................................... 1
1.5 Genco Distribution............................................................ 1
1.6 Genco Distribution Date....................................................... 1
1.7 Genco Separation Agreement.................................................... 2
1.8 Genco Group................................................................... 2
1.9 Group......................................................................... 2
1.10 Impracticable................................................................. 2
1.11 Information Technology Services............................................... 2
1.12 Initial Services.............................................................. 2
1.13 Liability..................................................................... 2
1.14 Providing Company............................................................. 2
1.15 Receiving Company............................................................. 2
1.16 Representative................................................................ 2
1.17 Services...................................................................... 2
1.18 Shared Services............................................................... 2
1.19 Subsidiary.................................................................... 2
1.20 System........................................................................ 2
ARTICLE II SERVICES................................................................................. 3
2.1 Services...................................................................... 3
2.2 Subsidiaries; Services Performed by Others.................................... 4
2.3 Charges and Payment........................................................... 5
2.4 General Obligations; Standard of Care......................................... 8
2.5 Certain Limitations........................................................... 10
2.6 Confidentiality............................................................... 10
2.7 Term; Early Termination....................................................... 11
2.8 Disclaimer of Warranties, Limitation of Liability and Indemnification......... 12
2.9 Representatives............................................................... 13
2.10 Employee Matters.............................................................. 13
ARTICLE III MISCELLANEOUS........................................................................... 13
3.1 Taxes......................................................................... 13
3.2 Laws and Governmental Regulations............................................. 14
3.3 Relationship of Parties....................................................... 14
3.4 References.................................................................... 14
3.5 Modification and Amendment.................................................... 14
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3.6 Inconsistency................................................................. 14
3.7 Resolution of Disputes........................................................ 15
3.8 Successors and Assignment..................................................... 15
3.9 Notices....................................................................... 15
3.10 Governing Law................................................................. 15
3.11 Severability.................................................................. 15
3.12 Counterparts.................................................................. 15
3.13 Rights of the Parties......................................................... 15
3.14 Reservation of Rights......................................................... 15
3.15 Entire Agreement.............................................................. 16
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TRANSITION SERVICES AGREEMENT
THIS TRANSITION SERVICES AGREEMENT, entered into effective as
of August 31, 2002 (the "Effective Date"), is between CenterPoint Energy, Inc.,
a Texas corporation ("CenterPoint"), and Texas Genco Holdings, Inc., a Texas
corporation ("Genco"). Capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned to them in Article I hereof or
assigned to them in the Genco Separation Agreement (as defined below).
WHEREAS, Genco is an indirect, wholly owned Subsidiary of
CenterPoint; and
WHEREAS, the parties have entered into a Separation Agreement
of even date herewith (the "Genco Separation Agreement") pursuant to which,
among other things, approximately 19% of the shares of Genco common stock owned
by CenterPoint will be distributed to the shareholders of CenterPoint (the
"Genco Distribution"); and
WHEREAS, the parties agree that it will be necessary and
desirable for CenterPoint to provide to Genco the "Services" described herein
for a transitional period following the Genco Distribution.
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, the parties, intending to be
legally bound, agree as follows:
ARTICLE I
DEFINITIONS
For the purpose of this Agreement the following terms shall
have the following meanings:
1.1 ADDITIONAL SERVICES. "Additional Services" shall have
the meaning set forth in subsection 2.1(c).
1.2 ANCILLARY AGREEMENTS. "Ancillary Agreements" has the
meaning assigned to that term in the Genco Separation Agreement.
1.3 CENTERPOINT GROUP. "CenterPoint Group" shall mean
CenterPoint and its Subsidiaries excluding Genco and other members of the Genco
Group.
1.4 CORPORATE CENTER SERVICES. "Corporate Center
Services" shall mean the Services described in Exhibit 2.1(a)(i).
1.5 GENCO DISTRIBUTION. "Genco Distribution" has the
meaning set forth in the recitals hereto.
1.6 GENCO DISTRIBUTION DATE. "Genco Distribution Date"
has the meaning assigned to that term in the Genco Separation Agreement.
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1.7 GENCO SEPARATION AGREEMENT. "Genco Separation
Agreement" has the meaning set forth in the recitals hereto.
1.8 GENCO GROUP. "Genco Group" shall mean Genco and its
Subsidiaries.
1.9 GROUP. "Group" shall mean either of the CenterPoint
Group or the Genco Group, as the context requires.
1.10 IMPRACTICABLE. "Impracticable" (and words of similar
import) shall have the meaning set forth in Section 2.5(b).
1.11 INFORMATION TECHNOLOGY SERVICES. "Information
Technology Services" shall mean the Services described in Exhibit 2.1(a)(ii).
1.12 INITIAL SERVICES. "Initial Services" shall have the
meaning set forth in Section 2.1(a).
1.13 LIABILITY. "Liability" has the meaning assigned to
that term in the Genco Separation Agreement.
1.14 PROVIDING COMPANY. "Providing Company" shall mean,
with respect to any particular Service, CenterPoint, or if a CenterPoint
Subsidiary is identified on the applicable Exhibit as the party to provide such
Service, such CenterPoint Subsidiary.
1.15 RECEIVING COMPANY. "Receiving Company" shall mean,
with respect to any particular Service, Genco or such Genco Subsidiary or Genco
Subsidiaries as may be identified on the applicable Exhibit as the party to
receive such Service or as Genco may hereafter designate to receive such
Service.
1.16 REPRESENTATIVE. "Representative" of any party shall
mean a managerial level employee appointed by such party to have the
responsibilities and authority set forth in Section 2.9.
1.17 SERVICES. "Services" shall have the meaning set forth
in Section 2.1(c).
1.18 SHARED SERVICES. "Shared Services" shall mean the
Services described in Exhibit 2.1(a)(iii).
1.19 SUBSIDIARY. "Subsidiary" shall mean, with respect to
CenterPoint or Genco, a corporation, partnership, limited partnership, limited
liability company or other entity more than 50% of the voting common stock or
other interests entitled to vote generally for the election of directors (or
comparable governing body) is owned, directly or indirectly, by CenterPoint or
Genco, respectively.
1.20 SYSTEM. "System" shall mean the software, hardware,
data store or maintenance and support components or portions of such components
of a set of information technology assets identified in Exhibit 2.1(a)(ii)
hereto.
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ARTICLE II
SERVICES
2.1 SERVICES.
(a) INITIAL SERVICES. Except as otherwise provided
herein, during the applicable term determined pursuant to Section 2.7 hereof,
the following "Initial Services" shall be provided by CenterPoint or other
Providing Company with respect to a Service to Genco or other Receiving Company
with respect to a Service:
(i) Corporate Center Services;
(ii) Information Technology Services; and
(iii) Shared Services.
(b) FINAL EXHIBITS. The parties have made good faith
efforts as of the date hereof to identify each Initial Service and complete the
content of each Exhibit pertaining to the Initial Services. To the extent an
Exhibit has not been prepared for an Initial Service or an Exhibit is otherwise
incomplete as of the date hereof, the parties shall use good faith efforts to
prepare or complete Exhibits by the Genco Distribution Date. Any Services
reflected on any such additional or amended Exhibit shall be deemed an "Initial
Service" as if set forth on such Exhibit as of the date hereof.
(c) ADDITIONAL SERVICES.
(i) From time to time after the Genco Distribution Date,
the parties may identify additional services that one party will
provide to the other party in accordance with the terms of this
Agreement (the "Additional Services" and, together with the Initial
Services, the "Services"). The parties shall create an Exhibit for each
Additional Service setting forth a description of the Service, the time
period during which the Service will be provided, the charge for the
Service and any other terms applicable thereto and obtain the approval
of each party's Representative. Except as set forth in Section
2.1(c)(ii), the parties may, but shall not be required to, agree on
Additional Services during the term of this Agreement.
(ii) Except as set forth in the next sentence, the
Providing Company shall be obligated to perform, at charges established
pursuant to Section 2.3, any Additional Service that: (A) was provided
by the Providing Company immediately prior to the Genco Distribution
Date and that the Receiving Company reasonably believes was
inadvertently or unintentionally omitted from the list of Initial
Services or (B) is essential to effectuate an orderly transition of
Genco to an independently managed, public company following the Genco
Distribution, unless in either case such performance would
significantly disrupt the Providing Company's operations or materially
increase the scope of its responsibility under this Agreement. If the
Providing Company reasonably believes the performance of Additional
Services required under the foregoing clauses (A) or (B) would
significantly disrupt its operations or materially increase the scope
of its responsibility under this Agreement, the Providing Company and
the Receiving
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Company shall negotiate in good faith to establish terms under which
the Providing Company can provide such Additional Services, but the
Providing Company shall not be obligated to provide such Additional
Services if, following good faith negotiation, the Providing Company
and the Receiving Company are unable to reach agreement on such terms.
(d) SCALED UP OR MODIFIED SERVICES. If Genco requests the
level at which any Service is to be provided to be scaled up to a level in
excess of the level in effect on the Genco Distribution Date (or, in the case of
Corporate Center Services, such levels as may reasonably be expected to result
taking into account the status of Genco as a separate public company), or a
modification to any Service, Genco shall give CenterPoint such advance notice as
it may reasonably require sufficient to enable CenterPoint to make any necessary
preparations to perform such Services on the scaled-up or modified basis, and to
develop changes in the cost-based rates for those services as described in
Section 2.3(d). For purposes of this Section, the level of a Service shall be
considered to be "scaled up" if providing the service at the proposed level
involves an increase in personnel, equipment or other resources that is not, in
the opinion of the Providing Company, de minimis and is not reasonably embraced
by the agreed definition and scope of that Service prior to the proposed
increase.
2.2 SUBSIDIARIES; SERVICES PERFORMED BY OTHERS. At its
option, a Providing Company may cause any Service it is required to provide
hereunder to be provided by any other Person that is providing, or may from time
to time provide, the same or similar services for the Providing Company. Unless
otherwise specified herein or on an Exhibit hereto, the Providing Company shall
remain responsible, in accordance with the terms of this Agreement, for
performance of any Service it causes to be so provided. A Receiving Company may
direct that any Service required to be provided hereunder be provided for the
benefit of another member of the Group of which the Receiving Company is a
member, but unless specified herein or on an Exhibit hereto, the Receiving
Company shall be responsible for the payment of charges and other performance
required of the Receiving Company with respect to such Service.
To the extent CenterPoint personnel who traditionally have
provided services contemplated by this Agreement are transferred to a similar
position with Genco or a member of the Genco Group, such personnel shall
continue to provide services to Genco and, until the Genco Distribution Date,
will provide such services to CenterPoint to the extent CenterPoint requests. To
the extent such transferred personnel provide services to Genco, CenterPoint
shall be relieved of its obligations to provide such services to Genco under
this Agreement.
If CenterPoint personnel necessary to provide services under
this Agreement are transferred to Genco before the Genco Distribution Date and
CenterPoint is thereby rendered unable to continue to provide such services as
contemplated by this Agreement, CenterPoint shall be excused from its
obligations to provide such services, except to the extent either (i) such
services can reasonably be provided from personnel remaining with CenterPoint
without an increase in costs to CenterPoint that are not subject to
reimbursement under this Agreement or (ii) such services are treated as
Additional Services.
Services that Genco provides to CenterPoint prior to the Genco
Distribution Date shall be treated as though Genco is the Providing Company and
CenterPoint is the Receiving
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Company under this Agreement. CenterPoint shall compensate Genco for such
services in the same manner as Genco compensates CenterPoint for similar
services, and the risk allocation to Genco for such services shall be the same
as the risk allocation to CenterPoint for the services.
2.3 CHARGES AND PAYMENT.
(a) GENERAL PRINCIPLES RELATING TO CHARGES FOR SERVICES.
Subject to the specific terms of this Agreement, the Services will be charged
and paid for on the same general basis as has been heretofore in effect, with
the intent that such charges shall approximate the fully allocated direct and
indirect costs of providing the services, including reimbursement of
out-of-pocket third party costs and expenses, but without any element of profit
except to the extent routinely included as a component of traditional utility
cost of capital. It is the further intent of the parties that the fully
allocated direct and indirect costs incurred by CenterPoint and its Subsidiaries
in providing Services under this Agreement and similar services to other
entities within the CenterPoint Group will be charged for on a basis that
allocates such costs charged on a fair, nondiscriminatory basis. The parties
shall use good faith efforts to discuss any situation in which the actual charge
for a Service is reasonably expected to exceed the estimated charge, if any, set
forth on an Exhibit for a particular Service, provided, however, that charges
incurred in excess of any such estimate shall not justify stopping the provision
of, or payment for, Services under this Agreement.
(i) Special Provisions for Corporate Center Services. In
the case of Corporate Center Services, the costs of Services included
in Exhibit 2.1(a)(i) will be direct billed on the basis of the fully
allocated direct and indirect costs of providing those Services
determined under the principles set forth in Section 2.3(a) where
practicable. The costs of all other Corporate Center Services will be
gathered in a common cost pool with similar services provided to other
members of the CenterPoint Group and allocated to Genco and to other
members of the CenterPoint Group pursuant to the existing methodology
derived from the 1999 corporate cost allocation study conducted for
Reliant Energy, Incorporated by DMG Maximus. As is the case under the
current methodology, when there is a significant increase or decrease
in one or more components of the cost of providing a Service, or when a
category of Services is terminated as provided in Section 2.7, an
adjustment to the allocation will be made by CenterPoint to reflect
such changes. Out-of-pocket costs and expenses will also be included in
the charges as provided in this Section 2.3(a).
(ii) Special Provisions for Information Technology
Services. In the case of Information Technology Services, Services will
be charged initially based on the rates and usage formulas set forth in
Exhibit 2.1(a)(ii) and shall be adjusted from time to time thereafter.
The rates and formulas in effect at the Genco Distribution Date will
continue in effect until December 31, 2003, unless adjustments prior to
that date are required as specified in Section 2.3(b). Out-of-pocket
costs and expenses will also be included in the charges as provided in
this Section 2.3(a). Subsequent to December 31, 2003, components of
rates attributable to equipment usage will be adjusted to reflect
compensation for depreciation and return on capital investment.
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In the case of any Services associated with facilitating the
transition to an independent information technology infrastructure for
Genco (as distinguished from the continuation of services of the nature
heretofore provided) the scope and pricing of which has not been
defined as of the Genco Distribution Date, the rates therefor will be
determined by CenterPoint on the basis of the same cost-based
methodology underlying the pricing of other Services provided under
this Agreement. CenterPoint and Genco will use their respective
commercially reasonable efforts to minimize incremental costs of
effecting a transition to an independent information technology
infrastructure for Genco.
It is understood that, except as otherwise provided herein or
agreed in writing, the cost of buying new hardware or obtaining new
software licenses specifically for the benefit of Genco shall be the
responsibility of Genco.
It is understood that CenterPoint's commitment to deliver the
level of service specified herein (including any Exhibits hereto) is
contingent upon adherence by Genco to CenterPoint's process and
technology standards as currently in effect and as subsequently
modified and communicated to Genco.
It is understood that CenterPoint is responsible for
protecting the performance levels and security of existing systems and
information technology infrastructure. Accordingly, Genco agrees to
review all modifications to any existing system currently running on
CenterPoint's infrastructure and to obtain CenterPoint's approval,
which shall not be unreasonably withheld, for such modifications.
Similarly, Genco will review all new systems to be run on CenterPoint's
infrastructure, or which connect with it, and will obtain CenterPoint's
approval, which shall not be unreasonably withheld or delayed, before
such systems are put in development or production.
It is understood that the rates provided for herein are based
on a continuation of CenterPoint's centralized information technology
infrastructure and organization. If Genco requests changes to any
Services provided that require the segmentation of CenterPoint's
information technology infrastructure into multiple or independent
units, CenterPoint shall have the right to elect whether or not to
provide Services on such changed basis, including the right to
establish the economic terms on which it is willing to provide such
Services.
(iii) Special Provisions for Shared Services. In the case
of Shared Services, the Services will be charged initially based on the
rates and usage formulas set forth in the applicable Service Level
Agreements covering services referenced in Exhibit 2.1(a)(iii) and
shall be adjusted from time to time thereafter, as provided herein. The
rates and formulas in effect at the Genco Distribution Date will
continue in effect until December 31, 2003, unless adjustments prior to
that date are required as specified in Section 2.3(b). Out-of-pocket
costs and expenses will also be included in the charges as provided in
this Section 2.3(a).
(b) ECONOMIC REOPENER. If, in the case of any Services,
events or circumstances arise which, in the opinion of the Providing Company,
render the costs of providing such Services as determined under the principles
set forth in Section 2.3(a) materially
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different from those being charged under a specific rate or formula then in
effect, the specific rate or formulas shall be equitably adjusted to take into
account such events or changed circumstances and bring them into line with the
general principles set forth in Section 2.3(a). Rates for a Service will also be
adjusted on a pro rata basis whenever the cost of providing the Service
increases by reason of the necessity to renegotiate a software license or obtain
a new license as a result of the change in the relationship between the
Providing Company and the entity to whom the Service is provided.
(c) ANNUAL ADJUSTMENTS. Specific rates and formulas for
Services provided hereunder shall be subject to adjustment as of January 1 in
each year commencing January 1, 2004 to bring the rates and formulas into
conformity with the general principles referred to in Section 2.3(a), based on
estimated fixed and variable costs and budgeted usage levels for the year
commencing on such January 1.
(d) SCALED UP OR MODIFIED SERVICES. If Genco requests the
scaling up or modifications of services under Section 2.1(d), CenterPoint shall
determine appropriate changes in the charges for such scaled up or modified
services in accordance with the general principles set forth in Section 2.3(a)
and shall give notice thereof to Genco. CenterPoint shall not be required to
incur costs or obligations or otherwise commit time and resources in preparation
for providing such Services on the scaled up or modified basis (except to the
extent necessary to make such determination of appropriate changes in the
charges to be made) unless and until Genco gives CenterPoint notice that it will
accept the charges for such services determined by CenterPoint in accordance
with this Section 2.3(d). If the scaling up of Services requires the hiring of
additional employees by CenterPoint or its Subsidiaries or the procurement of
additional equipment or services (other than equipment or services the full cost
of which is paid or reimbursed by Genco on a current basis), CenterPoint may
include in the charges for the scaled up services provisions for recovery
(either as part of the periodic rate or as payments due upon termination of the
Services) of (a) employee severance expenses and (b) the cost of equipment and
systems that CenterPoint cannot otherwise recover following termination of the
Services, in each case to the extent attributable to the scaled-up service
levels. In case any scaling up or modification of services requires the
incurrence of costs to implement such modification or scaling up (for example,
an SAP change or payroll configuration), CenterPoint may charge Genco for such
costs on an "up front" basis, in addition to any adjustments in periodic rates
occasioned by such scaling up or modification.
(e) CHARGES FOR ADDITIONAL SERVICES. The Receiving
Company shall pay the Providing Company the charges, if any, set forth on each
Exhibit hereafter created for each of the Additional Services listed therein.
Charges, if any, for other Additional Services, including those required by
Section 2.1(c)(ii), shall be determined according to methods in use prior to the
Genco Distribution Date or such other method as may be mutually agreed that
ensures that the Providing Company recovers costs and expenses, but without any
profit except to the extent routinely included as a component of traditional
utility cost of capital, in accordance with subsection 2.3(a). Notwithstanding
the foregoing, however, the agreement of a party to provide or receive any
Additional Service that is not required pursuant to Section 2.1(c)(ii) at any
given rate or charge shall be at the sole discretion of such party.
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(f) PAYMENT TERMS. Charges and collections for Services
rendered pursuant to this Agreement shall continue to be made using the SAP
functionality in use as of the date of this Agreement unless and until either
party elects to discontinue such procedures, in which case the Providing Company
shall thereafter ▇▇▇▇ the Receiving Company monthly for all charges pursuant to
this Agreement and the Receiving Company shall pay the Providing Company for all
Services within 30 days after receipt of an invoice therefor. Charges shall be
supported by reasonable documentation (which may be maintained in electronic
form), consistent with past practices. Late payments shall bear interest at the
lesser of the prime rate announced by Chase Bank and in effect from time to time
plus 2% per annum or the maximum non-usurious rate of interest permitted by
applicable law.
(g) PERFORMANCE UNDER ANCILLARY AGREEMENTS.
Notwithstanding anything to the contrary contained herein, the Receiving Company
shall not be charged under this Agreement for any Services that are specifically
required to be performed under the Genco Separation Agreement or any other
Ancillary Agreement and any such other Services shall be performed and charged
for in accordance with the terms of the Genco Separation Agreement or such other
Ancillary Agreement.
(h) ERROR CORRECTION; TRUE-UPS; ACCOUNTING. The Providing
Company shall make adjustments to charges as required to reflect the discovery
of errors or omissions in charges. The Providing Company and the Receiving
Company shall conduct an annual true-up process to adjust charges based on a
reconciliation of differences in budgeted usage and costs with actual
experience. It is the intent of the parties that such true-up process will be
conducted using substantially the same process, procedures and methods of review
as have been heretofore in effect. Services under this Agreement and charges
therefor shall be subject to the audit rights set forth in Section 8.4 of the
Genco Separation Agreement.
2.4 GENERAL OBLIGATIONS; STANDARD OF CARE.
(a) PERFORMANCE METRICS: PROVIDING COMPANY. Subject to
Sections 2.3 and 2.5(c), the Providing Company shall maintain sufficient
resources to perform its obligations hereunder and shall perform such
obligations in a commercially reasonable manner. Specific performance metrics
for the Providing Company may be set forth in Exhibits. Where none is set forth,
the Providing Company shall provide Services in accordance with the policies,
procedures and practices in effect before the date of this Agreement and shall
exercise the same care and skill as it exercises in performing similar services
for itself.
(b) PERFORMANCE METRICS: RECEIVING COMPANY. Specific
performance metrics for the Receiving Company may be set forth in Exhibits.
Where none is set forth, the Receiving Company shall, in connection with
receiving Services, follow the policies, procedures and practices in effect
before the date of this Agreement including providing information and
documentation sufficient for the Providing Company to perform the Services as
they were performed before the date of this Agreement and making available, as
reasonably requested by the Providing Company, sufficient resources and timely
decisions, approvals and acceptances in order that the Providing Company may
accomplish its obligations hereunder in a timely manner.
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(c) TRANSITIONAL NATURE OF SERVICES; CHANGES. The parties
acknowledge the transitional nature of the Services and that the Providing
Company may make changes from time to time in the manner of performing the
Services if the Providing Company is making similar changes in performing
similar services for members of its own Group and if the Providing Company
furnishes to the Receiving Company substantially the same notice the Providing
Company shall provide members of its own Group respecting such changes.
(d) RESPONSIBILITY FOR ERRORS; DELAYS. The Providing
Company's sole responsibility to the Receiving Company:
(i) for errors or omissions in Services shall be to
furnish correct information and/or adjustment in the Services, at no
additional cost or expense to the Receiving Company; provided, the
Receiving Company must promptly advise the Providing Company of any
such error or omission of which it becomes aware after having used
reasonable efforts to detect any such errors or omissions in accordance
with the standard of care set forth in subsection 2.4(b); and provided,
further, that the responsibility to furnish correct information or an
adjustment of services at no additional cost or expense to the
Receiving Company shall not be construed to require the Providing
Company to make any payment or incur any Liability for which it is not
responsible, or with respect to which it is provided indemnity, under
Section 2.8; and
(ii) for failure to deliver any Service because of
Impracticability shall be to use commercially reasonable efforts,
subject to subsection 2.5(b), to make the Services available and/or to
resume performing the Services as promptly as reasonably practicable.
(e) GOOD FAITH COOPERATION; CONSENTS. The parties will
use good faith efforts to cooperate with each other in all matters relating to
the provision and receipt of Services. Such cooperation shall include exchanging
information, providing electronic access to systems used in connection with
Services to the extent the systems in use are designed and configured to permit
such access, performing true-ups and adjustments and obtaining all consents,
licenses, sublicenses or approvals necessary to permit each party to perform its
obligations hereunder. The costs of obtaining such consents, licenses,
sublicenses or approvals shall be allocated in accordance with Section 2.3. The
parties will maintain documentation supporting the information contained in the
Exhibits and cooperate with each other in making such information available as
needed in the event of a tax audit, whether in the United States or any other
country.
(f) ALTERNATIVES. If the Providing Company reasonably
believes it is unable to provide any Service because of a failure to obtain
necessary consents, licenses, sublicenses or approvals pursuant to subsection
2.4(e) or because of Impracticability, the parties shall cooperate to determine
the best alternative approach. Until such alternative approach is found or the
problem otherwise resolved to the satisfaction of the parties, the Providing
Party shall use commercially reasonable efforts, subject to Section 2.5(b) and
Section 2.5(c), to continue providing the Service or, in the case of Systems, to
support the function to which the System relates or permit Receiving Party to
have access to the System so Receiving Party can support the function itself.
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2.5 CERTAIN LIMITATIONS.
(a) SERVICE BOUNDARIES AND SCOPE. Except as provided in
an Exhibit for a specific Service, (i) the Providing Company shall be required
to provide the Services only at the locations such Services are being provided
by the Providing Company for the members of the Genco Group immediately prior to
the Genco Distribution Date; and (ii) the Services will be available only for
purposes of conducting the business of Genco and its Subsidiaries substantially
in the manner it was conducted prior to the Genco Distribution Date.
(b) IMPRACTICABILITY. The Providing Company shall not be
required to provide any Service to the extent the performance of such Service
becomes "Impracticable" as a result of a cause or causes outside the reasonable
control of the Providing Company including unfeasible technological
requirements, or to the extent the performance of such Services (i) would
require the Providing Company to violate any applicable laws, rules or
regulations or (ii) would result in the breach of any software license or other
applicable contract in effect on the date of this Agreement.
(c) ADDITIONAL RESOURCES. Except as provided in an
Exhibit for a specific Service, in providing the Services, the Providing Company
shall not be obligated to (i) maintain the employment of any specific employee;
(ii) purchase, lease or license any additional equipment or software; or (iii)
pay any costs related to the transfer or conversion of the Receiving Company's
data to the Receiving Company or any alternate supplier of Services.
(d) NO SALE, TRANSFER, ASSIGNMENT. No Receiving Company
may sell, transfer, assign or otherwise use the Services provided hereunder, in
whole or in part, for the benefit of any Person other than a member of the Genco
Group.
2.6 CONFIDENTIALITY.
(a) INFORMATION SUBJECT TO OTHER OBLIGATIONS. The
Providing Company and the Receiving Company agree that all Information regarding
the Services, including, but not limited to, price, costs, methods of operation,
and software, and all Information provided by any Receiving Company in
connection with the Services, shall be maintained in confidence and shall be
subject to Sections 8.2 and 8.11 of the Genco Separation Agreement.
(b) ALL INFORMATION CONFIDENTIAL. The Providing Company's
Systems used to perform the Services provided hereunder are confidential and
proprietary to the Providing Company or third parties. The Receiving Company
shall treat these Systems and all related procedures and documentation as
confidential and proprietary to the Providing Company or its third party
vendors.
(c) INTERNAL USE; TITLE, COPIES, RETURN. Subject to the
applicable provisions of the Genco Separation Agreement governing ownership, use
and licensing of Intellectual Property (as defined therein), the Receiving
Company agrees that:
(i) all Systems, procedures and related materials
provided to the Receiving Company are for the Receiving Company's
internal use only and only as related to the Services or any of the
underlying Systems used to provide the Services;
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(ii) title to all Systems used in performing the Services
provided hereunder shall remain in the Providing Company or its third
party vendors;
(iii) The Receiving Company shall not copy, modify, reverse
engineer, decompile or in any way alter Systems without the Providing
Company's express written consent; and
(iv) Upon the termination of any of the Services, the
Receiving Company shall return to the Providing Company, as soon as
practicable, any equipment or other property of the Providing Company
relating to the Services which is owned or leased by it and is or was
in the Receiving Company's possession or control.
2.7 TERM; EARLY TERMINATION.
(a) TERM. The term of this Agreement shall commence on
the date hereof and shall remain in effect through the earlier of such time as
(i) all Services are terminated as provided in this Section or (ii) CenterPoint
ceases to own a majority of the voting power represented by the outstanding
Genco common stock. This Agreement may be extended by the parties in writing
either in whole or with respect to one or more of the Services, provided,
however, that such extension shall only apply to the Service for which the
Agreement was extended. The parties may agree on an earlier expiration date
respecting a specific Service by specifying that date on the Exhibit for that
Service. Services shall be provided up to and including the date set forth in
the applicable Exhibit, subject to earlier termination as provided herein.
(b) TERMINATION BY GENCO OF SPECIFIC SERVICE CATEGORIES.
Genco may terminate this Agreement either with respect to all, or with respect
to any one or more, of the Services provided hereunder at any time and from time
to time, for any reason or no reason, by giving written notice to the Providing
Party as follows:
(i) for Corporate Center Services, except to the extent
otherwise provided in Exhibit 2.1(a)(i), a terminated category of
Services must include all Services included in one of the nine major
service categories specified in Exhibit 2.1(a)(i), and notice of
termination thereof must be given at least 30 days in advance of the
effective date of the termination.
(ii) for Information Technology Services, a terminated
category of Services must include one of the thirteen major service
categories specified in Exhibit 2.1(a)(ii), in its entirety, and a
notice of termination must be given at least 90 days in advance of the
effective date of the termination.
(iii) for Shared Services, a terminated category of
Services must include a complete service function specified in Exhibit
2.7(b)(iii) and advance notice of termination for that function must be
given no later than the date specified in Exhibit 2.7(b)(iii).
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(c) TERMINATION OF LESS THAN ALL SERVICES. In the event
of any termination with respect to one or more, but less than all, Services,
this Agreement shall continue in full force and effect with respect to any
Services not terminated hereby.
(d) USER IDs, PASSWORDS. The parties shall use good faith
efforts at the termination or expiration of this Agreement or any specific
Exhibit hereto, to ensure that all user IDs and passwords are canceled and,
subject to Section 2.6(c), that any data pertaining solely to the other parties
are deleted or removed from Systems.
2.8 DISCLAIMER OF WARRANTIES, LIMITATION OF LIABILITY AND
INDEMNIFICATION.
(a) DISCLAIMER OF WARRANTIES. EACH PROVIDING COMPANY AND
ITS SUBSIDIARIES DISCLAIM ALL WARRANTIES, EXPRESS OR IMPLIED, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO THE SERVICES. EACH PROVIDING COMPANY AND ITS
SUBSIDIARIES MAKE NO REPRESENTATIONS OR WARRANTIES AS TO THE QUALITY,
SUITABILITY OR ADEQUACY OF THE SERVICES FOR ANY PURPOSE OR USE.
(b) LIMITATION OF LIABILITY; INDEMNIFICATION OF RECEIVING
COMPANY. Each Providing Company and its Subsidiaries shall have no Liability to
any Receiving Company with respect to its furnishing any of the Services
hereunder except for Liabilities arising out of or resulting from the gross
negligence or willful misconduct occurring after the Genco Distribution Date of
the Providing Company or any of its Subsidiaries. Each Providing Company will
indemnify, defend and hold harmless each Receiving Company in respect of all
such Liabilities arising out of or resulting from such gross negligence or
willful misconduct. Such indemnification obligation shall be a Liability of the
Providing Company for purposes of the Genco Separation Agreement, and the
provisions of Article III of the Genco Separation Agreement with respect to
indemnification shall govern with respect thereto. IN NO EVENT SHALL A PROVIDING
COMPANY OR ANY OF ITS SUBSIDIARIES HAVE ANY LIABILITY UNDER THIS AGREEMENT OR
OTHERWISE ARISING OUT OF OR RESULTING FROM THE PERFORMANCE OF, OR THE FAILURE TO
PERFORM, SERVICES FOR LOSS OF ANTICIPATED PROFITS BY REASON OF ANY BUSINESS
INTERRUPTION, FACILITY SHUTDOWN OR NON-OPERATION, LOSS OF DATA OR OTHERWISE OR
FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES, WHETHER OR NOT
CAUSED BY OR RESULTING FROM NEGLIGENCE, INCLUDING GROSS NEGLIGENCE, OR BREACH OF
OBLIGATIONS HEREUNDER AND WHETHER OR NOT THE PROVIDING COMPANY OR ANY OF ITS
SUBSIDIARIES WAS INFORMED OF THE POSSIBILITY OF THE EXISTENCE OF SUCH DAMAGES.
(c) LIMITATION OF LIABILITY; INDEMNIFICATION OF PROVIDING
COMPANY. Each Receiving Company shall indemnify and hold harmless each Providing
Company in respect of all Liabilities arising out of or resulting from the
Providing Company's furnishing or failing to furnish the Services provided for
in this Agreement, other than Liabilities arising out of or resulting from the
gross negligence or willful misconduct of the Providing Company. The provisions
of this indemnity shall apply only to losses that relate directly to the
provision of Services. Such indemnification obligation shall be a Liability of
the Receiving Company for purposes of the Genco Separation Agreement and the
provisions of Article III of the Genco
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Separation Agreement with respect to indemnification shall govern with respect
thereto. IN NO EVENT SHALL A RECEIVING COMPANY OR ANY OF ITS SUBSIDIARIES HAVE
ANY LIABILITY UNDER THIS AGREEMENT OR OTHERWISE ARISING OUT OF OR RESULTING FROM
THE PERFORMANCE OF, OR THE FAILURE TO PERFORM, SERVICES FOR LOSS OF ANTICIPATED
PROFITS BY REASON OF ANY BUSINESS INTERRUPTION, FACILITY SHUTDOWN OR
NON-OPERATION, LOSS OF DATA OR OTHERWISE OR FOR ANY INCIDENTAL, INDIRECT,
SPECIAL OR CONSEQUENTIAL DAMAGES, WHETHER OR NOT CAUSED BY OR RESULTING FROM
NEGLIGENCE, INCLUDING GROSS NEGLIGENCE, OR BREACH OF OBLIGATIONS HEREUNDER AND
WHETHER OR NOT THE PROVIDING COMPANY OR ANY OF ITS SUBSIDIARIES WAS INFORMED OF
THE POSSIBILITY OF THE EXISTENCE OF SUCH DAMAGES.
(d) SUBROGATION OF RIGHTS VIS-A-VIS THIRD PARTY
CONTRACTORS. In the event any Liability arises from the performance of Services
hereunder by a third party contractor, the Receiving Company shall be subrogated
to such rights, if any, as the Providing Company may have against such third
party contractor with respect to the Services provided by such third party
contractor to or on behalf of the Receiving Company. Subrogation under this
Section 2.8(d) shall not affect the obligation of the Providing Company to
perform Services under this Agreement.
2.9 REPRESENTATIVES. The parties shall each appoint one
or more Representatives to facilitate communications and performance under this
Agreement. The maximum number of Representatives for each party shall be three,
one for each of the three principal categories specified in Section 2.1(a). Each
party may treat an act of a Representative of another party as being authorized
by such other party without inquiring behind such act or ascertaining whether
such Representative had authority to so act. Each party shall have the right at
any time and from time to time to replace any of its Representatives by giving
notice in writing to the other party setting forth the name of (i) each
Representative to be replaced and (ii) the replacement, and certifying that the
replacement Representative is authorized to act for the party giving the notice
in all matters relating to this Agreement (or matters relating to one or more
categories specified in Section 2.1(a)). Each Representative is hereby
authorized by the party he or she represents to approve the establishment of new
or modifications to existing Exhibits for Initial Services before or after the
Genco Distribution Date and the addition of new Exhibits for Additional Services
after the Genco Distribution Date.
2.10 EMPLOYEE MATTERS. To the extent Genco has adopted
such plans or programs, eligible employees of Genco will continue to participate
in CenterPoint's benefit plans and programs after the Genco Distribution Date,
in accordance with the terms and conditions of such plans and programs as they
may be amended or terminated by CenterPoint at any time, for so long as
CenterPoint continues to own 80% or more of the shares of Genco common stock or
such earlier date as Genco elects to terminate participation in one or more of
such plans or programs.
ARTICLE III
MISCELLANEOUS
3.1 TAXES. (a) General. Each Receiving Company shall bear
all taxes, duties and other similar charges (and any related interest and
penalties), imposed as a result of its receipt of Services under this Agreement,
including any tax which a Receiving Company is
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required to withhold or deduct from payments to a Providing Company, except any
net income tax imposed upon the Providing Company by the country of its
incorporation or any governmental entity within its country of incorporation.
(b) Sales Tax Liability and Payment. Notwithstanding
Section 3.1(a), each Receiving Company is liable for and will indemnify and hold
harmless any Providing Company from all sales, use and similar taxes (plus any
penalties, fines or interest thereon) (collectively, "Sales Taxes") assessed,
levied or imposed by any governmental or taxing authority on the providing of
Services by the Providing Company to the Receiving Company. The Providing
Company shall collect from the Receiving Company any Sales Tax that is due on
the Service it provides to such Receiving Company and shall pay such Sales Tax
so collected to the appropriate governmental or taxing authority.
3.2 LAWS AND GOVERNMENTAL REGULATIONS. The Receiving
Company shall be responsible for (i) compliance with all laws and governmental
regulations affecting its business and (ii) any use the Receiving Company may
make of the Services to assist it in complying with such laws and governmental
regulations. The provision of Services shall comply, to the extent applicable,
with CenterPoint's Internal Code of Conduct. The Providing Company shall comply
with all laws and governmental regulations applicable to the provision of
Services.
3.3 RELATIONSHIP OF PARTIES. Nothing in this Agreement
shall be deemed or construed by the parties or any third party as creating the
relationship of principal and agent, partnership or joint venture between the
parties, it being understood and agreed that no provision contained herein, and
no act of the parties, shall be deemed to create any relationship between the
parties other than the relationship of independent contractor nor be deemed to
vest any rights, interest or claims in any third parties.
3.4 REFERENCES. All reference to Sections, Articles,
Exhibits or Schedules contained herein mean Sections, Articles, Exhibits or
Schedules of or to this Agreement, as the case may be, unless otherwise stated.
When a reference is made in this Agreement to a "party" or "parties", such
reference shall be to a party or parties to this Agreement unless otherwise
indicated. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation". The use of the singular herein shall be deemed to be or include the
plural (and vice versa) whenever appropriate. The use of the words "hereof",
"herein", "hereunder", and words of similar import shall refer to this entire
Agreement, and not to any particular article, section, subsection, clause,
paragraph or other subdivision of this Agreement, unless the context clearly
indicates otherwise. The word "or" shall not be exclusive; "may not" is
prohibitive and not permissive.
3.5 MODIFICATION AND AMENDMENT. Except for modifications
to Exhibits, which may be made by Representatives pursuant to Section 2.9
hereof, this Agreement may not be modified or amended, or any provision waived,
except in the manner set forth in the Genco Separation Agreement.
3.6 INCONSISTENCY. In the event of any inconsistency
between the terms of this Agreement and any of the Exhibits hereto, the terms of
this Agreement, other than charges, shall control.
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3.7 RESOLUTION OF DISPUTES. If a dispute, claim or
controversy results from or arises out of or in connection with this Agreement
or the performance of, or failure to perform, the Services, the parties agree to
use the procedures set forth in Article VII of the Genco Separation Agreement,
in lieu of other available remedies, to resolve the same.
3.8 SUCCESSORS AND ASSIGNMENT. This Agreement shall be
binding upon and inure to the benefit of the parties and their respective
successors and permitted assigns. Except as contemplated by Section 2.2, no
party shall assign this Agreement or any rights herein without the prior written
consent of the other party, which may be withheld for any or no reason.
3.9 NOTICES. Unless expressly provided herein, all
notices, claims, certificates, requests, demands and other communications
hereunder shall be in writing and shall be deemed to be duly given (i) when
personally delivered or (ii) if mailed registered or certified mail, postage
prepaid, return receipt requested, on the date the return receipt is executed or
the letter refused by the addressee or its agent or (iii) if sent by overnight
courier which delivers only upon the signed receipt of the addressee, on the
date the receipt acknowledgment is executed or refused by the addressee or its
agent or (iv) if sent by facsimile or other generally accepted means of
electronic transmission, on the date confirmation of transmission is received
(provided that a copy of any notice delivered pursuant to this clause (iv) shall
also be sent pursuant to clause (ii) or (iii)), addressed to the attention of
the addressee's Chief Executive Officer at the address of its principal
executive office or to such other address or facsimile number for a party as it
shall have specified by like notice.
3.10 GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of Texas.
3.11 SEVERABILITY. Wherever possible, each provision of
this Agreement shall be interpreted in such a manner as to be effective and
valid under applicable law. If any portion of this Agreement is declared invalid
for any reason, such declaration shall have no effect upon the remaining
portions of this Agreement, which shall continue in full force and effect as if
this Agreement had been executed with the invalid portions thereof deleted.
3.12 COUNTERPARTS. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, and all of
which shall constitute one and the same instrument.
3.13 RIGHTS OF THE PARTIES. Nothing expressed or implied
in this Agreement is intended or will be construed to confer upon or give any
person or entity, other than the parties and to the extent provided herein their
respective Subsidiaries, any rights or remedies under or by reason of this
Agreement or any transaction contemplated thereby.
3.14 RESERVATION OF RIGHTS. The waiver by either party of
any of its rights or remedies afforded hereunder or at law is without prejudice
and shall not operate to waive any other rights or remedies which that party
shall have available to it, nor shall such waiver operate to waive the party's
rights to any remedies due to a future breach, whether of a similar or different
nature. The failure or delay of a party in exercising any rights granted to it
hereunder shall not constitute a waiver of any such right and that party may
exercise that right at any time.
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Any single or partial exercise of any particular right by a party shall exhaust
the same or constitute a waiver of any other right.
3.15 ENTIRE AGREEMENT. All understandings,
representations, warranties and agreements, if any, heretofore existing between
the parties regarding the subject matter hereof are merged into this Agreement,
which fully and completely express the agreement of the parties with respect to
the subject matter hereof.
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IN WITNESS WHEREOF, the parties have executed this Transition Services
Agreement as of the date first above written.
CENTERPOINT ENERGY, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
President and Chief Executive Officer
TEXAS GENCO HOLDINGS, INC.
By: /s/ ▇▇▇▇▇ ▇. TEES
------------------------------------------
▇▇▇▇▇ ▇. Tees
President and Chief Executive Officer
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EXHIBIT 2.1(a)(i)
CORPORATE CENTER SERVICES
A1. OFFICE OF THE CHIEF ACCOUNTING OFFICER.
The Office of the Chief Accounting Officer includes the
general activities and costs to support the Office of the Chief Accounting
Officer such as salaries for the Chief Accounting Officer and an Executive
Assistant as well as the costs associated with the following corporate centers:
A.1.1. Corporate Risk Control.
The major activities and costs associated with this corporate cost
center include:
- Establish and monitor risk policies and limits.
- Ensure the adequacy of SBU's infrastructures to comply with
established risk control policies, procedures and limits.
- Ensure reasonableness of valuation methodologies, assumptions
and models.
- Provide support and oversight for the development of capital
projects and other major commitments.
- Provide consulting on risk-related activities as needed.
- Support Board of Directors Audit Committee
A.1.2. Financial Accounting.
Major activities and costs associated with this corporate center
include:
- Preparation of internal and external financial reports.
- Financial analysis of the results of operations.
- External audit fees.
- Consulting fees relating to financial accounting issues.
- SEC compliance reporting.
- Accounting support of financing activities.
- Accounting support for various strategic planning initiatives.
- Financial projections and quarterly performance reviews.
- Accounting support on business unit capital projects,
acquisitions, etc.
- Support Board of Directors Audit Committee
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A.1.3. Federal Tax.
Major activities and costs associated with this corporate center
include:
- Federal tax planning.
- Preparation of estimates of federal taxes.
- Calculation of current and deferred federal tax expense.
- Current taxes payable and deferred tax liability.
- Preparation of federal income tax returns.
- Coordination and response to Internal Revenue Service
inquiries and audits.
- Preparation and maintenance of international tax data for
accrual and dividend planning purposes.
- Maintenance of tax systems.
- Monitoring proposed tax legislation.
- Litigation support for federal tax issues.
- Due diligence reviews of tax implications of proposed
acquisitions.
- Consulting fees related to federal tax issues and strategic
planning.
A.1.4. State and Local Tax.
Major activities and costs associated with this corporate center
include:
- Preparation of sales and use tax returns.
- Preparation of state income and franchise tax returns.
- Preparation of estimates and payment of state income taxes.
- Calculation of state current and deferred tax expense, current
taxes payable, and deferred tax liabilities.
- State tax planning.
- Coordination and response to state and local tax inquiries and
audits.
- Costs of consulting fees related to sales, use, and state tax
issues, and strategic planning.
- Preparation of SFAS 109 accruals.
- Performance of due diligence reviews for proposed acquisitions
and state income tax estimates for proposed acquisitions.
- Monitoring of proposed tax legislation and preparing
appropriate response.
- Litigation support for state and local tax issues.
2
A.1.5. Property Tax.
Major activities and costs associated with this corporate center
include:
- Payment and review of property taxes and preparation of
returns.
- Negotiation of property taxes.
- Costs of consulting fees related to property and tax issues
and strategic planning.
A.1.6. Internal Audit.
The major activities and costs associated with this corporate center
include:
- Internal process and financial reviews of business units and
business units' functions.
- Internal process reviews of corporate functions.
- Assist in the external audit.
- Review of benefit payments, travel expenses, etc.
- Operational audits.
- Assist in due diligence reviews of projects, acquisitions,
etc.
- Participate and supplement corporate risk functions.
- Support Board of Directors Audit Committee.
A2. CORPORATE FINANCE.
Corporate Finance includes the general activities and costs
such as salaries of the Vice President Corporate Finance, Treasurer and
executive assistants, and consulting costs related to financings and insurance.
This area also includes the costs and activities associated with the following
corporate cost centers:
A.2.1. Financial Services.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support the financial services
function.
- Debt compliance monitoring.
- Payment of financing obligations (including interest) and
related fees, trust fees, etc.
- Review of pension plan portfolio and make funding payments to
the pension trust. (Trust Administration)
- Trust administration for nuclear decommissioning trust.
3
A.2.2. Cash Management.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support cash management
including department salaries, secretarial services, and
supplies.
- Payment of financing obligations (including interest) and
related fees.
- Daily cash management.
- Monitoring bank accounts.
- Execution of wire transfers.
- Forecasting cash needs.
- Managing banking relations in order to resolve problems and to
minimize transaction costs.
A.2.3. Corporate Insurance.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support the insurance benefits
group including salaries for department employees.
- Internal evaluation of insurance risks and needs.
- Consulting costs related to insurance evaluations.
A.2.4. Investor Services.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support the investor services
department including salaries and supplies.
- Payment of dividends to shareholders.
- Coordination of dividend reinvestment plan.
- Mailing of annual reports
- Shareholder recordkeeping.
- Coordination of shareholder meetings.
A.2.5. Corporate Finance.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support the corporate finance
function.
- Evaluation and implementation of optimal capital structures,
optimal sources of capital, and the attraction of capital.
- Support for investment activities.
- Establishment of and preservation of the liquidity.
4
- Establishment and maintenance of relations with the rating
agencies, banks, and the fixed income, mezzanine and private
equity communities.
- Preparation of periodic rating agency presentations.
A3. INVESTOR RELATIONS.
Major costs and activities associated with this corporate cost
center include:
- General activities and costs to support the investor relations
department including salaries of department employees,
secretarial services, travel, and meeting costs.
- Communication with the investment community (institutional
investors and shareholders) about earnings and business
strategies.
- Plan and prepare analyst presentations.
- Meetings with security analysts and rating agencies.
- Prepare financial analysis to support discussions with
security analysts and rating agencies.
- Prepare print publications (reports/fact sheets) sent to third
parties including investors, analysts, shareholders and rating
agencies.
- Speechwriting for financial presentations/meetings.
A4. CORPORATE PLANNING
The major activities and costs associated with this corporate
cost center include:
- General activities and costs to support strategic planning for
corporate and business units such as salaries of strategic
planning department employees, secretarial services,
consulting costs, etc.
- Assistance to business units in the development of strategies,
goals, and measures.
- Economic and financial analysis of business unit and corporate
strategies.
- Development and analysis of five year strategic forecasts of
business units.
- Outside consulting costs related to the evaluation of
strategic plans of business units and corporate.
A5. OFFICE OF THE GENERAL COUNSEL.
The Office of the General Counsel (Legal Department) is
responsible for managing the legal affairs. The major activities and costs that
are associated with this corporate cost center include:
5
- General legal activities and costs to support the corporate
office and all business units including salaries of in-house
attorneys, other legal professionals, legal assistants,
outside counsel fees, travel costs, duplication costs, etc.
- Corporate and securities law.
- Employment law.
- Regulatory law.
- Contract law.
- Patent law.
- Litigation.
- Work related to and evaluation of legal claims.
- Outside counsel to assist in the above activities.
A6. CORPORATE COMMUNICATIONS.
This corporate center includes those activities and costs
necessary to support the administration and management of corporate
communications. Services include external communications and event sponsorship
with customers, media, financial audiences, and the community at large. The
following corporate cost centers are also a part of corporate communications:
A.6.1. Internal Relations.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support the internal relations
department including department salaries, secretarial service,
publications, printing costs, etc.
- Internal communication assistance to other business units.
- Internal employee communications.
- Communication of corporate and business unit visions to the
employees.
- Employee awards.
- Development and maintenance of intranet sites.
A.6.2. External Relations.
- This corporate center includes the following major functions
and the associated costs to support them including salaries of
management, other professional and secretarial assistance,
outside services for production of print, video and Internet
communications materials, outside production costs for events
and consulting fees.
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A.6.2.1. Public Relations, Corporate & Financial
Communications
- External communication of financial, strategic and general
corporate information as well as communications to announce
and launch new business ventures. Audiences include national,
financial, trade and local news media, stockholders,
customers, trade associations and the general public.
- Production of annual and quarterly reports to shareholders,
executive speeches, corporate brochures and videos and
corporate information on Internet sites.
- Communications support for unregulated business units,
including:
- Response to media inquiries
- Pro-active media relations
- Project communications
- Event coordination
- Selection and supervision of outside public relations
firms retained for specific projects
- Screening, selection and speechwriting services for
speaking engagements
A.6.2.2. Corporate Branding & Promotions
- Development and management of the corporate names, logotypes
and brand identity standards.
- Sponsorships and event marketing activities to create strong
external awareness of CenterPoint and the unregulated business
units.
- Implementation and management of promotional opportunities
created for CenterPoint and the unregulated business units
through sponsorships.
- Management of special events for other corporate centers such
as Corporate Community Relations and the unregulated business
units.
A7. GOVERNMENT AFFAIRS.
The major activities and costs associated with this center are
the salaries of executives, professionals and executive assistants as well as
consultant and advisor and other costs directly related to legislative advocacy.
This corporate center also includes a number of other cost centers that are
described below:
A.7.1. Texas State Relations.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support the Texas state
governmental relations department including salaries of
department employees, secretarial services, state legislative
advocacy costs, legislative consulting and advisor costs, and
travel costs, etc.
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- Lobbying activities related to industry issues, environmental
issues, taxes, nuclear waste, tort reform, ethics, etc.
- Housing accommodations in Austin, Texas.
A.7.2. Limestone and Cedar Bayou Conference Centers.
- The major activities and costs associated with this corporate
cost center are to support the operation and maintenance of
the Cedar Bayou Conference Center including salaries of
permanent staff and site-related costs.
A.7.3. Federal Relations.
The major costs and activities associated with this corporate cost
center include:
- General activities and costs to support the federal
governmental relations department including salaries of
department employees, secretarial services, federal
legislative advocacy costs, federal legislative consulting and
advisor costs, and travel costs, etc.
- Lobbying activities related to industry issues, PUHCA,
environmental issues, taxes, transportation, etc.
A.7.4. Third Party Initiatives.
The major costs and activities associated with this corporate cost
center include:
- General activities and costs to support legislative
initiatives including salaries of department employees,
secretarial services, legislative advocacy costs, legislative
consulting and advisor costs, and travel costs, etc.
- Preparation of ethics filings (state, local, and federal).
- Communication with Third Party Groups to minimize adverse
legislation.
- Communication with employees encouraging participation of
employees in legislative activities.
A.7.5. Corporate Community Relations.
The major costs and activities associated with this corporate cost
center include:
- Local and regional charitable contributions and donations.
- Coordination of corporate contributions and memberships.
- Communication and establishment of relationship with
community.
8
A.7.6. Local Government Relations.
The major costs and activities associated with this corporate cost
center include:
- General activities and costs to support the Texas local
governmental relations department including salaries of
department employees, secretarial services, local legislative
advocacy costs, legislative consulting and advisor costs, etc.
- Lobbying activities related to industry issues, environmental
issues, taxes, franchise taxes, operational ordinances, etc.,
with local regulators.
A.7.7. State Affairs.
The major activities and costs associated with this corporate cost
center include:
- General activities and costs to support the State Affairs
(primarily for states other than Texas) governmental relations
department including salaries of department employees,
secretarial services, state legislative advocacy costs,
legislative consulting and advisor costs, and travel costs,
etc. Outside consulting costs are direct billed to the
appropriate SBU.
- Lobbying activities related to acquiring, siting, licensing,
operating and maintaining power plants along with
deregulation, environmental issues, taxes, etc.
A8. CORPORATE HUMAN RESOURCES
A.8.1. Compensation Design and Delivery
Major activities and costs associated with this corporate center
include:
- Provide consultation and counseling on compensation issues.
- Provide data input, execution and retrieval for compensation
activities including planning, promotions, adjustments,
recognition, etc.
- Design and deliver base compensation, variable compensation,
long-term incentives, and recognition/retention programs.
A.8.2. Benefits Design and Delivery
Major activities and costs associated with this corporate center
include:
- Design and deliver pension, savings, medical insurance, life
insurance, and other related health and welfare programs.
- Design and deliver annual enrollment process and other benefit
plan models.
- Focal point for providing salary survey and market information
for compensation planning.
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- Lead and manage benefits call center relationship process to
insure client satisfaction with benefit delivery process.
- Perform due diligence of all acquisitions and divestitures
related to benefit plans.
- Deliver benefit programs, processes, and governance plans for
implementation within business/functional units.
A.8.3. Recruiting, Staffing and Selection
Major activities and costs associated with this corporate center
include:
- Design, develop and implement internal and external hiring
process including college campus, local markets, and global
experienced candidate selection.
- Develop interview and selection process.
- Manage contingent workforce contracts and relationships.
- Manage labor and union relationships.
- Manage separation process and policy including outplacement
service providers.
- Develop and administer relocation process both on a domestic
and an international basis.
- Provide for effective SAP interface and implementation of
technology support and resources to provide reporting, data
management, and user-friendly applications for client use.
- Focal point for corporate diversity process and affirmative
action plans.
- Design and manage new hire orientation and related employee
processing activities in conjunction with business/functional
units, including pre-employment screening processes and
testing activity.
- Manage and administer unemployment and worker compensation
claims.
A.8.4. Organization Effectiveness and Learning
Major activities and costs associated with this corporate center
include:
- Design and/or select learning resources to support client
needs and build competencies.
- Deliver tools and services to clients to facilitate
organizational assessment, benchmarking, problem solving,
process re-engineering, breakthrough thinking, change
management, and succession planning.
- Manage external provider relationships for delivery of
training and other learning/assessment resources.
- Manage and schedule internal learning facilities and resources
including training rooms, conference sites, materials, and
distance learning processes.
10
- Tool development and implementation process for delivery of
Individual Performance Improvement Process.
A9. REGULATORY
Major activities and costs associated with this corporate center
include:
- Identifying, analyzing and communicating key issues related to
the public, local, state and federal regulators.
- Preparation of filings.
- Participation in hearings.
- Communication to internal and external stakeholders.
- Regulatory planning and policy.
11
Exhibit 2.1(a)(ii)
INFORMATION TECHNOLOGY SERVICES
SERVICE 1: DATA CIRCUIT MANAGEMENT
- Circuit Connection and Internal Distribution
- Capacity Monitoring
- Circuit Consolidation Services
- Carrier Management and Administration (Life Cycle Management)
- Access to CenterPoint Private Communication Network
- Software/Hardware Maintenance for Data Network Components
- Vendor and Contract Management
- Problem Identification & Resolution
SERVICE 2: DESKTOP DATA DEVICE SERVICES
- Desktop Connectivity
- WAN Access & Transport
- Information Security
- Nerve Center Monitoring
- Vendor Contract Management
- Problem Identification & Resolution
SERVICE 3: SOLUTIONS DELIVERY (PROGRAMMING)
SAP PRODUCTION SUPPORT
- SAP Applications/Development
- Modifications/Enhancements
- Deployment/Training
- Functional Teams
- Problem Identification & Resolution.
1
SERVICE 4: MAINFRAME OPERATIONS
PART 1: CPU UTILIZATION & MAINFRAME DATA STORAGE
- Monitoring by IT Nerve Center
- Disaster Recovery Services for non-SAP mainframe
applications
- Migration and automated scheduling of corporate
applications
- Planning, design, acquisition, installation of hardware and
software upgrades
- Performance tuning
- Capacity planning and analysis (CPU, DASD, tape)
- Microfiche processing
- Online report viewing and archival
- White paper print (mainframe application reports)
- Distribution of mainframe reports to LAN printers
- Enterprise Change Management
- SAP infrastructure support
- Problem Identification & Resolution
PART 2: DEDICATED SERVER SUPPORT (NON-SHARED HARDWARE)
- Monitoring by IT Nerve Center
- Problem identification and resolution
- Backup and Recovery
- Migration and automated scheduling of corporate
applications
- Planning, design, acquisition, installation of hardware and
software upgrades
- Performance tuning
- Capacity planning and analysis
- Enterprise Change Management
2
- Vendor and Contract Management
- Problem Identification & Resolution
PART 3: ▇▇▇▇ PRINT
- OCE High-speed mainframe printers
- Staffing, equipment maintenance, usage, supplies, etc. to
support ▇▇▇▇ print
- Planning, design, acquisition, installation of hardware and
software upgrades
- Disaster Recovery Services (successful test in April 2000)
- Problem Identification & Resolution
SERVICE 5: TELECOMMUNICATIONS
PART 1: TELEPHONE BASIC LINE
- Operation and maintenance of the telephone switch network
- Telephone Lines, Fax Machine Lines, and Modem Lines
- Video/Audio Teleconference Services
- Voice Mail and Voice Processing Services
- Caller ID Services
- 411 Information / 911 Emergency Services
- Security
- Call Feature Options
- Problem Identification & Resolution
PART 2: CALL CENTER BASIC LINE
- Operation and Maintenance of the Phone System and New
Applications
- Private Network Connectivity
- Agent Consoles and Headsets
3
- Detailed Real-Time / Historical Call Traffic Management
Reports
- Security
- Problem Identification & Resolution
PART 3: VOICE SERVICES MOVES/ADDS/CHANGES
- Consultation and technician time to add, move, or
reconfigure voice assets
- Voice desktop telephone lines, modem lines, fax machine
lines
- Miscellaneous cables and connectors
PART 4: RADIO SERVICES
- Radio frequency coordination
- Maintenance of Federal Communication Commission licensing
- Federal Aviation Administration regulatory compliance for
radio towers
- Utility Telecommunication Counsel activities
- Local, state, and national regulatory activities
4
EXHIBIT 2.1(a)(iii)
SHARED SERVICES
FACILITIES MANAGEMENT.
Facilities Project Management.
- Scope development
- Cost and schedule estimation
- Design and engineering contract documents
- Construction management services
- Employee relocation
- Furniture acquisition and relocation
- Cost tracking and reporting services
Building Operations.
- Janitorial services
- Utility services
- Building repairs and maintenance
- Employee relocations and moves
- General operating requirements
Real Estate.
- Facilities Management coordinates the sale of surplus
properties, the acquisition of properties and lease
negotiations
FINANCIAL SERVICES.
Payroll Services.
- Issue regular payroll checks
- Issue special payroll checks
- Issue cash advances
- Process employee per diem expense reimbursements
- Process travel reimbursements
- Process educational assistance payments
- Process relocation allowances
- Comply with union agreements
- Prepare and file payroll related tax returns
- Issue employee W-2 forms and certain non-employee 1099s
- Maintain payroll records
- Provide litigation and audit support
- Comply with all payroll related reporting requirements
1
- Provide requested client support
Remittance Processing Services
- Receive and initiate bank deposits for customer payments
- Prepare incoming mail for processing
- Capture data image and perform data entry of payment
information
- Initiate transmission of data to the host mainframe for
customer payment update
- Provide support for all electronic payments
- Perform image archiving of stubs and checks
- Process returned checks
- Provide customer/vendor interaction and resolution of payments
- Return correspondence sent in with customer payments to
central point at each business unit
- Perform timely reconciliation of general ledger accounts
- Collect and return to business unit the generated forms
soliciting customer participation in special programs (i.e.
Bank Drafts Balanced Billing, Good Neighbor, etc) which
customer returns with payment
Check Disbursement Services.
- Printing of checks on standard check stock
- Inserting checks into a standard envelope
- Providing separate check inserts for up to two preapproved
standard inserts
- Sorting checks for distribution and delivery to mail room
- Maintenance of check printing control log
- Processing and posting of returned checks
- Investigation of fraudulent checks
- Processing exception items to the bank positive pay file
Corporate Bank Reconciliation.
- Timely reconciliation of General Ledger cash accounts to bank
account balances
State Escheat Reporting.
- State escheat reporting including notification letters and
required reporting. Maintenance of third party software and
database required for escheat reporting
Corporate Travel Services.
Professional business travel and off site meeting services, including:
2
- Air, hotel and car reservations
- Performs other travel support such as visa and passport
services
- Offers various alternatives for communicating travel requests
(telephone, fax, e-mail and self booking tools)
- Provides training / tips and support in making travel
arrangements
- Provides professional meeting planner to assist in
arrangements including facilities, audio-visual equipment,
catering, meeting logistics & contract negotiations
Business Consulting.
Financial Services provides business consulting services on request at
hourly billing rates. Services can include client satisfaction program
assistance, focus group facilitation, and new business services.
OFFICE SUPPORT SERVICES.
Mail Services.
- Routing and delivery of interoffice mail, U.S. mail, certified
mail and overnight mail (FedEx, UPS, Airborne)
- Mail metering; maintenance of PO boxes and postal permits
- Consulting on Company and U. S. Postal Service processes and
requirements
- Daily pick-up and delivery for CenterPoint locations
Graphics
- Original graphic design and production services for brochures,
newsletters, monthly publications, posters, invitations,
calendars, quarterly reports, annual reports, and icons/logos
- Original illustrations or photography as needed to support
design projects
- Original design and production of signage and banners
- Original Web page design and production
- Trade show display and promotional pieces
- Project research and strategy planning
- Consulting and project coordination
- Research and maintenance of image library to support design
projects
Office Supplies.
Product evaluations; participation in product procurement; maintenance
of standard (stock) supply lists; product delivery for standard and
non-standard supplies; and vendor liaison activities.
Forms
- Forms analysis
3
- Business unit consulting and support for forms
preparation/forms needs Forms design for new and revised forms
- Maintenance of forms inventory levels, production and
distribution
- Participation in negotiation and maintenance of vendor
contracts
- Forms delivery via vendor to site, desktop delivery or LAN
distribution
- Maintenance of PowerForms software including strategic
direction, training, and business unit support
Insert Operations
- Insert and mail customer bills and other high volume mailings
using high speed inserting equipment
- Order and stock customer ▇▇▇▇ envelopes and other envelopes as
requested by clients
- Obtain/maintain lowest applicable postage rate for mailings
- Maintain U.S. Postal Service postage payment account
- Meet all U.S. Postal Service preparation requirements for high
volume mailers
- Maintain documentation required to support high volume
mailings for Postal discount
- Provide consultation on Company and U.S. Postal Service
requirements for mailings
Document Center.
- High speed duplicating
- Network publishing
- Mainframe and variable print with postal discount capability
- Color copying
- Engineering maps reproduction
- Full bindery/finishing
- Consulting and support on document preparation and printing
requirements.
- Brochures
- Newsletters
- Monthly publication
- - Forms
- - Envelopes
- - Marketing and promotional pieces
- - Invitations
- Business cards
- Letterheads
- Calendars
4
- Annual reports
Convenience Copiers
- Arrange acquisition and maintain low-volume capacity copiers
in various locations for the convenience of business units
(client pays directly for copier)
- Administer copier contract and ensure contract compliance
- Perform needs analysis for business unit equipment and
consulting on relocations, removals, upgrades or downgrades,
and new products
- Provide ongoing product evaluations
- Communicate status of equipment acquisitions, removal, etc.
- Maintain accurate equipment inventory and volume records
Records Management
- Provide storage options for clients files through contract
with third party provider
- Coordinate Retrieval of boxes / files for client review
- Develop and maintain a retention schedule that meets
operational and legal requirements
- Provide notification when files reach scheduled destruction
date and acquires appropriate documentation to destroy records
- Provide training and business unit support to evaluate file
storage options
PROCUREMENT.
Purchasing
- Establish and maintain vendor agreements
- Provide IT procurement support - software and license
- Manage the vendor base and measures vendor performance
Logistics
- Coordinate waste disposal with third party vendor, including
disposal of hazardous wastes and PCBs (clients direct billed
by vendor for third party services)
- Provide material handling and transportation services to
position hazardous waste for shipment to disposal facilities
- Manage disposal contractor services
- Coordinate collection and classification of trash and waste
for appropriate disposal through third party contract (clients
direct billed by vendor for third party services)
- Schedule pick up of trash containers and process documents for
payment
- Prepare trash disposal manifests as necessary
5
Accounts Payable Automated Feed.
- Oversee automated feeds of payment requests for goods and
services in the Accounts Payable system and provide
reconciliation
- Correct automated entry rejects
Accounts Payable Automated ERS/EDI.
- Oversee automated entry of invoices into the Accounts Payable
system via purchase order evaluated receipt settlement and
electronic data interchange
Accounts Payable Manual Invoice Processing.
- Process invoices manually into the Accounts Payable system
- Perform account code validation
- Validate and identify material codes
- Confirm to Purchase Order
- Prepare correcting journal entries for Accounts Payable
transactions
- Image records and supporting documentation via FileNet for all
non-automated invoices to support records retention and
retrieval
Accounts Payable Manual Invoice Processing without imaging.
- Process invoices manually into the Accounts Payable system
- Perform account code validation
- Validate and identify material codes
- Confirm to Purchase Order
- Prepare correcting journal entries for Accounts Payable
transactions
Accounts Payable Ancillary.
- Vendor file maintenance
- Check processing activities
- State escheat process
- Returned check process
- Bank stop-payment activities
- Control report monitoring and correction
- Interactive Voice Response system maintenance
- Form 1099 tax reporting
- General ledger account reconciliation
- FileNet imaging system maintenance
- Production of on-demand standard Accounts Payable reports
- Monitoring procurement card exception reports
- Reconciliation of procurement card activity
6
- Coordination of year-end invoice accrual process
- Requested Accounts Payable workshops and training
Accounts Payable Ancillary without imaging.
- Vendor file maintenance
- Check processing activities
- State escheat process
- Returned check process
- Bank stop payment activities
- Control report monitoring and correction
- Interactive Voice Response system maintenance
- Form 1099 tax reporting
- General ledger account reconciliation
- Production of on-demand standard Accounts Payable reports
- Monitoring procurement card exception reports
- Reconciliation of procurement card activity
- Coordination of year-end invoice accrual process
- Requested Accounts Payable workshops and training
Accounts Payable Emergency Checks.
- Process invoices manually into the Accounts Payable system
- Perform account code validation
- Validate and identify material codes
- Perform vendor file maintenance (as required)
- Image records and supporting documentation via FileNet to
support records retention and retrieval
- Oversee manual check generation and distribution
Inventory Accounting.
- Reconcile inventory accounts within the Accounts Payable
system.
- Assist in audit of inventory controls and inventory levels
Supplier Diversity
- Manage the GSA Subcontracting Plan and the Five-Year Plan
Procurement Initiatives
- Monitor MWBE procurement processes and procedures and
associated results
- Respond to Federal, State, and Local
reports/filings/issues/concerns/requests
- Plan and implement internal/external training, workshops,
networking, and recognition events
7
- Implement, evaluate, and monitor Second-Tier expectations and
requirements
- Participate in MWBE outreach and development activities
- Coordinate internal Advisory Council
- Assist clients with bids requiring MWBE participation/Update
and enhance MWBE database
- Liaison to political, business, and community organizations
and councils with strong interest in supplier diversity
- Publicize and communicate supplier diversity emphasis &
awareness internally/externally
CORPORATE SECURITY
- Provide services necessary to plan and implement physical
security measures for the protection of Reliant Energy
personnel and assets
- Manage work requirements for contracted security personnel
including contracted guard services and off-duty police
officers
- Plan, coordinate installation and monitor electronic security
systems
- Develop and maintain security policies and site security
procedures, including periodic assessments for compliance and
functionality
- Provide security support for employees traveling or residing
outside the U.S.
- Perform confidential investigative services
- Provide pre-employment verification
ADMINISTRATIVE SUPPORT.
Business Services.
- Shared Services budgeting and planning functions
- Creation, maintenance and reporting for the client
satisfaction programs
- Coordination and compilation of benchmarking/outsourcing
studies
- Special projects/reports
8
EXHIBIT 2.7(b)(iii)
SHARED SERVICES
TERMINATION NOTIFICATION PERIODS
SHARED SERVICES
TYPE OF SERVICE TERMINATION PERIOD
FACILITIES MANAGEMENT
1. Facilities Project Management Same as building lease
2. Building Operations Same as building lease
3. Real Estate 60 days or end of third party broker agreement
FINANCIAL ADMINISTRATION
1. Payroll 120 days
2. Remittance Processing 120 days
3. Check Disbursement 120 days
4. Corporate Bank Reconciliation 60 days
5. Travel 90 days
OFFICE SUPPORT SERVICES
1. Office Mail Services Same as building lease
2. Insert Operations 120 days
3. Graphics 60 days
4. Office Supplies 60 days
5. Forms 60 days
6. Document Center 60 days
7. Convenience Copiers 60 days
8. Appliance Sales 60 days
9. Records Management 120 days
PROCUREMENT
1. Purchasing 90 days
2. Logistics 90 days
3. Accounts Payable Automated 120 days
4. Accounts Payable Manual 120 days
5. Investment Recovery 90 days
6. Waste Disposal 90 days
7. Rubber Goods 90 days
8. Trash Disposal 90 days
CORPORATE SECURITY
1. Security Services 90 days (or same as building lease)
ADMINISTRATIVE SUPPORT
1. Support Charges function of other services
Note: Current estimate of lease expiration at Reliant Energy Plaza is December
2004.