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 Agreement...................................... 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............................... 1
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 Service ................................................. 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, dated as of ____, 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, up to 20% 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 Agreement. "Ancillary Agreement" 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.
1.7 Genco Separation Agreement. "Genco Separation Agreement" has the
meaning set forth in the recitals hereto.
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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 Service. "Service" 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 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
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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
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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 ____,
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 ____, 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
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Services, the Services will be charged initially based on the rates and
usage formulas set forth 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 ____,
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 different from those being charged under a specific
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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, 2003 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.
(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
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this Agreement unless and until either party elects to discontinue such
procedures, in which case the Providing Company shall thereafter xxxx 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 7.4 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.
(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
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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 7.2 and 7.10
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 ____ or until 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. Except as otherwise provided on an Exhibit for a particular Service,
the obligation to provide Corporate Center Services shall terminate on ____. 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. 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.
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 required to withhold or deduct from payments to a
Providing Company, except any net income
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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 VI 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:
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[Name]
[Title]
TEXAS GENCO HOLDINGS, INC.
By:
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[Name]
[Title]
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