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EXHIBIT 10.6
RETAIL AGREEMENT
THIS RETAIL AGREEMENT (the "Agreement") is entered into as of December
31, 2000, by and between Reliant Energy, Incorporated ("REI"), a Texas
corporation, and Reliant Resources, Inc. ("Resources"), a Delaware corporation,
as an Ancillary Agreement pursuant to that certain Master Separation Agreement
("MSA") between REI and Resources, dated as of December 31, 2000, as follows:
1. Definitions. Unless otherwise defined herein, terms used herein which
are defined in the MSA shall have the meanings ascribed to them in the
MSA.
2. Scope of Agreement. In order to implement the Business Separation Plan,
effective as of January 1, 2001, all retail electric functions performed
by REI shall become the responsibility of Resources, and personnel
performing those functions shall become employees of a member of the
Resources Group as of that date. This Agreement sets forth the
understanding of the parties regarding the transfer of those functions
and personnel and regarding certain transition services to be performed
between REI and Resources to implement the transfer of those functions
until the Choice Date as defined in the MSA but which is currently
expected to be January 1, 2002.
3. Customer Care Services.
3.1 Customer Care Personnel. On or before January 1, 2001, REI shall
terminate from its employment and Reliant Energy Customer Care
LLC ("Customer Care") shall employ those personnel of REI
(including management and contractor personnel) who are then
engaged in providing the following services for the Reliant
Energy HL&P Division ("HL&P") (and, in the case of remittance
processing services, REI's regulated gas utility divisions Entex
and Arkla):
(a) Call Center services,
(b) Credit and Collections,
(c) Remittance processing, and
(d) Revenue accounting,
excepting only those certain individuals identified by REI to Resources
as required to be retained by REI in order to prepare for the
implementation similar functions on behalf of REI following Choice Date.
3.2 Equipment. As of January 1, 2001, REI shall contribute to
Customer Care the remittance processing equipment described on
Schedule 2.2, which will be used by Customer Care to provide
services to the REI Group.
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In addition, REI does hereby grant to Customer Care the right and
license to use its remaining remittance processing machine and
other equipment of REI currently utilized in providing customer
care services but which is not sold hereunder until such time as
Customer Care ceases to provide services under this Agreement to
REI with respect to retail electric customers. Customer Care
shall utilize this machine as a backup for its processing, and
shall be responsible for operation and maintenance costs
associated with the machine until its rights to use such machine
terminate.
Such right and license is granted to Customer Care on a no-cost
basis, AS IS AND WITHOUT WARRANTY OR REPRESENTATION AND WITH ALL
FAULTS.
3.3 Office Space. REI will lease to Customer Care approximately
150,000 square feet of office and equipment space currently
occupied in space owned or leased by REI in order to perform
services under this Agreement for the duration of services
provided by Customer Care. Office services and other shared
service support functions will be provided by REI to Customer
Care pursuant to the terms of the Transition Services Agreement
executed between REI and Resources contemporaneously with the MSA
(the "Transition Services Agreement").
3.4 Other Services by REI. REI will continue to provide services for
printing retail electric bills and inserting them for mailing.
These services will be provided by REI personnel pursuant to the
Transition Services Agreement. Following Choice Date, REI will
continue to provide these services pursuant to the terms of the
Transition Services Agreement to the member of the Resources
Group succeeding to its retail electric customers.
3.5 Services Provided by Customer Care to HL&P. During the period
from January 1, 2001 until Choice Date, Customer Care shall
provide the services traditionally provided by the personnel
transferred pursuant to Section 3.1 for REI and its regulated
electric and gas distribution utility operations, including
providing call center, credit and collections and revenue
accounting services for HL&P and receiving and processing
payments for HL&P, Arkla and Entex. Such services shall be
provided with personnel hired by Customer Care from HL&P and
other personnel hired or otherwise engaged by Customer Care to
provide such services. Customer Care shall provide no services to
other members of the Resources Group (except processing payments
under the General Land Office contract for Reliant Energy
Solutions, Inc. and with respect to customers purchasing from
members of the Resources Group under the retail pilot program
provided for in the Utilities Code) or to third parties during
the period services are provided under this section. The parties
shall develop a mutually agreeable
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service level agreement regarding such services which will
provide for levels of service generally consistent with those
historically provided by HL&P and which, when developed, shall be
attached hereto as Schedule 3.5. The parties recognize that
Resources will need to train Customer Care personnel on its new
systems that will be in place as of Choice Date. To that end,
Resources shall be free to rotate its personnel into training
after September 2001 provided that (i) Resources substitutes
appropriate contractor personnel to ensure that customer service
does not decline during the training period and (ii) the costs to
HL&P during the training are not greater than costs would have
been had the training rotations not been made.
3.6 Termination of Services. Services provided by Customer Care shall
terminate at Choice Date, and Resources shall be free to provide
these services to other business units of the Resources Group or
to third parties.
3.7 Changes to Services. Customer Care agrees to add or delete
specific services upon reasonable request from a member of the
REI Group so long as they are generally within the scope of the
services provided under this Section 3, provided that the costs
of any increase or decrease in personnel or equipment required to
implement such change are borne by the member of the REI Group
requesting them.
3.8 Code of Conduct and Reporting Requirements. During the period
Customer Care provides services related to retail electric
customers of REI, all personnel of Customer Care shall continue
to observe the Code of Conduct adopted for HL&P personnel, and
management personnel of Customer Care shall report for
operational and organizational purposes only to an Executive Vice
President of Resources and not to any personnel of Resources who
are engaged in providing unregulated retail electric service for
any business in the Resources Group.
3.9 Charges for Services. For the services provided by Customer Care,
members of the REI Group shall reimburse Customer Care for the
fully allocated direct and indirect costs incurred by Customer
Care to provide the services, and shall reimburse Customer Care
for out-of-pocket expenditures to third parties incurred to
perform services. Charges will be made on a basis that allocates
such costs on a fair nondiscriminatory basis. It is understood
that all salary and salary-related costs attributable to the
personnel transferred to Customer Care from HL&P shall be borne
by the REI Group for services prior to Choice Date.
3.10 Payment Terms. Charges and collections for services rendered
pursuant to this Agreement shall continue to be made using the
methodology and procedures for intracompany billing in use as of
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the date of this Agreement unless and until either party elects
to discontinue such procedures, in which case Customer Care shall
thereafter xxxx members of the REI Group receiving the services
monthly for all charges pursuant to this Agreement and such
members receiving the services shall pay Customer Care for all
services within thirty 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 Houston, N.A. and in effect
from time to time plus two percent (2%) per annum or the maximum
non-usurious rate of interest permitted by applicable law.
3.11 Error Correction; True-ups; Accounting. Customer Care shall make
adjustments to charges as required to reflect the discovery of
errors or omissions in charges. Customer Care and REI 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 among members of the REI Group. Services under this
Agreement and charges therefor shall be subject to the provisions
of Section 10.5 of the Separation Agreement (Audit Rights).
3.12 Severance Costs. Upon the termination of services provided by
Customer Care, REI will reimburse Resources for the actual costs
of severance incurred under a previously approved severance plan
for personnel (i) who were hired by Customer Care from REI
pursuant to this Agreement, (ii) who are terminated by Resources
within 60 days after Customer Care terminates its services for
REI (other than employees who are terminated during such period
due to death, disability or cause) and (iii) who are not employed
by a member of the REI Group within 30 days after their
separation from the Resources Group. No severance costs shall be
payable with respect to any personnel hired by any member of the
Resources Group from REI other than personnel hired by Customer
Care to perform services under this Section 3 of this Agreement.
Nor shall REI be responsible for severance costs related to
personnel initially hired by Customer Care from REI but who
subsequently are transferred to employment by another member of
the Resources Group prior to their termination from Resources.
3.13 Indemnification. REI agrees to defend, indemnify and hold
Resources and Customer Care and their respective personnel
harmless against liability on claims made by the personnel for
whom REI has agreed to reimburse Resources for severance (the
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"Personnel") to the extent claims relate to: (i) the severance of
the Personnel and their severance payments, (ii) employment of
the Personnel with REI prior to their transfer to Customer Care
(including their selection for transfer to Customer Care), (iii)
policies and personnel of REI and (iv) benefits provided to the
Personnel with respect to their employment with REI, including in
such indemnity, indemnification against employment grievances,
equal employment or sexual harassment charges or other employment
related claims of the Personnel. As a condition for REI providing
this indemnity, Resources and Customer Care agree to cooperate
fully with REI on the defense of such claims and to provide REI
with all information available to them and, to the extent within
their control, witnesses necessary with respect to the defense of
such claims. The compromise or settlement of any claims against
Resources or Customer Care for which indemnity is provided by REI
shall be the sole responsibility of REI, provided that any such
compromise or settlement, unless Resources shall otherwise agree,
shall include a full and unconditional release of Resources and
Customer Care from liability and shall not impose injunctive
relief or require admissions of fault or liability from Resources
or Customer Care. This indemnity shall not extend to, and REI
will not indemnify Resources against, claims related to
employment grievances, equal employment or sexual harassment
charges or other employment related claims made by the Personnel
with respect to policies or conduct of Resources during the
period the Personnel are employed by Customer Care; provided,
however, that REI will on request of Resources assume the defense
of Resources against any such claims which are asserted in
conjunction with claims for which REI has agreed to indemnify
Resources. Resources shall be responsible for and shall control
the compromise or settlement of claims for which REI has not
indemnified Resources.
4. Services After Choice Date. As of the Choice Date and thereafter, the
electric retail customers of Reliant Energy HL&P will become customers
of an unregulated Retail Electric Provider pursuant to the Utilities
Code, and a member of the Resources Group which qualifies as a Retail
Electric Provider will succeed to those customers who do not elect an
alternative supplier. For those customers, all customer care functions
will be assumed by a member of the Resources Group. Following Choice
Date, Customer Care will provide no further services for REI to REI's
electric customers, and REI will provide customer care functions related
to its electric transmission and distribution functions from its own
resources.
4.1 Services to Members of REI Group. Following Choice Date, Reliant
Energy Retail Services LLC (Retail Services), or another member
of the Resources Group providing customer services will, upon
request, provide remittance processing services to the gas
utilities which are members of the REI Group. Compensation for
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these services will be on the same basis as compensation paid to
Customer Care for similar services prior to Choice Date. The
members of the REI Group may terminate such services at any time
upon ninety (90) days prior written notice, and in any event such
services shall terminate as of January 1, 2004, unless continued
under a separate agreement between the parties.
5. Limitation of Liability. Neither Resources nor Customer Care shall have
any liability to any member of the REI Group 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 of
Resources or any member of the Resources Group. Resources will
indemnify, defend and hold harmless each member of the REI Group
receiving services under this Agreement in respect of all liabilities
arising out of or resulting from such gross negligence or willful
misconduct. Such indemnification obligation shall be a Liability of
Resources for purposes of the MSA and the provisions of Article III of
the MSA with respect to indemnification shall govern with respect
thereto. IN NO EVENT SHALL RESOURCES OR ANY MEMBER OF THE RESOURCES
GROUP 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, AND WHETHER OR NOT RESOURCES OR ANY MEMBER
OF THE RESOURCES GROUP WAS INFORMED OF THE POSSIBILITY OF THE EXISTENCE
OF SUCH DAMAGES. IN NO EVENT SHALL RESOURCES OR ANY MEMBER OF THE
RESOURCES GROUP HAVE ANY LIABILITY HEREUNDER OR OTHERWISE ARISING OUT OF
OR RESULTING FROM THE PERFORMANCE OF, OR FAILURE TO PERFORM, SERVICES IN
AN AGGREGATE AMOUNT EXCEEDING THE TOTAL CHARGES PAID OR PAYABLE TO
RESOURCES HEREUNDER.
REI shall indemnify and hold harmless Customer Care in respect of all
Liabilities arising out of or resulting from Customer Care'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 Customer Care or any other member of the
Resources Group. The provisions of this indemnity shall apply only to
losses which relate directly to the provision of services hereunder.
Such indemnification obligation shall be a Liability of REI for purposes
of the Separation Agreement and the provisions of Article III of the
Separation Agreement with respect to indemnification shall govern with
respect thereto. IN NO EVENT SHALL REI OR ANY MEMBER OF THE REI GROUP
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
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NOT CAUSED BY OR RESULTING FROM NEGLIGENCE, INCLUDING GROSS NEGLIGENCE,
OR BREACH OF OBLIGATIONS HEREUNDER AND WHETHER OR NOT REI OR ANY MEMBER
OF THE REI GROUP WAS INFORMED OF THE POSSIBILITY OF THE EXISTENCE OF
SUCH DAMAGES.
6. Taxes. (a) Each member of the REI Group receiving services under this
Agreement shall bear all sales and use taxes, duties and other similar
charges (and any related interest and penalties), imposed as a result of
their receipt of services under this Agreement.
(b) Sales Tax Liability and Payment. Notwithstanding Section
6(a), each member of the REI Group that receives services under this
Agreement shall be liable for and will indemnify and hold harmless each
member of the Resources Group 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 a member of the Resources
Group to a member of the REI Group. Resources shall collect from REI any
Sales Tax that is due on the service it provides to a member of the REI
Group and shall pay such Sales Tax so collected to the appropriate
governmental or taxing authority.
7. Responsibility for Errors; Delays. Customer Care's sole responsibility
to the member of the REI Group receiving the services:
(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 Customer Care 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
provided for in this Agreement; 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 Customer Care 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 5; and
(ii) for failure to deliver any service because of
Impracticability, shall be to use commercially reasonable efforts,
subject to the next sentence, to make the services available and/or to
resume performing the services as promptly as reasonably practicable.
Customer Care 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 Customer Care
including unfeasible technological requirements, or to the extent the
performance of such services would require Customer Care to violate any
applicable laws, rules or regulations or would result in the breach of
any software license or other applicable contract in effect on the date
of this Agreement.
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8. Dispute Resolution. Any dispute arising under this Agreement among REI,
Resources or a member of their respective groups shall be exclusively
resolved under the dispute resolution provisions of Article IX of the
MSA, and each party, for itself and all its Affiliates, hereby waives
any right to seek judicial resolution of such disputes except for
enforcement of an arbitration award made in accordance with such dispute
resolution provisions.
9. Miscellaneous Provisions.
9.1 Amendments. This Agreement shall not be supplemented, amended or
modified in any manner whatsoever (including by course of dealing
or of performance or usage of trade) except in writing signed by
the parties.
9.2 Successors and Assignments. This Agreement shall be binding upon
and inure to the benefit of the parties and their respective
successors and permitted assigns. 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.
9.3 Books and Records and Audit Rights. Maintenance of books and
records relating to this Agreement and audit rights shall be as
prescribed in the MSA.
9.4 Notices. Any notice, demand, offer, request or other
communication required or permitted to be given by either party
pursuant to the terms of this Agreement shall be in writing and
shall be deemed effectively given the earlier of (i) when
received, (ii) when delivered personally, (iii) one (1) business
day after being delivered by facsimile (with receipt of
appropriate confirmation), (iv) one (1) business day after being
deposited with an overnight courier service or (v) four (4) days
after being deposited in the U.S. mail, First Class with postage
prepaid, and addressed to the attention of the party's General
Counsel at the address of its principal executive office or such
other address as a party may request by notifying the other in
writing.
9.5 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas.
9.6 Headings. The various headings used in this Agreement are for
convenience only and are not to be used in interpreting the text
of the Articles or Sections in which they appear or to which they
relate.
9.7 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
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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.
9.8 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.
9.9 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 their respective
Subsidiaries and Affiliates, as the case may be, any rights or
remedies under or by reason of this Agreement or any transaction
contemplated thereby.
9.10 Waiver 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. Any single or
partial exercise of any particular right by a party shall exhaust
the same or constitute a waiver of any other right.
9.11 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.
9.12 No Sale, Transfer, Assignment. Neither REI nor any member of the
REI Group 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 REI Group.
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IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first written above.
RELIANT ENERGY, INCORPORATED
By
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Name:
Title:
RELIANT RESOURCES, INC.
By
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Name:
Title:
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