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EXHIBIT 10.60
SERVICES AGREEMENT
This Agreement is made and entered into as of the 1st day of January,
1997, between Enron Corp., an OREGON corporation ("Enron"), and Enron Oil & Gas
Company, a Delaware corporation ("EOG").
For and in consideration of the mutual promises and conditions
contained herein, the parties hereto agree as follows:
1. In order to assist the continued and orderly conduct of
certain corporate functions currently performed by Enron for the benefit of
EOG, Enron agrees to provide and EOG agrees to purchase, subject to the terms
and conditions set forth herein, certain corporate staff and support services
(collectively, the "Services").
2. This Agreement shall become effective and Enron shall make the
Services available to EOG pursuant to the terms of this Agreement commencing on
January 1, 1997, and shall continue thereafter for a period of 10 years (unless
otherwise specified herein) and from year to year thereafter unless terminated
upon written notice by either party 60 days prior to the anniversary date of
this Agreement. IF ENRON'S STOCK OWNERSHIP IN EOG FALLS BELOW 35% OF THE
ISSUED AND OUTSTANDING COMMON STOCK OF EOG HAVING THE RIGHT TO VOTE FOR
DIRECTORS OF EOG, THEN EITHER PARTY SHALL HAVE THE RIGHT TO TERMINATE THIS
AGREEMENT BY GIVING WRITTEN NOTICE TO THE OTHER PARTY, SUCH TERMINATION TO BE
EFFECTIVE AS OF THE DATE SET FORTH IN SUCH NOTICE; PROVIDED,
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HOWEVER, THAT EOG SHALL HAVE THE RIGHT TO DELAY THE EFFECTIVE DATE OF ANY SUCH
TERMINATION BY ENRON FOR A PERIOD OF UP TO ONE YEAR IN ORDER FOR EOG TO MAKE
NECESSARY ARRANGEMENTS FOR THE SERVICES TO BE PROVIDED BY THIRD PARTIES BY SO
NOTIFYING ENRON WITHIN 15 DAYS AFTER RECEIPT OF ENRON'S NOTICE OF TERMINATION.
3. The parties understand and agree that the Services shall be
substantially identical in nature and quality to the Services provided to EOG
by Enron during the 12-month period prior to the effective date of this
Agreement.
4. EOG, as compensation for the performance of the Services,
agrees to reimburse Enron for: (i) all expenses actually incurred by Enron and
readily identifiable to EOG relating to corporate staff and support services
provided by Enron hereunder ("Direct Charges"), as identified in Exhibit A
attached hereto, which calculation shall be based on the cost incurred by Enron
in providing such Services and charged to EOG, IN EACH INSTANCE, USING THE
METHODOLOGY THAT MOST REASONABLY REFLECTS THE USE OF THE SPECIFIC SERVICE BY
EOG AND ITS SUBSIDIARIES, ON THE ONE HAND, AND BY ENRON AND ITS OTHER
SUBSIDIARIES OR AFFILIATED COMPANIES, ON THE OTHER HAND (excepting the
calculation of charges for "Rent and LHI" as indicated in Exhibit A for any
square footage occupied during the term hereof) , (ii) the actual cost of any
goods or services purchased for EOG by Enron from third parties unaffiliated
with Enron ("Operating Charges"), (iii) the actual cost or charge for
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outsourced services provided by any third party unaffiliated with Enron for EOG
under an Enron or Enron affiliate agreement with such third party ("Outsourced
Charges") and (iv) AN ALLOCATED PORTION OF ADMINISTRATIVE AND GENERAL EXPENSES
INCURRED BY ENRON FOR CORPORATE STAFF AND SUPPORT SERVICES, COMPOSED OF THOSE
SERVICES AS IDENTIFIED IN EXHIBIT B ATTACHED HERETO (EXCLUDING THOSE SERVICES
ON EXHIBIT B FOR WHICH THE AMOUNT SHOWN UNDER THE HEADING "EOG" IS $0), AND FOR
WHICH EOG DOES NOT RECEIVE DIRECT CHARGES ("ALLOCATED CHARGE"). THE ALLOCATED
CHARGE PAYABLE BY EOG UNDER CLAUSE (IV) OF THE IMMEDIATELY PRECEDING SENTENCE
WILL BE (I) THE PORTION OF THE EXPENSES REFERRED TO IN CLAUSE (IV) ALLOCATED TO
EOG USING THE MODIFIED MASSACHUSETTS FORMULA, MINUS (II) $2,800,000 PER YEAR
BEGINNING JANUARY 1, 1997; PROVIDED, HOWEVER, THAT THE ALLOCATED CHARGE DURING
ANY YEAR SHALL NOT EXCEED THE ALLOCATED CHARGE CEILING (AS DEFINED BELOW). The
$2,800,000 will be adjusted annually, in the same manner that the Allocated
Charge Ceiling is adjusted below, based upon any change in the SEASONALLY
ADJUSTED Consumer Price Index for all Urban Consumers as determined by the U.S.
Department of Labor, Bureau of Labor Statistics (the "CPI-U").
THE ALLOCATED CHARGE CEILING FOR THE YEAR 1997 SHALL BE $5,300,000. THE
ALLOCATED CHARGE CEILING FOR EACH YEAR THEREAFTER SHALL BE ADJUSTED ANNUALLY,
AS HEREINAFTER PROVIDED, FOR CHANGES IN THE CPI-U, AND ROUNDED TO THE NEAREST
$100,000.
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FOR THE PURPOSE OF COMPUTING THE EFFECTS OF THE CPI-U CHANGE ON THE
ALLOCATED CHARGE CEILING, THE PARTIES HERETO AGREE THAT THE BASE PERIOD FOR THE
CPI-U IS "1982/84 EQUALS 100", AND THE CPI-U INDEX NUMBER FOR DECEMBER 31, 1996
IS 159.2. CPI-U ADJUSTMENTS TO THE ALLOCATED CHARGE CEILING SHALL BE MADE
ANNUALLY, BASED UPON THE CPI-U INDEX NUMBER FOR THE MONTH OF DECEMBER FOR THE
IMMEDIATELY PRECEDING YEAR (SUCH ADJUSTMENTS ARE TO BE EFFECTED UPON
PUBLICATION OF THE CPI-U INDEX NUMBER FOR SUCH MONTH). IN THE EVENT THE BUREAU
OF LABOR STATISTICS SHIFTS THE CPI-U REFERRED TO HEREIN FROM THE "1982/84
EQUALS 100" BASE PERIOD TO A DIFFERENT BASE PERIOD, EOG AND ENRON AGREE TO USE
THE REBASING FACTORS PUBLISHED BY THE BUREAU OF LABOR STATISTICS FOR CONVERTING
THE "1982/84 EQUALS 100" BASE PERIOD TO THE NEW APPLICABLE BASE. IN THE EVENT
(I) WITH RESPECT TO THE CPI-U, REBASING FACTORS ARE NOT PUBLISHED OR (II) THE
CPI-U IS DISCONTINUED, A PROPER INDEX OR CLASSIFICATION WITH APPROPRIATE
ADJUSTMENT FACTORS SHALL BE SUBSTITUTED BY WRITTEN AGREEMENT BETWEEN ENRON AND
EOG.
IF THE COMPENSATION FOR ANY SERVICE DOES NOT INCLUDE SALES, USE, EXCISE
VALUE ADDED OR SIMILAR TAXES, AND IF ANY SUCH TAXES ARE IMPOSED ON THE SERVICES
AFTER THE EFFECTIVE DATE OF THIS AGREEMENT, THEN SUCH TAXES SHALL BE PAID BY
EOG.
THE METHODOLOGIES USED FOR DETERMINING DIRECT CHARGES,
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OPERATING CHARGES, OUTSOURCED CHARGES AND ALLOCATED CHARGES TO EOG WILL BE
EVALUATED PERIODICALLY TO DETERMINE WHETHER MORE ACCURATE METHODOLOGIES MAY BE
AVAILABLE FOR DETERMINING SUCH CHARGES THAN THOSE BEING USED ON THE EFFECTIVE
DATE OF THIS AGREEMENT. CHANGES IN METHODOLOGIES WILL BE IMPLEMENTED ONLY
AFTER BEING AGREED TO BY BOTH ENRON AND EOG.
5. Enron shall invoice EOG by the 15th working day of each month
for all Direct Charges, Operating Charges, Outsourced Charges and Allocated
Charges, all with respect to the preceding month. All invoices shall reflect
in reasonable detail a description of the Services performed during the
preceding month, and shall be due and payable on the last day of the month of
the invoice. In the event of default in payment by EOG, and if such payment is
not made within thirty days after written notice is sent to EOG by certified
mail to the address specified below, Enron may terminate this Agreement as to
those Services which relate to the unpaid portion of the invoice by giving
written notice of such election to EOG. In the event of a dispute as to the
propriety of invoiced amounts, EOG shall pay all undisputed amounts on each
invoice, but shall be entitled to withhold payment of any amount in dispute and
shall promptly notify Enron of its dispute. Enron shall provide EOG with
records relating to the disputed amount so as to enable the parties to resolve
the dispute. So long as the parties are attempting in good faith to resolve
the dispute, Enron shall not be entitled to terminate the Services related to
and by reason of the disputed charge.
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6. Any input necessary for Enron or any third party to perform
any Services shall be submitted by EOG in a manner consistent with the
practices utilized during the period prior to the effective date of this
Agreement, which manner shall not be altered except by mutual written agreement
of the parties. Should EOG's failure to supply such input render Enron's or
any third party's performance of any Services unreasonably difficult, Enron or
any third party, upon reasonable notice, may refuse to perform such Services
until such input is supplied.
7. EOG acknowledges that the Services shall be provided only with
respect to the business of EOG. EOG will not request performance of any
Services for the benefit of any entity other than EOG and its subsidiaries or
affiliates. EOG represents and agrees that it will use the Services only in
accordance with all applicable federal, state and local laws and regulations
and communications and common carrier tariffs, and in accordance with the
reasonable conditions, rules, regulations and specifications which may be set
forth in any manuals, materials, documents or instructions in existence on the
effective date of this Agreement and furnished by Enron to EOG. Enron or any
third party reserves the right to take all actions, including termination of
any particular Services, that Enron or any third party reasonably believes to
be necessary to assure compliance with applicable laws, regulations and
tariffs.
8. Enron will assign to EOG all user codes, passwords or numbers,
or other control or identifying cards or numbers, necessary for Enron to
perform the Services. EOG assumes full
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responsibility for selection and use of any such codes, passwords, cards or
numbers that may be permitted or required in connection with the Services
involved.
9. The Services will be of the same nature and quality as those
provided to EOG during the 12-month period prior to the effective date of this
Agreement.
ALL PRODUCTS OBTAINED FOR EOG ARE AS IS, WHERE IS, WITH ALL FAULTS.
NEITHER ENRON, ANY ENRON AFFILIATE NOR ANY THIRD PARTY PERFORMING ANY SERVICES
HEREUNDER MAKE ANY WARRANTIES OR REPRESENTATIONS WHATSOEVER, EXPRESS OR
IMPLIED, INCLUDING THE WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE WITH RESPECT TO THE SERVICES RENDERED OR PRODUCTS OBTAINED FOR EOG.
IN NO EVENT SHALL ENRON BE LIABLE TO EOG OR ANY OTHER PERSON FOR ANY
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES RESULTING FROM ANY ERROR IN THE
PERFORMANCE OF SERVICES OR FROM THE BREACH OF THIS AGREEMENT, REGARDLESS OF
ENRON OR ANY THIRD PARTY FAULT. TO THE EXTENT ANY THIRD PARTY HAS LIMITED ITS
LIABILITY TO ENRON FOR SERVICES UNDER AN OUTSOURCING OR OTHER AGREEMENT, EOG
AGREES TO BE BOUND BY SUCH LIMITATION OF LIABILITY FOR ANY PRODUCT OR SERVICE
PROVIDED TO EOG BY SUCH THIRD PARTY UNDER ENRON'S AGREEMENT.
Enron shall have no obligation to perform the Services if its failure
to do so is caused by or results from any act of God, governmental action,
natural disaster, strike, failure of essential equipment or any other cause or
circumstance beyond the control of Enron. Enron agrees that upon restoring
service
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following any failure of any equipment necessary for Enron to provide any
Services, Enron will allow EOG to have equal priority, in accordance with prior
practice, with respect to access to the restored service. At its election,
Enron may cause one or more of its subsidiaries (other than EOG) , affiliates
or third party contractors to provide the services called for by this
Agreement; however, such action shall not release Enron from its obligations
under this Agreement.
10. In the event any portion of this Agreement shall be found by a
court of competent jurisdiction to be unenforceable, that portion of the
Agreement will be null and void and the remainder of the Agreement will be
binding on the parties as if the unenforceable provisions had never been
contained herein.
11. This Agreement shall not be assignable by either of the
parties hereto except by operation of law.
12. This Agreement constitutes the entire agreement of the parties
relating to the performance of the Services and all prior or contemporaneous
written or oral agreements are merged herein. This Agreement may not be
changed except by a writing signed by both parties. This Agreement shall be
governed by the laws of the State of Texas.
13. Any notice, request, instruction, correspondence or other
document to be given hereunder by either party to the other (herein
collectively called "Notice") shall be in writing and delivered personally or
mailed, postage prepaid, or by facsimile or telegram, as follows:
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IF TO ENRON:
Enron Corp.
0000 Xxxxx Xxxxxx
P. 0. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Senior Vice President,
Chief Accounting and Information
Officer
Facsimile No.: 000-000-0000
IF TO EOG:
Enron Oil & Gas Company
0000 Xxxxx Xxxxxx
P. 0. Xxx 0000
Xxxxxxx, Xxxxx 00000-0000
Attention: Senior Vice President and
Chief Financial Officer
Facsimile No.: 000-000-0000
Notice given by personal delivery or mail shall be effective upon actual
receipt by the party to whom addressed. Notice given by facsimile or telegram
shall be effective upon actual receipt if received during the recipient's
normal business hours, or at the beginning of the recipient's next business day
after receipt if not received during the recipient's normal business hours.
Any party may change any address to which Notice is to be given to it by giving
Notice as provided above of such change of address.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be signed
on the date(s) noted below on their behalf by their duly authorized officers
effective as of January 1, 1997.
ENRON CORP.
By: /s/ J. XXXXXXXX XXXXXX
------------------------------------
J. Xxxxxxxx Xxxxxx,
Senior Vice President,
Corporate Development
Date: December 9, 1997
ENRON OIL & GAS COMPANY
By: /s/ XXXXXXX X XXXXXXX
------------------------------------
Xxxxxxx X. Xxxxxxx
Chairman of the Board
and Chief Executive Officer
Date: December 9, 1997
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EXHIBIT A
Major Sub
Cat. Cat. RC# Title Charge Basis
----------------------------------------------------------------------------------------------
PENSION, THRIFT & MEDICAL
2320 Savings Plan Head Count
* 2321 Retirement Plan Demographics (see note below)
2323 EE Life, AD&D Dep Head Count
2324 Long Term Disability Head Count
* 2325 Supp. Exec. Retirement Plan Demographics (see note below)
2326 ESOP Admin. Fees Head Count
2338(2333) Business Travel Insurance Head Count
* 2335 FAS 106 Demographics (see note below)
2356 Adm. Fees For Met Life Head Count
2330 HMO Premiums Head Count
2331 Drug Plan - Admin. Chgs. Head Count
2337 Active Medical/Dental Head Count
*NOTE: The effective date for change in methodology for these items
will be the later of January 1, 1996 or the beginning of the 22nd month
prior to the date of the Equity Participation and Business Opportunity
Agreement between EOG and Enron Corp.
COMPENSATION PLANS
2314 Restricted Stock Actual Participation
0028 Long-term Incentive Plan Actual Participation
1148 Perf. Based Rest. Stock Actual Participation
AVIATION
0781 Aviation Reservation Fee Usage
0782 Aviation Usage Usage
BUILDING FACILITIES & SERVICES
Building Rent & Related
0566 Construction Services Usage
0580 Facility Planning Usage
0581 Facility Maintenance EB Space
0629 Corporate Security EB Space
0666 Recycling Usage
0692 EPCO-Churn Relocation Usage
0898 Office Relocation/Furniture EB Space
1829 International Security Usage
2234 Facilities Operatons EB Space
2441 Building Utilities EB Space
2455 Building Rent and LHI EB Space @ 13.50/sq. ft. up to
170K sq. ft. Amounts over 170K
will be negotiated separately.
Parking Garage Svcs. and Transp. Subs.
0060 Service Garage Employee Election
2478 Parking Employee Election
2334 Transportation Subsidy Employee Election
Copy, Graphics & Audio Visual Services
0224 Forms Management Usage
0228 Copier Center Usage
0339 Artistic Services Usage
0703 Audio Visual Services Usage
2255 Convenience Copiers Usage
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EXHIBIT A
Major Sub
Cat. Cat. RC# Title Charge Basis
--------------------------------------------------------------------------------------------
BUILDING FACILITIES & SERVICES(continued)
Mail, Shipping & Receiving
0103 Shipping & Receiving Usage
0492 Mail Center Usage
Records Related Costs
0215 Record Center Houston Usage
0489 Record & Info Management Usage
Real Estate Management
0075 EPCO Administration Usage
0508 Real Estate Management Usage
0752 EPCO Legal Services Usage
Health & Employee Services
0647 Health & Employee Services Headcount
0776 Manager - Wellness Headcount
2453 Cafeteria Headcount
2454 Body Shop Headcount
2460 Employee Recreation Headcount
2475 Coffee Headcount
2477 Corporate Special Events Mgt. Comm. Member Head Count
Telecommunications
0117 Enron Information Services % of Total EIS Services
2357 Telecomm. Houston Operations Usage
2358 Computer Services Usage
2359 Ardmore Center Usage
OUTSIDE PROFESSIONAL SERVICES
2349 Outside Auditing Fees Per AA&Co.
0408 Contract Audit Services Per AA&Co.
INSURANCE
2411 Insurance Premiums/Cost Methodology representing
basis for premiums
DATA PROCESSING COSTS
EIS Charges Usage
EDS Charges Usage
Amortization of EDS Pre-paids Historical Usage
HR & BENEFITS RELATED
0071 Alcohol/Drug Testing Usage
0208 Compensation & Benefits Replaced by 2012
0319 Corporate Human Resources Head Count
0246 Payroll Head Count
0649 Benefits Accounting Replaced by 2012
2012 EMI Management Fee Head Count
2242 Fair Employment Head Count
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EXHIBIT A
Major Sub
Cat. Cat. RC# Title Charge Basis
--------------------------------------------------------------------------------------------
RECRUITING, TRAINING & FAIR EMPLOYMENT PRACTICES
0658 Corp. Org. Development & Trng. Head Count
1150 Corp HR Services Usage-moved from HR
1121 VP - Recruit, Trng. & FEP Head Count
TREASURY, FINANCE & RISK MANAGEMENT
Bank Fees Usage
0410 Risk Management Primarily % of Premiums
0451 Treasury Usage
0041 Corporate Finance Usage
TAX
0441 State Tax Group Usage
0564 Ad Valorem Tax Dept. Usage
LEGAL
0610 Corporate Secretary Usage
0611 Misc. MLP Expenses Usage
0854 Legal Litigation Usage
0860 Corporate Legal Usage
0861 Environmental Legal Usage
2416 Legal Library Attny. Head Count
INVESTOR RELATIONS
0405 Investor Relations Usage
EMPLOYEE MATCHING
2381 Corp. Contributions - Houston Employee Elections
CORPORATE EVENTS
1274 Management Conference Attendees
1137 Enron Earth Day Headcount
1140 Volunteer Events Headcount
1284 Employee Picnic Headcount
2397 Employee Communications Headcount
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EXHIBIT B
Total Enron
RC Net Oil &
Description* Number Expenses Gas
-------------------------------- ------- ----------- ----------
MMF % 22.10%
Direct Cost In - Shared Services $14,166,000 $3,130,686
Direct Cost In - Other 2,783,457 615,144
Executive Consultants 89 2,000,000 442,000
Corporate Financial Planning 137 1,008,000 222,768
Corporate Accounting & Reporting 138 1,811,000 400,231
Competitive Analysis 150 440,000 0
Sr. Vice President - Corporate Mkt. & Resources 302 1,117,000 246,857
Sr. Vice President - CIAAO 303 602,000 133,042
President and COO 304 1,800,000 397,800
Chief of Staff 305 693,000 153,153
Corporate Affairs 307 619,000 136,799
Executive Reception 308 544,000 120,224
Political Action Committee 309 34,000 7,514
Workforce Diversity 315 383,000 84,643
Investor Relations 405 1,663,000 0
Vice President - Tax 445 2,816,000 0
Corporate Development 460 706,000 156,026
Vice President & Treasurer 588 473,000 104,533
Corporate Secretary 610 1,616,000 0
MLP Services 611 60,000 0
Organizational Development & Testing 658 0 0
Government Affairs & Public Policy 808 0 0
Public Policy Analysis 848 192,000 0
Corporate Legal 860 1,259,000 0
Federal Government Affairs 866 1,283,000 283,543
State Government Affairs 870 913,000 201,773
Chairman and CEO 890 2,100,000 464,100
Corporate Advertising 1109 0 0
Corporate Aircraft Usage 2001 4,365,300 964,731
NQ Stock Plan 2315 0 0
Exec Perqs 2317 0 0
Employee Performance Awards 2318 150,000 33,150
Corporate Contributions - Houston 2381 0 0
Corporate Memberships 2396 490,000 108,290
Employee Communications 2397 359,800 79,516
Corporate Communications 2398 684,600 151,297
Media Relations 2399 1,942,000 429,182
Executive Board Meeting Expenses 2418 1,034,400 228,602
1997 EOG Service Agreement Reduction (2,800,000)
1997 EOG Service Agreement Cap Adjustment 0 (1,186,000)
----------- ----------
TOTAL $50,107,557 $5,309,604 **
=========== ==========
* May vary as new costs centers are created.
** The calculated 1997 amount based on the 1/94 Enron/EOG Service agreement is
$8.1mm.
