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
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Schedule 2.2, which will be used by Customer Care to provide services
to the REI Group.
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
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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
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.
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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 the date of this
Agreement unless and until either party elects to discontinue such
procedures, in which case Customer Care shall thereafter bill 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 The Chase Manhattan Bank 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.
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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 "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.
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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 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 such 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
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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 REI OR ANY MEMBER OF THE REI GROUP
WAS INFORMED OF THE POSSIBILITY OF THE EXISTENCE OF SUCH DAMAGES.
6. Taxes. (a)(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
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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.
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.
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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 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.
9.13 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 required to be
provided hereunder, the parties agree to use the procedures set forth
in Article IX of the MSA, in lieu of other available remedies, to
resolve the same.
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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 /s/ David M. McClanahan
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David M. McClanahan
Vice Chairman
RELIANT RESOURCES, INC.
By /s/ R. S. Letbetter
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R. S. Letbetter
Chairman, President and
Chief Executive Officer
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Retail Agreement - Reliant Energy Inc. and Reliant Resources Inc.
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