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1999-010 NOTE Amended by Ordinance No. 2000-316 ORDINANCE NO ~ ~-~57/~ AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE CITY MANAGER TO EXECUTE A PROFESSIONAL SERVICES AGREEMENT WITH REED CONSULTING GROUP FOR CONSULTING SERVICES PERTAINING TO ELECTRIC RESTRUCTURING MATTERS AND THE POSSIBLE DIVESTITURE OF THE CITY'S ELECTRIC GENERATION AND DISTRIBUTION ASSETS, AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR, AND PROVIDING AN EFFECTIVE DATE WHEREAS, the City Council deems it in the public interest to engage Reed Consulting Group to provide profesmonal consulting serwces to the City pertaining to the electric restructuring matters and the possible divestiture of the C~ty's electric generatmn and distribution assets, and WHEREAS, Chapter 2254 of the Texas Government Code, known as the "Professional Services Procurement Act", provides that a City may not select a provider of professional services on the basis of competitive Nds, but must select the provider on the basis of demonstrated competence and quahficat~ons, and for a fair and reasonable price, and WHEREAS, the profesmonal fees as provided in the Professional Services Agreement are fair and reasonable, conmdermg all relevant factors, as well as the magnitude of the project for wNch Reed Consulting Group ~s bemg engaged, and said professional fees do not exceed any maximum prowded by law for such professional services, and WHEREAS, the C~ty Council has prowded m the City Budget for the appropnauon of funds to be used for the purchase of the professional services, as set forth in the Professional Services Agreement, NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS SECTION I That the City Manager ~s hereby anthonzed to execute a Professional Services Agreement w~th Reed Consulting Group for professional consulting services pertmnlng to electric restructuring matters and the possible divestiture of the City's electric generation and distribution assets, m substantmlly the form of the Professional Services Agreement attached hereto and incorporated herewith by reference SECTION II That the award of th~s Agreement ~s on the basis of the demonstrated competence and qualifications of Reed Consulting Group and the abthty of Reed Consultmg Group to ,perform the services needed by the City for a fair and reasonable price SECTION III That the expenditure of funds as provided in the attached Professional Services Agreement ~s hereby authorized SECTION IV That this ordinance shall become effective ~mmedlately upon its passage and approval JACK M~R, MAYOR ATTEST JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM HERBERT L PROUTY, CITY ATTORNEY By ~'~ s \Our Doeuments\Ordtnanc~s\98\ReedConsultmg Group PSA (D~vest RFP) doc STATE OF TEXAS § COUNTY OF DENTON § PROFESSIONAl, SERVICES AGREEMENT Tins Agreement is entered into this fifth day of January, 1999, by and between Reed Consulting Group ("REED"), a Massachusetts corporaUon, w~th as pnnc~pal office at 200 Wheeler Road, Burhngton, Massachusetts, 01803, and the C~ty of Denton, Texas ("CITY"), a Texas mumc~pal corporauon, with ~ts pnnc~pal office at 215 East McKanney Street, Denton, Texas, 76201, for professional and related consulting servmes to be prowded to CITY, both parttes acting by and through their duly authorized representatives Th~s Agreement supercedes, terminates and replaces in as entirety the Professional Services Agreement entered into by the parties hereto on March 3, 1998 WHEREAS, that ~n cons~derat, on of the covenants and agreements herein contmned, REED and the CITY do hereby mutually AGREE as follows ARTICLE I SCOPE OF SERVICES The CITY hereby engages REED, and REED hereby agrees to prowde to CITY the services set forth ~n the mdtwdual Task Order made an attachment to this Agreement The Task Order generally provides for prc, fessional services revolved ~n assisting the CITY w~th its posmble electric generation and d~stnbution d~vestlture The following work products and professmnal servtces are among the primary deliverables to be prowded m connecUon with the d~vestlture process 1) Detmled schedule and entmal path coordinat~on for all work tasks, 2) Document ldentfficatmn, collectxon, and organization, 3) Management of data room and/or CD-ROM production if apphcable, 4) Terms of Sale analys~s and recommendations, including assistance with the prehmmary Purchase and Sale Agreement and other closing documentation, 5) Preparatmn of database of potential bidders, 6) Preparatmn of early ~nterest letter and other marketing materials, including webs~te ff apphcable, 7) Preparauon of Offenng Memorandum, 8) Due diligence support, including written and verbal Q&A coordination, 9) Preparation of s~te tour protocol documents and ~mplementat~on of s~te-tours, 10) PreparaUon of Human Resources manual and Labor Transmon Plan and assistance ~n commumcat~on with employees, 11) Rewew of enwroumental documentation and recommendations for presenting and conveying enwronmental assets and habd~t~es, 12) Preparauon of site separation plans and documentation as needed, Professional Services Agreement Reed Consulting Group - Page I 13) Marketing and negotiations with final bidders, 14) Bidder qualification and final bid review ARTICLE II FEES FOR SERVICES For services provided by REED to CITY pursuant to this Agreement, CITY shall pay REED in accordance with the rates and charges set forth in the Attachment to Professional Services Agreemem dated January 5, 1999 (the "Attachment") attached hereto and made a part of this Agreement for all purposes, provided, however, such charges and rotes shall not exceed $2,025,000 unless the CITY agrees by an amendmem to this Agreement to an increase the maximum fee for services for this engagement ARTICLE III BILLING AND PAYMENT REED shall submit a monthly statement to CITY setting forth the amount due for services and itemizing amounts due for expenses CITY shall pay the full amount of such statement within thirty (30) days after receipt Any sums billed, not disputed ~n written form setting forth specific exceptions and unpmd after thirty (30) days from the date of receipt, shall be subject to a late payment charge equal to one (1) percent for each month or fraction thereof past due Notlmng coutmned in this article shall require the CITY to pay for any work wbach is unsatisfactory as reasonably determined by the City Manager for the CITY after having considered testimony and/or documentauon from REED, or which is not submitted in compliance with the terms of th~s Agreement No late charge shall apply to any such unsatisfactory or disputed work The CITY shall not be required to make any payments to REED when REED is tn default under this Agreement ARTICLE IV INDEPENDENT CONTRACTOR REED shall provide services to CITY as an ~ndependent contractor, not as an employee of CITY REED shall not have or clmm any right arising from employee status REED agrees to perform the services hereunder in connection with the project as stated m this Agreement with due diligence, and ~n accordance with the highest professional standards obtmned for such services in the State of Texas ARTICLE V TERM AND TERMINATION OF AGREEMENT A Unless otherwise terminated as provided herein, th~s Agreement shall become effective upon execution by the parties and shall terminate when the services provided for herein have been fully and completely performed This Agreement may be sooner terminated m accordance w~th the provisions hereof Time ~s of the essence in flus Agreement REED will make all reasonable efforts to complete the services set forth herein as expeditiously as possible to meet the schedule estabhshed by the CITY Professmnal Services Agreement Reed Consulting Group - Page 2 B Notwithstanding any other provision of this Agreement, either party may terminate this Agreement by giving tturty (30) days advance written notice to the other party C Tins Agreement may also be terminated in whole or in part in the event of either party substantially falling to fulfill its obhgatlons under the Agreement No such termination will be effected, unless the breaclung party is given (1) written notice, delivered by certified mini, return receipt requested, of intent to terminate, and not less than thirty (30) calendar days to cure the fmlure, and (2) an opportunity for consultation with the terminating party prior to termination D If this Agreement is terminated prior to completion of the services to be provided hereunder, REED shall immediately cease all services and shall render a final bill for services to CITY within thirty (30) days after the date of termination, and CITY shall pay REED for all services properly rendered and reimbursable expenses to termination incurred prior to the date of termination in accordance with Article III hereof Should the CITY subsequently contract with a new consultant for continuation of services on the project as defined m the attached Task Order, REED shall fully cooperate m providing information Except as expressly noted by REED on certain documents, copies of documents prepared or furnished by REED pursuant to this Agreement shall become the property of the CITY, but REED may mamtmn copies of such documents for its use In the event that the CITY is m breach of this Agreement and the Agreement terminates, the CITY shall return all data and materials which REED reasonably determines to be competitively sensitive or proprietary Nottnng m this Agreement creates any rights for the CITY in any intellectual property owned by REED ARTICLE VI INSURANCE Dunng the performance of the services under this Agreement, REED shall mmntam the following insurance with an insurance company licensed to do business in the State of Texas by the State Insurance Commission or any successor agency that has a rating with Best Rate Careers of at least an "A-" or above A Comprehensive General Liability Insurance with bodily injury limits of not less than $1,000,000 for each occurrence and not less than $1,000,000 in the aggregate, and with property damage limits of not less than $100,000 for each occurrence and not less than $100,000 in the aggregate B Automobile Liability Insurance with bodily injury limits of not less than $500,000 for each person and not less than $500,000 for each accident, and with property damage limits of not tess than $100,000 for each accident Professional Services Agreement Reed Consultmg Group - Page 3 C Worker's Compensanon Insurance in accordance with statutory requirements and Employers' Lmbdaty Insurance wtth hmits of not less than $100,000 for each accadent D Professional Laablhty Insurance with limits of not less than $2,000,000 annual aggregate E REED shall furnish Insurance certificates or insurance pohcaes at the CITY's request to evadence such coverages The ansurance policies shall name the CITY as an ad&taonal insured on all such policies m the extent lawfully possible and shall contmn a prowsaon that such insurance shall not be canceled or mo&fled vothout tlurty (30) days prior written notice m CITY and REED In such event, REED shall, prior to the effective date of the change or cancellation, promptly deliver to CITY substitute policies or cemficates providing or evidencing the same coverage ARTICLE VII LIABILITY A REED shall mdemmfy and hold harmless the CITY, its officials, employees, attorneys and agents, from and agmnst any and all hablhty, claims, demands, damages, losses, and expenses, including, but not limited to, court costs and reasonable attorney% fees incurred by CITY, for whach REED is detenmned to be legally hable resultang from negligent acts, errors, or omissaons by REED, its directors, officers, agents, and employees in performance of services reqmred by this Agreement Liability, clarms, demands, damages, losses, or expenses resulting from the negligent acts, errors or omissions, whether active or passave, by CITY, its officaals, employees, attorneys, and agents are excluded from REED's obhgatlons pursuant to this paragraph B REED's lndemmficataon of the CITY, as provided in Article VII A, above, as to any act or omasslon constituting professional malpractice, shall be expressly hmited to the mount of fees payable to REED under thts Agreement as set forth an Artacle II ofthas Agreement C REED's andemmfication of the CITY, as provided in Artacle VII A above, resulting from any neghgent acts, errors, or omissions of REED, other than professional malpractace, shall be expressly hmated to the proceeds of its applicable ~nsurance coverage, as identified m Artacle VI A, B & C ofttus Agreement D To the extent permitted by apphcable law, CITY shall indemnify and hold harmless REED, its officials, employees, attorneys and agents to the same extent and w~th the same hm~tataons as expressed in Article VII A, B, and C ofthas Agreement E Nothing in thas Agreement shall be construed to create a hablhty to any person who is not a party to thas Agreement and notlung herean shall watve any of either party's defenses, both at law or equity, to any claim, cause of action or htagatlon filed by anyone Professional Services Agreement Reed Consulting Group - Page 4 not a party to this Agreement, including the defense of governmental immunity, which defenses are hereby expressly reserved ARTICLE VIII OBSERVATION AND REVIEW OF THE WORK REED shall exercise reasonable care and due diligence in dlscovenng and promptly reporting to the CITY any defects or deficiencies in the work of REED or of any contractors, subcontractors, or subconsultants working on the project ARTICLE IX RESONSIBILITY FOR CLAIMS AND LIABILITIES Approval by the CITY shall not constitute nor be deemed a release of the responsibility and liability of REED, its employees, associates, agents and consultants for the accuracy and competency of their designs or other work Nor shall such approval be deemed to be an assumption of such responsibility by the CITY for any defect in the work prepared by REED, its employees, associates, agents and consultants ARTICLE X ATTORNEY'S FEES If either party hereto shall become involved in litigation arising directly out of REED's performance under this Agreement, the prevailing party shall be entitled to recover its reasonable attorney's fees, costs and expenses This provision shall be construed as applicable to the entire Agreement ARTICLE XI NOTICES A Any noUce, demand, information, invoice, report, or item otherwise required, authorized, or provided for in this Agreement, unless otherwise specified herein, shall be deemed properly given if delivered in person or sent by United States Mini, First Class Postage prepaid to CITY REED Howard Martin, Assistant City Manager/Utthues Reed Consulting Group, Ina City of Denton, Texas James Coyne, Vice Presmdent 215 E MeKanney Street 200 Wheeler Road Denton, TX 76201 Burlington, MA 91803 B All notaces mailed shall be deemed effective upon receipt by the party to whom such notice is given Professional Services Agreement Reed Consulting Group - Page 5 ARTICLE XII ARBITRATION AND ALTERNATE DISPUTE RESOLUTION The parties may agree to settle any disputes under this Agreement by submlttmg the dispute to arbitration or other means of alternate dispute resolution such as mechahon No arbitration or alternate dispute resolution anmng out of or relating to, this Agreement involving one party's disagreement may include the other party to the disagreement without the other's approval ARTICLE XIII OWNERSHIP OF DOCUMENTS All documents prepared or furmshed by REED (and REED's subcontractors or subconsultants) pursuant to this Agreement are instruments of service and shall become the property of the CITY upon the tenmnatlon of this Agreement REED is entitled to retain copies of all such documents REED agrees to honor all written requests of the CITY to mmntam certain designated documents as confidential and not to disclose the same to any party, except as may be required by law and with prior notice to the CITY The documents prepared and furmshed by REED are intended only to be applicable to this project and the CITY's use of these documents in any other project shall be at the CITY's sole ask and expense In the event the CITY uses the documents in another project or for other purposes than specified herein any of the information or materials developed pursuant to this Agreement, REED is released from any and all liability relating to their use in that project ARTICLE XIV ACCESS TO RECORDS OF REED BY CITY REED agrees that the CITY shall, until the expiration of three (3) years after the final payment under this Agreement, have access to and the right to examine any d~rectly pertinent books, documents, papers and records of REED revolving transactions relating to this Agreement, with the exception of any books, documents, papers and records wbach REED determines competlt~vely sensitive or proprietary and which pertmn to the property rights of others REED agrees that the CITY shall have access dunng normal working hours to all necessary REED facilities and shall be provided adequate and appropriate working space in order to conduct audits or examinations in compliance w~th ttns section The CITY shall give REED reasonable advance notice of intended audits or examinations ARTICLE XV PERSONNEL A REED represents that, except as provided for in the Attachment, it has or will secure at its own expense all personnel required under ttus Agreement, and such personnel shall not be employees or officers of the CITY REED shall inform the CITY Professional Servmes Agreement Reed Consultmg Group - Page 6 of any confltct of interest or potenttal confltct of tnterest that may arise dunng the term of th~s Agreement B All services reqmred hereunder will be performed by REED or under its supervlston All personnel engaged tn work shall be quahfied and shall be authorized and penmtted under state and local laws to perform such services ARTICLE XVI DISCRIMINATION PROHIBITED In performing the servmes reqmred hereunder, REED shall not dtscnmtnate agmnst any person on the bas~s of race, color, rehglon, sex, nattonal ongm or ancestry, age, or phystcal hand~cap ARTICLE XVII COMPLIANCE WITH LAWS REED shall comply w~th all federal, state, local laws, roles, regulattons, and ordtnances apphcable to the work covered hereunder as they may now read or as they may be hereinafter amended ARTICLE XVIII COORDINATION OF WORK ON THE ENGAGEMENT A REED shall commence, can'y on, and complete this engagement wtth all apphcable dtspatch, tn a sound, economical, effictent manner, and, tn accordance with the provisions hereof In accomphshmg the project, REED shall take such steps as are appropriate to ensure that the work tnvolved ts properly coordtnated w~th related work being carned on by the CITY B The CITY shall assist REED by plamng at REED's dtsposal all available tnfollnatlon pertment to the project, tncludmg prevtous reports, any other data relattve to the project and arranging for access to, and make all provtstons for REED to enter tn or upon, pubhc and private property as reqmred for REED to perform servtces under flus Agreement C REED agrees to cooperate fully wtth R J Covtngton Consulting ("Covtngton") and C~ty staff, together wtth the Ctty's outstde attorneys and consultants in completing thts asstgnmant REED agrees to work m close coordmatlon w~th Covtngton, CITY staff, as well as wtth the CITY's outstde attorneys and consultants in order to maxtmtze the efficlency and quahty of the project dehverables to the CITY constdenng the aggresstve schedule of tins project The CITY ts relying upon REED to mmntaln open hnes of communication w~th Cowngton at all ttmes m order to coordtnate the work and to avmd any eonfltct or any unnecessary duphcatton of effort Dunng the course of thts project the CITY expects, and REED agrees to refrain from, any actton against any consultant ProfeSsional Services Agreement Reed Consulting Group - Page 7 hired by the CITY on flus project which might disrupt or impair the course of the work being performed for the CITY on this project ARTICLE XIX SEVERAL OBLIGATIONS Except where specifically stated in flus Agreement to be otherwse, the duties, obligations and liabilities of the parties are intended to be several and not joint or collective Nothing contmned in this Agreement shall be construed to create an association, trust, partnership, or joint venture or impose a trust or partnership duty, obligation, or liability on or with regard to either party Each party shall be individually and severally liable for its own obligations under this Agreement ARTICLE XX MODIFICATION No waiver or modification of flus Agreement or of any covenant, condition, limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith No evidence of any waiver of modification shall be offered or received in evidence in any proceeding arising between the parties hereunder, unless such waiver or modification is in writing, and duly executed The parties further agree that the provisions of this Article will not be waived unless as herein provided ARTICLE XXI ASSIGNABILITY REED shall not assign any interest in this Agreement and shall not transfer any interest in flus Agreement (whether by assignment, novation or otherwise) without the pnor written consent of the CITY ARTICLE XXII SUCCESSORS IN INTEREST This Agreement and the Attachment appended hereto shall be binding on, and inure to the benefit of, each party's successors and assigns ARTICLE XXIII ENTIRE AGREEMENT Tins Agreement and the Attachment appended hereto constitute the complete and final expression of the agreement of the parties and is intended as a complete and exclusive statement of the terms of their agreements and supersedes all prior and contemporaneous offers, promises, representations, negotiations, discussions, communications, and agreements which may have been made in connection with the subject matter hereof Profosslonal Services Agreement Reed Consulting Group - Page 8 ARTICLE XXIV SEVERABILITY If any provision of this Agreement is found or deemed by a court of competent .lunsdlctton to be invalid or unenforceable, it shall be considered severable from the remainder of flus Agreement and shall not cause the remainder to be invalid or unenforceable In such an event, the parties shall reform this Agreement to replace such stricken provision with a valid and enforceable provision which comes as close as possible to expressing the lntentton of the stricken provision ARTICLE XXV GOVERNING LAW Tlus Agreement shall be construed and interpreted according to, and the rights of the parties shall be governed by, the laws of the State of Texas Venue of any suit or cause of action under this Agreement shall lie exclusively in Denton County, Texas ARTICLE XXVI WAIVER Any waiver at any time by either party of its rights with respect to default under this Agreement, or with respect to any other matters arising in connections with ttus Agreement, shall not be deemed a waiver vath respect to any subsequent default or other matter ARTICLE XXVII CAPTIONS The capttons of this Agreement are for informational purposes only and shall not in any way affect substantive terms or conditions of this Agreement ARTICLE XXVIII TERMINATION OF AGREEMENT The Professional Servtces Agreement previously entered into by the parties hereto, dated March 3, 1998 is hereby terminated Professional Services Agreement Reed Consulting Group - Page 9 IN WITNESS HEREOF, the City of Denton, Texas has executed this Agreement by its duly-authorized City Manager, and REED has executed thts Agreement by and through Its duly-authorized undersigned officer on this the Fifth day of January, 1999 "CITY" CITY OF DENTON, TEXAS A Texas Municipal Corporation ATTEST I~l~l-7;z, C~[a/[ager By ~1~ ~~ A~ROVED AS TO LEGAL FO~ HE~ERT L PROUTY, CITY ATTO~EY REED CONSULTING GROUP A Massachusetts Corporation Jafnes C-o~, Vice President ATTEST /Pre'seo~Ha~t~ome, Sr ProJect Manager Professional Services Agreement Reed Consulting Group - Page 10 ATTACHMENT TO PROFESSIONAL SERVICES AGREEMENT BETWEEN REED CONSULTING GROUP AND THE CITY OF DENTON, TEXAS DATED January 5, 1999 This Attachment terminates and replaces in its entirety the Attachment to Professional Services Agreement entered into by the parties hereto on July 24, 1998 during a previous engagement, and defines a Scope of Services and Budget for additional professional services to be performed by Reed Consultmg Group ("REED") for the City of Denton ("CITY") Scope of Work Attached is an outline of thc scope of services providing for REED to assist the City with its generation and dlstnbntlon divestiture Th~s scope ~s based upon REED's prior discussions and work with the CITY's Electric Department and R J Covington Consulting REED wlll be working m close coordination with R J Covington Consulting, CITY operating personnel, other legal counsel, an environmental auditor/consultant, a labor actuary, and other support personnel as deemed necessary as the divestiture program proceeds We expect that REED, m conjunctmn with other advisors to the CITY will need to make s~gmficant efforts to complete this project on schedule Should REED behevc that tasks are falling behind due to a lack of human resources, we will alert the CITY to the problem, and REED stands ready to step up to its commitment to the project At the outset, REED expects to provide appropriate personnel that will be working side-by-side with CITY staff to successfully complete,th~s process Dehverables The followmg work products and professional services arc among the primary deliverables to be provided in connection with the divestiture process 1) Detailed schedule and crmcal path coordlnanon for all work tasks, 2) Document ldentfficatmn, collection, and organization, 3) Management of data room and/or CD-ROM production if apphcable, 4) Terms of Sale analys~s and recommendations, including assistance with thc preliminary Purchase and Sale Agreement and other closing documentation, 5) Preparation of database of potential b~dders, 6) Preparatmn of early interest letter and other marketing materials, including webslte if applicable, 7) Preparation of Offering Memorandum, 8) Due ddlgence support, including written and verbal Q&A coordination, 9) Preparatmn of site tour protocol documents and implementation of site-tours, Attachment to Professional Services Agreement Reed Consultmg Group - Page 1 10) Preparation of Human Resources manual and Labor Transition Plan and assistance in communication with employees, 1 l) Review of environmental documentation and recommendations for presenting and conveying environmental assets and liabilities, 12) Preparation of site separation plans and documentation as needed, 13) Marketing and negotiations with final bidders, 14) Bidder qualification and final bid review Schedule REED is prepared to commence work on this assignment with a target project k~ck-off in the month of January, 1998 Based on REED's experience in other divestitures and discussions concerning the target project schedule, REED has planned on a nine to twelve-month process from project kick-off until selection of the final bidder and initiation of the closing process Key variables that wll affect the ultimate project duration include unforeseen legislative and regulatory aeUon, the number of short-list bidders and the intensity of their due diligence, and the project design selected for the bidding process REED understands the potential premium associated with being one of the first sets of electric assets available for purchase in the Texas market, and the desire to respond proactively to the Co-Serv Electric interest in the CITY's electric system REED will therefore make every effort to keep to the agreed schedule Dunng the kick-off phase of the assignment, REED will produce, m conjunction with the team, a detmled project schedule for its tasks Proleet Team Throughout the asstgnment, REED will remain committed to providing the CITY with a level and quality of resources that fully meets CITY requirements, and that enables REED to meet the planned schedule REED's preliminary team includes the following Individuals Coyne leads the firm's economic services practice, has extensive experience in strategic planning, mergers and acquisitions, and financial services Mr Coyne has played leading roles in the Boston Edison, GPU, Bangor Hydro and Nevada Power/Sierra Pacific divestitures Prescott C Hartshorne Senior Project Manager, has significant managerial experience on two sell-side divestiture assignments Mr Hartshorne has a background m corporate finance, public finance, and commercial lending, with specific in-depth experience in project finance, financial modeling, and non-rate-regulated investments Attachment to Profess~ona! Services Agreement Reed Consaltmg Group - Page 2 corporate strategtc planning, mergers and acquls~t~ons, and the development of new core businesses Mr Hevert received an M B A from the Umverstty of Massachusetts and a B S m Bus~ness Admmlstratmn from the Umvers~ty of Delaware He ~s a Chartered Fmanc~al Analyst and a member of the Assocmtmn for Investment Management and Research, the Boston Security Analyst Society, and the Planning Forum Thomas A Mills, Jr Vine President with REED Prewous experience ~ncludes bond adwsory and other financial services to utility chents, as well as over 13 years m mergers and acqms~t~ons and other related investment bankmg pos~t~ons Mmhael A Roach Semor Consultant w~th REED has extensive experience ~n supporting generation d~vest~ture programs and analymng and modehng electnmty markets Mr Roach has assisted m the system separation efforts for GPU and m detailed due diligence support services for the Boston Edison and GPU divestitures Gerald Bodle A Semor Consultant with REED-Austin office for 2 Va years, prowdlng financml, economic and technical studies for mumc~pal and private utlht~es in rate design, valuations, peer rewews, and operations Mr Bodyl received h~s BBA ~n F~nance from the Umvers~ty of Texas - Ausun B~nh Le Assistant Consultant w~th REED, has strong experience xn document room support, leading that effort ~n the Bangor Hydro and Nevada Power d~vestaures Andrew Greene Semor ProJect Manager w~th REED, prowdes environmental, pohcy and techmcal advisory servmes Mr Greene has worked extensively on environmental and due dd~gence support ~ssues ~n the GPU d~vest~ture In addition, REED will use additional consultants to prowde an ~n-depth and responsive staff for the duration of the project Based on REED's experience elsewhere, over the course of the engagement, REED may use up to 20 REED personnel for various tasks m the assignment Commercml Terms and Fees Based on the scope, volume and ~ntens~ty of work ~nvolved ~n the proposed d~vest~ture of generation and d~stnbutlon assets, the CITY agrees to pay to REED a flat monthly fee of $150,000 per month for the duration of thru engagement Attachment to Professional Services Agreement Reed Consulting Group - Page 3 Th~s scope of services and fee structure is ~ntended to prowde the CITY w~th a comprehensmve level of support and a team of semor experienced staff throughout all stages of the proposed d~vest~mre~program In addxtmn to REED's fees for services, the CITY shall reimburse REED for REED's out-of- pocket exgenses reasonably recurred on the project at REED's d~rect cost REED and the CITY AGREE, that all the terms, conditions, covenants and provisions of the Professxonal Serv~cas Agreement, dated March 3, 1998 are terminated, and are replaced by the Professtonal Servmes Agreement dated January 5, 1999 Thts Attachment to the Professional Services Agreement, dated January 5, 1999 ~s incorporated by reference to the Professional Servmas Agreement, dated January 5, 1999 as ewdenced by the s~gnatures of the part,es' duly authorized s~gnatonas set forth below Authorized by ~ Accepted by CITY OF ~NTO,N, TEXAS~. / REED CONSULTING GROUP By Date -~ /'a]~ Date /~'~ ATTEST JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM HERBERT L PROUTY, CITY ATTORNEY Date Attachment to Professional Serwces Agreement Reed Consulttng Group - Page 4 ORDINANCE NO JOOO- /,& AN ORDINANCE OF THE CITY OF DENTON, TEXAS AUTHORIZING THE CITY MANAGER TO EXECUTE A FIRST AMENDMENT TO THE PROFESSIONAL SERVICES AGREEMENT DATED JANUARY 5, 1999, BY AND BETWEEN THE CITY AND NAVIGANT CONSULTING, INC, FOR FURTHER CONSULTING SERVICES PERTAINING TO ELECTRIC RESTRUCTURING MATTERS AND THE POSSIBLE DIVESTITURE OF THE CITY'S ELECTRIC GENERATION ASSETS, AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR, PROVIDING FOR RETROACTIVE EFFECT OF THE AMENDMENT TO AGREEMENT, AND PROVIDING AN EFFECTIVE DATE WHEREAS, the C~ty Council deems ~t m the pubhc ~nterest to engage Nawgant Consulting, Inc, Burhngton, Massachusetts ("Nawgant"), successor to the Reed Consulting Group to prowde further professmnal consulting services to the C~ty pertaining to the electric restructunng matters and the possible d~vestlture of the C~ty's electric generation assets, and WHEREAS, on the 5th day of January, 1999, the C~ty Councd passed and approved Ordinance No~99-010, whmh ordinance authorized the City Manager to execute a Professmnal Servmes Agreement ("Agreement") w~th Reed Consulting Group, a Massachusetts Corporation ("Reed") providing for professmnal consulting services, and WHEREAS, Nawgant succeeded to and acqmred the rights of Reed under the Agreement, with the approval of the City, and has been continuously provldmg professional servmes to the C~ty respectmg electric restmctunng matters as well as the possible divestiture of the C~ty's electric generation assets, and recently, the mounts provided for payment to Nawgant have been exhausted pursuant to the Agreement, and the work of Nav~gant, although substantmlly complete, ~s not yet complete, and accordingly, the City Council beheves that it is necessary and appropriate to continue Nawgant's engagement respecting the matters described above for a t~me, so that the posmbte thvestlture of the C~ty's electric generation assets may be brought to a close, one way or the other Accordingly, the City Councd desires to enter ~nto a F~rst Amendment (the "Amendment") to the above Agreement, a copy of Much Amendment ~s attached hereto and incorporated herewith by reference, and WHEREAS, Chapter 2254 of the Texas Government Code, known as the "Professional Services Procurement Act", promdas that a City may not select a provider of professional services on the bas~s of competitive b~ds, but must select the provider on the basis of demonstrated competence and quahficatmns, and for a fmr and reasonable price, and WHEREAS, the professmnal fees as provided in the Professional Services Agreement are fmr and reasonable, cons~denng all relevant factors, as well as the magnitude of the project for which Nawgant Consulting Group ~s being engaged, and smd professional fees do not exceed any maximum provided by law for such professional services, and WHEREAS, the City Council has provided in the City Budget for the appropriation of funds to be used for the purchase of the professional services, as set forth an the Professional Services Agreement, NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS SECTION 1 That the City Manager is hereby authorized to execute a First Amendment to the Professional Services Agreement dated January 5, 1999, by and between the City and Navlgant, for professional consulting services pertaining to electric restmctunng matters and the possible divestiture of the City's electric generation assets, in substantmlly the form of the First Amendment to Professional Services Agreement attached hereto and ~ncorporated herewith by reference SECTION 2 That the award of this Agreement is on the basis of the demonstrated competence and qualifications of Nav~gant and the ability of Navigant to perform the services needed by the City for a fair and reasonable price SECTION 3 That the expenditure of funds as provided in the attached First Amendment to Professional Services Agreement is hereby authorized SECTION 4 That the above and foregoing F~rst Amendment to the Professional Services Agreement, dated January 5, 1999 is hereby ratified, confirmed, and retroactively approved, and shall be effective from and after January l, 2000 SECTION 5 That except as otherwise provided in Section 4 above, th~s Ordinance shall become effective immediately upon its passage and approval PASSED APPROVED the dayof ,2000 EULINE BROCK, MAYOR ATTEST JENNIFER WALTERS, CITY SECRETARY APl )VED AS TO LEGAL FORM HEl ~ERT L PROUTY, CITY ATTORNEY By /~/)~)~ S \Our Documents\Ord~nances~0\Na~gant Consulting 1 st Amended PSA DME D~vestlture doc THE STATE OF TEXAS )( COUNTY OF DENTON )( FIRST AMENDMENT TO PROFESSIONAL SERVICES AGREEMENT DATED JANUARY 5, 1999 THIS FIRST AMENDMENT to that certain Professional Services Agreement, dated January 5, 1999, heretofore entered into by and between the City of Denton, Texas, a Texas Munic~pal Corporation, and Reed Consulting Group, a Massachusetts Corporat~un, is made and entered into on this date by the City of Denton, Texas, a Texas mumclpal corporation, w~th ~ts pnncipal offices at 215 East McKmney S~'eet, Denton, Denton County, Texas 76201 (hereafter called "C~ty"), and Nawgant Consulting, Inc, a Corporation, with its pnnc~pal office at 200 Wheeler Road, Burhngton, Massachusetts, 01803 (hereafter called "Nav~gant"), acting herein by and through their respective duly authorized representatives and officers WHEREAS, on January 5, 1999, the C~ty entered into a Professional Services Agreement (hereai~er the "Agreement") w~th Reed Consulting Group, a Massachusetts Corporation (hereafter "Reed") prowdmg for spec~ahzcd, ~ntens~ve professional services revolved m assisting the City w~th its possible divest~ture of ~ts electric generation and related assets, and the City Council passed and approved Ordinance No 99-010 on that date, authorizing the City Manager to execute smd Agreement, which, among other things, provided for payment of professional fees and out-of-pocket expenses to the consultant, in an amount not to exceed $2,025,000, and WHEREAS, thereafter, through th~s date, Reed Consulting Group, and now, its successor by merger Nawgant Consulting, Ine, have dthgently performed extensive and complex professional services for the C~ty, as d~rected by the City, ~ncident to the marketing, as well as the current re-marketing of the City's elec~c generation resources (the "Project"), w~th the focus of the present act~wty being hunted by the City to the sale, disposition, or other d~vestlture of the C~ty's Spencer Generation Plant as well as the two hydroelectric generation fac~htles s~tuated ~n Denton County, Texas, owned by the C~ty, and WHEREAS, at the t~me the Agreement was entered into by the City and Reed Consulting Group in January 1999, neither the C~ty, nor Reed could predict w~th any certainty the length of time the professional engagement would entail, nor could they predict the market reception or reaction to the C~ty's offenng or,ts electric assets for sale, disposition, or other divestiture The parties, in determunng the not-to-exceed compensation at that t~me could do no more than make a coordinated, reasonably informed, good-faith estimate about the likely period of time and the quantum ofprofessiunal services needed to complete the engagement, and WHEREAS, by the close of 1999, the Project was not yet complete, but the funds provided for ~n the Agreement for the payment of professional fees to Reed, then to Nawgant Consulting, Inc were nearly exhausted, and shortly thereafter, the C~ty authorized Navigant to move forward with a re-marketing effort in hopes of maxlmlz~ng thc financial effects to the City of a possible sale, disposition, or d~vestlture of its local electric generation assets, by additional efforts to be made by Navigant with the remmnlng bidders, and at that tame Navlgant, an order to continue the Project, orally agreed with City Staff, in pnneaple, that because of where the ProJect stood, that Navlgant would voluntarily restructure its compensation under the Agreement and any future amendment to the Agreement to be entered into by and between the C~ty and Navigant, effective as of January l, 2000, an order to continue on the ProJect without interruption, m order to contain the City's out-of-pocket costs, in order to take into account a slightly lesser amount of work then being performed on the ProJect, as well as to bear some nsk of loss of ItS professional fees on the ProJect in the event that the City was not successful in selling, disposing of, or divesting ItS local electric generation assets, and the City and Navigant recognize that, as the properties being marketed by Navlgant involve real property interests, an acceptable way to restructure a portion of Navlgant's fee for professional services is to provide for an additional, fixed completion fee which ~s payable to Navigant solely an the event that there as a successful closing and funding of the sale, disposition, or divestiture of the Spencer Generation Plant (with or without the City's two hydroelectric generation units), which event would satisfy the contingency, and WHEREAS, the City and Nawgant, intend by th~s First Amendment to Professional Services Agreement, Dated January 5, 1999 (hereafter the "First Amendment") to provide for their respective rights and responsibilities, each to the other, effective from and after January 1, 2000, until such tame as the ProJect is completed, whether by a successful closing and funding of a sale of the City's local electric generation assets, or by a cancellation of the ProJect, NOW, THEREFORE, the City of Denton, Texas and Navlgant Consulting, Inc (hereatter collectively referred to as the "Parties"), in consideration of their mutual promises and covenants, as well as for other good and valuable considerations, do hereby AGREE to the following ,amendments to the terms and conditions of the Agreement dated January 5, 1999, to wit I INCORPORATION OF PREAMBLE The parties agree that the preamble set forth herelnabove is hereby incorporated ante this First Amendment by reference for all purposes pertinent II CHANGE OF CONSULTANT'S NAME AND BINDING EFFECT The parties agree that Navlgant Consulting, Inc shall be the responsible entity respecting the performance of the terms and provisions of the Agreement as well as to this First Amendment, and that Nawgant shall succeed to the rights of Reed under the Agreement for all purposes The parties stipulate that Reed was merged into Navlgant, and that NavIgant, for purposes of the performance of the Agreement, is the corporate successor to Reed, which nominal change of name the City expressly consents to and hereby ratifies Page 2 III FEES FOR SERVICES AND PAYMENT OF EXPENSES The part,es agree that the prowslons of Article II of the Agreement, together with the apphcable~ provisions of the "Attachment to Professional Services Agreement Between Reed Consulting Group and the C~ty of Denton, Texas Dated January 5, 1999' (hereafter the "Attachment") shall be amended as follows I The total "not-to-exceed" amount for professional fees and direct out-of-pocket expenses incurred on the Project shall not exceed $2,425,000 2 The City shall continue to reimburse Navxgant for Navlgant's direct out-of-pocket expenses reasonably recurred m the Project on a billed monthly basis, at Navlgant's direct cost 3 The flat monthly fee of $150,000 per month for the duration of the engagement, shall be modified, effective as of January 1, 2000 as follows 4 The City shall pay Nawgant a flat monthly fee of $25,000 for professional services rendered on the Project for the month of January 2000, then 5 The City shall pay Namgant a flat monthly fee of $20,000 for professional services rendered on the ProJect for the month of February 2000, and for each successive month thereafter, until such t~me as the City executes and delivers to a purchaser of the Spencer Generation Plant (with or without the City's two hydroelectric generation units) a defimtive asset purchase agreement, then the parties agree that the $20,000 flat monthly fee provided for by this subparagraph shall be prorated on a daffy basis, to be calculated effective as of the date at which the definmve asset purchase agreement is executed and delivered by the City to such purchaser, then 6 In the event that the City executes and delivers a definitive asset purchase agreement providing for the sale or disposition of the Spencer Generation Plant (with or without the City's two hydroelectric generation units), then thereafter, the City shall pay Navigant, until the Project, and this engagement ~s closed, its professional fees on an as-needed, billed monthly, hourly fee basis, ~n such hourly amounts as are set forth ~n the "Standard Hourly Bflhng Rate Schedule (effective January 1, 2000)," attached hereto as Exhibit "1", and ~ncorporated herewith by reference 7 In the event that the ProJect ~s not complete, and th~s engagement ~s not closed by January 1, 2001, and Namgant ~s rendenng professional services to the C~ty at that time, then Namgant may notify the C~ty in writing that it elects to increase its hourly bflhng rates for its staffperformlng services on the project, effective as of January 1, 2001, to 1ts standard hourly billing rates and the C~ty shall accordingly pay Navlgant m accordance with such increased rates Page 3 8 In the event that the City is unable to successfully close and fund a successful sale, disposition, or other d~vest~ture of ~ts Spencer Generation Plant (w~th or w~thout the City's two hydroelectric generation umts) within the twelve (12) months immediately following the date of the execution and dehvery of a defimt~ve asset purchase agreement (as referred to here~nabove), then, in that event the only sums owed by the C~ty to Navagant for professional fees pursuant to the Agreement and the F~rst Amendment, from and after January 1, 2000, shall be those eamed flat monthly fees as provided for in paragraphs III C 1 and III C 2 above, and any as-needed, hourly fees earned by Nawgant, as prowded for ~n paragraphs III C 3 and III C 4 above 9 In the event that the City is successful, and ~s able to close and fund a sale, d~spos~t~on, or divestiture of the Spencer Generation Plant (w~th or w~thout the C~ty's two hydroelectric generation umts), within the twelve (12) months ~mmed~ately following the date of the execution and dehvery of a defimt~ve asset purchase agreement (as referred to above), then, ~n that event only, pursuant to the agreement of the part,es providing for the restructunng of Nawgant's professional fees for the period of t~me on and after January 1, 2000, the C~ty shall pay to Nav~gant, w~th~n twenty days following closing and funding of the referenced sale, disposition, or other d~vest~ture of the Spencer Generation Plant (with or w~thout the City's two hydroelectric units) an addmonal fixed completion fee of $250,000, for Nawgant's professional servmes prewously rendered, earned, but deferred until the successful completion of the contingency described ~n th~s subparagraph NOTICES The part, es agree that the terms and provlsmns of Artmle IX of the Agreement shall be amended to prowde the following as the apphcable notme addresses of the partms, to wit CITY NAVIGANT C~ty of Denton, Texas Nawgant Consulting, Inc M~chael W Jez, C~ty Manager James M Coyne, Managing D~rector 215 East McKanney Street 200 Wheeler Road Denton, TX 76201 Burhngton, MA 91803 V COORDINATION OF WORK ON THE ENGAGEMENT The parties agree that the terms and provisions of Article XVIII of the Agreement shall be amended to add the following prows~on D The parties agree that the pnnc~pal members of the ProJect Team are, and shall be James M Coyne and Prescott Hartshome Other Navlgant consultants will continue to be ut~hzed on the ProJect on an as-needed barns as determined by the Pnnmpals The pnnc~pal members of the ProJect Team will remmn active on the ProJect until ~ts completion Over the Page 4 course of completing this engagement, should pnnc~pal members of the Project Team move to a new entity, unless Navlgant arranges for continued services from the pnnclpal members of the Project Te~m (subcontracted or otherwise), the City reserves the right to have the Agreement and this First Amendment follow the Project Team to the new entity where the pnneipals will be employed In that event, payment for services due to Navlgant under the Agreement and the First Amendment will be hmlted to the flat monthly fees and as-needed hourly professional fees rendered through the date the Project is transferred to the Pnnmpals' new entity If, however, the Project has progressed to an executed asset purchase agreement for the Spencer Generatmn Plant, Navlgant shall be entitled to one-half the fixed completion fee if the financial closing is achieved VI SURVIVAL OF AGREEMENT The parties agree, that except as specifically provided by th~s First Amendment document; that all of the terms, covenants, condmons, agreements, rights, responslbllmes, and obligations of the parties set forth in the Agreement, shall remain in full force and effect IN, WITNESS WHEREOF, the City of Denton, Texas and Nav~gant Consulting, Inc have executed First Amendment to Profesmonal Service Agreement Dated January 5, 1999 in four (4) original count..e~arts, by and t~o~ugh~ctlve duly authorized representatives and officers on this the ~ day of~g,O~ ,2000 "CITY" CITY OF DENTON, TEXAS A Texas Municipal Corporation 'Mlchae}tW Je~yrManager ATTEST JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM HERBERT L PROUTY, CITY ATTORNEY Page 5 "NAVIGANT" NAVIGANT CONSULTING, INC A Corporation ATTEST By Page 6 Navigan,,t' CONSULTING, INC NAVIGANT CONSULTING, INC Flnancmi Services Standard Hourly Billing Rate Schedule (effective January 1, 2000) Executive Managing D~rector $400 Semor Managmg Director $325 Managing Director $325 Director $300 Principal $250 Semor Engagement Manager $225 Senior Consultant $200 Consultant $150 Associate $125 Technical Writer $100 Research Librarian $100 Analyst $100 Administrative Assistant $45 Clerical Assistant $25 Preparation for testimony and testimony may be billed at one and one-half t~mes the regular billing rates on this schedule