Outsourcing Agreement

Outsourcing Agreement





THIS OUTSOURCING AGREEMENT (this " Agreement "), dated as of July 1, 2002, is by and between Westar Energy, Inc. (" Westar "), with offices at 818 S. Kansas Avenue, Topeka, Kansas 66612, and Protection One Data Services, Inc. (" PODS ") with offices at 818 S. Kansas Avenue, Topeka, Kansas 66612.



W I T N E S S E T H:





WHEREAS , Westar desires to outsource certain services and functions currently performed by Westar to PODS as more fully described herein;



WHEREAS , PODS is willing to assume responsibility for such outsourced services and functions, all in accordance with the terms and conditions of this Agreement;



NOW, THEREFORE , Westar and PODS hereby agree as follows:





1. AGREEMENT AND TERM



1.1 Agreement. Upon the terms and conditions of this Agreement, PODS shall provide to Westar certain information technology ("IT") services currently performed by Westar described in the IT Services Addendum attached hereto as Schedule 1.1 and such additional addenda that may from time to time be executed by the parties, each of which shall be attached hereto as consecutively numbered amendments to Schedule 1.1 (the "IT Services").





1.2 Term . The term of this Agreement will commence on July 1, 2002 (the "Effective Date") and will end on December 31, 2005. Either party may terminate this Agreement on six (6) months prior written notice, provided, however, that such notice may not be given prior to June 30, 2003. This Agreement may also be terminated as provided in Sections 7.1-7.4. Unless terminated as provided herein, the term of this agreement will be automatically extended for successive additional periods of one year each. Each successive year commencing on the first day of January following the Effective Date shall be referred to as an "Agreement Year".







2. RESPONSIBILITY FOR RESOURCES





2.1 Employees.





(a) With the consent of Westar, PODS has offered employment to Westar employees previously identified by PODS and listed on Schedule 2.1 (the " Employees") effective as of July 1, 2002, in accordance with PODS92 normal employment policies, upon the terms and conditions set forth in said Schedule 2.1. Westar will provide all payroll, employment tax, and other information relating to the Employees as may be reasonably requested by PODS consistent with any applicable confidentiality restrictions. As to any Employees not accepting employment offers from PODS, Westar shall have the option to retain such employees or terminate their










employment in accordance with Westar92s standard employment policies. Responsibility for severance and any related liability for those Employees not accepting employment offers from PODS shall be the sole responsibility of Westar.



(b) During the period commencing on the Effective Date and ending (i) September 30, 2002, as it relates to terminations and (ii) December 31, 2002, as it relates to relocations, PODS may identify certain hired Employees that it does not believe to be appropriate for providing the IT Services and terminate the employment of such Employees, or may relocate positions and as a result trigger the right of Employees under employment policies applicable to them to terminate their employment and receive severance benefits. As to each such Employee, Westar agrees to reimburse PODS for severance payments and related costs made or incurred by PODS to or for such Employee; provided, that such severance payments will not exceed the amount of severance pay that Westar would have owed such Employee had the Employee remained a Westar employee up to the date of termination of employment.





(c) With respect to the hired Employees whose employment is not terminated pursuant to Section 2.1(b) above, PODS will maintain such Employees at a salary and benefits comparable to those provided by PODS as of the Effective Date as provided in Schedule 2.1 until July 1, 2003; provided, however, that any Employee hired by PODS may be terminated for good cause as defined in PODS92 existing personnel policies or as part of a general reduction in force adopted by PODS. Severance and related liabilities for any Employee hired by PODS and terminated after September 30, 2002 except as set forth in Section 2.1(b) shall be the responsibility of PODS. Nothing in this Agreement is intended to create any obligation of any party hereto to any employees of any party, nor to make any employee of any party hereto a third party beneficiary of this Agreement.





2.2 Facilities. Commencing on the Effective Date and for the term hereof, Westar will provide to PODS the use of the space specified in the Facilities Schedule attached hereto as Schedule 2.2(a) which space is currently occupied by Westar in performing the services and functions to be performed by PODS hereunder (the " Facilities"), pursuant to the Facilities License attached hereto as Schedule 2.2(b). Westar shall obtain the necessary consents and approvals from Westar92s landlord, if applicable, with respect to PODS92 use and occupancy of the Facilities. PODS will have the right to vacate any portion of the space comprising the Facilities that PODS no longer desires to use. Any such space that PODS vacates will be returned to Westar.





2.3 Relocation. With Westar92s prior written consent, PODS shall have the right to relocate the site of its services hereunder to an alternate site at its expense; provided that such relocation shall not affect either party92s obligation to provide access to the Westar Systems and Third Party Services as described herein, and shall not result in a material degradation of service to Westar or any party to whom Westar is contracted to provide service.





2.4 Westar Equipment. Commencing on the Effective Date and for the term hereof, Westar will provide to PODS, in their then-existing working condition, the use of all furnishings, fixtures, computers, computer-related equipment, data communication lines and all



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other equipment in use by Westar as of the Effective Date in performing the functions to be performed by PODS for Westar hereunder, including those items listed on Schedules 2.4(a) and 2.4(b) (the "Westar Equipment") in accordance with the following:



(a) Commencing on the Effective Date and for the term hereof, Westar will provide PODS with access to all Westar Equipment that is owned by Westar or leased by Westar pursuant to capital leases or similar financing arrangements and used by Westar in performing the functions to be performed by PODS hereunder (collectively, the "Westar Owned Equipment"), including, without limitation, the Westar Equipment listed in Schedule 2.4(a). From time to time as determined by the parties after the Effective Date, the parties will conduct an inventory of the Westar Owned Equipment and, based on the results of such inventory, modify Schedule 2.4(a). Westar will continue to insure the Westar Owned Equipment and shall retain liability for any loss or damage to the Westar Owned Equipment unless caused by the negligence or willful misconduct of PODS, including any of its employees, agents or contractors.





(b) Commencing on the Effective Date and for the term hereof, Westar will provide to PODS the use of all Westar Equipment that is leased by Westar other than pursuant to capital leases or similar financing arrangements and used by Westar in performing the functions to be performed by PODS hereunder (collectively, the "Westar Leased Equipment"), including without limitation the Westar Equipment listed in Schedule 2.4(b). From time to time after the Effective Date as determined by the parties, the parties will conduct an inventory of Westar Leased Equipment and, based on the results of such inventory, modify Schedule 2.4(b). There shall not be any adjustment to the fee schedule as leases are canceled or added except as set forth in Section 5.2.





2.5 Westar Systems. Commencing on the Effective Date and for the term hereof, Westar will and hereby does provide to PODS a limited, non-transferable license to use and access the systems currently used by Westar in performing the functions to be performed by PODS hereunder and any successor systems (the "Westar Systems") for use in performing the services hereunder for Westar and for third parties as provided for herein. Westar shall also provide all necessary support for PODS92 continued use and access to the Westar Systems. The Westar Systems include all software described in Schedule 2.5, which includes all programs and documentation therefor and the tangible media on which such programs are recorded. Westar shall be responsible for obtaining any necessary consents or assignments from any third party licensors of the Westar Systems prior to the Effective Date to enable PODS to use the Westar Systems in accordance with this Section. Notwithstanding the above, Westar shall not be responsible for any cost associated with support, consents, or assignments to the extent the support, consents or assignments are needed for use of the Westar Systems by PODS in performing services for parties other than Westar, ONEOK, and Wolf Creek.





2.6 Upgrades to Westar Systems. From time to time during the term of this Agreement, Westar may elect, at its own expense, to upgrade or change the Westar Systems, provided that such upgrade or change provides substantially the same functionality. IT Services related to routine upgrades are covered under the agreement. IT Services related to major upgrades will be negotiated separately.



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2.7 Third Party Services. Commencing on the Effective Date and for the term hereof, Westar will make available to PODS other than as specified below, all third party services used by Westar in performing the functions to be performed by PODS hereunder, including those described on Schedule 2.7 (the "Third Party Services"). If requested by PODS and agreed to by Westar, Westar will, to the extent permitted by such agreement, terminate or assign to PODS any agreement pursuant to which any Third Party Services are provided. PODS will pay, or reimburse Westar, for any penalties or charges incurred by Westar as a result of any termination or assignment requested by PODS.





2.8 Upgrades/Additions to Westar Equipment and Westar Systems. From time to time during the term hereof, PODS will identify to Westar changes and upgrades to Westar Equipment or Westar Systems ("New Equipment") that PODS believes will result in enhanced performance or reduced costs in providing the IT Services hereunder. PODS will provide Westar with a reasonably detailed summary of (a) the anticipated expense associated with the New Equipment, (b) the anticipated benefits and savings to be derived from the acquisition of the New Equipment and (c) the proposed adjustment, if any, to the fees to be paid hereunder. Westar will not unreasonably refuse to acquire New Equipment so long as the net impact on Westar is either to maintain or to reduce fees hereunder, or to materially enhance the performance of the IT Services. In the event the acquisition of the New Equipment will result in reduced expense to PODS and maintain fees at an equivalent level to Westar (after adjusting the Fees for the depreciated costs of the New Equipment), PODS will be allowed to retain the benefit of all such savings.





2.9 The Shared Services Agreement. Westar and PODS acknowledge that they are parties to a Shared Services Agreement dated April 1, 1999 (the "Shared Services Agreement"). The Shared Services Agreement is amended, as of the Effective Date, to delete the " Information Technology Services" described in Exhibit 3 thereof.





2.10 Westar Financing Changes. In the event Westar elects to change any of the finance arrangements it presently has in place with respect to Westar Equipment or Westar Systems, and such financing change adversely affects PODS92 costs in providing the IT Services, the fees due hereunder shall be equitably adjusted so that PODS does not incur any additional costs as a result of such a financing change.





2.12 Obligations assumed by PODS. As of the Effective Date, PODS shall assume the payment obligations of Westar related to the Westar Leased Equipment, the Westar Systems and the Third Party Services. PODS will make the payments directly to the applicable lessor, licensor or other third party when due unless otherwise agreed by the parties.







3. IT SERVICES





3.1 IT Services for WESTAR. PODS will provide to Westar the IT Services as set forth in the IT Services Addendum.



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3.2 IT Services for ONEOK and Wolf Creek.





(a) The parties acknowledge that Westar is a party to that certain Shared Services Agreement with ONEOK Inc. ("ONEOK") dated November 26, 1997, as renewed and amended. As part of the IT Services to be provided hereunder, PODS will provide to ONEOK those services specifically set forth on Schedule 3.2(a)(1) (the "ONEOK Services"). The ONEOK services will be provided as part of the IT Services and Westar will remain the party in contract with ONEOK. PODS will not separately bill ONEOK. In the event ONEOK initiates a change request with Westar with regard to the ONEOK services, Westar will promptly communicate such request to PODS and the parties will cooperate as reasonably necessary to accommodate such change request in accordance with the procedures set forth in 3.3 below. Westar represents and warrants to PODS that ONEOK is presently paying Westar the fees set forth on Schedule 3.2(a)(2) (the "ONEOK Fees"), and during the term of this agreement Westar will pay PODS an amount equal to the ONEOK Fees collected by Westar from ONEOK. Westar is under no obligation to PODS by virtue of this Section 3.2(a) to keep the Shared Services Agreement with ONEOK in force and effect. In the event the Shared Services Agreement is terminated, Westar shall have no further obligations to make any payments to PODS under this Section 3.2(a) other than payment of any ONEOK Fees received by Westar attributable to the period prior to such termination and, with respect to the period after such termination, the payment of the fixed costs previously associated with the ONEOK Services as agreed to by the parties, provided that PODS makes reasonable efforts to re-allocate or dispose of the assets to which such fixed costs are attributable such that Westar92s obligations to make payments will be reduced. During the initial eighteen months of the term of this agreement, PODS will be entitled to recoup any direct expenses incurred by PODS as a result of a termination of the work order relating to ONEOK prior to reducing fees to Westar.





(b) The parties acknowledge that Westar is a party to that certain Owner Work Order with Wolf Creek Nuclear Operating Corporation. ("Wolf Creek") dated February 5, 1999. As part of the IT Services to be provided hereunder, PODS will provide to Wolf Creek those services specifically set forth on Schedule 3.2(b)(1) (the "Wolf Creek Services"). The Wolf Creek Services will be provided as part of the IT Services and Westar will remain the party in contract with Wolf Creek. PODS will not separately bill Wolf Creek. In the event Wolf Creek initiates a change request with Westar with regard to the Wolf Creek services, Westar will promptly communicate such request to PODS and the parties will cooperate as reasonably necessary to accommodate such change request in accordance with the procedures set forth in 3.3 below. Westar represents and warrants to PODS that Wolf Creek is presently paying Westar the fees set forth on Schedule 3.2(b)(2) (the "Wolf Creek Fees"), and during the term of this agreement Westar will pay PODS an amount equal to the Wolf Creek Fees collected by Westar from Wolf Creek. Westar is under no obligation to PODS by virtue of this Section 3.2(b) to keep the Owner Work Order with Wolf Creek in force and effect. In the event the Owner Work Order is terminated, Westar shall have no further obligations to make any payments to PODS under this Section 3.2(b) other than payment of any Wolf Creek Fees received by Westar attributable to the period prior to such termination and, with respect to the period after such termination, the payment of the fixed costs previously associated with the Wolf Creek as agreed to by the parties, provided that PODS makes reasonable ...