EXHIBIT 99.5
[PEROTSYSTEMS(TM) LETTERHEAD]
26 November 1997
VIA FAX: 202/393-5760
Skadden, Arps, Slate, Meagher & Flom LLP
Attn: Martin R. Hoffman
1440 New York Avenue, N.W.
Washington, D.C. 20005-2111
Re: California Independent System Operator
Dear Marty:
As we discussed during our recent meeting with Mr. Jeffrey Tranen of the
California Independent System Operator, Inc. (ISO) and Mr. Ronald Nash of Perot
Systems Corporation ("Perot Systems"), I am enclosing for your review the
following documents:
1. A "Disclaimer" proposed to be used in Perot Systems' sales and
marketing presentations involving the California energy market
deregulation.
2. A "Letter" proposed to be sent to potential participants in the
California energy market to whom Perot Systems has made sales
and marketing presentations.
3. An "Ethics Wall" proposed to be invoked formally for Perot Systems
associates working with the ISO.
In response to Mr. Tranen's inquiry, Perot Systems has made presentations
regarding our consulting capabilities with respect to California market
restructuring to three potential market participants (in addition to related
presentations made to the ISO and the California Power Exchange). Of these
three companies, two decline to reveal their identities under the terms of our
non-disclosure agreements. The remaining company is San Diego Gas and Electric,
and its parent, Energy Pacific, which has informed the ISO of our confidential
discussion.
In response to Mr. Tranen's inquiry regarding our relationship with Policy
Assessment Corporation (PAC), I have reviewed our contracts database and made
appropriate inquiries regarding any such relationship. Perot Systems has no
Mr. Martin R. Hoffman
26 November 1997
Page 2
contractual relationship with PAC, except for mutual non-disclosure agreements.
Perot Systems and PAC make periodic joint sales presentations in situations
where we have mutual business interests, and we have discussed various
potential joint projects. However, we have not yet engaged in any joint
projects and none are currently pending. Perot Systems has not provided any
services to PAC, but has received consulting services from PAC. In addition,
PAC does not employ any current or former associates of Perot Systems.
Upon your approval of the forms of these documents, Perot Systems will promptly
(i) formally communicate the content of the Ethics Wall to the appropriate
associates, (ii) send the Letter to each of potential participants to whom
Perot Systems has made sales and marketing presentations regarding our
consulting capabilities with respect to California market restructuring, and
(iii) ensure that the Disclaimer appears as part of our sales and marketing
presentations regarding our consulting capabilities with respect to California
market restructuring.
Based on our discussions of November 18th, and following our compliance with
Mr. Tranen's requests in this matter, it is our understanding that the ISO will
make similar requests to each of the ISO's vendors who offer consulting
services relating to California market restructuring and that Mr. Tranen will
formally withdraw the allegations made in his letter dated October 22, 1997.
If you have any questions regarding these matters, please call me at
972/383-5615 at your earliest convenience. Best wishes for the holidays.
Sincerely,
/s/ CHARLES N. BELL
Charles N. Bell
CC: Jeffrey D. Tranen (w/attachments)
California Independent System Operator, Inc.
Andy Goletz (w/attachments)
Ron Nash (w/attachments)
Ken Scot (w/attachments)
Ed Smith (w/attachments)
PROPOSED DISCLAIMER SLIDE
Perot Systems' services addressing the restructuring of California's power
markets and development of supporting infrastructure and services are based on
our understanding of the California ISO's and PX's business protocols; NOT the
use of, or knowledge of, any proprietary client systems.
Proposed Letter to Contacts:
The California Independent Service Operator (ISO) has retained Perot Systems
Corporation (Perot Systems) as a member of the ISO Alliance, LLC to provide
professional services to the ISO in the design, development, integration and
roll-out of the information technology applications supporting the ISO's
business operations.
Recently, the ISO expressed concerns over the potential insights which Perot
Systems and the ISO's other service providers may possess into its proprietary
systems or operations.
To address these concerns and avoid any suggestion, whether real or perceived,
of Perot Systems using information not in the public domain in performing
services to other clients, Perot Systems agreed to initiate several actions,
including contacting its present clients and those prospects with whom we have
been discussing matters of California market restructuring to reinforce our
position in matters of this nature.
I am writing to you in support of these agreements.
Perot Systems' offering of our services addressing the restructuring of
California's power markets and development of supporting infrastructure and
services, are based on our understanding of the ISO's and the California
Exchange's business protocols; not the use of, or knowledge of, any proprietary
client systems.
We are fortunate to count amongst the members of our team, subject matter
experts in such issues as congestion theory and in other equally critical
aspects of the business rules governing these markets. It is through these
Associates' comprehension of the business rules and their applications to the
market that our strategic service offerings are shaped.
Perot Systems' Standards and Ethical Principals embody the highest concepts and
standards of honesty and integrity. Our values require that we operate with
absolute integrity and that each of our associates conduct themselves in a
manner that will bring credit to themselves, their families and the company at
all times. Each and every associate pledges his or her personal and
professional commitment to these principals and values. There are no exceptions.
It is understandable that the major changes all of us are facing in
deregulating this industry should be accompanied by states of anxiousness. Perot
Systems feels it important that our clients can be assured that one constant
they can expect is the measure of integrity with which we will approach their
business dealings. We welcome the opportunity to discuss these matters if you
have any concerns or questions whatsoever. We will be contacting each of you
directly to review any concerns which you may have.
These are exciting times. We look forward to working with you to shape the
future.
Sincerely,
MEMORANDUM
To: All Perot Systems Associates and Independent Contractors Engaged on the
California ISO Account
From: Andy Goletz
Date: [DRAFT]
Re: California ISO Ethics Wall
Please review the attached document and return the attached Affirmation to me as
soon as possible. It is essential that you review this document carefully and
comply with its requirements.
If you have any questions, please give me a call.
CALIFORNIA INDEPENDENT SYSTEM OPERATOR
ETHICS WALL
NOVEMBER 17, 1997
THIS DOCUMENT REQUIRES YOUR IMMEDIATE CAREFUL REVIEW
The core concepts of Perot Systems Corporation's ("Perot Systems") Standards and
Ethical Principals are the highest standards of honesty and integrity. Our
values require that we operate with integrity and that each of our associates
conduct themselves in a manner that will bring credit to themselves, their
families and the company at all times.
California Independent System Operator, Inc. (the "Client") has engaged the ISO
Alliance, LLC (the "Alliance") to provide certain project management, system
development, system integration, system testing and training services in
connection with electric utility deregulation and the new competitive
environment in the California electric industry. Perot Systems is a member of,
and a subcontractor to, the Alliance and has certain contractual obligations to
the Alliance and our Client with respect to (1) the disclosure and use of the
Alliance's and our Client's confidential information and (2) the acceptance of
certain third party client engagements.
Perot Systems' Standards and Ethical Principals, as well as your Associate
Agreement, Independent Contractor Agreement, or Confidentiality and Proprietary
Rights Agreement, as the case may be, prohibit the disclosure or use of our
Client's confidential or proprietary business and technical information without
Perot Systems' and our Client's approval.
From time to time, you may be called upon to participate in discussions with the
California Power Exchange (the "PX"), one or more investor owned utilities, one
or more scheduling coordinators (including the PX when acting in such capacity),
vendors or other persons who may use or have another interest in the computer
systems or our Client. In addition, you should be aware than certain Perot
Systems associates may be engaged in marketing consulting or technology services
to these parties.
In order to ensure compliance with Perot Systems' Standards and Ethical
Practices and our contractual obligations to our Client and to avoid the
appearance of a conflict of interest, Perot Systems is formally establishing a
so-called "Ethics Wall" with respect to all associates who perform services for
our Client. This Ethics Wall will serve to reinforce, to the greatest extent
practicable, the care to be exercised by all associates involved in Perot
Systems' work for our Client, particularly when talking to persons who are
involved in Perot Systems' work for third parties who may have an interest in
our Client's confidential or proprietary information.
ALL PEROT SYSTEMS ASSOCIATES AND CONTRACT PERSONNEL MUST
CAREFULLY REVIEW AND COMPLY WITH THE FOLLOWING RESTRICTIONS
WHICH COMPRISE THE ETHICS WALL
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CALIFORNIA INDEPENDENT SYSTEM OPERATOR
ETHICS WALL
NOVEMBER 17, 1997
Definitions
1. Except for persons designated as members of the Marketing Team or the
Joint Team, all Perot Systems associates and independent contractors who are
currently providing, services for this Client are designated members of the
"Client Team."
2. Except for persons designated as members of the Joint Team, all Perot
Systems associates who are actively involved in the marketing and sale of Perot
Systems' services to competitors or customers of this Client are designated
part of the "Marketing Team." Third parties with whom Perot Systems is making
joint marketing presentations will also be designated members of the Marketing
Team.
3. All Perot Systems associates who (a) provide services after the date of
this document or during the six months prior to the date of this document have
provided services for this Client, and (b) are actively involved in the
marketing and sale of Perot Systems' services to competitors, customers or
suppliers of this Client are designated part of the "Joint Team." The Client
will be notified of the assignment of associates to the Joint Team.
4. All written and oral information disclosed by Client or its agents to the
Client Team will be considered by all members of the Client Team to be
confidential ("Confidential Information") and will be held in strict confidence
except to the extent (a) reasonably necessary for the Client Team to perform
Perot Systems' contractual obligations to Client, as such obligations and
reasonable necessity are determined by the Account Manager, or (b) disclosure of
such Confidential Information is authorized by Client or Perot Systems' legal
department. Unless otherwise required by Perot Systems' contractual obligations
to Client, Confidential Information will not include information that is (1)
publicly available without fault of Perot Systems or the Alliance, (2) or was
known to Perot Systems prior to its disclosure by Client or members of the
Alliance, or (3) received from a third party without restriction as to
confidentiality. This paragraph is intended to define a standard of conduct for
Perot Systems' associates and independent contracts, and will not be deemed to
modify any term or condition of any agreement between Perot Systems and Client,
any associate, any independent contractor or any other person, as the case may
be.
Requirements
5. So long as Perot Systems is providing services for this Client, and for 90
days thereafter, Perot Systems' will:
(a) maintain accurate and complete lists of the Client Team, the
Marketing Team and the Joint Team and post such lists in locations
accessible to all members of the Client Team, the Marketing Team and
the Joint Team;
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CALIFORNIA INDEPENDENT SYSTEM OPERATOR
ETHICS WALL
NOVEMBER 17, 1997
(b) notify all members of the Client Team each time a new associate or
independent contractor joins or leaves the Client Team;
(c) distribute this document to each associate and independent contractor
who performs services for the Client and each other Perot Systems
associate who is reasonably expected to be a member of the Marketing
Team; and
(d) maintain a file containing the Affirmations of this Ethics Wall
executed by all member of the Client Team, Marketing Team and Joint
Team.
6. Members of the Client Team are absolutely barred from disclosing any of
Client's Confidential Information to any person other than (1) members of the
Client Team, except where such person is a member of the Marketing Team or
Joint Team, their supervisors, or (2) persons authorized by Client or a Perot
Systems attorney to receive such Confidential Information; provided, in each
case, that such person has entered into a confidentiality agreement with Perot
Systems or Client.
7. Members of the Joint Team may actively participate in Perot Systems'
marketing activities and may provide consulting services for third parties other
that Client, provided that such person does not disclose any Confidential
Information to any third party.
8. Each member of the Client Team, Marketing Team and Joint Team will execute
the Affirmation attached to this document.
PEROT SYSTEMS ASSOCIATES AND INDEPENDENT CONTRACTORS WHO HAVE CONCERNS
ABOUT PERCEIVED VIOLATIONS OF THE REQUIREMENTS SET FORTH IN THIS
DOCUMENT WILL IMMEDIATELY REPORT SUCH INFORMATION TO PEROT
SYSTEMS' LEGAL DEPARTMENT AT 972/383-5600
IF YOU ARE NOT DESIGNATED AS A MEMBER OF THE CLIENT PROJECT TEAM, THE
MARKETING TEAM, OR THE JOINT TEAM, BUT BELIEVE THAT YOU SHOULD BE
INCLUDED ON ONE OF THOSE LISTS, PLEASE CONTACT THE ACCOUNT
MANAGER OR THE PEROT SYSTEMS LEGAL DEPARTMENT IMMEDIATELY.
IF YOU HAVE ANY QUESTIONS CONCERNING THE REQUIREMENTS OF THIS
ETHICS WALL, PLEASE CONTACT THE ACCOUNT MANAGER OR THE
PEROT SYSTEMS LEGAL DEPARTMENT.
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CALIFORNIA INDEPENDENT SYSTEM OPERATOR
ETHICS WALL
November 17, 1997
AFFIRMATION
By signing this Affirmation, I represent to Perot Systems that:
A. I have read Perot Systems' Standards and Ethical Principles, and agree to
abide by its requirements; and
B. I have read this CALIFORNIA INDEPENDENT SYSTEM OPERATOR ETHICS WALL, and
agree to abide by its requirements.
Signature:
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Name:
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Date:
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