\n 9.04 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS…………….29
\n 9.05 AUDITS REGARDING VENDOR CONTRACTS………………………………..30
\n 9.06 BENEFICIARY DESIGNATIONS………………………………………..30
\n 9.07 REQUESTS FOR IRS AND DOL OPINIONS………………………………..30
\n 9.08 FIDUCIARY MATTERS………………………………………………30
\n 9.09 CONSENT OF THIRD PARTIES………………………………………..30
\n 9.10 TAX COOPERATION………………………………………………..31
\n 9.11 PLAN RETURNS…………………………………………………..31<\/p>\nARTICLE X. EMPLOYMENT-RELATED MATTERS………………………………………………..31
\n 10.01 TERMS OF RESOURCES EMPLOYMENT……………………………………31
\n 10.02 HR DATA SUPPORT SYSTEMS…………………………………………31
\n 10.03 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS………………………31
\n 10.04 CONFIDENTIALITY AND PROPRIETARY INFORMATION……………………….31
\n 10.05 ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND COMMISSIONS……………36
\n 10.06 PAYROLL AND WITHHOLDING…………………………………………36
\n 10.07 PERSONNEL AND PAY RECORDS……………………………………….37
\n 10.08 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES…………37<\/p>\n
ARTICLE XI. GENERAL PROVISIONS………………………………………………………37
\n 11.01 EFFECT IF IPO AND\/OR DISTRIBUTION DOES NOT OCCUR…………………..37
\n 11.02 RELATIONSHIP OF PARTIES…………………………………………37
\n 11.03 AFFILIATED COMPANIES……………………………………………37
\n 11.04 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS…………………..38
\n 11.05 GOVERNING LAW………………………………………………….38
\n 11.06 SEVERABILITY…………………………………………………..38
\n 11.07 AMENDMENT……………………………………………………..38
\n 11.08 TERMINATION……………………………………………………38
\n 11.09 CONFLICT………………………………………………………39
\n 11.10 COUNTERPARTS…………………………………………………..39
\n<\/c><\/s><\/table>\n
-iv-
\n 6<\/p>\n
EMPLOYEE MATTERS AGREEMENT<\/p>\n
This EMPLOYEE MATTERS AGREEMENT (this “Agreement”) is entered into as
\nof December 31, 2000, between Reliant Energy, Incorporated, a Texas corporation
\n(“REI”), and Reliant Resources, Inc., a Delaware corporation (“Resources”).
\nCapitalized terms used herein and not otherwise defined shall have the meanings
\nascribed to such terms in Article I hereof.<\/p>\n
RECITALS<\/p>\n
WHEREAS, the Board of Directors of REI and Resources have each
\ndetermined that it would be appropriate and desirable for REI to separate the
\nResources Group from the REI Group;<\/p>\n
WHEREAS, REI and Resources currently contemplate that Resources will
\nmake an initial public offering (“IPO”) of an amount of its common stock
\npursuant to a registration statement on Form S-1 filed pursuant to the
\nSecurities Act of 1933, as amended, that will reduce REI’s ownership of
\nResources by less than 20%;<\/p>\n
WHEREAS, REI currently contemplates that, following the IPO, REI’s
\nsuccessor holding company will distribute to the holders of its common stock, by
\nmeans of a pro rata distribution, all of the shares of Resources common stock it
\nthen owns (the “Distribution”);<\/p>\n
WHEREAS, in furtherance of the foregoing, REI and Resources have agreed
\nto enter into this Agreement to allocate between them assets, liabilities and
\nresponsibilities with respect to certain employee compensation, benefit plans
\nand programs, and certain employment matters; and<\/p>\n
NOW, THEREFORE, in consideration of the foregoing and the covenants and
\nagreements set forth below, the parties hereto agree as follows:<\/p>\n
ARTICLE I.<\/p>\n
DEFINITIONS<\/p>\n
Wherever used in this Agreement, the following terms shall have the
\nmeanings indicated below, unless a different meaning is plainly required by the
\ncontext. Capitalized terms used herein and not otherwise defined shall have the
\nmeanings ascribed to such terms in the Separation Agreement. The singular shall
\ninclude the plural, unless the context indicates otherwise. Headings of sections
\nare used for convenience of reference only, and in case of conflict, the text of
\nthis Agreement, rather than such headings, shall control:<\/p>\n
-1-
\n 7<\/p>\n
1.01 ACTION. “Action” means any demand, action, suit, countersuit,
\narbitration, inquiry, proceeding or investigation by or before any federal,
\nstate, local, foreign or international Governmental Authority or any arbitration
\nor mediation tribunal.<\/p>\n
1.02 AFFILIATES. “Affiliates” shall have the meaning set forth in the
\nSeparation Agreement.<\/p>\n
1.03 AGREEMENT. “Agreement” means this Employee Matters Agreement,
\nincluding all the Addenda, Schedules and Exhibits hereto, and all amendments
\nmade hereto from time to time.<\/p>\n
1.04 AICP. “AICP,” when immediately preceded by “REI,” means the
\nReliant Energy, Incorporated Annual Incentive Compensation Plan, as amended and
\nrestated effective January 1, 1999. When immediately preceded by “Resources,”
\n“AICP” means the annual incentive compensation plan to be established by
\nResources pursuant to Sections 2.03 and 7.05.<\/p>\n
1.05 ANCILLARY AGREEMENTS. “Ancillary Agreements” shall have the
\nmeaning set forth in the Separation Agreement.<\/p>\n
1.06 ASO CONTRACTS. “ASO Contracts” is defined in Subsection 6.04(a)
\nand Schedule 6.04(a).<\/p>\n
1.07 BENEFIT RESTORATION PLAN. “Benefit Restoration Plan,” when
\nimmediately preceded by “REI,” means the Reliant Energy, Incorporated Benefit
\nRestoration Plan, as established effective June 1, 1985 and thereafter amended
\nfrom time to time. When immediately preceded by “Resources,” “Benefit
\nRestoration Plan” means the frozen Resources Benefit Restoration Plan to be
\nestablished by Resources pursuant to Sections 2.03 and 5.03.<\/p>\n
1.08 COBRA. “COBRA” means the continuation coverage requirements for
\n“group health plans” under Title X of the Consolidated Omnibus Budget
\nReconciliation Act of 1985, as amended from time to time, and as codified in
\nCode Section 4980B and ERISA Sections 601 through 608.<\/p>\n
1.09 CODE. “Code” means the Internal Revenue Code of 1986, as amended
\nfrom time to time.<\/p>\n
1.10 COMMON STOCK. “Common Stock,” when immediately preceded by “REI,”
\nmeans the common stock, without par value of REI. When immediately preceded by
\n“Resources,” “Common Stock” means the common stock, par value $.001 per share,
\nof Resources.<\/p>\n
1.11 DEFERRED COMPENSATION PLAN. “Deferred Compensation Plan,” when
\nimmediately preceded by “REI,” means the Reliant Energy, Incorporated Deferred
\nCompensation Plan, as established effective September 1, 1985, the Reliant
\nEnergy, Incorporated Deferred Compensation Plan, as amended and restated
\neffective January 1, 1989, and the Reliant Energy, Incorporated Deferred
\nCompensation Plan, as amended and restated effective January 1, 1991, each such
\nplan as thereafter amended from time to time. Depending on the context, “REI<\/p>\n
-2-
\n 8<\/p>\n
Deferred Compensation Plan” shall mean all of such plans or a particular one of
\nsuch plans. When immediately preceded by “Resources,” “Deferred Compensation
\nPlan” means the deferred compensation plan to be established by Resources
\npursuant to Sections 2.03 and 5.02 that corresponds to the REI Deferred
\nCompensation Plan.<\/p>\n
1.12 DISTRIBUTION. “Distribution” has the meaning set forth in the
\nRecitals hereof, as the same is further described in the Separation Agreement.<\/p>\n
1.13 DISTRIBUTION DATE. “Distribution Date” shall have the meaning set
\nforth in the Separation Agreement.<\/p>\n
1.14 DISTRIBUTION RATIO. “Distribution Ratio” means the number of
\nshares of Resources Common Stock each holder of REI Common Stock on the Record
\nDate (or such holder’s designated transferee or transferees) will be entitled to
\nreceive in the Distribution determined by multiplying the number of shares of
\nREI Common Stock held by such holder on the Record Date by a fraction, the
\nnumerator of which is the number of shares of Resources Common Stock
\nbeneficially owned by REI on the Record Date and the denominator of which is the
\nnumber of shares of REI Common Stock outstanding on the Record Date.<\/p>\n
1.15 DOL. “DOL” means the United States Department of Labor.<\/p>\n
1.16 EMPLOYMENT LIABILITIES. “Employment Liabilities” means all claims,
\ncauses of action, demands, liabilities, debts or damages (known or unknown)
\nrelated to all employment matters addressed in this Agreement, including but not
\nlimited to claims arising under federal, state or local statute (including,
\nwithout limitation, Title VII of the Civil Rights Act of 1964, as amended
\n(“Title VII”); the Age Discrimination in Employment Act of 1967, including the
\nOlder Workers Benefit Protection Act of 1990 (“ADEA”); the Civil Rights Act of
\n1866, as amended, the Civil Rights Act of 1991, the Americans with Disabilities
\nAct of 1990 (“ADA”), the Energy Reorganization Act, as amended, 42 U.S.C. ss.
\n5851; the Workers Adjustment and Retraining Notification Act of 1988; the
\nPregnancy Discrimination Act of 1978; ERISA; FMLA; the Fair Labor Standards Act;
\nthe Occupational Safety and Health Act; the Equal Pay Act); claims in connection
\nwith workers’ compensation or “whistle blower” statutes and\/or contract, tort,
\ndefamation, slander, wrongful termination or any other state or federal
\nregulatory, statutory or common law or local ordinance.<\/p>\n
1.17 ERISA. “ERISA” means the Employee Retirement Income Security Act
\nof 1974, as amended from time to time.<\/p>\n
1.18 ESOP “ESOP” means the employee stock ownership plan portion of the
\nREI Savings Plan.<\/p>\n
1.19 EXECUTIVE PLANS. “Executive Plans,” when immediately preceded by
\n“REI,” means the Houston Industries Incorporated Executive Life Insurance Plan
\nand the Houston Industries Incorporated Executive Benefits Plan. When
\nimmediately preceded by “Resources,” “Executive Plans” means the Resources
\nexecutive plans to be established pursuant to Sections 2.03 and 5.01 that
\ncorrespond to the respective REI Executive Plans.<\/p>\n
-3-
\n 9<\/p>\n
1.20 FLEXIBLE BENEFITS PLAN. “Flexible Benefits Plan,” when immediately
\npreceded by “REI,” means the Reliant Energy, Incorporated Flexible Benefits
\nPlan. When immediately preceded by “Resources,” Flexible Benefits Plan means the
\nflexible benefits plan to be established by Resources pursuant to Section 2.03
\nand Article VI that corresponds to the REI Flexible Benefits Plan.<\/p>\n
1.21 FMLA. “FMLA” means the Family and Medical Leave Act of 1993, as
\namended from time to time.<\/p>\n
1.22 FOREIGN PLAN. “Foreign Plan” means those Resources Plans
\nmaintained by Resources for the benefit of its non-expatriate employees outside
\nthe U.S.<\/p>\n
1.23 FRINGE BENEFITS. “Fringe Benefits,” when immediately preceded by
\n“REI,” means the REI fringe benefits, plans, programs and arrangements sponsored
\nand maintained by REI (as set forth in Article VIII). When immediately preceded
\nby “Resources,” “Fringe Benefits” means the fringe benefits, plans, programs and
\narrangements established or to be established by Resources pursuant to Section
\n2.03 and Article VIII that correspond to the respective REI Fringe Benefits.<\/p>\n
1.24 GOVERNMENTAL AUTHORITY. “Governmental Authority” shall mean any
\nfederal, state, local, foreign or international court, government, department,
\ncommission, board, bureau, agency, official or other regulatory, administrative
\nor governmental authority.<\/p>\n
1.25 GROUP INSURANCE POLICIES. “Group Insurance Policies” is defined in
\nSubsection 6.04(b) and the Schedule thereto.<\/p>\n
1.26 HCFA. “HCFA” means the United States Health Care Financing
\nAdministration.<\/p>\n
1.27 HEALTH AND WELFARE PLANS. “Health and Welfare Plans,” when
\nimmediately preceded by “REI,” means the REI Health Plans, the REI Flexible
\nBenefits Plan, and the health and welfare plans listed on Schedule 1.27
\nestablished and maintained by REI for the benefit of employees and retirees of
\nany member of the REI Group, and such other welfare plans or programs as may
\napply to such employees and retirees as of the Distribution Date. When
\nimmediately preceded by “Resources,” “Health and Welfare Plans” means the
\nResources Health Plans, the Resources Flexible Benefits Plan, and the health and
\nwelfare plans to be established by Resources pursuant to Section 2.03 and
\nArticle VI that correspond to the respective REI Health and Welfare Plans.<\/p>\n
1.28 HEALTH PLANS. “Health Plans,” when immediately preceded by “REI,”
\nmeans the Plans set forth on Schedule 1.28, and any similar or successor plans,
\nprograms or arrangements. When immediately preceded by “Resources,” “Health
\nPlans” means the health plans, programs and arrangements to be established by
\nResources pursuant to Section 2.03 and Article VI that correspond to the
\nrespective REI Health Plans.<\/p>\n
-4-
\n 10<\/p>\n
1.29 HMO. “HMO” means a health maintenance organization that provides
\nbenefits under the REI Health Plans or the Resources Health Plans.<\/p>\n
1.30 HMO AGREEMENTS. “HMO Agreements” is defined in Subsection 6.04(c)
\nand Schedule 6.04(c).<\/p>\n
1.31 IPO. “IPO” has the meaning set forth in the Recitals hereof, as
\nthe same is further described in the Separation Agreement.<\/p>\n
1.32 IPO CLOSING DATE. “IPO Closing Date” means the first date on which
\nthe proceeds of any sale of Resources Common Stock to the underwriters in the
\nIPO are received.<\/p>\n
1.33 IRS. “IRS” means the United States Internal Revenue Service.<\/p>\n
1.34 LEAVE OF ABSENCE PROGRAMS. “Leave of Absence Programs,” when
\nimmediately preceded by “REI,” means the personal, medical, military and FMLA
\nleave offered from time to time under the personnel policies and practices of
\nREI. When immediately preceded by “Resources,” “Leave of Absence Programs” means
\nthe leave of absence programs established and maintained by Resources.<\/p>\n
1.35 LIABILITIES. “Liabilities” shall mean any and all Indebtedness (as
\nsuch term is defined in the Separation Agreement), liabilities and obligations,
\nwhether accrued, fixed or contingent, mature or inchoate, known or unknown,
\nreflected on a balance sheet or otherwise, including, but not limited to, those
\narising under any law, rule, regulation, Action, order, injunction or consent
\ndecree of any Governmental Authority or any judgment of any court of any kind or
\nany award of any arbitrator of any kind, and those arising under any contract,
\ncommitment or undertaking.<\/p>\n
1.36 LICP. “LICP” means the 1994 Houston Industries Incorporated
\nLong-Term Incentive Compensation Plan and the Houston Industries Incorporated
\nLong-Term Incentive Compensation Plan (Established Effective as of January 1,
\n1989), each such plan as thereafter amended from time to time.<\/p>\n
1.37 LTIP. “LTIP” means the Long-Term Incentive Plan of Reliant
\nResources, Inc. as described in Section 7.04.<\/p>\n
1.38 NEW REI OPTION. “New REI Option” shall have the meaning set forth
\nin Section 7.01.<\/p>\n
1.39 NORAM RABBI TRUSTS. “NorAm Rabbi Trusts” means that certain trust
\nagreement dated as of August 8, 1989 by and between Arkla, Inc. and Boatmen’s
\nTrust Company (also referred to as “Trust Agreement No. 1”), that certain trust
\nagreement dated as of August 8, 1989 by and between Arkla, Inc. and Boatmen’s
\nTrust Company (also referred to as “Trust Agreement No. 2”) and that certain
\ntrust agreement dated as of August 8, 1989 by and between Arkla, Inc. and
\nBoatmen’s Trust Company (also referred to as “Trust Agreement No. 3”).<\/p>\n
-5-
\n 11<\/p>\n
1.40 OPTION. “Option,” when immediately preceded by “REI,” means an
\noption to purchase REI common stock pursuant to a Stock Plan. When immediately
\npreceded by “Resources,” “Option” means an option to purchase Resources common
\nstock pursuant to a plan providing such benefits to be established by Resources
\npursuant to Section 2.03 and Article VII.<\/p>\n
1.41 OUTSOURCE. “Outsource” is defined in Subsection 6.02(b).<\/p>\n
1.42 PARTICIPATING COMPANY. “Participating Company” means: (a) REI; (b)
\nany Person (other than an individual) that REI has approved for participation
\nin, has accepted participation in, and which is participating in, a Plan
\nsponsored by REI; or (c) any Person (other than an individual) which, by the
\nterms of such a Plan, participates in such a Plan sponsored by REI or any
\nemployees of which, by the terms of such a Plan, participate in or are covered
\nby such a Plan.<\/p>\n
1.43 PBGC. “PBGC” means the Pension Benefit Guaranty Corporation.<\/p>\n
1.44 PERSON. “Person” means an individual, a partnership, a
\ncorporation, a limited liability company, an association, a joint stock company,
\na trust, a joint venture, an unincorporated organization and a governmental
\nentity or any department, agency or political subdivision thereof.<\/p>\n
1.45 PLAN. “Plan,” depending on the context, may mean any plan, policy,
\nprogram, payroll practice, arrangement, contract, trust, insurance policy, or
\nany agreement or funding vehicle providing compensation or benefits to
\nemployees, former employees or directors of REI or Resources.<\/p>\n
1.46 QDRO. “QDRO” means a domestic relations order which qualifies
\nunder Code Section 414(p) and ERISA Section 206(d) and which creates or
\nrecognizes an alternate payee’s right to, or assigns to an alternate payee, all
\nor a portion of the benefits payable to a participant under the REI Savings Plan
\nor the Retirement Plan.<\/p>\n
1.47 QMCSO. “QMCSO” means a medical child support order which qualifies
\nunder ERISA Section 609(a) and which creates or recognizes the existence of an
\nalternate recipient’s right to, or assigns to an alternate recipient the right
\nto, receive benefits for which a participant or beneficiary is eligible under
\nany of the Health Plans.<\/p>\n
1.48 RECORD DATE. “Record Date” means the close of business on the date
\nto be determined by the Board of Directors of REI as the record date for
\ndetermining the shareholders of REI entitled to receive shares of Resources
\nCommon Stock in the Distribution.<\/p>\n
1.49 REI. “REI” means Reliant Energy, Incorporated a Texas corporation.
\nIn all such instances in which REI is referred to in this Agreement, it shall
\nalso be deemed to include a reference to each member of the REI Group, unless it
\nspecifically provides otherwise; REI shall be solely responsible to Resources
\nfor ensuring that each member of the REI Group complies with the applicable
\nterms of this Agreement.<\/p>\n
-6-
\n 12<\/p>\n
1.50 REI EMPLOYEE. “REI Employee” means an individual who, on the
\nDistribution Date, is or was employed with any member of the REI Group and is
\nnot a Resources Employee.<\/p>\n
1.51 REI GROUP. “REI Group” shall have the meaning set forth in the
\nSeparation Agreement.<\/p>\n
1.52 REI STOCK VALUE. “REI Stock Value” means the average over the five
\ntrading days immediately preceding the Distribution Date of the high and low
\nsales price (with dividend) of a share of REI Common Stock on the New York Stock
\nExchange – Composite Transactions reporting system, as reported in The Wall
\nStreet Journal on each of the five trading days immediately preceding the
\nDistribution Date.<\/p>\n
1.53 REI TERMINATED EMPLOYEE. “REI Terminated Employee” means any
\nindividual who is a former employee of any member of the REI Group and who, on
\nthe Distribution Date, is not a Resources Employee.<\/p>\n
1.54 REI WCP. “REI WCP” means the REI Workers’ Compensation Program,
\ncomprised of the various arrangements established by a member of the REI Group
\nto comply with the workers’ compensation requirements of the states in which the
\nREI Group conducts business.<\/p>\n
1.55 RESOURCES. “Resources” means Reliant Resources, Inc., a Delaware
\ncorporation. In all such instances in which Resources is referred to in this
\nAgreement, it shall also be deemed to include a reference to each member of the
\nResources Group, unless it specifically provides otherwise; Resources shall be
\nsolely responsible to REI for ensuring that each member of the Resources Group
\ncomplies with the applicable terms of this Agreement.<\/p>\n
1.56 RESOURCES EMPLOYEE. “Resources Employee” means any individual who,
\nas of the Distribution Date, is: (a) either actively employed by, or on a leave
\nof absence from, any member of the Resources Group; (b) a Resources Terminated
\nEmployee; (c) an alternate payee under a QDRO, alternate recipient under a
\nQMCSO, beneficiary, covered dependent, or qualified beneficiary (as such term is
\ndefined under COBRA), of an employee described in Subsection (a) or (b) above;
\nor (d) an employee or group of employees designated by REI and Resources, by
\nmutual agreement, as Resources Employees; but not (e) a Resources Retired
\nEmployee. An employee may be a Resources Employee pursuant to this Section
\nregardless of whether such employee is, as of the Distribution Date, alive,
\nactively employed, on a temporary leave of absence from active employment, on
\nlayoff, terminated from employment, retired or on any other type of employment
\nor post-employment status relative to a REI Plan, and regardless of whether, as
\nof the Distribution Date, such employee is then receiving any benefits from a
\nREI Plan.<\/p>\n
1.57 RESOURCES GROUP. “Resources Group” shall have the meaning set
\nforth in the Separation Agreement.<\/p>\n
1.58 RESOURCES RETIRED EMPLOYEE. “Resources Retired Employee” means any
\nindividual who would have qualified as a Resources Employee but who retired on
\nor <\/p>\n
-7-
\n 13<\/p>\n
after January 1, 2001 and on or before the Distribution Date and who is
\nidentified as a Resources Retired Employee by mutual agreement between Resources
\nand REI on or before the Distribution Date.<\/p>\n
1.59 RESOURCES STOCK VALUE. “Resources Stock Value” means the average
\nof the high and low sales price of a share of Resources Common Stock on the New
\nYork Stock Exchange – Composite Transactions reporting system, as reported in
\nThe Wall Street Journal, for each of the five trading days immediately preceding
\nthe Distribution Date.<\/p>\n
1.60 RESOURCES TERMINATED EMPLOYEE. “Resources Terminated Employee”
\nmeans any individual who is a former employee of any member of the REI Group who
\nwas terminated from any member of the Resources Group on or after January 1,
\n2001 and on or before the Distribution Date. Notwithstanding the foregoing,
\n“Resources Terminated Employee” shall not, unless otherwise expressly provided
\nto the contrary in this Agreement, include: (a) an individual who is a REI
\nEmployee at the Distribution Date; (b) an individual who is otherwise a
\nResources Terminated Employee, but who is subsequently employed by any member of
\nthe REI Group on or prior to the Distribution Date; or (c) a Resources Retired
\nEmployee.<\/p>\n
1.61 RESOURCES UNION EMPLOYEES. “Resources Union Employees” mean
\nResources Employees whose employment is covered by the terms of a collective
\nbargaining agreement.<\/p>\n
1.62 RESOURCES WCP CLAIMS. “Resources WCP Claims” is defined in
\nSubsection 6.07(a)(i).<\/p>\n
1.63 RETIREMENT PLAN. “Retirement Plan” means the Reliant Energy,
\nIncorporated Retirement Plan, a defined benefit plan.<\/p>\n
1.64 SAVINGS PLAN. “Savings Plan” when immediately preceded by “REI,”
\nmeans the Reliant Energy, Incorporated Savings Plan, a defined contribution
\nplan. When immediately preceded by “Resources,” ” Savings Plan” means the
\nsavings plan to be established by Resources pursuant to Sections 2.03 and 4.01.
\nWhen immediately preceded by “REMA,” “Savings Plan” means the Reliant Energy
\nMid-Atlantic Savings Plan for Non-Union Employees, a defined contribution plan.<\/p>\n
1.65 SAVINGS RESTORATION PLAN. “Savings Restoration Plan,” when
\nimmediately preceded by REI, means the Reliant Energy, Incorporated Savings
\nRestoration Plan, as established effective January 1, 1991 and thereafter
\namended from time to time. When immediately preceded by “Resources,” “Savings
\nRestoration Plan” means the plan to be established by Resources pursuant to
\nSection 5.03(b) which corresponds to the REI Savings Restoration Plan.<\/p>\n
1.66 SEC. “SEC” means the United States Securities and Exchange
\nCommission.<\/p>\n
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\n 14<\/p>\n
1.67 SEPARATION. “Separation” shall have the meaning set forth in the
\nSeparation Agreement.<\/p>\n
1.68 SEPARATION AGREEMENT. “Separation Agreement” means the Master
\nSeparation Agreement between REI and Resources entered into as of December 31,
\n2000 of which this Agreement is an Exhibit.<\/p>\n
1.69 SEPARATION DATE. “Separation Date” shall have the meaning set
\nforth in the Separation Agreement.<\/p>\n
1.70 SEVERANCE PLANS. “Severance Plans,” when immediately preceded by
\n“REI,” means the severance pay plans established and maintained by REI. When
\nimmediately preceded by “Resources,” “Severance Plans” means the severance pay
\nplans established and maintained by Resources.<\/p>\n
1.71 STOCK PLAN. “Stock Plan,” when immediately preceded by “REI,”
\nmeans the LICP, the Houston Industries, Incorporated Stock Plan for Outside
\nDirectors, the Reliant Energy, Incorporated Business Unit Performance Share
\nPlan, and the Reliant Energy, Incorporated and Subsidiaries Common Stock
\nParticipation Plan for Designated New Employees and Non-Officer Employees.<\/p>\n
1.72 STOCK PURCHASE PLAN. “Stock Purchase Plan” means the Reliant
\nResources, Inc. Employee Stock Purchase Plan as established by Resources
\npursuant to Section 7.03.<\/p>\n
1.73 SUBSIDIARY. “Subsidiary” shall have the meaning set forth in the
\nSeparation Agreement.<\/p>\n
1.74 TAX ALLOCATION AGREEMENT. “Tax Allocation Agreement” means the
\nAncillary Agreement which is attached as an exhibit to the Separation Agreement.<\/p>\n
1.75 UNION PLANS. “Union Plans,” means all Plans maintained by REI or
\nResources for the benefit of certain of their bargaining unit employees.<\/p>\n
ARTICLE II.<\/p>\n
GENERAL PRINCIPLES<\/p>\n
2.01 ASSUMPTION OF RESOURCES LIABILITIES. Except as specified otherwise
\nin this Agreement, or as mutually agreed upon by Resources and REI from time to
\ntime, REI hereby assumes and agrees to pay, perform, fulfill and discharge, in
\naccordance with their respective terms, subject to Section 9.02 and to the
\nindemnification provisions of Section 2.02, all Liabilities to or relating to
\nResources Retired Employees, to the extent relating to, arising out of or
\nresulting from former employment with any member of the REI Group and\/or the
\nResources Group (including Liabilities arising under or relating to REI Plans
\nand Resources <\/p>\n
-9-
\n 15<\/p>\n
Plans). Except as specified otherwise in this Agreement, or as mutually agreed
\nupon by Resources and REI from time to time, Resources hereby assumes and agrees
\nto pay, perform, fulfill and discharge, in accordance with their respective
\nterms, all of the following: (a) subject to Section 9.02 and to the
\nindemnification provisions of Section 2.02, all Liabilities to or relating to
\nResources Employees, in each case relating to, arising out of or resulting from
\nemployment by any member of the REI Group before the Distribution Date,
\n(including Liabilities arising under or relating to REI Plans and Resources
\nPlans); (b) subject to Section 9.02 and to the indemnification provisions of
\nSection 2.02, all other Liabilities to or relating to employees of any member of
\nthe Resources Group, to the extent relating to, arising out of or resulting from
\nfuture, present or former employment with any member of the Resources Group
\n(including Liabilities arising under or relating to REI Plans and Resources
\nPlans); (c) subject to Section 9.02 and to the indemnification provisions of
\nSection 2.02, all Liabilities relating to, arising out of or resulting from any
\nother actual or alleged employment relationship with any member of the Resources
\nGroup; and (d) subject to Section 9.02 and to the indemnification provisions of
\nSection 2.02, all other Liabilities relating to, arising out of or resulting
\nfrom obligations, liabilities and responsibilities expressly assumed or retained
\nby any member of the Resources Group or a Resources Plan, pursuant to this
\nAgreement.<\/p>\n
2.02 EMPLOYMENT LIABILITIES INDEMNIFICATION<\/p>\n
(a) Indemnification by Resources. Except as otherwise provided in
\nthis Agreement, including Subsection 2.02(c), Resources shall, for itself and as
\nagent for each member of the Resources Group, indemnify, defend (or, where
\napplicable, pay the defense costs for) and hold harmless the REI Indemnitees (as
\nsuch term is defined in the Separation Agreement) from and against any and all
\nEmployment Liabilities that any third party seeks to impose upon the REI
\nIndemnitees, or which are imposed upon the REI Indemnitees, if and to the extent
\nsuch Employment Liabilities relate to, arise out of or result from any of the
\nfollowing items (without duplication):<\/p>\n
(i) any acts or omissions or alleged acts or omissions by or
\n on behalf of any member or person employed by a member of
\n the Resources Group in the conduct of the Resources
\n Business;<\/p>\n
(ii) any claim by an officer of any member of the Resources
\n Group (who is an officer as of the IPO Closing Date)
\n against any member or employee of any member of the REI
\n Group except with respect to benefit obligations of
\n Resources Employees assumed by REI pursuant to a specific
\n provision of this Agreement; and<\/p>\n
(iii) any breach by Resources or any member or person employed
\n by a member of the <\/p>\n
-10-
\n 16<\/p>\n
Resources Group of this Agreement, the Separation
\n Agreement or any other Ancillary Agreement.<\/p>\n
In the event that any member of the Resources Group makes a payment to
\nthe REI Indemnitees hereunder, and the Employment Liability on account of which
\nsuch payment was made is subsequently diminished, either directly or through a
\nthird-party recovery, REI will promptly repay (or will procure a REI Indemnitee
\nto promptly repay) such member of the Resources Group the amount by which the
\npayment made by such member of the Resources Group exceeds the actual cost of
\nthe associated indemnified Employment Liability.<\/p>\n
(b) Indemnification by REI. Except as otherwise provided in this
\nAgreement, including Subsection 2.02(c), REI shall, for itself and as agent for
\neach member of the REI Group, indemnify, defend (or, where applicable, pay the
\ndefense costs for) and hold harmless the Resources Indemnitees (as such term is
\ndefined in the Separation Agreement) from and against any and all Employment
\nLiabilities that any third party seeks to impose upon the Resources Indemnitees,
\nor which are imposed upon the Resources Indemnitees, if and to the extent such
\nEmployment Liabilities relate to, arise out of or result from any of the
\nfollowing items (without duplication):<\/p>\n
(i) any acts or omissions or alleged acts or omissions by or
\n on behalf of any member or person employed by a member of
\n the REI Group in the conduct of the REI Business;<\/p>\n
(ii) any claim by an officer of any member of the REI Group
\n (who is an officer as of the IPO Closing Date) against
\n any member or employee of any member of the Resources
\n Group; and<\/p>\n
(iii) any breach by REI or any member or person employed by a
\n member of the REI Group of this Agreement, the Separation
\n Agreement or any other Ancillary Agreement.<\/p>\n
In the event that any member of the REI Group makes a payment to the
\nResources Indemnitees hereunder, and the Employment Liability on account of
\nwhich such payment was made is subsequently diminished, either directly or
\nthrough a third-party recovery, Resources will promptly repay (or will procure a
\nResources Indemnitee to promptly repay) such member of the REI Group the amount
\nby which the payment made by such member of the REI Group exceeds the actual
\ncost of the indemnified Employment Liability.<\/p>\n
(c) Exceptions. In accordance with the current practice in effect
\nas of the execution of the Agreement, with respect to claims for benefits or
\ncompensation, if an underlying act or omission as contemplated in Subsections
\n2.02(a) or 2.02(b) occurs and <\/p>\n
-11-
\n 17<\/p>\n
such act or omission constitutes the principal basis for such a claim, then
\nSubsection 2.02(a) or (b) shall apply, as applicable, to establish
\nindemnification obligations. If, however, no specific act or omission occurs
\nthat is attributable to REI or Resources and the principal underlying basis for
\na claim for benefits or compensation involves plan administration or other
\nsimilar systemic type activities related to maintenance of plans,
\nnotwithstanding Subsections 2.02(a) and (b), in accordance with the current
\npractice in effect as of the execution of the Agreement, Resources and REI shall
\nbe responsible for their pro rata allocated share of costs to defend such claim.
\nIn addition, if a claim relates specifically to the transfer or other movement
\nof employment between REI and Resources in connection with the Separation and to
\nthe employee benefit changes made in connection therewith, then notwithstanding
\nSubsections 2.02(a) and (b), in accordance with the current practice in effect
\nas of the execution of the Agreement, Resources and REI shall be responsible for
\ntheir pro rata allocated share of costs to defend such claim.<\/p>\n
(d) Relationship to Article III of Separation Agreement.<\/p>\n
(i) Unless expressly modified in this Section 2.02, all other
\n provisions of Article III of the Separation Agreement will
\n apply to an indemnifiable claim.<\/p>\n
(ii) Any claim which is not an Employment Liability will only
\n be subject to the provisions of the Separation Agreement.<\/p>\n
2.03 ESTABLISHMENT OF RESOURCES PLANS.<\/p>\n
(a) Health and Welfare Plans and Retiree Medical. Except as
\n specified otherwise in this Agreement, effective as of the Distribution
\n Date or such other date(s) as REI and Resources may mutually agree,
\n Resources shall establish the Resources Health and Welfare Plans. The
\n foregoing Resources Health and Welfare Plans as in effect as of the
\n Distribution Date shall be substantially comparable to the REI Plans as
\n in effect on the Distribution Date; provided, however, that Resources
\n shall not establish a substantially comparable retiree life or retiree
\n medical program (except as may be required for certain, if any,
\n Resources Union Employees) but shall, in its discretion, make available
\n a group insurance arrangement through which eligible retired employees
\n of the members of the Resources Group may purchase retiree medical
\n insurance at group rates.<\/p>\n
(b) Savings Plan and Fringe Benefits. Except as specified
\n otherwise in this Agreement, effective as of the Distribution Date or
\n such other date(s) as REI and Resources may mutually agree, Resources
\n shall establish the Resources Savings Plan as more fully described in
\n Article IV and the Resources Fringe Benefits as more fully described in
\n Article VIII.<\/p>\n
-12-
\n 18<\/p>\n
(c) Equity and Other Compensation. Except as specified otherwise
\n in this Agreement, effective as of January 1, 2001, or such other
\n date(s) as REI and Resources may mutually agree, Resources shall
\n establish the Resources AICP, the Resources Stock Purchase Plan and the
\n LTIP, and effective as of the Distribution Date or such other date(s)
\n as REI and Resources may mutually agree, Resources shall establish such
\n Plans as may be determined to be appropriate, including, without
\n limitation, the Resources Deferred Compensation Plan, Resources Savings
\n Restoration Plan, Resources Benefit Restoration Plan and Resources
\n Executive Plans. The foregoing Resources Plans shall be substantially
\n comparable to the REI Plans as in effect on the Distribution Date.<\/p>\n
(d) Resources Under No Obligation to Maintain Plans. Except as
\n specified otherwise in this Agreement, nothing in this Agreement shall
\n preclude Resources, at any time from amending, merging, modifying,
\n terminating, eliminating, reducing, or otherwise altering in any
\n respect any Resources Plan, any benefit under any Resources Plan or any
\n trust, insurance policy or funding vehicle related to any Resources
\n Plan (to the extent permitted by law).<\/p>\n
2.04 RESOURCES’S PARTICIPATION IN REI PLANS.<\/p>\n
(a) Participation in REI Plans.<\/p>\n
(i) Except as specified otherwise in this Agreement, or as REI
\n and Resources may mutually agree, Resources shall adopt
\n as a Participating Company the REI Plans in effect as of
\n January 1, 2001, to the extent that Resources has not yet
\n established substantially comparable Plans. Effective as
\n of any date on or after January 1, 2001 and before the
\n Distribution Date (or such other date as REI and Resources
\n may mutually agree upon), any member of the Resources
\n Group not described in the preceding sentence may, at its
\n request and with the consent of REI and Resources, become
\n a Participating Company in any or all of the REI Plans,
\n to the extent that Resources has not yet established a
\n substantially comparable Plan.<\/p>\n
(ii) On and after the Distribution Date, Resources Retired
\n Employees shall continue to participate in the REI Plans
\n for which they are eligible as of the Distribution Date,
\n including, but not limited to, the Retirement Plan, REI
\n Savings Plan and any REI Plan as provided in Article V.<\/p>\n
(b) REI’s General Obligations as Plan Sponsor.<\/p>\n
-13-
\n 19<\/p>\n
(i) To the extent that Resources is a Participating Company in
\n any REI Plan(s), REI shall continue to administer, or
\n cause to be administered, in accordance with their terms
\n and applicable law, such REI Plan(s), and shall have the
\n sole and absolute discretion and authority to interpret
\n the REI Plan(s), as set forth therein. REI shall not,
\n without first consulting with Resources, amend or
\n terminate any material feature of any REI Plan in which
\n Resources is a Participating Company, except to the
\n extent such amendment or termination would not affect any
\n benefits of Resources Employees under such Plan or as may
\n be necessary or appropriate to comply with applicable law.<\/p>\n
(ii) With regard to Resources Retired Employees participating
\n in REI Plans after the Distribution Date, REI shall
\n continue to administer, or cause to be administered, in
\n accordance with their terms and applicable law, such REI
\n Plans, and shall have sole and absolute discretion and
\n authority to interpret such Plans or amend or terminate
\n such Plans, as set forth therein.<\/p>\n
(c) Resources’s General Obligations as Participating Company.
\n Resources shall perform with respect to its participation in the REI
\n Plans, the duties of a Participating Company as set forth in each such
\n Plan or any procedures adopted pursuant thereto, including (without
\n limitation): (i) assisting in the administration of claims, to the
\n extent requested by the claims administrator of the applicable REI
\n Plan; (ii) cooperating fully with REI Plan auditors, benefit personnel
\n and benefit vendors; (iii) preserving the confidentiality of all
\n financial arrangements REI has or may have with any vendors, claims
\n administrators, trustees or any other entity or individual with whom
\n REI has entered into an agreement relating to the REI Plans; and (iv)
\n preserving the confidentiality of participant information (including,
\n without limitation, health information in relation to FMLA leaves) to
\n the extent not specified otherwise in this Agreement.<\/p>\n
(d) Termination of Participating Company Status. Except as
\n specified otherwise in this Agreement or otherwise may be mutually
\n agreed upon by REI and Resources, effective as of the Distribution Date
\n or such other date as Resources establishes a substantially comparable
\n Plan (as specified in Section 2.03 or otherwise in this Agreement),
\n Resources shall automatically cease to be a Participating Company in
\n the corresponding REI Plan.<\/p>\n
-14-
\n 20<\/p>\n
2.05 TERMS OF PARTICIPATION BY RESOURCES EMPLOYEES IN RESOURCES PLANS.<\/p>\n
(a) Non-Duplication of Benefits. As of the Distribution Date or
\n such other date that applies to the particular Resources Plan, the
\n separate Resources Plans shall be, with respect to employees of the
\n Resources Group, in all respects the successors in interest to, and
\n shall not provide benefits that duplicate benefits provided by, the
\n corresponding REI Plans. REI and Resources shall mutually agree, if
\n necessary, on methods and procedures, including amending the respective
\n Plan documents, to prevent employees of the Resources Group from
\n receiving duplicate benefits from the REI Plans and the Resources
\n Plans.<\/p>\n
(b) Service Credit. Except as specified otherwise in this
\n Agreement, with respect to Resources Employees, each Resources Plan
\n shall provide that all service, all compensation and all other
\n benefit-affecting determinations that, as of the Distribution Date,
\n were recognized under the corresponding REI Plan shall, as of the
\n Distribution Date, receive full recognition and credit and be taken
\n into account under such Resources Plan to the same extent as if such
\n items occurred under such Resources Plan, except to the extent that
\n duplication of benefits would result. The service crediting provisions
\n shall be subject to any respectively applicable “service bridging,”
\n “break in service,” “employment date,” or “eligibility date” rules
\n under the Resources Plans and the REI Plans.<\/p>\n
2.06 FOREIGN PLANS. Resources intends to maintain all Foreign Plans in
\nexistence as of January 1, 2001 in its discretion in accordance with the
\napplicable plan documents and applicable laws.<\/p>\n
2.07 UNION PLANS. REI and\/or Resources shall continue to maintain all
\nUnion Plans in existence as of January 1, 2001 up to and after the Distribution
\nDate as required by the terms of the applicable collective bargaining agreements
\nand in accordance with the terms of those plans and subject to collective
\nbargaining. For example, but not by way of limitation, Resources will establish
\nqualified plans which mirror the Retirement Plan and REI Savings Plan for the
\nbenefit of certain Resources Union Employees, and will assume the sponsorship of
\ncertain other tax qualified plans for the benefit of certain other Resources
\nUnion Employees.<\/p>\n
-15-
\n 21<\/p>\n
2.08 RELIANT ENERGY TEGCO, INC. EMPLOYEES. Notwithstanding any
\nprovision of this Agreement to the contrary, effective as of January 1, 2001
\nthrough the Distribution Date, non-union employees of Reliant Energy Tegco,
\nInc., a wholly owned subsidiary of REI, shall participate in all employee
\nbenefit plans sponsored by REI and\/or Resources in the same manner and to the
\nsame extent as such employees would participate in such plans if such employees
\nwere employed by a member of the Resources Group rather than a member of the REI
\nGroup.<\/p>\n
2.09 VOLUNTARY EMPLOYEES’ BENEFICIARY ASSOCIATIONS. REI shall continue
\nto sponsor and shall assume all assets and Liabilities associated with and shall
\nretain the Houston Industries Incorporated Group Welfare Benefits Trust
\nAgreement (as amended and restated effective January 1, 1989), Houston Lighting
\nand Power Company Union Retirees’ Medical and Dental Benefits Trust Agreement
\n(effective December 1, 1995), Houston Lighting and Power Company Non-Union
\nRetirees’ Medical and Dental Benefits Trust Agreement (effective December 1,
\n1995) and the Houston Lighting and Power Company Retirees’ Life Insurance
\nBenefits Trust Agreement (effective December 1, 1995).<\/p>\n
ARTICLE III.<\/p>\n
DEFINED BENEFIT PLAN<\/p>\n
3.01 RESOURCES EMPLOYEES’ PARTICIPATION IN RETIREMENT PLAN. Effective
\nas of February 5, 2001, REI shall amend the Retirement Plan to provide that
\nemployees who become employed by any member of the Resources Group on or after
\nFebruary 5, 2001 shall not be eligible to participate in the Retirement Plan.
\nEffective as of March 1, 2001, REI shall amend the Retirement Plan to provide
\nthat eligible employees of any member of the Resources Group shall be fully
\nvested in their Cash Balance Accounts (as such term is defined in the Retirement
\nPlan) under the Retirement Plan and to provide that such employees shall no
\nlonger participate in the Retirement Plan on and after such date. In addition,
\nthe Retirement Plan shall be amended to generally provide a transition benefit
\nfor certain eligible employees of the members of the Resources Group who, as of
\nDecember 31, 2000, were participating in the Retirement Plan, were eligible for
\na Grandfathered Benefit under Section 7.6(a) of the Retirement Plan and
\ngenerally had attained the age of 42 and completed at least five years of
\nVesting Service (as such term is defined in the Retirement Plan) under the
\nRetirement Plan to reflect the loss, if any, of such participants’ Grandfathered
\nBenefit under Section 7.6(a) of the Retirement Plan and the value of such
\nparticipants’ retiree medical accounts. Such transition benefit, if any, will be
\nadded to each such eligible participant’s Cash Balance Account under the
\nRetirement Plan or the REI Benefit Restoration Plan to the extent the benefit
\nlimitations of the Code prevent such transition benefit from being paid under
\nthe Retirement Plan. Such transition benefit shall not include extra age and\/or
\nservice which may be provided under an employment, severance or supplemental
\npension agreement with an employee of any member of the Resources Group.
\nEffective as of the IPO Closing Date, REI shall assume all Liabilities to or
\nrelating to the employees of any member of the Resources Group and the Resources
\nRetired Employees under the Retirement Plan. Notwithstanding the foregoing to
\nthe contrary, this Section 3.01 shall not apply to Resources Union Employees.<\/p>\n
-16-
\n 22<\/p>\n
ARTICLE IV.<\/p>\n
DEFINED CONTRIBUTION PLAN<\/p>\n
4.01 RESOURCES SAVINGS PLAN. Effective as of March 1, 2001, the account
\nbalances of the employees of the members of the Resources Group who participate
\nin the REI Savings Plan shall be fully vested, and Resources, as a Participating
\nCompany in the REI Savings Plan, shall be responsible for providing in cash
\nand\/or Resources Common Stock a fully vested employer matching contribution on
\nup to 6% of each such employee’s eligible covered compensation. In addition,
\nResources may provide a fully vested discretionary employer contribution at the
\nend of each plan year based upon such employees’ eligible covered compensation
\nand\/or a fully vested discretionary employer contribution each payroll period
\nbased upon the first $85,000 of each such employee’s eligible covered
\ncompensation for the year 2001. Effective as of the Distribution Date, Resources
\nshall establish, or cause to be established, a trust, which is intended to be
\nqualified under Code Section 401(a), exempt from taxation under Code Section
\n501(a)(1), and forming the separate Resources Savings Plan. Except as provided
\nin this Article IV, such Resources Savings Plan shall be substantially
\ncomparable to the REI Savings Plan as applicable to employees of members of the
\nResources Group immediately prior to the Distribution Date. As soon as
\nreasonably practicable following the Distribution Date, REI shall cause to be
\ndetermined for the REI Savings Plan the amount of assets to be transferred from
\nthe REI Savings Plan to the Resources Savings Plan. Such amount shall be equal
\nto the greater of (a) the amount required under Code Section 414(l), or (b) the
\namount within the sub-account(s) within the Reliant Energy, Incorporated Savings
\nTrust that has been separately maintained and accounted for on behalf of
\nemployees of the members of the Resources Group less the amount attributable to
\nResources Retired Employees. Notwithstanding the foregoing to the contrary, this
\nSection 4.01 shall not apply to Resources Union Employees.<\/p>\n
4.02 ESOP. On and after the Distribution Date, Resources Employees
\nshall no longer participate in the ESOP, and the Resources Savings Plan shall
\nnot contain an ESOP. Therefore, the ESOP shall continue as a component of the
\nREI Savings Plan. After the Distribution Date, the ESOP will hold shares of
\nResources Common Stock, and applicable law generally prohibits such plans from
\nholding securities that are not “qualifying employer securities” within the
\nmeaning of Code Section 4975(e)(8) for more than 90 days after the Distribution
\nDate unless an extension is granted by the IRS. Accordingly, REI will request
\nthat the IRS grant an extension of such 90-day period to such a time as the REI
\nSavings Plan’s independent fiduciary deems prudent and the IRS deems acceptable
\nto allow the independent fiduciary to dispose of the Resources Common Stock
\nreceived by the ESOP on account of the Distribution and to reinvest in
\nqualifying employer securities in a manner consistent with the best interests of
\nthe ESOP participants. Notwithstanding the foregoing to the contrary, this
\nSection 4.02 shall not apply to Resources Union Employees who may be eligible to
\nparticipate in the ESOP.<\/p>\n
4.03 REMA SAVINGS PLAN. Effective as of January 1, 2001, Resources
\nshall assume the sponsorship of the REMA Savings Plan. Effective as of March 1,
\n2001, REI shall amend the REMA Savings Plan to provide the same benefit
\nstructure for eligible employees under the REMA Savings Plan as will be provided
\nas of such date for eligible non-union <\/p>\n
-17-
\n 23<\/p>\n
employees of the members of the Resources Group participating in the REI Savings
\nPlan (as described in Section 4.01). As soon as practicable following the
\nDistribution Date, Resources shall merge the REMA Savings Plan into the
\nResources Savings Plan .<\/p>\n
4.04 RESOURCES RETIRED EMPLOYEES. Notwithstanding the above, account
\nbalances of Resources Retired Employees, if any, shall remain in the REI Savings
\nPlan after the Distribution Date.<\/p>\n
ARTICLE V.<\/p>\n
EXECUTIVE AND OTHER PLANS<\/p>\n
5.01 EXECUTIVE PLANS.<\/p>\n
(a) Establishment of Resources Executive Plans. Effective as of
\n the Distribution Date or such other date as REI and Resources may
\n mutually agree, Resources shall establish the Resources Executive Plans
\n which shall be substantially comparable to the REI Executive Plans. As
\n of the Distribution Date, Resources shall assume all Liabilities to or
\n relating to the Resources Employees under the REI Executive Plans, and
\n REI shall transfer the split dollar life insurance policies under the
\n Executive Life Insurance Plan attributable to such Resources Employees
\n to Resources. As of the Distribution Date, REI shall assume all
\n Liabilities to or relating to Resources Retired Employees under the REI
\n Executive Plans.<\/p>\n
(b) Participation in Executive Plans. Effective as of the
\n Distribution Date or such other date as Resources establishes the
\n Resources Executive Plans, eligible Resources Employees determined in
\n accordance with the terms of the applicable plans shall only be
\n eligible to participate in the Resources Executive Plans.<\/p>\n
5.02 DEFERRED COMPENSATION PLAN.<\/p>\n
(a) Establishment of Resources Deferred Compensation Plan.
\n Effective as of the Distribution Date or such other date as REI and
\n Resources may mutually agree, Resources shall establish the Resources
\n Deferred Compensation Plan which shall be substantially comparable to
\n the REI Deferred Compensation Plan. As of January 1, 2001, Resources
\n shall assume all Liabilities to or relating to the Resources Employees
\n under the REI Deferred Compensation Plan; provided, however, that REI
\n shall transfer a cash amount equal to the cost of such Liabilities
\n transferred to Resources as soon as practicable following the
\n Distribution Date or such other date as REI and Resources may mutually
\n agree. As of January 1, 2001, REI shall assume all Liabilities to or
\n relating to Resources Retired Employees, and all corporate owned life
\n insurance policies associated with the REI Deferred Compensation Plan
\n shall remain at REI.<\/p>\n
-18-
\n 24<\/p>\n
(b) Participation in Deferred Compensation Plan. Resources
\n Employees who consent to an amendment to treat their employment with
\n Resources as continued employment under the REI Deferred Compensation
\n Plan shall not be treated as terminated employees under such Plan(s) as
\n of the Distribution Date. Effective as of the Distribution Date or such
\n other date as Resources establishes the Resources Deferred Compensation
\n Plan, eligible Resources Employees determined in accordance with the
\n terms of the Plan shall only be eligible to participate prospectively
\n in the Resources Deferred Compensation Plan.<\/p>\n
5.03 BENEFIT AND SAVINGS RESTORATION PLANS.<\/p>\n
(a) Benefit Restoration Plan. Effective as of March 1, 2001,
\n employees of the members of the Resources Group shall no longer accrue
\n benefits under the REI Benefit Restoration Plan. Effective as of March
\n 1, 2001, or such other date as REI and Resources may mutually agree,
\n Resources shall establish a frozen Resources Benefit Restoration Plan
\n which shall be substantially comparable to the REI Benefit Restoration
\n Plan. As of March 1, 2001, Resources shall assume all Liabilities to or
\n relating to the Resources Employees under the REI Benefit Restoration
\n Plan (except Liabilities under the REI Benefit Restoration Plan
\n associated with the transition benefit described in Section 3.01);
\n provided, however, that REI shall transfer a cash amount equal to the
\n cost of such Liabilities transferred to Resources as soon as
\n practicable following the Distribution Date or such other date as REI
\n and Resources may mutually agree. Also, as of March 1, 2001, Resources
\n shall assume all Liabilities under the REI Benefit Restoration Plan
\n associated with the transition benefit described in Section 3.01;
\n provided, however, that REI shall transfer a cash amount equal to
\n two-thirds (2\/3) of the cost of such Liabilities transferred to
\n Resources as soon as practicable following the Distribution Date or
\n such other date as REI and Resources may mutually agree. As of March 1,
\n 2001, REI shall assume all Liabilities to or relating to the Resources
\n Retired Employees under the REI Benefit Restoration Plan; provided,
\n however that Resources shall irrevocably and unconditionally guarantee,
\n in the event that REI becomes insolvent, the due and punctual payment
\n and satisfaction, when and as due, of all Liabilities relating to the
\n REI Benefit Restoration Plan for all persons who have the status of
\n retirees under the REI Benefit Restoration Plan as of the Distribution
\n Date or such other date as REI and Resources may mutually agree. For
\n purposes of this Section 5.03(a), the Liabilities under the REI Benefit
\n Restoration Plan include any supplemental pension benefits provided
\n under an employment, severance or supplemental pension agreement with
\n (i) an employee of any member of the Resources Group and (ii) any
\n person who has the status of a retiree under the REI Benefit
\n Restoration Plan as of the Distribution Date.<\/p>\n
-19-
\n 25<\/p>\n
(b) Savings Restoration Plan.<\/p>\n
(i) Establishment of Resources Savings Restoration Plan.
\n Effective as of March 1, 2001, or such other date as
\n REI and Resources may mutually agree, Resources shall
\n establish the Resources Savings Restoration Plan which
\n shall be substantially comparable to the REI Savings
\n Restoration Plan. As of March 1, 2001, Resources shall
\n assume all Liabilities to or relating to the Resources
\n Employees under the REI Savings Restoration Plan. As
\n of March 1, 2001, REI shall assume all Liabilities to
\n or relating to the Resources Retired Employees under
\n the REI Savings Restoration Plan.<\/p>\n
(ii) Participation in the Resources Savings Restoration
\n Plan. Effective as of March 1, 2001, or such other
\n date as Resources establishes the Resources Savings
\n Restoration Plan, eligible Resources Employees
\n determined in accordance with the terms of the
\n applicable Plan shall only be eligible to participate
\n in the Resources Savings Restoration Plan.<\/p>\n
5.04 RABBI TRUSTS. Effective as of the Distribution Date, or such other
\ndate as REI and Resources may mutually agree, Resources may establish a Rabbi
\nTrust, which shall be substantially similar to the Reliant Energy, Incorporated
\nExecutive Deferred Compensation Trust. Effective as of the Distribution Date,
\nREI shall continue to sponsor and shall assume all assets and Liabilities
\nrelating to the NorAm Rabbi Trusts.<\/p>\n
5.05 SEVERANCE PLANS. Resources shall establish such severance plans as
\nit deems necessary in its discretion. The REI Severance Plans shall provide that
\nno Resources Employee shall become eligible for severance benefits on account of
\nResources ceasing to be a Subsidiary of REI as of the Distribution Date.<\/p>\n
ARTICLE VI<\/p>\n
HEALTH AND WELFARE PLANS<\/p>\n
6.01 ASSUMPTION OF HEALTH AND WELFARE PLAN LIABILITIES.<\/p>\n
(a) General – Health and Welfare Plans. Each REI Health and
\n Welfare Plan shall retain all Liabilities incurred through the
\n Distribution Date or <\/p>\n
-20-
\n 26<\/p>\n
such other date as REI and Resources may mutually agree under each such
\n REI Health and Welfare Plan, whether or not claims are filed before the
\n Distribution Date, by or on behalf of Resources Employees or their
\n spouses or dependents. Resources shall indemnify each such plan against
\n the pre-Distribution Date Liabilities by paying the current cost of
\n coverage associated with such Resources Employees or their spouses or
\n dependents, to the extent not already paid.<\/p>\n
(b) Substantially Similar Self-Insured Plans. Any Health and
\n Welfare Plan self-insured by REI and substantially similar to any
\n Resources Health and Welfare Plan established as of the Distribution
\n Date, or such other date as agreed upon by REI and Resources, shall
\n cease to be responsible for Liabilities to or relating to Resources
\n Employees under the REI Health and Welfare Plans as of the Distribution
\n Date, and the corresponding Resources Health and Welfare Plans shall
\n assume such Liabilities as of the Distribution Date.<\/p>\n
(c) Retiree Life and Medical. Effective as of the IPO Closing
\n Date, employees of the members of the Resources Group shall no longer
\n be eligible to participate in REI’s retiree life insurance plan and
\n retiree medical plan, and REI shall assume all Liabilities under REI’s
\n retiree medical plan for certain eligible employees of the members of
\n the Resources Group who as of such date have generally attained the age
\n of 55 with at least 5 years of service after age 50 under such Plan,
\n provided, however, that such employees shall not accrue any additional
\n benefits under such Plan. Except as otherwise expressly provided above,
\n no other employee of any member of the Resources Group shall be
\n entitled to benefits under the REI retiree medical plan. Resources
\n shall make available a non-subsidized group insurance arrangement
\n through which eligible retired employees of the members of the
\n Resources Group may purchase retiree medical insurance at group rates.
\n Notwithstanding the foregoing to the contrary, Resources shall maintain
\n any retiree medical and retiree life insurance for certain Resources
\n Union Employees as may be required pursuant to Section 2.07.<\/p>\n
6.02 CLAIMS FOR HEALTH AND WELFARE PLANS.<\/p>\n
(a) Administration of REI Claims. REI shall administer claims
\n incurred under the REI Health and Welfare Plans by Resources Employees
\n before the Distribution Date, but only to the extent that Resources has
\n not, before the Distribution Date, established and assumed
\n administrative responsibility for a comparable Plan. Any determination
\n made or settlements entered into by REI with respect to such claims
\n shall be final and binding.<\/p>\n
(b) Outsourcing of Claims by REI. REI shall have the right to
\n engage a third party administrator, vendor, or insurance company to
\n administer (“Outsource”) claims incurred under the REI Health and
\n Welfare Plans, including claims incurred by employees of the members of
\n the Resources Group before the Distribution Date. REI may determine the
\n manner and extent of such <\/p>\n
-21-
\n 27<\/p>\n
Outsourcing, including the selection of one or more third party
\n administrators, vendors, or insurance companies and the ability to
\n transfer the liability for such claims to one or more independent
\n insurance companies. REI has Outsourced administration of many REI
\n Health and Welfare Plans, as set forth in Section 6.04 and the Schedule
\n thereto.<\/p>\n
(c) Outsourcing of Claims by Resources. REI shall use its
\n commercially reasonable best efforts for and on behalf of Resources to
\n negotiate for Outsourcing arrangements with its third party
\n administrators, vendors, or insurance companies with comparable
\n features to each of REI’s current Outsourcing arrangements.<\/p>\n
6.03 POST-DISTRIBUTION TRANSITIONAL ARRANGEMENTS.<\/p>\n
(a) Continuance of Elections, Co-Payments and Maximum Benefits.<\/p>\n
(i) As of the Distribution Date or such other date as REI
\n and Resources may mutually agree, Resources shall cause
\n the Resources Health and Welfare Plans to maintain
\n substantially comparable coverage and contribution
\n elections, if any, made by Resources Employees under
\n the REI Health and Welfare Plans and apply such
\n elections under the Resources Health and Welfare Plans
\n for the remainder of the period or periods, if any, for
\n which such elections are by their terms applicable. The
\n transfer or other movement of employment between REI
\n and Resources in connection with the Distribution shall
\n constitute neither a “status change” under the REI
\n Health and Welfare Plans or the Resources Health and
\n Welfare Plans nor a “qualifying event,” as defined
\n under COBRA.<\/p>\n
(ii) On and after the Distribution Date, Resources shall
\n cause the Resources Health Plans to recognize and give
\n credit for all benefits paid to Resources Employees
\n under the REI Health Plans for (A) all amounts applied
\n to deductibles, out of pocket maximums, co-payments and
\n other applicable benefit coverage limits with respect
\n to which such expenses have been incurred by Resources
\n Employees under the REI Health Plans for the remainder
\n of the calendar year in which the Distribution Date
\n occurs and (B) all benefits paid to Resources Employees
\n under the REI Health Plans for purposes of determining
\n when such persons have reached their lifetime maximum
\n benefits under the Resources Health Plans.
\n Notwithstanding the above, Resources’s obligations under
\n this Subsection 6.03(a)(ii) shall be limited by the
\n market availability of health insurance products or
\n other arrangements satisfying the criteria described
\n above. Resources shall use its <\/p>\n
-22-
\n 28<\/p>\n
commercially reasonable best efforts to locate and
\n engage the services of a vendor whose policies or other
\n arrangements meet the requirements above.<\/p>\n
(b) Flexible Benefits Plan. To the extent any Resources Employee
\n contributed to an account under the REI Flexible Benefits Plan during
\n the calendar year that includes the Distribution Date, then effective
\n as of the Distribution Date, REI shall transfer to the Resources
\n Flexible Benefits Plan the account balances of Resources Employees for
\n such calendar year under the REI Flexible Benefits Plan, regardless of
\n whether the account balance is positive or negative.<\/p>\n
(c) HCFA Administration. As of the Distribution Date, Resources
\n shall assume all Liabilities relating to, arising out of or resulting
\n from claims verified by REI or Resources under the HCFA data match
\n reports that relate to Resources Employees.<\/p>\n
6.04 VENDOR AND INSURANCE ARRANGEMENTS. REI shall use its commercially
\nreasonable best efforts for and on behalf of Resources to negotiate for,
\neffective as of the Distribution Date or such other date as REI and Resources
\nmutually agree upon: (a) third party ASO Contracts with comparable features and
\ncosts to the ASO Contracts entered into by REI, as set forth in Schedule 6.04(a)
\n(the “ASO Contracts”); (b) Group Insurance Policies with comparable features and
\ncosts to the Group Insurance Policies entered into by REI, as set forth in
\nSchedule 6.04(b) (the “Group Insurance Policies”); (c) HMO Agreements with
\ncomparable features and costs to the HMO Agreements entered into by REI, as set
\nforth in Schedule 6.04(c) (the HMO Agreements”), and (d) competitive premium
\nrates for all Resources Health and Welfare Plans. In each case, Resources shall,
\nas of the Distribution Date or such other date as REI and Resources mutually
\nagree upon, establish, adopt and\/or implement acceptable contracts, agreements
\nor arrangements. In accordance with Section 9.03, REI shall on or before the
\nDistribution Date provide upon the request of Resources, copies of such
\ncontracts or successor arrangements thereto identified in Schedules 6.04(a), (b)
\nand (c).<\/p>\n
6.05 COBRA AND HIPPA. REI shall be responsible, through the
\nDistribution Date, for compliance with the health care continuation coverage
\nrequirements of COBRA, the portability requirements under the Health Insurance
\nPortability and Accountability Act of 1996 (“HIPPA”) and the REI Health and
\nWelfare Plans with respect to employees of the members of the Resources Group
\nand qualified beneficiaries (as such term is defined under COBRA). REI shall
\nprovide all necessary notices, or cause the notices to be provided, as soon as
\nadministratively practical, but in no event later than required under COBRA.
\nResources shall be responsible for providing REI or its agents with all
\nnecessary employee change notices and related information for covered
\ndependents, spouses, qualified beneficiaries (as such term is defined under
\nCOBRA), and alternate recipients pursuant to QMCSO, in accordance with
\napplicable REI COBRA policies and procedures. As soon as administratively
\npracticable after the Distribution Date, REI shall provide Resources, through
\nhard copy, electronic format or such other mechanism as is appropriate under the
\ncircumstances, with a list of all qualified beneficiaries (as such term is
\ndefined under COBRA) that relate to the members of the Resources <\/p>\n
-23-
\n 29<\/p>\n
Group and the relevant information pertaining to their coverage elections.
\nEffective as of the Distribution Date, Resources shall be solely responsible for
\ncompliance with the health care continuation coverage requirements of COBRA and
\nthe portability requirements under HIPPA for the Resources Health and Welfare
\nPlans for Resources Employees and their qualified beneficiaries (as such term is
\ndefined under COBRA).<\/p>\n
6.06 LEAVE OF ABSENCE PROGRAMS AND FMLA.<\/p>\n
(a) Allocation of Responsibilities After Distribution Date.
\n Effective as of the Distribution Date, Resources shall establish the
\n Resources Leave of Absence Programs and FMLA programs and shall be
\n responsible for administering leaves of absence and complying with FMLA
\n with respect to Resources Employees.<\/p>\n
(b) Disclosure. As soon as administratively practicable after the
\n Distribution Date, REI shall provide to Resources copies of all records
\n pertaining to the leaves of absence and FMLA with respect to all
\n Resources Employees to the extent such records have not been previously
\n provided.<\/p>\n
6.07 REI WORKERS’ COMPENSATION PROGRAM.<\/p>\n
(a) ADMINISTRATION OF CLAIMS.<\/p>\n
(i) Through the Distribution Date or such other date as REI
\n and Resources may mutually agree, REI shall continue
\n to be responsible for the administration of all claims
\n that (A) are, or have been, incurred under the REI WCP
\n before the Distribution Date by employees of the
\n Resources Group (“Resources WCP Claims”), and (B) have
\n been historically administered by REI or its third
\n party administrator. However, REI will advise Resources
\n of and secure approval for any material changes to
\n current policy or practice with respect to the
\n administration of Resources WCP Claims.<\/p>\n
(ii) Effective as of the Distribution Date or such other
\n date as REI and Resources may mutually agree, Resources
\n shall be responsible for the administration of all
\n Resources WCP Claims.<\/p>\n
(iii) Each party shall fully cooperate with the other with
\n respect to the administration and reporting of
\n Resources WCP Claims, the payment of Resources WCP
\n Claims determined to be payable, and the transfer of
\n the administration of any Resources WCP Claims to the
\n other party.<\/p>\n
-24-
\n 30<\/p>\n
(b) SELF-INSURANCE STATUS.<\/p>\n
REI shall maintain and amend, as necessary, its certificates
\n of self-insurance and any other applicable policies to include
\n Resources until the Distribution Date, and Resources shall fully
\n cooperate with REI in obtaining such amendments. REI shall use
\n its commercially reasonable best efforts to obtain self-insurance
\n status for workers’ compensation for Resources effective as of
\n the Distribution Date in those jurisdictions in which Resources
\n conducts business, in which REI is self-insured, and where REI
\n and Resources mutually agree that such status is beneficial to
\n Resources. Resources hereby authorizes REI to take all actions
\n necessary and appropriate on its behalf in order to obtain such
\n self-insurance status. All costs incurred by REI in amending such
\n certificates, including without limitation filing fees,
\n adjustments of security and excess loss policies and amendments
\n of safety programs, shall be shared pro rata by REI and
\n Resources.<\/p>\n
(c) INSURANCE POLICY.<\/p>\n
(i) Effective as of the Distribution Date, in all states
\n other than those states where Resources is to be
\n self-insured pursuant to Subsection 6.07(b) above, REI
\n shall use its commercially reasonable best efforts to
\n negotiate for workers’ compensation insurance policies
\n on behalf of Resources from the issuing insurance
\n companies (as set forth in the relevant portion of
\n Schedule 6.04(b)) or different insurance companies
\n which are comparable to the policies previously
\n maintained by REI; provided that the retention under
\n such Resources policies shall be as determined by
\n Resources.<\/p>\n
(ii) REI shall use its commercially reasonable best efforts
\n to cause the premium rates for all workers’
\n compensation insurance policies for both REI and
\n Resources in effect for periods through the
\n Distribution Date to be based on the aggregate number
\n of employees covered under the workers’ compensation
\n insurance policies of both REI and Resources. Any
\n premiums due under the separate workers’ compensation
\n insurance issued to Resources shall be payable by
\n Resources.<\/p>\n
-25-
\n 31<\/p>\n
ARTICLE VII.<\/p>\n
EQUITY AND OTHER COMPENSATION<\/p>\n
7.01 REI OPTIONS.<\/p>\n
(a) Option Conversion. Outstanding REI Options granted prior to
\n the year 2001 that are unexercised and unexpired as of the Distribution
\n Date shall be replaced with two options, subject to specific country
\n tax and legal requirements, one a New REI Option and one a Resources
\n Option as follows. In general, a REI Option that qualifies as an
\n incentive stock option under the Code will be replaced with a New REI
\n Option and a Resources Option which will qualify as incentive stock
\n options, provided, however, that in order for incentive stock options
\n to remain qualified and retain their tax benefits under the Code, the
\n adjustment formulas described below may be required to be altered. With
\n respect to each New REI Option, (i) the number of shares of REI Common
\n Stock subject to such New REI Option shall equal the number of shares
\n of REI Common Stock subject to the REI Option immediately before the
\n Distribution Date, and (ii) the per-share exercise price of such New
\n REI Option shall equal the per-share exercise price of the REI Option
\n immediately prior to the Distribution Date multiplied by 1 minus a
\n fraction, the numerator of which is the Distribution Ratio multiplied
\n by the Resources Stock Value and the denominator of which is the REI
\n Stock Value. With respect to each Resources Option, (i) the number of
\n shares of Resources Common Stock subject to such Resources Option,
\n shall equal the number of shares of REI Common Stock subject to the REI
\n Option immediately before the Distribution Date multiplied by the
\n Distribution Ratio, and (ii) the per-share exercise price of such
\n Resources Option shall equal the Resources Stock Value multiplied by a
\n fraction, the numerator of which is the per-share exercise price of the
\n REI Option immediately prior to the Distribution Date and the
\n denominator of which is the REI Stock Value. The exercise price per
\n share of each such New REI Option and Resources Option will be
\n determined such that, immediately following the Distribution Date, the
\n difference between the exercise price of each option and the fair
\n market value of the shares underlying each option approximately equals,
\n in the aggregate, the difference between the exercise price of each REI
\n Option and the fair market value per share of REI Common Stock (with
\n dividend) immediately prior to the Distribution Date. In addition, the
\n ratio of the exercise price of the New REI Options to the fair market
\n value of REI’s Common Stock immediately after the Distribution Date,
\n and the ratio of the exercise price of the Resources Options to the
\n fair market value of Resources’s Common Stock immediately after the
\n Distribution Date, will both approximately equal the ratio of the
\n exercise price of the REI Options to the fair market value of REI’s
\n Common Stock (with dividend) immediately prior to the Distribution
\n Date. Employment with Resources will be treated as employment with REI
\n for purposes of the New REI Options, and employment with REI will be
\n treated as employment with Resources for purposes of the Resources
\n Options. Other than the adjustments described in this Section 7.01(a),
\n all other terms and conditions <\/p>\n
-26-
\n 32<\/p>\n
applicable to the REI Options (including, but not limited to, the
\n vesting schedule) shall remain applicable to the New REI Options and
\n the Resources Options following the Distribution Date, and the
\n Resources Options shall be issued pursuant to a separate mirror
\n transition option plan adopted specifically for the purpose of issuing
\n the Resources Options described in this Section 7.01.<\/p>\n
(b) Certain Non-U.S. Optionees. Except as may otherwise be agreed
\n upon by REI and Resources, this Section 7.01 shall govern the treatment
\n of REI Options held by Non-U.S. Resources Employees. In the event it is
\n determined that the local law applicable to any Non-U.S. Optionee
\n requires a different treatment, REI and Resources shall take such steps
\n as is required to comply with local law or may cash-out those Options
\n that cannot reasonably be conformed.<\/p>\n
7.02 REI RESTRICTED SHARES. Performance shares (or bookkeeping units
\nrepresenting such shares) outstanding under the LICP and the Reliant Energy,
\nIncorporated Business Unit Performance Share Plan shall vest for the performance
\ncycle ending December 31, 2000 according to the terms and conditions of the
\napplicable Plan. Assuming the Distribution Date occurs during the calendar year
\n2001, the Plan administrator shall determine, as of the Distribution Date, the
\nlevel at which the performance objectives have or would have been achieved
\nthrough the end of the performance cycle ending December 31, 2001 and shall vest
\nthe outstanding performance shares for such cycle as of the Distribution Date as
\nthough such performance objectives were achieved at that level. As of the
\nDistribution Date, the Plan administrator shall convert outstanding performance
\nshares (or bookkeeping units representing such shares) for the performance cycle
\nending December 31, 2002 to a number of time-based restricted shares equal to
\nthe number of performance shares that would have vested if the performance
\nobjectives for the performance cycle were achieved at the maximum level. Such
\ntime based restricted shares shall vest if the participant holding such award
\nremains continuously employed with Resources or REI through December 31, 2002.
\nHolders of these and other time-based restricted shares granted prior to the
\nyear 2001 that are outstanding on the Distribution Date shall receive shares of
\nResources Common Stock (or bookkeeping units representing such shares) in the
\nsame ratio as REI shareholders, but such Resources Common Stock shall be subject
\nto the same time-based vesting schedule and the other terms and conditions of
\nthe applicable Plan under which they were granted.<\/p>\n
7.03 STOCK PURCHASE PLAN. Effective January 1, 2001, Resources shall
\nestablish a Stock Purchase Plan for the benefit of employees of the members of
\nthe Resources Group which shall be comparable to the plan set forth in Schedule
\n7.03.<\/p>\n
7.04 RESOURCES LONG-TERM INCENTIVE PLAN. Effective on or before January
\n1, 2001, or such other date as REI and Resources may mutually agree, Resources
\nshall establish the LTIP for the benefit of employees of the members of the
\nResources Group which shall be comparable to the plan set forth in Schedule
\n7.04. The LTIP is intended to comply with Code Section 162(m).<\/p>\n
-27-
\n 33<\/p>\n
7.05 RESOURCES ANNUAL INCENTIVE COMPENSATION PLAN. Effective on or
\nbefore January 1, 2001, or such other date as REI and Resources may mutually
\nagree, Resources shall establish the Resources AICP for the benefit of employees
\nof the members of the Resources Group which shall be comparable to the plan set
\nforth in Schedule 7.05. The AICP is intended to comply with Code Section 162(m).<\/p>\n
ARTICLE VIII.<\/p>\n
FRINGE AND OTHER BENEFITS<\/p>\n
8.01 FRINGE BENEFITS. Employees of the Resources Group shall continue
\nto participate in REI’s employee assistance program, educational assistance
\nprogram, executive financial planning program and relocation program and shall
\ncontinue to have access to the credit union, The Employee Association and the
\nWellness Activity Center (collectively, the “REI Fringe Benefits”) through the
\nDistribution Date or such other date as REI and Resources may mutually agree.
\nEffective as of the Distribution Date, Resources shall establish the Resources
\nFringe Benefits which Resources deems appropriate in its sole discretion.
\nEffective as of the Distribution Date, eligible Resources Employees determined
\nin accordance with the terms of the applicable plans or programs shall only be
\neligible to participate in the Resources Fringe Benefits.<\/p>\n
8.02 APPLIANCE LOANS. Effective as of the Distribution Date, Resources
\nwill purchase or cause to be purchased, for an amount equal to the outstanding
\nprincipal amount thereof plus accrued and unpaid interest thereon through the
\nDistribution Date, all outstanding loans on the Distribution Date made by REI to
\nResources Employees under any REI appliance purchase program. From and after the
\nDistribution Date, REI shall have no further responsibility for such loans or
\nfor the administration of this program with respect to Resources Employees.<\/p>\n
8.03 CHAIRMAN’S SCHOLARSHIP FUNDS. The chairman’s scholarship funds
\nshall remain at REI through and after the Distribution Date.<\/p>\n
8.04 REI FOUNDATION. Effective as of January 1, 2001, sponsorship of
\nthe REI Foundation shall be transferred to Resources.<\/p>\n
8.05 OTHER BENEFITS. To the extent that REI maintains, sponsors or
\nprovides other fringe benefits for its employees not specifically identified in
\nSection 8.01, then REI shall, to the extent permitted by law, continue to make
\nsuch benefits available to employees of the Resources Group on substantially
\nsimilar terms and conditions as are offered to the employees of any member of
\nthe REI Group through the Distribution Date or such other date upon which
\nResources and REI mutually agree. Resources and REI agree to make commercially
\nreasonable best efforts to mutually agree on whether, when, and on what terms
\nany member of the Resources Group shall maintain, sponsor or offer fringe
\nbenefits.<\/p>\n
ARTICLE IX.<\/p>\n
-28-
\n 34<\/p>\n
9.01 TRANSITION SERVICES AGREEMENT. On or about the date hereof, REI
\nand Resources shall enter into the Transition Services Agreement covering the
\nprovisions of various services to be provided by REI to Resources. The
\nprovisions of this Agreement shall be subject to the provisions of such
\nTransition Services Agreement.<\/p>\n
9.02 PAYMENT OF LIABILITIES, PLAN EXPENSES AND RELATED MATTERS.<\/p>\n
(a) Shared Costs. Resources shall pay its share, as determined by
\n REI in good faith, of any contributions made to any trust maintained in
\n connection with a REI Plan while Resources is a Participating Company
\n in any such REI Plan.<\/p>\n
(b) Contributions to Trusts. With respect to REI Plans to which
\n employees of Resources make contributions, REI shall use reasonable
\n procedures to determine Resources Liabilities associated with such
\n Plans, taking into account such contributions, settlements, refunds and
\n similar payments.<\/p>\n
(c) Administrative Expenses Not Chargeable to a Trust. To the
\n extent not charged pursuant to this Article IX, and to the extent not
\n otherwise agreed to by REI and Resources, and to the extent not
\n chargeable to a trust established in connection with a REI Plan,
\n Resources shall be responsible, through either direct payment or
\n reimbursement to REI, for its allocable share of expenses incurred by
\n REI in the administration of (i) the REI Plans while Resources
\n participates in such Plans, and (ii) the Resources Plans, to the extent
\n REI administers such Plans. For this purpose, Resources’s allocable
\n share of such expenses shall be calculated in accordance with current
\n practice in effect as of the date of this Agreement.<\/p>\n
9.03 SHARING OF PARTICIPANT INFORMATION. In accordance with the
\napplicable provisions of the Separation Agreement, REI and Resources shall
\nshare, or cause to be shared, all participant information that is necessary or
\nappropriate for the efficient and accurate administration of each of the REI
\nPlans and the Resources Plans during the respective periods applicable to such
\nPlans as Resources and REI may mutually agree. REI and Resources and their
\nrespective authorized agents shall, subject to applicable laws of
\nconfidentiality and data protection, be given reasonable and timely access to,
\nand may make copies of, all information relating to the subjects of this
\nAgreement in the custody of the other party or its agents, to the extent
\nnecessary or appropriate for such administration.<\/p>\n
9.04 REPORTING AND DISCLOSURE COMMUNICATIONS TO PARTICIPANTS. While
\nResources is a Participating Company in the REI Plans, REI shall take, or cause
\nto be taken, all actions necessary or appropriate to facilitate the distribution
\nof all REI Plan-related communications and materials to employees, participants
\nand beneficiaries, including (without limitation) summary plan descriptions and
\nrelated summaries of material modification(s), summary annual reports,
\ninvestment information, prospectuses, notices and enrollment material for the
\nREI Plans. Resources shall provide all information needed by REI to <\/p>\n
-29-
\n 35<\/p>\n
facilitate such REI Plan-related communications. Resources shall take, or cause
\nto be taken, all actions necessary or appropriate to facilitate the distribution
\nof all Resources Plan-related communications and materials to employees,
\nparticipants and beneficiaries. Resources shall assist, and Resources shall
\ncause each other applicable member of the Resources Group to assist, REI in
\ncomplying with all reporting and disclosure requirements of ERISA, including the
\npreparation of Form Series 5500 annual reports, for the REI Plans, where
\napplicable.<\/p>\n
9.05 AUDITS REGARDING VENDOR CONTRACTS. From the period beginning as of
\nthe Distribution Date or such other date as REI and Resources mutually agree
\nupon and ending on such date as REI and Resources may mutually agree, REI and
\nResources and their duly authorized representatives shall have the right to
\nconduct joint audits with respect to any vendor contracts that relate to both
\nthe REI Health and Welfare Plans and the Resources Health and Welfare Plans. The
\nscope of such audits shall remain consistent with the current practices and all
\ndocuments and other information currently made available for review shall
\ncontinue to be made available. REI and Resources shall agree on the performance
\nstandards, audit methodology, auditing policy and quality measures, reporting
\nrequirements, and the manner in which costs incurred in connection with such
\naudits will be shared.<\/p>\n
9.06 BENEFICIARY DESIGNATIONS. Subject to Section 9.09, all beneficiary
\ndesignations made by employees of the Resources Group for the REI Plans (other
\nthan the Retirement Plan, except to the extent Resources may be required to
\nestablish or assume the sponsorship of a retirement plan(s) pursuant to Section
\n2.07) shall be transferred to and be in full force and effect under the
\ncorresponding Resources Plans until such time, if ever, any such beneficiary
\ndesignations are replaced or revoked by the employees of the Resources Group who
\nmade the beneficiary designations. All beneficiary designations made by
\nResources Retired Employees for the Resources Plans shall be transferred to and
\nbe in full force and effect under the corresponding REI Plans until such time,
\nif ever, any such beneficiary designations are replaced or revoked by the
\nResources Retired Employees who made the beneficiary designations.<\/p>\n
9.07 REQUESTS FOR IRS AND DOL OPINIONS. REI and Resources shall make
\nsuch applications to regulatory agencies, including the IRS and DOL, as may be
\nnecessary or appropriate. Resources and REI shall cooperate fully with one
\nanother on any issue relating to the transactions contemplated by this Agreement
\nfor which REI and\/or Resources elects to seek a determination letter or private
\nletter ruling from the IRS or an advisory opinion from the DOL.<\/p>\n
9.08 FIDUCIARY MATTERS. REI and Resources each acknowledge that actions
\ncontemplated to be taken pursuant to this Agreement may be subject to fiduciary
\nduties or standards of conduct under ERISA or other applicable law, and no party
\nshall be deemed to be in violation of this Agreement if such party fails to
\ncomply with any provisions hereof based upon such party’s good faith
\ndetermination that to do so would violate such a fiduciary duty or standard.<\/p>\n
9.09 CONSENT OF THIRD PARTIES. If any provision of this Agreement is
\ndependent on the consent of any third party (such as a vendor) and such consent
\nis withheld, REI and Resources shall use their commercially reasonable best
\nefforts to implement the applicable <\/p>\n
-30-
\n 36<\/p>\n
provisions of this Agreement. If any provision of this Agreement cannot be
\nimplemented due to the failure of such third party to consent, REI and Resources
\nshall negotiate in good faith to implement the provision in a mutually
\nsatisfactory manner.<\/p>\n
9.10 TAX COOPERATION. In connection with the interpretation and
\nadministration of this Agreement, REI and Resources shall take into account the
\nagreements and policies established pursuant to the Separation Agreement and the
\nTax Allocation Agreement.<\/p>\n
9.11 PLAN RETURNS. Plan Returns shall be filed or caused to be filed by
\nREI or Resources as the case may be in accordance with the principles
\nestablished in the Tax Allocation Agreement. For purposes of this Section 9.11,
\n“Plan Returns” means any return, report, certificate, form or similar statement
\nor document required to be filed with a government agency with respect to an
\nemployee benefit plan governed by the ERISA, or a program governed by Section
\n6039D of the Code.<\/p>\n
ARTICLE X.<\/p>\n
EMPLOYMENT-RELATED MATTERS<\/p>\n
10.01 TERMS OF RESOURCES EMPLOYMENT. Employees of the Resources Group
\nshall be required to execute a new agreement regarding confidential information
\nand proprietary developments in a form approved by Resources. In addition,
\nnothing in the Separation Agreement, this Agreement, or any Ancillary Agreement
\nshould be construed to change the at-will status of any of the employees of any
\nmember of the REI Group or the Resources Group.<\/p>\n
10.02 HR DATA SUPPORT SYSTEMS. REI shall provide human resources data
\nsupport for employees of the members of the Resources Group in accordance with
\nthe terms of the Transition Services Agreement.<\/p>\n
10.03 EMPLOYMENT OF EMPLOYEES WITH U.S. WORK VISAS. Resources will
\ncomply with all immigration laws and regulations of the Unites States of America
\nas such laws and regulations applied to employees of any member of the REI Group
\nin the United States of America pursuant to a work or training visa regardless
\nof visa category. Resources expressly assumes all obligations, liabilities and
\nundertakings arising from or under attestations made in each certified and
\neffective Labor Condition Application filed by REI. Resources shall file amended
\npetitions with the Immigration and Naturalization Service, as may be necessary
\nor appropriate. In such cases, the foreign national employee will remain
\nemployed by a member of the REI Group and continue to participate in the REI
\nPlans until such amended petitions have been approved.<\/p>\n
10.04 CONFIDENTIALITY AND PROPRIETARY INFORMATION.<\/p>\n
(a) No provision of the Separation Agreement or any Ancillary
\n Agreement shall be deemed to release any individual for any violation
\n of the REI non-competition guideline or any agreement or policy
\n pertaining to confidential or proprietary information of any member of
\n the REI Group or Resources Group, <\/p>\n
-31-
\n 37<\/p>\n
or otherwise relieve any individual of his or her obligations under
\n such non-competition guideline, agreement, or policy.<\/p>\n
(b) Employee Agreements. As used in this Section 10.04(b),
\n “Employee Agreement” means any employment, severance, supplemental
\n pension agreement or confidentiality agreement, and any corresponding
\n agreements executed by REI or Resources employees in connection with
\n their employment. Nothing in this Agreement, the Separation Agreement
\n or any other Ancillary Agreement shall be deemed to supercede any
\n provision regarding the conduct of employees mandated by the Federal
\n Energy Regulatory Commission or any other applicable regulatory
\n authority.<\/p>\n
(i) Survival of REI Employee Agreement Obligations and
\n REI’s Common Law Rights. The REI Employee Agreements
\n of all Resources Employees and all former REI
\n employees transferred to Resources on or before the
\n Distribution Date shall remain in full force and
\n effect according to their terms, and all Liabilities
\n thereunder shall be assumed by Resources.
\n Notwithstanding the foregoing to the contrary, none of
\n the following acts committed by former REI or Resources
\n employees within the scope of their Resources
\n employment shall constitute a breach of such REI
\n Employee Agreements: (i) the use or disclosure of
\n Confidential Information (as that term is defined in
\n the REI Employee Agreement) for or on behalf of
\n Resources, if such disclosure is consistent with the
\n assignment or license of rights, businesses and assets
\n granted to Resources and restrictions imposed on
\n Resources under the Separation Agreement, any other
\n Ancillary Agreement or any other agreement between the
\n parties, and (ii) the rendering of any services,
\n directly or indirectly, to Resources to the extent
\n such services are consistent with the assignment or
\n license of rights, businesses and assets granted to
\n Resources and the restrictions imposed on Resources
\n under the Separation Agreement, any other Ancillary
\n Agreement or any other agreement between the parties.
\n Further, REI retains any rights it has under statute
\n or common law with respect to actions by its former
\n employees to the extent such actions are inconsistent
\n with the assignment or license of rights, businesses
\n and assets granted to Resources and restrictions
\n imposed on Resources under the Separation Agreement,
\n any other Ancillary Agreement or any other agreement
\n between the parties.<\/p>\n
(ii) Survival of Resources’s Employee Agreement Obligations
\n and Resources’s Common Law Rights. The Resources
\n Employee Agreements of all REI Employees and all former
\n Resources employees transferred to REI on or before the
\n Distribution Date shall remain in full force and effect
\n according to<\/p>\n
-32-
\n 38<\/p>\n
their terms; provided, however, that none of the
\n following acts committed by former Resources or REI
\n employees within the scope of their REI employment
\n shall constitute a breach of such Resources Employee
\n Agreements: (i) the use or disclosure of Confidential
\n Information (as that term is defined in the REI
\n Employee Agreement) for or on behalf of REI, if such
\n disclosure is consistent with the rights, businesses
\n and assets retained by REI and restrictions imposed on
\n REI under the Separation Agreement, any other
\n Ancillary Agreement or any other agreement between the
\n parties, and (ii) the rendering of any services,
\n directly or indirectly, to REI to the extent such
\n services are consistent with the rights, businesses
\n and assets retained by REI and the restrictions
\n imposed on REI under the Separation Agreement, any
\n other Ancillary Agreement or any other agreement
\n between the parties. Further, Resources retains any
\n rights it has under statute or common law with respect
\n to actions by its former employees to the extent such
\n actions are inconsistent with the rights, businesses
\n and assets retained by REI and restrictions imposed on
\n REI under the Separation Agreement, any other Ancillary
\n Agreement or any other agreement between the parties.<\/p>\n
(iii) Assignment, Cooperation for Compliance and Enforcement.<\/p>\n
(A)(1) REI retains all rights under the REI Employee
\n Agreements of all former REI employees necessary to permit REI to
\n protect the rights and interests of REI, but hereby transfers and
\n assigns to Resources its rights under the REI Employee Agreements
\n of all former REI employees to the extent required to permit
\n Resources to enjoin, restrain, recover damages from or obtain
\n specific performance of the REI Employee Agreements or obtain
\n other remedies against any employee who breaches his or her REI
\n Employee Agreement, and to the extent necessary to permit
\n Resources to protect its rights and interests.<\/p>\n
(2) REI and Resources agree, at their own respective cost
\n and expense, to use their reasonable efforts to cooperate as
\n follows: (A) Resources shall advise REI of: (1) any violation(s)
\n of the REI Employee Agreements by Resources or former REI
\n employees, and (2) any violation(s) of the Resources Employee
\n Agreements which affect REI’s rights; and (B) REI shall advise
\n Resources of any violation(s) of the REI Employee Agreements by
\n current or former REI employees which affect Resources’s rights;
\n provided, however, that the foregoing obligations shall only
\n apply to violation(s) which become known to an attorney within
\n the legal department of the party obligated to provide notice
\n thereof.<\/p>\n
-33-
\n 39<\/p>\n
(3) REI and Resources each may separately enforce the REI
\n Employee Agreements of Resources and former REI employees to the
\n extent necessary to reasonably protect their respective
\n interests, provided, however, that (i) Resources shall not
\n commence any litigation relating thereto without first consulting
\n with REI’s General Counsel or his or her designee and (ii) REI
\n shall not commence any litigation relating thereto against any
\n former REI employee who is at the time an employee of the
\n Resources Group without first consulting with Resources’s General
\n Counsel or his or her designee. If either party, in seeking to
\n enforce any REI Employee Agreement, notifies the other party that
\n it requires, or desires, the other party to join in such action,
\n then the other party shall do so. In addition, if either party
\n commences or becomes a party to any action to enforce a REI
\n Employee Agreement of an employee of the Resources Group or
\n former REI employee, the other party shall, whether or not it
\n becomes a party to the action, cooperate with the other party by
\n making available its files and employees who have information or
\n knowledge relevant to the dispute, subject to appropriate
\n measures to protect the confidentiality of any proprietary or
\n confidential information that may be disclosed in the course of
\n such cooperation or action and subject to any relevant privacy
\n laws and regulations. Any such action shall be conducted at the
\n expense of the party bringing the action and the parties shall
\n agree on a case by case basis on compensation, if any, of the
\n other party for the value of the time of such other party’s
\n employees as reasonably required in connection with the action.<\/p>\n
(B)(1) Resources retains all rights under the Resources
\n Employee Agreements of all former Resources employees necessary
\n to permit Resources to protect the rights and interests of
\n Resources, but hereby transfers and assigns to REI its rights
\n under the Resources Employee Agreements of all former Resources
\n employees to the extent required to permit REI to enjoin,
\n restrain, recover damages from or obtain specific performance of
\n the Resources Employee Agreements or obtain other remedies
\n against any employee who breaches his or her Resources Employee
\n Agreement, and to the extent necessary to permit REI to protect
\n its rights and interests.<\/p>\n
(2) REI and Resources agree, at their own respective cost
\n and expense, to use their reasonable efforts to cooperate as
\n follows: (A) REI shall advise Resources of: (1) any violation(s)
\n of the Resources Employee Agreements by REI or former Resources
\n employees, and (2) any violation(s) of the REI Employee
\n Agreements which affect Resources’s rights; and (B) Resources
\n shall advise REI of any violations of the Resources Employee
\n Agreements by current or former Resources employees which affect
\n REI’s rights; provided, however, that the foregoing obligations
\n shall only apply to violations which become known <\/p>\n
-34-
\n 40<\/p>\n
to an attorney within the legal department of the party
\n obligated to provide notice thereof.<\/p>\n
(3) REI and Resources each may separately enforce the REI
\n Employee Agreements of REI and former Resources employees to the
\n extent necessary to reasonably protect their respective
\n interests, provided, however, that (i) REI shall not commence any
\n litigation relating thereto without first consulting with
\n Resources’s General Counsel or his or her designee and (ii)
\n Resources shall not commence any litigation relating thereto
\n against any former Resources employee who is at the time a REI
\n Employee without first consulting with REI’s General Counsel or
\n his or her designee. If either party, in seeking to enforce any
\n Resources Employee Agreement, notifies the other party that it
\n requires, or desires, the other party to join in such action,
\n then the other party shall do so. In addition, if either party
\n commences or becomes a party to any action to enforce a Resources
\n Employee Agreement of a REI Employee or former Resources
\n employee, the other party shall, whether or not it becomes a
\n party to the action, cooperate with the other party by making
\n available its files and employees who have information or
\n knowledge relevant to the dispute, subject to appropriate
\n measures to protect the confidentiality of any proprietary or
\n confidential information that may be disclosed in the course of
\n such cooperation or action and subject to any relevant privacy
\n laws and regulations. Any such action shall be conducted at the
\n expense of the party bringing the action and the parties shall
\n agree on a case by case basis on compensation, if any, of the
\n other party for the value of the time of such other party’s
\n employees as reasonably required in connection with the action.<\/p>\n
(C) REI and Resources understand and acknowledge that
\n matters relating to the making, performance, enforcement,
\n assignment and termination of employee agreements are typically
\n governed by the laws and regulations of the national, federal,
\n state or local governmental unit where an employee resides, or
\n where an employee’s services are rendered, and that such laws and
\n regulations may supersede or limit the applicability or
\n enforceability of this Section 10.04. In such circumstances, REI
\n and Resources agree to take action with respect to the employee
\n agreements that best accomplishes the parties’ objectives as set
\n forth in this Section 10.04 and that is consistent with
\n applicable law.<\/p>\n
-35-
\n 41<\/p>\n
10.05 ACCRUED PAYROLL, BONUSES, PROFIT SHARING AND COMMISSIONS. Except
\nas otherwise specified in an Ancillary Agreement, Resources shall be responsible
\nfor all Liabilities relating to, arising out of, or attributable to payroll,
\nbonuses, profit sharing and commissions accrued by employees of Resources
\nthrough the Distribution Date. REI and Resources shall agree on the manner and
\nmethod of payment for all payroll, bonuses, profit sharing and commissions
\nagreed to on behalf of employees who have been employed by Resources on or
\nbefore the Distribution Date. REI shall provide or cause to be provided to
\nResources in the same manner as in effect on the date of this Agreement all
\npayroll services as required in the Transition Services Agreement.<\/p>\n
10.06 PAYROLL AND WITHHOLDING.<\/p>\n
(a) Income Reporting, Withholding. REI shall perform in the same
\nmanner as in effect on the date of this Agreement the income reporting and
\nwithholding function under Resources’s employer identification number for
\nemployees of the Resources Group and other service providers as required by the
\nTransition Services Agreement.<\/p>\n
(b) Delivery of, and Access to, Documents and Other Information.
\nConcurrently with the Distribution Date, REI shall cause to be delivered to
\nResources, the employee information set forth on all IRS Forms W-4 executed by
\nREI Employees designated as Resources Employees as of the Distribution Date. For
\nthe period ending on the Distribution Date (and for such additional period as
\nREI and Resources may mutually agree), REI shall make reasonably available to
\nResources all forms, documents or information, no matter in what format stored,
\nrelating to compensation or payments made to any employee or service provider of
\nResources. Such information may include, but is not limited to, information
\nconcerning employee payroll deductions, payroll adjustments, records of time
\nworked, tax records (e.g., IRS Forms W-2, W-4, 940 and 941), and information
\nconcerning garnishment of wages or other payments.<\/p>\n
(c) Consistency of Tax Positions; Duplication. REI and Resources
\nshall individually and collectively make commercially reasonable best efforts to
\navoid unnecessarily duplicated federal, state or local payroll taxes, insurance
\nor workers’ compensation contributions, or unemployment contributions arising on
\nor after the Distribution Date. REI and Resources shall take consistent
\nreporting and withholding positions with respect to any such taxes or
\ncontributions.<\/p>\n
-36-
\n 42<\/p>\n
10.07 PERSONNEL AND PAY RECORDS. For the period beginning on the date
\nof this Agreement and ending on the Distribution Date (and for such additional
\nperiod as REI and Resources may mutually agree), REI shall make reasonably
\navailable to Resources for review and reproduction, subject to applicable laws
\non confidentiality and data protection, all current and historic forms,
\ndocuments or information, no matter in what format stored, relating to
\npre-Distribution Date personnel and medical records. Such forms, documents or
\ninformation may include, but is not limited to: (a) information regarding
\nranking or promotions of employees of the Resources Group; (b) the existence and
\nnature of garnishment orders or other judicial or administrative actions or
\norders affecting an employee’s or service provider’s compensation; and (c)
\nperformance evaluations.<\/p>\n
10.08 NON-TERMINATION OF EMPLOYMENT; NO THIRD-PARTY BENEFICIARIES. No
\nprovision of this Agreement, the Separation Agreement, or any Ancillary
\nAgreement shall be construed to create any right, or accelerate entitlement, to
\nany compensation or benefit whatsoever on the part of any Resources Employee or
\nother future, present or former employee of REI or Resources under any REI Plan
\nor Resources Plan or otherwise. Without limiting the generality of the
\nforegoing: (a) except as otherwise provided in this agreement or applicable
\nprovisions of Plans, neither the Distribution nor the termination of the
\nParticipating Company status of Resources or any member of the Resources Group
\nshall cause any employee to be deemed to have incurred a termination of
\nemployment; and (b) no transfer of employment between REI and Resources before
\nthe Distribution Date shall be deemed a termination of employment for any
\npurpose hereunder.<\/p>\n
ARTICLE XI.<\/p>\n
GENERAL PROVISIONS<\/p>\n
11.01 EFFECT IF IPO AND\/OR DISTRIBUTION DOES NOT OCCUR. Subject to
\nSection 11.08, if the IPO and\/or Distribution does not occur, then all actions
\nand events that are, under this Agreement, to be taken or occur effective as of
\nthe IPO Closing Date, and\/or Distribution Date, or otherwise in connection with
\nthe IPO and\/or Distribution, shall not be taken or occur except to the extent
\nspecifically agreed by Resources and REI.<\/p>\n
11.02 RELATIONSHIP OF PARTIES. Nothing in this Agreement shall be
\ndeemed or construed by the parties or any third party as creating the
\nrelationship of principal and agent, partnership or joint venture between the
\nparties, the understanding and agreement being that no provision contained
\nherein, and no act of the parties, shall be deemed to create any relationship
\nbetween the parties other than the relationship set forth herein. This Agreement
\nshall be binding upon and inure solely to the benefit of and be enforceable by
\neach party and its respective successors and permitted assigns. Nothing in this
\nAgreement, express or implied, is intended to or shall confer upon any other
\nperson any right, benefit or remedy of any nature whatsoever under or by reason
\nof this Agreement.<\/p>\n
11.03 AFFILIATED COMPANIES. Each of REI and Resources shall cause to be
\nperformed, and hereby guarantee the performance of, any and all actions of any
\nand all members of the REI Group or the Resources Group, respectively.<\/p>\n
-37-
\n 43<\/p>\n
11.04 INCORPORATION OF SEPARATION AGREEMENT PROVISIONS. If a dispute,
\nclaim or controversy results from or arises out of or in connection with this
\nAgreement, the parties agree to use the procedures set forth in Article IX of
\nthe Separation Agreement in lieu of other available remedies, to resolve same.
\nThe provisions of Article IX (Arbitration and Dispute Resolution), and Sections
\n5.5 (Issuance of Stock), 10.2 (Further Instruments), 10.5 (Audit Rights), 10.8
\n(Governmental Approvals), 11.1 (Limitation of Liability), 11.5 (Notices), 11.7
\n(Binding Effect; Assignment) and 11.11 (Authority) of the Separation Agreement
\nare hereby incorporated herein by reference, and unless otherwise expressly
\nspecified herein, such provisions shall apply as if fully set forth herein
\n(references in this Section 11.04 to an “Article” or “Section” shall mean
\nArticles or Sections of the Separation Agreement, and, except as expressly set
\nforth herein, references in the material incorporated herein by reference shall
\nbe references to the Separation Agreement).<\/p>\n
11.05 GOVERNING LAW. To the extent not preempted by applicable federal
\nlaw, this Agreement shall be governed by, construed and interpreted in
\naccordance with the laws of the State of Texas, irrespective of the choice of
\nlaw principles of the State of Texas, as to all matters, including matters of
\nvalidity, construction, effect, performance and remedies.<\/p>\n
11.06 SEVERABILITY. If any term or other provision of this Agreement is
\ndetermined to be invalid, illegal or incapable of being enforced by any rule of
\nlaw or public policy, all other conditions and provisions of this Agreement
\nshall nevertheless remain in full force and effect so long as the economic or
\nlegal substance of the transactions contemplated hereby is not affected in any
\nmanner materially adverse to either party. Upon such determination that any term
\nor other provision is invalid, illegal or incapable of being enforced, the
\nparties hereto shall negotiate in good faith to modify this Agreement so as to
\neffect the original intent of the parties as closely as possible and in an
\nacceptable manner to the end that transactions contemplated hereby are fulfilled
\nto the fullest possible extent.<\/p>\n
11.07 AMENDMENT. The Boards of Directors of Resources and REI may
\nmutually agree to amend the provisions of this Agreement at any time or times,
\neither prospectively or retroactively, to such extent and in such manner as the
\nBoards mutually deem advisable. Each Board may delegate its amendment power, in
\nwhole or in part, to one or more Persons or committees as it deems advisable.
\nAccordingly, each Board hereby gives the chief executive officer of Resources
\nand the chief executive officer of REI the full power and authority to mutually
\nadopt an amendment to this Agreement (subject to each of their authority to
\namend Plans).<\/p>\n
11.08 TERMINATION. This Agreement may be terminated and the
\nDistribution abandoned at any time prior to the IPO Closing Date by REI in its
\nsole discretion. This Agreement may be terminated at any time after the IPO
\nClosing Date and before the Distribution Date by mutual consent of REI and
\nResources. In the event of termination pursuant to this Section, no party shall
\nhave any liability of any kind under this Agreement to the other party.<\/p>\n
-38-
\n 44<\/p>\n
11.09 CONFLICT. In the event of any conflict between the provisions of
\nthis Agreement and the Separation Agreement, any Ancillary Agreement, or Plan,
\nthe provisions of this Agreement shall control.<\/p>\n
11.10 COUNTERPARTS. This Agreement may be executed in two or more
\ncounterparts each of which shall be deemed to be an original, but all of which
\ntogether shall constitute but one and the same Agreement.<\/p>\n
-39-
\n 45<\/p>\n
IN WITNESS WHEREOF, each of the parties have caused this Employee
\nMatters Agreement to be executed on its behalf by its officers thereunto duly
\nauthorized on the day and year first above written.<\/p>\n
RELIANT ENERGY, INCORPORATED<\/p>\n
By:\/s\/ David M. McClanahan
\n ———————————–
\n David M. McClanahan
\n Vice Chairman<\/p>\n
RELIANT RESOURCES, INC.<\/p>\n
By: \/s\/ R. S. Letbetter
\n ———————————–
\n R. S. Letbetter
\n Chairman, President and
\n Chief Executive Officer<\/p>\n
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