\n 8.5 Releases and Indemnities……………………………………………………………30<\/p>\nARTICLE IX ARBITRATION; DISPUTE RESOLUTION……………………………………………………..30<\/p>\n
9.1 Agreement to Arbitrate……………………………………………………………..30
\n 9.2 Escalation………………………………………………………………………..31
\n 9.3 Demand for Arbitration……………………………………………………………..31
\n 9.4 Arbitrators……………………………………………………………………….32
\n 9.5 Hearings………………………………………………………………………….33
\n 9.6 Discovery and Certain Other Matters………………………………………………….33
\n 9.7 Certain Additional Matters………………………………………………………….34
\n 9.8 Arbitration of Genco Option Agreement Cases…………………………………………..35
\n 9.9 Continuity of Service and Performance………………………………………………..35
\n 9.10 Law Governing Arbitration Procedures…………………………………………………35<\/p>\n
ARTICLE X COVENANTS AND OTHER MATTERS…………………………………………………………35<\/p>\n
10.1 Other Agreements…………………………………………………………………..35
\n 10.2 Further Instruments………………………………………………………………..36
\n 10.3 Agreement For Exchange of Information………………………………………………..36
\n 10.4 Auditors and Audits; Annual and Quarterly Statements and Accounting……………………..38
\n 10.5 Audit Rights………………………………………………………………………40
\n 10.6 Preservation of Legal Privileges…………………………………………………….40
\n 10.7 Payment of Expenses………………………………………………………………..41
\n 10.8 Governmental Approvals……………………………………………………………..41
\n 10.9 Regulatory Proceedings……………………………………………………………..41
\n 10.10 Continuance of REI Credit Support; Borrowings…………………………………………43
\n 10.11 Certain Non-competition Provisions; Freedom of Action………………………………….44
\n 10.12 Clawback Payment…………………………………………………………………..44
\n 10.13 Nuclear Decommissioning Trust and Investment………………………………………….44
\n 10.14 Auctions of Capacity……………………………………………………………….45
\n 10.15 Confidentiality……………………………………………………………………46
\n 10.16 1000 Main Lease……………………………………………………………………47<\/p>\n
ARTICLE XI MISCELLANEOUS……………………………………………………………………..48<\/p>\n
11.1 Limitation of Liability…………………………………………………………….48
\n 11.2 Entire Agreement…………………………………………………………………..48
\n 11.3 Governing Law……………………………………………………………………..48
\n 11.4 Termination……………………………………………………………………….48
\n 11.5 Notices…………………………………………………………………………..48
\n 11.6 Counterparts………………………………………………………………………49
\n 11.7 Binding Effect; Assignment………………………………………………………….49
\n 11.8 Severability………………………………………………………………………49
\n 11.9 Failure or Indulgence Not Waiver; Remedies Cumulative………………………………….49
\n 11.10 Amendment…………………………………………………………………………49
\n 11.11 Authority…………………………………………………………………………49
\n 11.12 Interpretation…………………………………………………………………….50
\n 11.13 Conflicting Agreements……………………………………………………………..50
\n<\/c><\/c><\/s><\/table>\n
-iv-
\n 6<\/p>\n
-v-
\n 7<\/p>\n
MASTER SEPARATION AGREEMENT<\/p>\n
THIS MASTER SEPARATION AGREEMENT (this “Agreement”) is entered into as of
\nDecember 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, Resources is a wholly owned subsidiary of REI; and<\/p>\n
WHEREAS, the Board of Directors of REI has determined that it would be
\nappropriate and desirable for REI to separate the Resources Group from the REI
\nGroup, and, in that connection, for Resources or its Subsidiaries to acquire
\ncertain entities currently associated with the Resources Business and certain
\nother assets from REI or its Subsidiaries and to assume related liabilities; and<\/p>\n
WHEREAS, the Board of Directors of Resources has also approved such
\ntransactions; and<\/p>\n
WHEREAS, REI and Resources currently contemplate that Resources will make
\nan initial public offering (“IPO”) of an amount of its common stock pursuant to
\na registration statement on Form S-1 filed pursuant to the Securities Act of
\n1933, as amended, that will reduce REI’s ownership of Resources by less than
\n20%; and<\/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”); and<\/p>\n
WHEREAS, REI and Resources intend that the Distribution will qualify as a
\ntax-free distribution under Section 355 of the Internal Revenue Code of 1986, as
\namended (the “Code”), and that this Agreement is intended to be, and is hereby
\nadopted as, a plan of reorganization under Section 368 of the Code; and<\/p>\n
WHEREAS, the parties intend in this Agreement, including the Exhibits and
\nSchedules hereto, to set forth the principal arrangements between them regarding
\nthe separation of the Resources Group from the REI Group, the IPO, and the
\nDistribution.<\/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
8<\/p>\n
ARTICLE I<\/p>\n
DEFINITIONS<\/p>\n
1.1 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
1.2 AFFILIATES. An “Affiliate” of any Person means another Person that
\ndirectly, or indirectly through one or more intermediaries, controls, is
\ncontrolled by, or is under common control with, such Person. For this purpose
\n“control” means the possession, directly or indirectly, of the power to direct
\nor cause the direction of the management and policies of the Person controlled,
\nwhether through ownership of voting securities, by contract or otherwise. The
\nfact that any Person may be deemed at any time an Affiliate of another Person
\nfor purposes of the Utilities Code shall not create any implication that such
\nPersons are “affiliates” for purposes of this Agreement. Notwithstanding
\nanything herein to the contrary, no member of the Resources Group shall be
\ndeemed an Affiliate of any member of the REI Group and no member of the REI
\nGroup shall be deemed an Affiliate of any member of the Resources Group.<\/p>\n
1.3 ANCILLARY AGREEMENTS. “Ancillary Agreements” has the meaning set forth
\nin Section 2.5.<\/p>\n
1.4 BUSINESS DAY. “Business Day” means a day other than a Saturday, a
\nSunday or a day on which banking institutions located in the State of Texas are
\nauthorized or obligated by law or executive order to close.<\/p>\n
1.5 BUSINESS SEPARATION PLAN. “Business Separation Plan” means the Business
\nSeparation Plan, as amended, filed by REI with the PUCT in accordance with
\nSection 39.051 of the Utilities Code and approved by the PUCT at its open
\nmeeting on December 1, 2000 (Docket No. 21956).<\/p>\n
1.6 CHOICE DATE. “Choice Date” shall mean January 1, 2002, or such other
\ndate as may be fixed by the PUCT for the commencement of customer retail
\nelectric choice in the area served by REI’s retail electric business.<\/p>\n
1.7 CODE. “Code” means the Internal Revenue Code of 1986, as amended from
\ntime to time.<\/p>\n
1.8 COMMISSION. “Commission” means the Securities and Exchange Commission.<\/p>\n
1.9 CUSTOMER CARE LLC. “Customer Care LLC” means Reliant Energy Customer
\nCare Services LLC, a Delaware limited liability company all of the membership
\ninterests in which are owned by Retail Holdings LLC.<\/p>\n
1.10 DISTRIBUTION. The “Distribution” has the meaning set forth in the
\nRecitals hereof.<\/p>\n
1.11 DISTRIBUTION AGENT. “Distribution Agent” has the meaning set forth in
\nSection 7.1.<\/p>\n
2
\n 9<\/p>\n
1.12 DISTRIBUTION DATE. “Distribution Date” has the meaning set forth in
\nSection 7.1.<\/p>\n
1.13 EXCHANGE ACT. “Exchange Act” means the Securities Exchange Act of
\n1934, as amended.<\/p>\n
1.14 FINAL ORDER. Unless the context requires otherwise, “Final Order,”
\n“Order,” “Injunction,” “Decree,” “Legal Restraint,” “Prohibition,” “Writ” or
\nother words of similar import shall mean final adjudication by a court or
\nregulatory agency that is no longer subject to rehearing or appeal.<\/p>\n
1.15 GENCO ASSETS. “Genco Assets” means all of the generation assets (as
\nthat term is defined in Section 39.251(3) of the Utilities Code) of the Reliant
\nEnergy HL&P Division of REI. The Genco Assets shall include, without limitation,
\nthe generation plants and other assets set forth in Schedule 1.15 and contract
\nand permit rights associated with those generation plants. The methodology for
\ndetermining the demarcation between Genco Assets and transmission and
\ndistribution assets is set forth in Section D of the Business Separation Plan.<\/p>\n
1.16 GENCO BUSINESS. “Genco Business” shall mean the electric generation
\nbusiness and operations conducted with the Genco Assets.<\/p>\n
1.17 GENCO; GENCO INC. “Genco Inc.” means the corporation to which the
\nmembership interests in Genco GP LLC and Genco LP LLC will be contributed as
\nprovided in Section 8.4. Genco means Genco Inc. or Genco LP, as the context may
\nrequire.<\/p>\n
1.18 GENCO LIABILITIES. “Genco Liabilities” shall mean (without
\nduplication)<\/p>\n
(i) any and all Liabilities under contracts for the purchase of fuel,
\n equipment or other goods and services for use in the Genco Business;<\/p>\n
(ii) any and all Liabilities that are expressly contemplated by this
\n Agreement or any Ancillary Agreement as Liabilities to be assumed by Genco
\n LP, including Liabilities under the Technical Services Agreement and the
\n contracts, agreements and permits included in the Genco Assets;<\/p>\n
(iii) all Liabilities (other than Taxes based on, or measured by
\n reference to, net income), primarily relating to, arising out of, or
\n resulting from:<\/p>\n
(A) the operation of the Genco Business, as conducted at any time
\n prior to, on or after, the Genco Organization Date (including any
\n Liability relating to, arising out of or resulting from any act or
\n failure to act by any director, officer, employee, agent or
\n representative (whether or not such act or failure to act is or was
\n within such Person’s authority));<\/p>\n
(B) the operation of any business conducted by Genco at any time
\n after the Genco Organization Date (including any Liability relating
\n to, arising out of or resulting from any act or failure to act by any
\n director, officer, employee, agent or representative (whether or not
\n such act or failure to act is or was within such Person’s authority));
\n or<\/p>\n
3
\n 10<\/p>\n
(C) the ownership or use of the Genco Assets.<\/p>\n
1.19 GENCO LP. “Genco LP” means a yet-to-be formed limited partnership,
\nbeing the limited partnership to which the Genco Assets will be transferred as
\nprovided in Section 8.1.<\/p>\n
1.20 GENCO OPTION. “Genco Option” means the “Option” as defined in the
\nGenco Option Agreement.<\/p>\n
1.21 GENCO OPTION AGREEMENT. “Genco Option Agreement” means the Texas Genco
\nOption Agreement dated as of December 31, 2000 between REI and Resources.<\/p>\n
1.22 GENCO ORGANIZATION DATE. “Genco Organization Date” means the date on
\nwhich the Genco Assets are contributed to Genco LP as provided in Section 8.1.<\/p>\n
1.23 GENCO PUBLIC OWNERSHIP EVENT. “Genco Public Ownership Event” has the
\nmeaning assigned to that term in the Genco Option Agreement.<\/p>\n
1.24 GOVERNMENTAL APPROVALS. “Governmental Approvals” means any notices,
\nreports or other filings to be made, or any consents, registrations, approvals,
\npermits or authorizations to be obtained from, any Governmental Authority.<\/p>\n
1.25 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
1.26 GROUP. “Group” means either of the REI Group or the Resources Group,
\nas the context requires.<\/p>\n
1.27 HOLDING COMPANY RESTRUCTURING. “Holding Company Restructuring” means
\nthe corporate restructuring consisting of the transactions set forth in Section
\n6.2, as such transactions may be modified at the election of REI as contemplated
\nby Section 6.5.<\/p>\n
1.28 INDEBTEDNESS. “Indebtedness” of any Person means, (a) all obligations
\nof such Person for borrowed money, (b) all obligations of such Person evidenced
\nby bonds, debentures, notes or similar instruments, (c) all obligations of such
\nPerson upon which interest charges are customarily paid, (d) all obligations of
\nsuch Person under conditional sale or other title retention agreements relating
\nto property or assets purchased by such Person, (e) all obligations of such
\nPerson issued or assumed as the deferred purchase price of property or services,
\n(f) all Indebtedness of others secured by (or for which the holder of such
\nIndebtedness has an existing right, contingent or otherwise, to be secured by)
\nany mortgage, lien, pledge, or other encumbrance on property owned or acquired
\nby such Person, whether or not the obligations secured thereby have been
\nassumed, (g) all guarantees by such Person of Indebtedness of others, (h) all
\ncapital lease obligations of such Person, and (i) all securities or other
\nsimilar instruments convertible or exchangeable into any of the foregoing, but
\nexcluding daily cash overdrafts associated with routine cash operations.<\/p>\n
1.29 INDEMNIFYING PARTY. “Indemnifying Party” has the meaning set forth in
\nSection 3.4(a).<\/p>\n
4
\n 11<\/p>\n
1.30 INDEMNITEE. “Indemnitee” shall have the meaning set forth in Section
\n3.4(a).<\/p>\n
1.31 INFORMATION. “Information” means information, whether or not
\npatentable or copyrightable, in written, oral, electronic or other tangible or
\nintangible forms, stored in any medium, including studies, reports, records,
\nbooks, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
\ntechniques, designs, specifications, drawings, blueprints, diagrams, models,
\nprototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
\ncomputer programs or other software, marketing plans, customer names,
\ncommunications by or to attorneys (including attorney-client privileged
\ncommunications), memos and other materials prepared by attorneys or under their
\ndirection (including attorney work product), and other technical, financial,
\nemployee or business information or data.<\/p>\n
1.32 INSURANCE PROCEEDS. “Insurance Proceeds” means those monies:<\/p>\n
(a) received by an insured from an insurance carrier; or<\/p>\n
(b) paid by an insurance carrier on behalf of the insured;<\/p>\n
in any such case net of any applicable premium adjustments (including reserves
\nand retrospectively rated premium adjustments) and net of any costs or expenses
\n(including allocated costs of in-house counsel and other personnel) incurred in
\nthe collection thereof.<\/p>\n
1.33 IPO. “IPO” has the meaning set forth in the Recitals hereof.<\/p>\n
1.34 IPO CLOSING DATE. “IPO Closing Date” means the first date on which the
\nproceeds of any sale of Resources Common Stock to the underwriters in the IPO
\nare received.<\/p>\n
1.35 IPO PROSPECTUS. “IPO Prospectus” means the prospectus included in the
\nIPO Registration Statement, including any prospectus subject to completion,
\nfinal prospectus or any supplement to or amendment of any of the foregoing.<\/p>\n
1.36 IPO REGISTRATION STATEMENT. “IPO Registration Statement” means the
\nRegistration Statement on Form S-1 (Registration No. 333-48038) of Resources
\nfiled with the Commission pursuant to the Securities Act of 1933, as amended,
\nregistering the shares of Resources Common Stock to be issued in the IPO,
\ntogether with all amendments thereto.<\/p>\n
1.37 LIABILITIES. “Liabilities” shall mean any and all Indebtedness,
\nliabilities and obligations, whether accrued, fixed or contingent, mature or
\ninchoate, known or unknown, reflected on a balance sheet or otherwise,
\nincluding, but not limited to, those arising under any law, rule, regulation,
\nAction, order, injunction or consent decree of any Governmental Authority or any
\njudgment of any court of any kind or any award of any arbitrator of any kind,
\nand those arising under any contract, commitment or undertaking.<\/p>\n
1.38 LOSSES. “Losses” shall mean any and all damages, losses, deficiencies,
\nLiabilities, obligations, penalties, judgments, settlements, claims, payments,
\nfines, interest costs and expenses (including, without limitation, the costs and
\nexpenses of any and all Actions and demands, assessments, judgments, settlements
\nand compromises relating thereto and the costs and expenses of attorneys’,
\naccountants’, consultants’ and other professionals’ fees and expenses <\/p>\n
5
\n 12<\/p>\n
incurred in the investigation or defense thereof or the enforcement of rights
\nhereunder), including direct and consequential damages, but excluding punitive
\ndamages (other than punitive damages awarded to any third party against an
\nIndemnified Party).<\/p>\n
1.39 MORTGAGE. “Mortgage” means the Mortgage and Deed of Trust dated
\nNovember 1, 1944 between Houston Lighting & Power Company and The Chase
\nManhattan Bank (successor to South Texas Commercial National Bank of Houston) as
\nTrustee, as amended and supplemented.<\/p>\n
1.40 MRT ENERGY MARKETING ASSETS AND LIABILITIES. “MRT Energy Marketing
\nAssets” shall mean the assets identified or described in Schedule 1.40 and “MRT
\nEnergy Marketing Liabilities” shall mean the liabilities identified or described
\nin that Schedule.<\/p>\n
1.41 NYSE. “NYSE” means the New York Stock Exchange.<\/p>\n
1.42 PERSON. “Person” means an individual, a partnership, a corporation, a
\nlimited liability company, an association, a joint stock company, a trust, a
\njoint venture, an unincorporated organization and a governmental entity or any
\ndepartment, agency or political subdivision thereof.<\/p>\n
1.43 PUCT. “PUCT” means the Public Utility Commission of Texas.<\/p>\n
1.44 RECI. “RECI” means Reliant Energy Communications, Inc., a Delaware
\ncorporation all of the stock of which is owned by REI.<\/p>\n
1.45 RECORD DATE. “Record Date” means the close of business on the date to
\nbe determined by the Board of Directors of REI as the record date for
\ndetermining the shareholders of REI entitled to receive shares of common stock
\nof Resources in the Distribution.<\/p>\n
1.46 REGCO. “Regco” means Reliant Energy Regco, Inc., a Texas or Delaware
\ncorporation, the corporation organized by REI and, by means of a merger of a
\nwholly owned subsidiary of Regco with and into REI, that will become a holding
\ncompany for REI’s regulated businesses, as described in Section 6.2; provided,
\nhowever, that if any provision of this Agreement referring to Regco applies at a
\ntime when Regco has not become such a holding company, references to Regco in
\nsuch provision shall be deemed to refer to REI or the ultimate parent entity of
\nREI, as the case may be.<\/p>\n
1.47 REGULATED RETAIL ASSETS. “Regulated Retail Assets” shall mean the
\nassets identified or described in Schedule 1.47.<\/p>\n
1.48 REGULATED RETAIL BUSINESS. “Regulated Retail Business” shall mean the
\nbusinesses identified or described in Schedule 1.48.<\/p>\n
1.49 REGULATED RETAIL LIABILITIES. “Regulated Retail Liabilities” shall
\nmean (without duplication), any and all Liabilities, whether arising before or
\nafter the Separation Date, of REI or its Subsidiaries or any of their
\npredecessor companies or businesses, including any employee-related Liabilities,
\nprimarily relating to, arising out of or resulting from the ownership or use of
\nthe Regulated Retail Assets or the operations or conduct of the Regulated Retail
\nBusiness <\/p>\n
6
\n 13<\/p>\n
(including any such Liability relating to, arising out of or resulting from any
\nact or failure to act by any director, officer, employee, agent or
\nrepresentative (whether or not such act or failure to act is or was within such
\nPerson’s authority)).<\/p>\n
1.50 REGULATORY PROCEEDINGS. “Regulatory Proceedings” shall mean filings,
\nnotices, adjudicatory proceedings, rulemakings, enforcement actions before an
\nagency or in court relative to regulatory activity, and any other proceedings at
\nor before any regulatory or administrative agency. The term shall also refer to
\nappellate activities relative to any of the foregoing, including actions seeking
\ninjunctions, writs of mandamus and appeals.<\/p>\n
1.51 REI’S AUDITORS. “REI’s Auditors” means REI’s independent certified
\npublic accountants.<\/p>\n
1.52 REI BUSINESS. “REI Business” means any business of REI and its
\nSubsidiaries other than the Resources Business.<\/p>\n
1.53 REI GROUP. “REI Group” means REI, each Subsidiary of REI (other than
\nany member of the Resources Group) immediately after the Separation Date,
\nincluding the Subsidiaries set forth in Schedule 1.53, and each Person that
\nbecomes a Subsidiary of REI after the Separation Date. After the Holding Company
\nRestructuring, references to the REI Group shall also include Regco and each
\nSubsidiary of Regco (other than any member of the Resources Group).
\nNotwithstanding anything herein to the contrary, after the closing of the
\nexercise of the Genco Option, the REI Group shall not include Genco Inc. or any
\nSubsidiary of Genco Inc.<\/p>\n
1.54 REI INDEMNITEES. “REI Indemnitees” has the meaning assigned to that
\nterm in Section 3.2.<\/p>\n
1.55 REPG. “REPG” means Reliant Energy Power Generation, Inc. (“REPG”), a
\nDelaware corporation all of the stock of which is owned by REI.<\/p>\n
1.56 RERC. “RERC” means Reliant Energy Resources Corp., a Delaware
\ncorporation all of the stock of which is owned by REI.<\/p>\n
1.57 RES. “RES” means Reliant Energy Services, Inc., a Delaware corporation
\nall of the stock of which is owned by RERC.<\/p>\n
1.58 RESOURCES AUDITORS. “Resources Auditors” means Resources’ independent
\ncertified public accountants.<\/p>\n
1.59 RESOURCES BALANCE SHEET. “Resources Balance Sheet” means the combined
\nbalance sheet of Resources and affiliates as of September 30, 2000.<\/p>\n
1.60 RESOURCES BUSINESS. “Resources Business” means (a) the business and
\noperations conducted by Resources and its Subsidiaries after giving effect to
\nthe transactions described in Article II, as described in the caption “Our
\nBusiness” in the IPO Prospectus, and including without limitation the following
\nassets and operations conducted by REI and its Subsidiaries prior to the
\nSeparation:<\/p>\n
7
\n 14<\/p>\n
(i) the non-Reliant Energy HL&P power generation assets and related
\n energy trading, marketing and risk management operations in North America
\n and Europe;<\/p>\n
(ii) the retail electric operations; and<\/p>\n
(iii) the eBusiness group, the communications business and venture
\n capital operations,<\/p>\n
and (b) except as otherwise specifically provided herein, any terminated,
\ndivested or discontinued business or operations that at the time of termination,
\ndivestiture or discontinuation related primarily to the Resources Business as
\nthen conducted.<\/p>\n
1.61 RESOURCES COMMON STOCK. “Resources Common Stock” means the Common
\nStock, par value $.001 per share, of Resources.<\/p>\n
1.62 RESOURCES DEBT OBLIGATIONS. “Resources Debt Obligations” means all
\nIndebtedness of Resources or any other member of the Resources Group, excluding
\nall Indebtedness of any member of the REI Group to the extent it constitutes
\nIndebtedness of Resources by virtue of clause (f) or clause (g) of the
\ndefinition of Indebtedness. Resources Debt Obligations shall include, as of the
\ndate of the most recent balance sheet of Resources included in the IPO
\nProspectus, the Indebtedness of Resources reflected on such balance sheet.<\/p>\n
1.63 RESOURCES EXCLUDED LIABILITIES. “Resources Excluded Liabilities” shall
\nmean any and all Liabilities that are expressly contemplated by this Agreement
\nor any Ancillary Agreement as Liabilities to be retained or assumed by REI or
\nany other member of the REI Group, and all agreements and obligations of any
\nmember of the REI Group under this Agreement or any of the Ancillary Agreements.<\/p>\n
1.64 RESOURCES GROUP. “Resources Group” means Resources, each Subsidiary of
\nResources immediately after the Separation Date, including the Subsidiaries set
\nforth in Schedule 1.64, and each Person that becomes a Subsidiary of Resources
\nafter the Separation Date.<\/p>\n
1.65 RESOURCES INDEMNITEES. “Resources Indemnitees” has the meaning
\nassigned to that term in Section 3.3.<\/p>\n
1.66 RESOURCES LIABILITIES. “Resources Liabilities” shall mean (without
\nduplication):<\/p>\n
(i) any and all Liabilities that are expressly contemplated by this
\n Agreement or any Ancillary Agreement to be assumed by Resources or any
\n member of the Resources Group, and all agreements, obligations and
\n Liabilities of any member of the Resources Group under this Agreement or
\n any of the Ancillary Agreements;<\/p>\n
(ii) all Liabilities (other than Taxes based on, or measured by
\n reference to, net income) primarily relating to, arising out of or
\n resulting from:<\/p>\n
8
\n 15<\/p>\n
(A) the operation of the Resources Business, as conducted at any
\n time prior to, on or after the IPO Closing Date (including any
\n Liability relating to, arising out of or resulting from any act or
\n failure to act by any director, officer, employee, agent or
\n representative (whether or not such act or failure to act is or was
\n within such Person’s authority));<\/p>\n
(B) the operation of any business conducted at any time after the
\n IPO Closing Date by any member of the Resources Group (including any
\n Liability relating to, arising out of or resulting from any act or
\n failure to act by any director, officer, employee, agent or
\n representative (whether or not such act or failure to act is or was
\n within such Person’s authority));<\/p>\n
(C) any Resources Assets; or<\/p>\n
(D) the Resources Debt Obligations;<\/p>\n
and in any case whether arising before, on or after the IPO Closing Date;
\nand<\/p>\n
(iii) all Liabilities reflected as liabilities or obligations of
\n Resources in the Resources Balance Sheet, subject to any discharge of such
\n Liabilities subsequent to the date of the Resources Balance Sheet.<\/p>\n
Notwithstanding the foregoing, the Resources Liabilities shall not include the
\nResources Excluded Liabilities.<\/p>\n
1.67 RESOURCES RIGHTS PLAN. “Resources Rights Plan” shall mean the
\nstockholders rights plan of Resources as evidenced by the Rights Agreement,
\ndated as of January 15, 2001, by and among Resources and The Chase Manhattan
\nBank, as Rights Agent.<\/p>\n
1.68 RETAIL ELECTRIC PROVIDER LLC. “Retail Electric Provider LLC” means
\nReliant Energy Retail Services LLC, a Delaware limited liability company all of
\nthe membership interests in which are owned by Retail Holdings LLC.<\/p>\n
1.69 RETAIL HOLDINGS LLC. “Retail Holdings LLC” means Reliant Energy Retail
\nHoldings LLC, a Delaware limited liability company all of the membership
\ninterests in which are owned by REI.<\/p>\n
1.70 SEPARATION. “Separation” means the transfer of the Resources Business
\nto Resources and its Subsidiaries and the assumption by Resources and its
\nSubsidiaries of the Resources Liabilities, all as more fully described in this
\nAgreement and the Ancillary Agreements.<\/p>\n
1.71 SEPARATION DATE. “Separation Date” has the meaning set forth in
\nSection 2.1 hereof.<\/p>\n
1.72 SUBSIDIARY. A “Subsidiary” of any Person means any corporation or
\nother organization whether incorporated or unincorporated of which at least a
\nmajority of the securities or interests having by the terms thereof ordinary
\nvoting power to elect at least a majority of the <\/p>\n
9
\n 16<\/p>\n
board of directors or others performing similar functions with respect to such
\ncorporation or other organization is directly or indirectly owned or controlled
\nby such Person or by any one or more of its Subsidiaries, or by such Person and
\none or more of its Subsidiaries.<\/p>\n
1.73 TAXES. “Taxes” has the meaning set forth in the Tax Allocation
\nAgreement.<\/p>\n
1.74 TAX ALLOCATION AGREEMENT. “Tax Allocation Agreement” means the Tax
\nAllocation Agreement dated as of December 31, 2000 between REI and Resources.<\/p>\n
1.75 THIRD PARTY CLAIM. “Third Party Claim” has the meaning set forth in
\nSection 3.5(a).<\/p>\n
1.76 UNDERWRITERS. “Underwriters” means the underwriters named in the
\nUnderwriting Agreement.<\/p>\n
1.77 UNDERWRITING AGREEMENT. “Underwriting Agreement” has the meaning set
\nforth in Section 4.1(b) hereof.<\/p>\n
1.78 UNREGULATED RETAIL ASSETS. “Unregulated Retail Assets” shall mean the
\nassets identified or described in Schedule 1.78.<\/p>\n
1.79 UNREGULATED RETAIL BUSINESS. “Unregulated Retail Business” shall mean
\nthe businesses identified or described in Schedule 1.79.<\/p>\n
1.80 UNREGULATED RETAIL LIABILITIES. “Unregulated Retail Liabilities” shall
\nmean (without duplication), any and all Liabilities, whether arising before or
\nafter the Separation Date, of REI or its Subsidiaries or any of their
\npredecessor companies or businesses, including any employee-related Liabilities,
\nprimarily relating to, arising out of or resulting from the ownership or use of
\nthe Unregulated Retail Assets or the operations or conduct of the Unregulated
\nRetail Business (including any such Liability relating to, arising out of or
\nresulting from any act or failure to act by any director, officer, employee,
\nagent or representative (whether or not such act or failure to act is or was
\nwithin such Person’s authority).<\/p>\n
1.81 UTILITIES CODE. “Utilities Code” means the Utilities Code of Texas.<\/p>\n
ARTICLE II<\/p>\n
SEPARATION<\/p>\n
2.1 SEPARATION DATE. Unless otherwise provided in this Agreement, or in any
\nagreement to be executed in connection with this Agreement, the effective time
\nand date of each action in connection with the Separation shall be as of 11:59
\np.m., Houston Time, December 31, 2000 or such other date as may be fixed by REI
\n(the “Separation Date”).<\/p>\n
10
\n 17<\/p>\n
2.2 RESTRUCTURING TRANSACTIONS. In order to effect the Separation, REI will
\ntake, or cause to be taken, the following actions:<\/p>\n
(a) REI will transfer the Regulated Retail Assets to Resources and
\nResources will assume the Regulated Retail Liabilities.<\/p>\n
(b) Resources will transfer the Regulated Retail Assets to Retail
\nHoldings LLC and Retail Holdings LLC will assume the Regulated Retail
\nLiabilities.<\/p>\n
(c) Retail Holdings LLC will transfer the Regulated Retail Assets to
\nCustomer Care LLC and Customer Care LLC will assume the Regulated Retail
\nLiabilities.<\/p>\n
(d) REI will transfer the Unregulated Retail Assets to Resources and
\nResources will assume the Unregulated Retail Liabilities.<\/p>\n
(e) Resources will transfer the Unregulated Retail Assets to Retail
\nHoldings LLC and Retail Holdings LLC will assume the Unregulated Retail
\nLiabilities.<\/p>\n
(f) Retail Holdings LLC will transfer the Unregulated Retail Assets to
\nRetail Electric Provider LLC and Retail Electric Provider LLC will assume the
\nUnregulated Retail Liabilities.<\/p>\n
(g) RERC will transfer to Resources the stock of each of its
\nSubsidiaries listed on Schedule 2.2(g) in exchange for the consideration listed
\non Schedule 2.2(g).<\/p>\n
(h) REI will contribute to Resources, as a contribution to capital,
\n(i) all of the stock of REPG, (ii) all of the stock of RECI, and (iii) all of
\nthe stock and membership interests of each of its Subsidiaries listed on
\nSchedule 2.2(h).<\/p>\n
(i) RES will contribute the MRT Energy Marketing Assets to the capital
\nof MRT Energy Marketing Company and MRT Energy Marketing Company will assume the
\nMRT Energy Marketing Liabilities.<\/p>\n
(j) RES will distribute to RERC all of the stock of MRT Energy
\nMarketing Company.<\/p>\n
(k) A newly formed wholly owned subsidiary of Resources will merge
\nwith and into RES, with the result that RES will survive the merger as a wholly
\nowned subsidiary of Resources and RERC will receive cash in exchange for all of
\nthe stock of RES.<\/p>\n
(l) REI will contribute to Resources the Genco Option, and in that
\nconnection REI and Resources will execute and deliver the Genco Option
\nAgreement.<\/p>\n
(m) REI will contribute to Resources, as a contribution to capital,
\nthe assets listed in Schedule 2.2 (m).<\/p>\n
2.3 RELEASE FROM MORTGAGE, ETC. REI shall obtain such releases from the
\nMortgage as may be necessary for the transfers referred to in Section 2.2(a) and
\nSection 2.2(c).<\/p>\n
11
\n 18<\/p>\n
2.4 INSTRUMENTS OF TRANSFER AND ASSUMPTION. REI and Resources agree that
\n(a) transfers of the Regulated Retail Assets, the Unregulated Retail Assets and
\nall other assets required to be transferred by this Agreement shall be effected
\nby delivery by REI or the other transferring entity, as applicable, to the
\ntransferee, of (i) with respect to those assets that constitute stock,
\ncertificates endorsed in blank or evidenced or accompanied by stock powers or
\nother instruments of transfer endorsed in blank, against receipt, (ii) with
\nrespect to any real property interest or any improvements thereon, a general
\nwarranty deed with general warranty of limited application limiting recourse and
\nremedies to title insurance and warranties by predecessors in title to REI, and
\n(iii) with respect to all other Assets, such good and sufficient instruments of
\ncontribution, conveyance, assignment and transfer, in form and substance
\nreasonably satisfactory to REI and Resources, as shall be necessary to vest in
\nthe designated transferee, all of the title and ownership interest of the
\ntransferor in and to any such Asset, and (b) to the extent necessary, the
\nassumption of the Liabilities contemplated pursuant to Section 2.2 hereof shall
\nbe effected by delivery by the transferee to the transferor of such good and
\nsufficient instruments of assumption, in form and substance reasonably
\nsatisfactory to REI and Resources, as shall be necessary for the assumption by
\nthe transferee of such Liabilities. Each of the parties hereto also agrees to
\ndeliver to any other party hereto such other documents, instruments and writings
\nas may be reasonably requested by such other parties hereto in connection with
\nthe transactions contemplated hereby. Notwithstanding any other provisions of
\nthis Agreement to the contrary, (x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO IN
\nTHIS ARTICLE II WILL BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY
\nNATURE (a) AS TO THE VALUE OR FREEDOM FROM ENCUMBRANCE OF, ANY ASSETS, (b) AS TO
\nANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
\nOF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR (c) AS TO THE LEGAL
\nSUFFICIENCY TO CONVEY TITLE TO ANY ASSETS, and (y) the instruments of transfer
\nor assumption referred to in this Section 2.4 shall not include any
\nrepresentations and warranties other than as specifically provided herein. REI
\nand Resources hereby acknowledge and agree that ALL ASSETS ARE BEING TRANSFERRED
\n“AS IS, WHERE IS.”<\/p>\n
2.5 AGREEMENTS. On the Separation Date, or as soon as practicable after the
\nSeparation Date, REI and Resources shall execute and deliver (or shall cause
\ntheir appropriate Subsidiaries to execute and deliver, as applicable) the
\nagreements between them designated as follows:<\/p>\n
(i) the Transition Services Agreement,<\/p>\n
(ii) the Employee Matters Agreement,<\/p>\n
(iii) the Tax Allocation Agreement,<\/p>\n
(iv) the Retail Agreement,<\/p>\n
(v) the Genco Option Agreement,<\/p>\n
(vi) the Technical Services Agreement,<\/p>\n
(vii) the Registration Rights Agreement,<\/p>\n
12
\n 19<\/p>\n
(viii) the Miscellaneous Transition Matters Agreement,<\/p>\n
(ix) the REP Lease,<\/p>\n
(x) the EDC Lease,<\/p>\n
(xi) the EC\/DC Lease,<\/p>\n
(xii) the Innovative Business Solutions Center Lease,<\/p>\n
(xiii) the Dark Fiber Lease Agreement,<\/p>\n
(xiv) the Fiber Optics Operation and Maintenance Agreement,<\/p>\n
(xv) the Intellectual Property Agreement, and<\/p>\n
(xvi) such other agreements, documents or instruments as the
\n parties may agree are necessary or desirable and which
\n specifically state that they are Ancillary Agreements
\n within the meaning of this Agreement<\/p>\n
(collectively, the “Ancillary Agreements”). To the extent such documents are not
\nexecuted and delivered on the Separation Date, they shall be executed and
\ndelivered as soon as practicable thereafter and (except as otherwise provided
\ntherein) shall be effective as of the Separation Date.<\/p>\n
ARTICLE III<\/p>\n
MUTUAL RELEASES; INDEMNIFICATION<\/p>\n
3.1 RELEASE OF PRE-CLOSING CLAIMS.<\/p>\n
(a) Except as provided in Section 3.1(c), effective as of the IPO
\nClosing Date, Resources does hereby, for itself and each other member of the
\nResources Group, their respective Affiliates (other than any member of the REI
\nGroup), successors and assigns, and all Persons who at any time prior to the IPO
\nClosing Date have been shareholders, directors, officers, agents or employees of
\nany member of the Resources Group (in each case, in their respective capacities
\nas such), remise, release and forever discharge REI, each member of the REI
\nGroup and their respective Affiliates (other than any member of the Resources
\nGroup), successors and assigns, and all Persons who at any time prior to the IPO
\nClosing Date have been shareholders, directors, officers, agents or employees of
\nany member of the REI Group (in each case, in their respective capacities as
\nsuch), and their respective heirs, executors, administrators, successors and
\nassigns, from any and all Liabilities whatsoever to Resources and each other
\nmember of the Resources Group, whether at law or in equity (including any right
\nof contribution), whether arising under any contract or agreement, by operation
\nof law or otherwise, existing or arising from any acts or events occurring or
\nfailing to occur or alleged to have occurred or to have failed to occur or any
\nconditions existing or alleged to have existed on or before the IPO Closing
\nDate, including in connection with the transactions and all other activities to
\nimplement any of the Separation, the IPO, the Restructuring and the
\nDistribution.<\/p>\n
13
\n 20<\/p>\n
(b) Except as provided in Section 3.1(c), effective as of the IPO
\nClosing Date, REI does hereby, for itself and each other member of the REI
\nGroup, their respective Affiliates (other than any member of the Resources
\nGroup), successors and assigns, and all Persons who at any time prior to the IPO
\nClosing Date have been shareholders, directors, officers, agents or employees of
\nany member of the REI Group (in each case, in their respective capacities as
\nsuch), remise, release and forever discharge Resources, each member of the
\nResources Group, and their respective Affiliates (other than any member of the
\nREI Group), successors and assigns, and all Persons who at any time prior to the
\nIPO Closing Date have been shareholders, directors, officers, agents or
\nemployees of any member of the Resources Group (in each case, in their
\nrespective capacities as such), and their respective heirs, executors,
\nadministrators, successors and assigns, from any and all Liabilities whatsoever
\nto REI and each other member of the REI Group, whether at law or in equity
\n(including any right of contribution), whether arising under any contract or
\nagreement, by operation of law or otherwise, existing or arising from any acts
\nor events occurring or failing to occur or alleged to have occurred or to have
\nfailed to occur or any conditions existing or alleged to have existed on or
\nbefore the IPO Closing Date, including in connection with the transactions and
\nall other activities to implement any of the Separation, the IPO, the
\nRestructuring and the Distribution.<\/p>\n
(c) Nothing contained in Section 3.1(a) or (b) shall impair any right
\nof any Person to enforce this Agreement, any Ancillary Agreement or any
\nagreements, arrangements, commitments or understandings that are specified in
\nthis Agreement or in any Ancillary Agreement. Nothing contained in Section
\n3.1(a) or (b) shall release any Person from:<\/p>\n
(i) any Liability, contingent or otherwise, assumed, transferred,
\n assigned or allocated to the Group of which such Person is a member in
\n accordance with, or any other Liability of any member of any Group
\n under, this Agreement or any Ancillary Agreement;<\/p>\n
(ii) any Liability for the sale, lease, construction or receipt
\n of goods, property or services purchased, obtained or used in the
\n ordinary course of business by a member of one Group from a member of
\n any other Group prior to the IPO Closing Date;<\/p>\n
(iii) any Liability for unpaid amounts for products or services
\n or refunds owing on products or services due on a value-received basis
\n for work done by a member of one Group at the request or on behalf of
\n a member of another Group;<\/p>\n
(iv) any Liability that the parties may have with respect to
\n indemnification or contribution pursuant to this Agreement for claims
\n brought against the parties by third Persons, which Liability shall be
\n governed by the provisions of this Article III and, if applicable, the
\n appropriate provisions of the Ancillary Agreements; or<\/p>\n
(v) any Liability the release of which would result in the
\n release of any Person other than a Person released pursuant to this
\n Section 3.1; provided that the parties agree not to bring suit or
\n permit any of their Subsidiaries to bring suit <\/p>\n
14
\n 21<\/p>\n
against any Person with respect to any Liability to the extent that
\n such Person would be released with respect to such Liability by this
\n Section 3.1 but for the provisions of this clause (v).<\/p>\n
(d) Resources shall not make, and shall not permit any member of the
\nResources Group to make, any claim or demand, or commence any Action asserting
\nany claim or demand, including any claim of contribution or any indemnification,
\nagainst REI or any member of the REI Group, or any other Person released
\npursuant to Section 3.1(a), with respect to any Liabilities released pursuant to
\nSection 3.1(a). REI shall not make, and shall not permit any member of the REI
\nGroup to make, any claim or demand, or commence any Action asserting any claim
\nor demand, including any claim of contribution or any indemnification, against
\nResources or any member of the Resources Group, or any other Person released
\npursuant to Section 3.1(b), with respect to any Liabilities released pursuant to
\nSection 3.1(b).<\/p>\n
(e) It is the intent of each of REI and Resources by virtue of the
\nprovisions of this Section 3.1 to provide for a full and complete release and
\ndischarge of all Liabilities existing or arising from all acts and events
\noccurring or failing to occur or alleged to have occurred or to have failed to
\noccur and all conditions existing or alleged to have existed on or before the
\nIPO Closing Date, between or among Resources or any member of the Resources
\nGroup, on the one hand, and REI or any member of the REI Group, on the other
\nhand (including any contractual agreements or arrangements existing or alleged
\nto exist between or among any such members on or before the IPO Closing Date),
\nexcept as expressly set forth in Section 3.1(c). At any time, at the request of
\nany other party, each party shall cause each member of its respective Group to
\nexecute and deliver releases reflecting the provisions hereof.<\/p>\n
3.2 INDEMNIFICATION BY RESOURCES. Except as provided in Section 3.4,
\nResources shall, and in the case of clauses (a), (b) and (c) below shall in
\naddition cause the Appropriate Member of the Resources Group to, indemnify,
\ndefend and hold harmless REI, each member of the REI Group and each of their
\nrespective directors, officers and employees, and each of the heirs, executors,
\nsuccessors and assigns of any of the foregoing (collectively, the “REI
\nIndemnitees”) from and against any and all Losses of the REI Indemnitees
\nrelating to, arising out of or resulting from any of the following (without
\nduplication):<\/p>\n
(a) the failure of Resources or any other member of the Resources
\nGroup or any other Person to pay, perform or otherwise promptly discharge any
\nResources Liabilities in accordance with their respective terms, whether prior
\nto or after the IPO Closing Date or the date thereof;<\/p>\n
(b) the Resources Business or any Resources Liability;<\/p>\n
(c) any breach by Resources or any member of the Resources Group of
\nthis Agreement or any of the Ancillary Agreements; and<\/p>\n
(d) any untrue statement or alleged untrue statement of a material
\nfact or omission or alleged omission to state a material fact required to be
\nstated therein or necessary to make the statements therein not misleading, with
\nrespect to all information contained in the IPO <\/p>\n
15
\n 22<\/p>\n
Registration Statement or any IPO Prospectus (other than information regarding
\nREI provided by REI to Resources for inclusion in the IPO Registration Statement
\nor any IPO Prospectus).<\/p>\n
As used in this Section 3.2, “Appropriate Member of the Resources Group” means
\nthe member or members of the Resources Group, if any, whose acts, conduct or
\nomissions or failures to act caused, gave rise to or resulted in the loss from
\nand against which indemnity is provided.<\/p>\n
3.3 INDEMNIFICATION BY REI. Except as provided in Section 3.4, REI shall,
\nand in the case of clauses (a), (b) and (c) below shall in addition cause the
\nAppropriate Member of the REI Group to, indemnify, defend and hold harmless
\nResources, each member of the Resources Group and each of their respective
\ndirectors, officers and employees, and each of the heirs, executors, successors
\nand assigns of any of the foregoing (collectively, the “Resources Indemnitees”)
\nfrom and against any and all Losses of the Resources Indemnitees relating to,
\narising out of or resulting from any of the following (without duplication):<\/p>\n
(a) the failure of REI or any other member of the REI Group or any
\nother Person to pay, perform or otherwise promptly discharge any Liabilities of
\nany member of the REI Group other than the Resources Liabilities, in accordance
\nwith their respective terms, whether prior to or after the IPO Closing Date or
\nthe date hereof;<\/p>\n
(b) the REI Business or any Liability of any member of the REI Group
\nother than the Resources Liabilities;<\/p>\n
(c) any breach by REI or any member of the REI Group of this Agreement
\nor any of the Ancillary Agreements; and<\/p>\n
(d) any untrue statement or alleged untrue statement of a material
\nfact or omission or alleged omission to state a material fact required to be
\nstated therein or necessary to make the statements therein not misleading, with
\nrespect to information regarding REI provided by REI to Resources for inclusion
\nin the IPO Registration Statement or any IPO Prospectus.<\/p>\n
As used in this Section 3.3, “Appropriate Member of the REI Group” means the
\nmember or members of the REI Group, if any, whose acts, conduct or omissions or
\nfailures to act caused, gave rise to or resulted in the Loss from and against
\nwhich indemnity is provided.<\/p>\n
3.4 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND OTHER
\nAMOUNTS. (a) The parties intend that any Loss subject to indemnification or
\nreimbursement pursuant to this Article III will be net of Insurance Proceeds
\nthat actually reduce the amount of the Loss. Accordingly, the amount which any
\nparty (an “Indemnifying Party”) is required to pay to any Person entitled to
\nindemnification hereunder (an “Indemnitee”) will be reduced by any Insurance
\nProceeds theretofore actually recovered by or on behalf of the Indemnitee in
\nreduction of the related Loss. If an Indemnitee receives a payment (an
\n“Indemnity Payment”) required by this Agreement from an Indemnifying Party in
\nrespect of any Loss and subsequently receives Insurance Proceeds, then the
\nIndemnitee will pay to the Indemnifying Party an amount equal to the excess of
\nthe Indemnity Payment received over the amount of the Indemnity Payment that
\nwould have been due if the Insurance Proceeds recovery had been received,
\nrealized or recovered before the Indemnity Payment was made.<\/p>\n
16
\n 23<\/p>\n
(b) An insurer who would otherwise be obligated to pay any claims
\nshall not be relieved of the responsibility with respect thereto or, solely by
\nvirtue of the indemnification provisions hereof, have any subrogation rights
\nwith respect thereto, it being expressly understood and agreed that no insurer
\nor any other third party shall be entitled to a “windfall” (i.e., a benefit they
\nwould not be entitled to receive in the absence of the indemnification
\nprovisions) by virtue of the indemnification provisions hereof. Nothing
\ncontained in this Agreement or any Ancillary Agreement shall obligate any member
\nof any Group to seek to collect or recover any Insurance Proceeds.<\/p>\n
3.5 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. (a) If an
\nIndemnitee shall receive notice or otherwise learn of the assertion by a Person
\n(including any Governmental Authority) who is not a member of the REI Group or
\nthe Resources Group of any claims or of the commencement by any such Person of
\nany Action (collectively, a “Third Party Claim”) with respect to which an
\nIndemnifying Party may be obligated to provide indemnification to such
\nIndemnitee pursuant to Section 3.2 or 3.3, or any other Section of this
\nAgreement or any Ancillary Agreement, such Indemnitee shall give such
\nIndemnifying Party written notice thereof within 20 days after becoming aware of
\nsuch Third Party Claim. Any such notice shall describe the Third Party Claim in
\nreasonable detail. Notwithstanding the foregoing, the failure of any Indemnitee
\nor other Person to give notice as provided in this Section 3.5(a) shall not
\nrelieve the related Indemnifying Party of its obligations under this Article
\nIII, except to the extent that such Indemnifying Party is actually prejudiced by
\nsuch failure to give notice.<\/p>\n
(b) An Indemnifying Party may elect to defend (and, unless the
\nIndemnifying Party has specified any reservations or exceptions, to seek to
\nsettle or compromise), at such Indemnifying Party’s own expense and by such
\nIndemnifying Party’s own counsel, any Third Party Claim. Within 30 days after
\nthe receipt of notice from an Indemnitee in accordance with Section 3.5(a) (or
\nsooner, if the nature of such Third Party Claim so requires), the Indemnifying
\nParty shall notify the Indemnitee of its election whether the Indemnifying Party
\nwill assume responsibility for defending such Third Party Claim, which election
\nshall specify any reservations or exceptions. After notice from an Indemnifying
\nParty to an Indemnitee of its election to assume the defense of a Third Party
\nClaim, such Indemnitee shall have the right to employ separate counsel and to
\nparticipate in (but not control) the defense, compromise, or settlement thereof,
\nbut the fees and expenses of such counsel shall be the expense of such
\nIndemnitee except as set forth in the next sentence. In the event that the
\nIndemnifying Party has elected to assume the defense of the Third Party Claim
\nbut has specified, and continues to assert, any reservations or exceptions in
\nsuch notice, then, in any such case, the reasonable fees and expenses of one
\nseparate counsel for all Indemnitees shall be borne by the Indemnifying Party.<\/p>\n
(c) If an Indemnifying Party elects not to assume responsibility for
\ndefending a Third Party Claim, or fails to notify an Indemnitee of its election
\nas provided in Section 3.5(b), such Indemnitee may defend such Third Party Claim
\nat the cost and expense (included allocated costs of in-house counsel and other
\npersonnel) of the Indemnifying Party.<\/p>\n
(d) Unless the Indemnifying Party has failed to assume the defense of
\nthe Third Party Claim in accordance with the terms of this Agreement, no
\nIndemnitee may settle or compromise any Third Party Claim without the consent of
\nthe Indemnifying Party.<\/p>\n
17
\n 24<\/p>\n
(e) No Indemnifying Party shall consent to entry of any judgment or
\nenter into any settlement of the Third Party Claim without the consent of an
\nIndemnitee if the effect thereof is to permit any injunction, declaratory
\njudgment, other order or other nonmonetary relief to be entered, directly or
\nindirectly, against such Indemnitee.<\/p>\n
(f) The provisions of Section 3.2 through 3.5 shall not apply to Taxes
\n(which are covered by the Tax Allocation Agreement).<\/p>\n
3.6 ADDITIONAL MATTERS. (a) Any claim on account of a Loss which does not
\nresult from a Third Party Claim shall be asserted by written notice given by the
\nIndemnitee to the related Indemnifying Party. Such Indemnifying Party shall have
\na period of 30 days after the receipt of such notice within which to respond
\nthereto. If such Indemnifying Party does not respond within such 30-day period,
\nsuch Indemnifying Party shall be deemed to have refused to accept responsibility
\nto make payment. If such Indemnifying Party does not respond within such 30-day
\nperiod or rejects such claim in whole or in part, such Indemnitee shall be free
\nto pursue such remedies as may be available to such party as contemplated by
\nthis Agreement and the Ancillary Agreements.<\/p>\n
(b) In the event of payment by or on behalf of any Indemnifying Party
\nto any Indemnitee in connection with any Third Party Claim, such Indemnifying
\nParty shall be subrogated to and shall stand in the place of such Indemnitee as
\nto any events or circumstances in respect of which such Indemnitee may have any
\nright, defense or claim relating to such Third Party Claim against any claimant
\nor plaintiff asserting such Third Party Claim or against any other person. Such
\nIndemnitee shall cooperate with such Indemnifying Party in a reasonable manner,
\nand at the cost and expense (including allocated costs of in-house counsel and
\nother personnel) of such Indemnifying Party, in prosecuting any subrogated
\nright, defense or claim.<\/p>\n
(c) In the event of an Action in which the Indemnifying Party is not a
\nnamed defendant, if either the Indemnified Party or Indemnifying Party shall so
\nrequest, the parties shall endeavor to substitute the Indemnifying Party for the
\nnamed defendant, if at all practicable. If such substitution or addition cannot
\nbe achieved for any reason or is not requested, the named defendant shall allow
\nthe Indemnifying Party to manage the Action as set forth in this Section and the
\nIndemnifying Party shall fully indemnify the named defendant against all costs
\nof defending the Action (including court costs, sanctions imposed by a court,
\nattorneys’ fees, experts’ fees and all other external expenses, and the
\nallocated costs of in-house counsel and other personnel), the costs of any
\njudgment or settlement, and the cost of any interest or penalties relating to
\nany judgment or settlement.<\/p>\n
(D) THE PARTIES UNDERSTAND AND AGREE THAT THE INDEMNIFICATION
\nOBLIGATIONS HEREUNDER AND UNDER THE ANCILLARY AGREEMENTS MAY INCLUDE
\nINDEMNIFICATION FOR LOSSES RESULTING FROM, OR ARISING OUT OF, DIRECTLY OR
\nINDIRECTLY, AN INDEMNIFIED PARTY’S OWN NEGLIGENCE OR STRICT LIABILITY.<\/p>\n
3.7 REMEDIES CUMULATIVE. The remedies provided in this Article III shall be
\ncumulative and, subject to the provisions of Article IX, shall not preclude
\nassertion by any <\/p>\n
18
\n 25<\/p>\n
Indemnitee of any other rights or the seeking of any and all other remedies
\nagainst any Indemnifying Party.<\/p>\n
3.8 SURVIVAL OF INDEMNITIES. The rights and obligations of each REI and
\nResources and their respective Indemnitees under this Article III shall survive
\nthe sale or other transfer by any party of any Assets or businesses or the
\nassignment by it of any Liabilities.<\/p>\n
3.9 INDEMNIFICATION OF DIRECTORS AND OFFICERS. For purpose of Sections 3.2
\nthrough 3.8, inclusive, and notwithstanding anything to the contrary contained
\nherein, Persons who serve on both the Board of Directors of Resources and the
\nBoard of Directors of REI and persons who serve as officers of both Resources
\nand REI shall be deemed both Resources Indemnitees and REI Indemnitees.<\/p>\n
ARTICLE IV<\/p>\n
THE IPO AND ACTIONS PENDING THE IPO<\/p>\n
4.1 TRANSACTIONS PRIOR TO THE IPO. Subject to the conditions specified in
\nSection 4.4, REI and Resources shall use their reasonable commercial efforts to
\nconsummate the IPO. Such efforts shall include, but not necessarily be limited
\nto, those specified in this Section 4.1:<\/p>\n
(a) Resources has filed the IPO Registration Statement, and shall use
\nits best efforts to cause such IPO Registration Statement to become effective,
\nincluding by filing such amendments thereto as may be necessary or appropriate,
\nresponding promptly to any comments of the Commission and taking such other
\naction in that connection as may be reasonably requested by REI. REI and
\nResources shall also cooperate in preparing, filing with the Commission and
\ncausing to become effective a registration statement registering the Resources
\nCommon Stock under the Exchange Act, and any registration statements or
\namendments thereof which are required to reflect the establishment of, or
\namendments to, any employee benefit and other plans necessary or appropriate in
\nconnection with the IPO, the Separation, the Restructuring, the Distribution or
\nthe other transactions contemplated by this Agreement.<\/p>\n
(b) Resources shall enter into an underwriting agreement with the
\nunderwriters named in the IPO Registration Statement (the “Underwriting
\nAgreement”), in form and substance reasonably satisfactory to Resources, and
\nshall comply with its obligations thereunder.<\/p>\n
(c) REI and Resources shall consult with each other and the
\nUnderwriters regarding the timing, pricing and other material matters with
\nrespect to the IPO.<\/p>\n
(d) Resources shall use its reasonable commercial efforts to take all
\nsuch action as may be necessary or appropriate under state securities and blue
\nsky laws of the United States (and any comparable laws under any foreign
\njurisdictions) in connection with the IPO.<\/p>\n
(e) Resources shall prepare, file and use reasonable commercial
\nefforts to seek to make effective, an application for listing of the Resources
\nCommon Stock issued in the IPO on the NYSE, subject to official notice of
\nissuance.<\/p>\n
19
\n 26<\/p>\n
4.2 USE OF PROCEEDS. Resources shall use the net proceeds from the IPO
\n(after deduction of all expenses in connection with the IPO payable by Resources
\nas provided in Section 10.7) initially to increase working capital and as and
\nwhen needed to fund capital expenditures, and, depending on the timing of future
\nacquisitions of generation facilities, may also use a portion of such net
\nproceeds to finance one or more such acquisitions. Should the net proceeds from
\nthe IPO exceed $1,400,000,000, 50% of the net proceeds above such amount shall
\nbe applied to prepay indebtedness owing from REPG to REI outstanding as of
\nDecember 31, 2000 in respect of the indebtedness of Reliant Energy FinanceCo III
\nLP, including accrued and unpaid interest on the amount so prepaid to the date
\nof prepayment (the amount thereof to be so prepaid, assuming exercise in full of
\nany underwriters’ overallotment option, being called the “Specified
\nIndebtedness”). If the net proceeds are sufficient to result in the repayment in
\nfull of all such indebtedness owing from REPG to REI outstanding as of December
\n31, 2000 in respect of the indebtedness of Reliant Energy FinanceCo III LP in
\naccordance with the preceding sentence, any excess shall be retained by
\nResources.<\/p>\n
4.3 COOPERATION. Resources shall consult with, and cooperate in all
\nrespects with, REI in connection with the pricing of the Resources Common Stock
\nto be offered in the IPO and shall, at REI’s direction, promptly take any and
\nall actions necessary or desirable to consummate the IPO as contemplated by the
\nIPO Registration Statement and the Underwriting Agreement.<\/p>\n
4.4 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. As soon as practicable
\nafter the Separation Date, the parties hereto shall use their reasonable
\ncommercial efforts to satisfy the conditions listed below to the consummation of
\nthe IPO. The obligations of the parties to use their reasonable commercial
\nefforts to consummate the IPO shall be conditioned on the satisfaction, or
\nwaiver by REI, of the following conditions:<\/p>\n
(a) The IPO Registration Statement shall have been filed and declared
\neffective by the Commission, and there shall be no stop order in effect with
\nrespect thereto.<\/p>\n
(b) The actions and filings with regard to state securities and blue
\nsky laws of the United States (and any comparable laws under any foreign
\njurisdictions) described in Section 4.1(d) shall have been taken and, where
\napplicable, have become effective or been accepted.<\/p>\n
(c) The Resources Common Stock to be issued in the IPO shall have been
\naccepted for listing on the NYSE, on official notice of issuance.<\/p>\n
(d) Resources shall have entered into the Underwriting Agreement and
\nall conditions to the obligations of Resources and the Underwriters shall have
\nbeen satisfied or waived.<\/p>\n
(e) REI shall be satisfied in its sole discretion that (1) it will own
\nmore than 80% of the outstanding Resources Common Stock following the IPO, (2)
\nit will control Resources within the meaning of Section 368(c) of the Code, and
\n(3) it will satisfy the stock ownership requirements of Section 1504(a)(2) of
\nthe Code with respect to the stock of Resources. All other conditions to permit
\nthe Distribution to qualify as a tax-free distribution to REI, Resources and
\nREI’s shareholders shall, to the extent applicable as of the time of the IPO,<\/p>\n
20
\n 27<\/p>\n
be satisfied, and there shall be no event or condition that is likely to cause
\nany of such conditions not to be satisfied as of the time of the Distribution or
\nthereafter.<\/p>\n
(f) Any material Governmental Approvals necessary to consummate the
\nIPO shall have been obtained and be in full force and effect.<\/p>\n
(g) No order, injunction or decree issued by any court or agency of
\ncompetent jurisdiction or other legal restraint or prohibition preventing the
\nconsummation of the Separation or the IPO or any of the other transactions
\ncontemplated by this Agreement or any Ancillary Agreement shall be in effect.<\/p>\n
(h) The Separation shall have become effective.<\/p>\n
(i) Such other actions as the parties hereto may, based upon the
\nadvice of counsel, reasonably request to be taken prior to the IPO in order to
\nassure the successful completion of the IPO shall have been taken.<\/p>\n
(j) This Agreement and all Ancillary Agreements have been executed and
\nshall not have been terminated.<\/p>\n
(k) A pricing committee designated by the Board of Directors of REI
\nshall have determined that the terms of the IPO are acceptable to REI.<\/p>\n
4.5 CANCELLATION OF OUTSTANDING INTERCOMPANY INDEBTEDNESS. Prior to the IPO
\nClosing Date, REI shall convert into a capital contribution, without the
\nissuance of any additional shares of Resources Common Stock to REI, all
\nIndebtedness owed by Resources or its Subsidiaries to any member of the REI
\nGroup as of December 31, 2000, including all amounts owed by REPG to REI as of
\nsuch date in respect of the indebtedness of Reliant Energy FinanceCo III LP
\nother than the portion thereof constituting “Specified Indebtedness” as defined
\nin Section 4.2 but excluding any Indebtedness as of such date consisting of (a)
\nborrowings made to provide cash collateral for margin obligations of RES and any
\nreplacements or refinancings thereof or (b) reimbursement and other obligations
\nunder letters of credit, surety bonds or similar instruments provided as
\nsecurity for obligations of RES and its subsidiaries. If the terms of the IPO
\ninclude an underwriters’ overallotment option and upon the exercise of such
\noption in full, the total net proceeds from the IPO would exceed $1,400,000,000
\n(whether or not the total net proceeds would exceed such amount if the option
\nwere not exercised), then<\/p>\n
(a) prior to the IPO Closing Date, no Specified Indebtedness shall be
\nconverted into a capital contribution;<\/p>\n
(b) if and to the extent the overallotment option is exercised, 50% of
\nthe net proceeds attributable to such exercise shall immediately be applied to
\nthe prepayment of any Specified Indebtedness not otherwise prepaid on the IPO
\nClosing Date; and<\/p>\n
(c) if and to the extent the overallotment option expires or
\nterminates without being exercised, the entire remaining amount of Specified
\nIndebtedness not theretofore prepaid shall be converted into a capital
\ncontribution without the issuance of any additional shares of Resources Common
\nStock to REI.<\/p>\n
21
\n 28<\/p>\n
ARTICLE V<\/p>\n
CORPORATE GOVERNANCE AND CERTAIN
\n FINANCIAL REPORTING AND OTHER MATTERS<\/p>\n
5.1 CHARTER AND BYLAWS. As of the IPO Closing Date, the Restated
\nCertificate of Incorporation and Bylaws of Resources shall be in the forms of
\nSchedule 5.1(a) and 5.1(b), respectively, with such changes therein as may be
\nagreed to in writing by REI.<\/p>\n
5.2 RIGHTS PLAN AMENDMENTS. Following the Closing Date and for so long as
\nREI beneficially owns shares representing at least 30% of the voting power of
\nall of the outstanding shares of Resources Common Stock, without the prior
\nwritten consent of REI, Resources shall not amend or modify the Resources Rights
\nPlan.<\/p>\n
5.3 CHARTER\/BYLAW AMENDMENTS. So long as REI owns shares representing 30%
\nof the voting power of all of the outstanding shares of Resources Common Stock,
\nResources will not, without the prior consent of REI, adopt any amendments to
\nits Restated Certificate of Incorporation or Bylaws or take or recommend to its
\nstockholders any action during the terms of this Agreement which would (i)
\nimpose limitations on the legal rights of REI or any other member of the REI
\nGroup as a stockholder of Resources other than those imposed pursuant to the
\nexpress terms of this Agreement or the form of Resources’ Restated Certificate
\nof Incorporation set forth as Schedule 5.1(a) hereto, including, without
\nlimitation, any action which would impose restrictions (A) based upon the size
\nof security holding, the business in which a security holder is engaged or other
\nconsiderations applicable to REI or any other member of the REI Group and not to
\nsecurity holders generally, or (B) by means of the issuance of or proposal to
\nissue any other class of securities having voting power disproportionately
\ngreater than the equity investment in Resources represented by such securities;
\n(ii) involve the issuance or corporate action providing for the issuance of any
\nwarrant, right capital stock or other security (A) which is, or under specified
\ncircumstances will become, convertible into or represent the right to acquire
\nany securities of REI or any other member of the REI Group or (B) which is
\ndependent upon the amount of voting securities owned by REI or any other member
\nof the REI Group, (iii) deny any benefit to REI or any other member of the REI
\nGroup proportionately as holders of any class of voting securities generally; or
\n(iv) alter voting or other rights of the holders of any class of voting
\nsecurities so that any such rights (or the vote required with respect to any
\nmatter) are determined with reference to the amount of voting securities held by
\nREI or any other member of the REI Group; provided, that this Section 5.3 shall
\nnot prohibit Resources from adopting the Resources Rights Plan or taking any
\naction otherwise prohibited hereby, so long as REI and the other members of the
\nREI Group are, either expressly or as part of a class of stockholders which
\nincludes REI and the other members of the REI Group, exempted from such action
\nor the limitations on legal rights imposed thereby.<\/p>\n
5.4 RESOURCES BOARD REPRESENTATION.<\/p>\n
(a) Beginning on the IPO Closing Date, and for so long as REI
\nbeneficially owns shares representing a majority of the voting power of all of
\nthe outstanding Resources Common Stock, REI shall have the right to designate
\nfor nomination by the Resources Board (or any nominating committee thereof) to
\nthe Resources Board a majority of the members of the <\/p>\n
22
\n 29<\/p>\n
Resources Board. For so long as REI beneficially owns shares representing less
\nthan a majority but at least 20% of the voting power of all of the outstanding
\nResources Common Stock, REI shall have the right to designate for nomination by
\nthe Resources Board (or any nominating committee thereof) to the Resources Board
\na proportionate number of members of the Resources Board, as calculated in
\naccordance with Section 5.4. Notwithstanding anything to the contrary set forth
\nherein, Resources’ obligations with respect to the election or appointment of
\nResources’ designated members shall be limited to the obligations set forth
\nunder subsections (b) and (c) below.<\/p>\n
(b) Resources shall exercise all authority under applicable law and
\nshall use its best efforts to cause at least three persons designated by REI to
\nbe elected to the Resources Board effective as of the IPO Closing Date (or at
\nthe first regularly scheduled meeting thereafter). For so long as REI
\nbeneficially owns shares representing a majority of the voting power of all of
\nthe outstanding Resources Common Stock, commencing with the annual meeting of
\nstockholders of Resources to be held in 2002 and prior to each annual meeting of
\nstockholders of Resources thereafter, REI shall be entitled to present to the
\nResources Board or any nominating committee thereof such number of designees of
\nREI (each, an “REI Designee”) for election to the Resources Board (or if there
\nis a classified board, the class of directors up for election) at such annual
\nmeeting as would result in REI having the appropriate number of REI Designees on
\nthe Resources Board as determined pursuant to subsection (a) above.<\/p>\n
(c) Resources shall at all such times exercise all authority under
\napplicable law and use its best efforts to cause all such designees to be
\nnominated as Board members by the nominating committee of the Resources Board if
\nthere is such a committee. Resources shall cause each REI Designee for election
\nto the Resources Board to be included in the slate of designees recommended by
\nthe Resources Board to holders of Resources Common Stock (including at any
\nspecial meeting of stockholders held for the election of directors) and shall
\nuse its best efforts to cause the election of each such REI Designee, including
\nsoliciting proxies in favor of the election of such persons. In the event that
\nany REI Designee elected to the Resources Board shall cease to serve as a
\ndirector for any reason, the vacancy resulting therefrom shall be filled by the
\nResources Board with a substitute REI Designee, unless such vacancy was caused
\nby action of stockholders (in which case, in accordance with Resources’ Restated
\nCertificate of Incorporation, the stockholders shall fill such vacancy). In the
\nevent that as a result of any increase in the size of the Resources Board, REI
\nis entitled to have one or more additional REI Designees elected to the
\nResources Board pursuant to subsection (a) above, the REI Board shall appoint
\nthe appropriate number of such additional REI Designees, unless such increase in
\nsize of the Resources Board was caused by the action of stockholders (in which
\ncase, in accordance with Resources’ Restated Certificate of Incorporation, the
\nstockholders shall elect such additional director or directors). The parties
\nhereto agree that the directors of Resources identified in the IPO Registration
\nStatement include at least three REI Designees.<\/p>\n
(d) If at any time that REI Designees are serving on the Resources
\nBoard, REI beneficially owns shares representing less than a majority but at
\nleast 20% of the total voting power of all of the outstanding Resources Common
\nStock, the number of persons REI shall be entitled to designate for nomination
\nby the Resources Board (or any nominating committee thereof) for election to the
\nResources Board shall be equal to the number of directors computed using the
\nfollowing formula (rounded to the nearest whole number): the product of (1) the<\/p>\n
23
\n 30<\/p>\n
percentage of the voting power of all of the outstanding shares of Resources
\nCommon Stock beneficially owned by REI and (2) the number of directors then on
\nthe Resources Board (assuming no vacancies exist). Notwithstanding the
\nforegoing, if REI beneficially owns shares of Resources Common Stock
\nrepresenting less than a majority of the total voting power of all outstanding
\nshares of Resources Common Stock and the calculation of the formula set forth in
\nthe foregoing sentence would result in REI being entitled to elect a majority of
\nthe members of the Resources Board, the formula will be recalculated with the
\nproduct being rounded down to the nearest whole number; provided, however, that
\nif REI, at any time, acquires additional shares of Resources Common Stock so
\nthat REI beneficially owns shares of Resources Common Stock representing a
\nmajority of the total voting power of all of the outstanding shares of Resources
\nCommon Stock, then the number of persons REI shall be entitled to designate for
\nnomination by the Resources Board (or any nominating committee thereof) for
\nelection to the Resources Board shall be adjusted upward, if appropriate as a
\nresult of rounding, in accordance with the provisions of this Section 5.4(d). If
\nthe number of REI Designees serving on the Resources Board exceeds the number
\ndetermined pursuant to the foregoing sentences of this Section 5.4(d) (such
\ndifference being herein called the “Excess Director Number), then REI in its
\nsole discretion shall instruct a number of REI Designees (the number of which
\ndesignees shall be equal to the Excess Director Number) to promptly resign from
\nthe Resources Board, and, to the extent such persons do not so resign, REI shall
\nassist Resources in increasing the size of the Resources Board, so that after
\ngiving effect to such increase, the number of REI Designees on the Resources
\nBoard is in accordance with the provisions of this Section 5.4(d).<\/p>\n
5.5 ISSUANCE OF STOCK. Following the IPO Closing Date and prior to the
\nDistribution Date, without the prior consent of REI, Resources shall not issue
\nany stock of Resources or any securities, options, warrants or rights
\nconvertible into or exercisable or exchangeable for stock of Resources if the
\nissuance would cause REI to fail to control Resources within the meaning of
\nSection 368(c) of the Code or if the issuance would cause REI to fail to satisfy
\nthe stock ownership requirements of Section 1504(a)(2) of the Code with respect
\nto the stock of Resources.<\/p>\n
ARTICLE VI<\/p>\n
HOLDING COMPANY RESTRUCTURING<\/p>\n
6.1 INTENT TO EFFECT HOLDING COMPANY RESTRUCTURING. REI intends to cause
\nthe Holding Company Restructuring described in this Article VI to occur as soon
\nas the conditions precedent set forth in Section 6.4 are satisfied.<\/p>\n
6.2 RESTRUCTURING STEPS. The Holding Company Restructuring shall consist of
\nthe following transactions:<\/p>\n
(a) REI will form a new wholly owned Subsidiary (“Genco Holding
\nCompany”) to become a transitory holding company of Genco LP.<\/p>\n
(b) Genco Holding Company will form two wholly owned limited liability
\ncompanies (“Genco GP LLC” and “Genco LP LLC”) that form Genco LP of which Genco
\nGP LLC is the 1% general partner and Genco LP LLC is the 99% limited partner.<\/p>\n
24
\n 31<\/p>\n
(c) REI will contribute the Genco Assets to the capital of Genco LP
\nfor the benefit of Genco Holding Company, Genco GP LLC and Genco LP LLC.<\/p>\n
(d) Regco will organize a wholly owned subsidiary (“MergerCo2”) for
\npurposes of effecting the Restructuring Merger.<\/p>\n
(e) MergerCo2 will merge (the “Restructuring Merger”) with and into
\nREI; in the merger the Regco stock owned by REI will be cancelled and each
\noutstanding share of common stock of REI will be automatically converted into an
\noutstanding share of common stock of Regco.<\/p>\n
(f) REI will distribute to Regco the stock of the Genco Holding
\nCompany and the stock of the Subsidiaries identified in Schedule 6.2(f) owned by
\nREI.<\/p>\n
(g) Regco will expressly assume all obligations of REI under this
\nAgreement and under each of the Ancillary Agreements and all other obligations
\nunder this Agreement and under each of the Ancillary Agreements which are
\nexpressed as requiring performance by, or imposing obligations on, Regco.<\/p>\n
(h) Genco Holding Company will merge with and into Regco.<\/p>\n
6.3 ACTIONS PRIOR TO THE HOLDING COMPANY RESTRUCTURING. (a) If required by
\napplicable law, Regco shall file a Registration Statement on Form S-4 with
\nrespect to the offer and sale of common stock of Regco in the Restructuring
\nMerger and use reasonable commercial efforts to cause the same to become
\neffective and the proxy statement and prospectus contained therein shall be
\nmailed to shareholders of REI in accordance with the requirements of the
\nSecurities Act of 1933, as amended.<\/p>\n
(b) Regco shall prepare and file, and use reasonable commercial
\nefforts to have approved, a listing of its common stock issued in the
\nRestructuring Merger on the NYSE, subject to official notice of issuance.<\/p>\n
(c) REI and Regco shall use reasonable commercial efforts to make
\nappropriate filings and applications with the Commission in order to satisfy the
\ncondition set forth in Section 6.4(b).<\/p>\n
6.4 CONDITIONS TO HOLDING COMPANY RESTRUCTURING. The following are
\nconditions to the Holding Company Restructuring. The conditions are for the sole
\nbenefit of REI and shall not give rise to or create any duty on the part of REI
\nor the REI Board of Directors to waive or not waive any such condition.<\/p>\n
(a) To the extent required by applicable law, the shareholders of REI
\nshall have approved an agreement and plan of merger necessary to effect the
\nRestructuring Merger.<\/p>\n
(b) (i) The Commission shall have issued an order acceptable to REI
\nunder Sections 9(a)(2) and 10 of the Public Utility Holding Company Act of 1935,
\nas amended, approving the acquisition by Regco of securities of “public utility
\ncompanies” in the Holding Company Restructuring and (ii) if no exemption from
\nthe registration requirements of such Act <\/p>\n
25
\n 32<\/p>\n
is available to Regco, the registration of Regco as a “holding company” under
\nsuch Act shall have become effective.<\/p>\n
(c) Any other material Governmental Approvals necessary to consummate
\nthe Holding Company Restructuring shall have been obtained and be in full force
\nand effect.<\/p>\n
(d) No order, injunction or decree issued by any court or agency of
\ncompetent jurisdiction or other legal restraint or prohibition preventing the
\nconsummation of the Holding Company Restructuring shall be in effect and no
\nother event outside the control of REI shall have occurred or failed to occur
\nthat prevents the consummation of the Holding Company Restructuring.<\/p>\n
(e) Regco shall have obtained a private letter ruling from the
\nInternal Revenue Service in form and substance satisfactory to Regco (in its
\nsole discretion), to the effect that the transfer from REI to Genco LP of the
\nownership of the nuclear decommissioning trust assets referred to in Section
\n10.13 and those Genco Assets that are subject to regulation by the Nuclear
\nRegulatory Commission will not adversely affect the tax status of Genco or of
\nthe nuclear decommissioning trust or of further contributions to such trust.<\/p>\n
(f) Such amendments, consents, waivers, approvals, refinancings or
\nother actions as may be necessary in connection with the Holding Company
\nRestructuring under debt obligations of REI and its Subsidiaries and material
\ncontracts and agreements to which REI or any of its Subsidiaries are parties
\nshall have been obtained or taken.<\/p>\n
6.5 SOLE DISCRETION OF REI. REI currently intends, following the
\nconsummation of the IPO, to complete the Holding Company Restructuring as
\npromptly as practicable after the IPO Closing Date. REI shall, in its sole and
\nabsolute discretion, determine the date of the consummation of the Holding
\nCompany Restructuring and the steps therein and all terms thereof, including,
\nwithout limitation, the form, structure and terms of any transaction(s) to
\neffect the Holding Company Restructuring and the timing of and conditions to the
\nconsummation thereof. In addition, REI may at any time and from time to time
\nuntil the completion of the Holding Company Restructuring decide to abandon the
\nHolding Company Restructuring or modify or change the terms of the Holding
\nCompany Restructuring including, without limitation, by accelerating or delaying
\nthe timing of the consummation of all or part of the Holding Company
\nRestructuring. Resources shall cooperate with REI in all respects to accomplish
\nthe Holding Company Restructuring and shall, at REI’s direction, promptly take
\nany and all actions necessary or desirable to effect the Holding Company
\nRestructuring.<\/p>\n
ARTICLE VII<\/p>\n
THE DISTRIBUTION<\/p>\n
7.1 THE DISTRIBUTION.<\/p>\n
(a) Delivery of Shares for Distribution. Subject to Section 7.4
\nhereof, on or prior to the date the Distribution is made (the “Distribution
\nDate”), Regco will deliver to the distribution agent to be appointed by Regco,
\nor if no distribution agent is appointed, then Regco (the “Distribution Agent”),
\nto distribute to the shareholders of Regco the shares of Resources <\/p>\n
26
\n 33<\/p>\n
Common Stock held by Regco pursuant to the Distribution for the benefit of
\nholders of record of common stock of Regco on the record date, a single stock
\ncertificate, endorsed by Regco in blank, representing all of the outstanding
\nshares of Resources Common Stock then owned by Regco, and shall cause the
\ntransfer agent for the shares of common stock of Regco to instruct the
\nDistribution Agent to distribute on the Distribution Date the appropriate number
\nof such shares of Resources Common Stock to each such holder or designated
\ntransferee or transferees of such holder.<\/p>\n
(b) Shares Received. Subject to Sections 7.4 and 7.5, each holder of
\ncommon stock of Regco on the Record Date (or such holder’s designated transferee
\nor transferees) will be entitled to receive in the Distribution a number of
\nshares of Resources Common Stock equal to the number of shares of common stock
\nof Regco held by such holder on the Record Date multiplied by a fraction the
\nnumerator of which is the number of shares of Resources Common Stock
\nbeneficially owned by Regco on the Record Date and the denominator of which is
\nthe number of shares of common stock of Regco outstanding on the Record Date.<\/p>\n
(c) Obligation to Provide Information. Resources and Regco, as the
\ncase may be, will provide to the Distribution Agent all share certificates and
\nany information required in order to complete the Distribution on the basis
\nspecified above.<\/p>\n
7.2 ACTIONS PRIOR TO THE DISTRIBUTION.<\/p>\n
(a) Regco and Resources shall prepare and mail, prior to the
\nDistribution Date, to the holders of common stock of Regco such information
\nconcerning Resources and the Distribution and such other matters as Regco shall
\nreasonably determine are necessary and as may be required by law. Regco and
\nResources will prepare, and Resources will, to the extent required under
\napplicable law, file with the Commission any such documentation which Regco and
\nResources determine is necessary or desirable to effectuate the Distribution,
\nand Regco and Resources shall each use its reasonable commercial efforts to
\nobtain all necessary approvals from the Commission with respect thereto as soon
\nas practicable.<\/p>\n
(b) Regco and Resources shall take all such actions as may be
\nnecessary or appropriate under the securities or blue sky laws of the United
\nStates (and any comparable laws under any foreign jurisdiction) in connection
\nwith the Distribution.<\/p>\n
(c) Resources shall prepare and file, and shall use its reasonable
\ncommercial efforts to have approved, an application for the listing of the
\nResources Common Stock to be distributed in the Distribution on the NYSE,
\nsubject to official notice of distribution.<\/p>\n
(d) Immediately prior to the Distribution, (i) each person who is an
\nofficer or employee of any member of the REI Group and an officer or employee of
\nany member of the Resources Group immediately prior to the Distribution (each a
\n“Joint Employee”) and who is to continue as an officer or employee of any member
\nof the REI Group after the Distribution shall resign from each of such person’s
\npositions as an officer or employee with each member of the Resources Group, and
\n(ii) each such Joint Employee who is to continue as an officer or employee of
\nany member of the Resources Group, after the Distribution, shall resign from
\neach of such person’s positions as an officer or employee with each member of
\nthe REI Group.<\/p>\n
27
\n 34<\/p>\n
7.3 SOLE DISCRETION OF REI. REI currently intends, following the
\nconsummation of the IPO, that Regco shall complete the Distribution as promptly
\nas practicable after the IPO Closing Date. Regco shall, in its sole and absolute
\ndiscretion, determine the date of the consummation of the Distribution and all
\nterms of the Distribution, including, without limitation, the form, structure
\nand terms of any transaction(s) and\/or offering(s) to effect the Distribution
\nand the timing of and conditions to the consummation of the Distribution. In
\naddition, REI (or Regco) may at any time and from time to time until the
\ncompletion of the Distribution decide to abandon the Distribution or modify or
\nchange the terms of the Distribution, including, without limitation, by
\naccelerating or delaying the timing of the consummation of all or part of the
\nDistribution. Resources shall cooperate with Regco in all respects to accomplish
\nthe Distribution and shall, at Regco’s direction, promptly take any and all
\nactions necessary or desirable to effect the Distribution, including, without
\nlimitation, the registration under the Securities Act of 1933, as amended, of
\nthe Resources Common Stock on an appropriate registration form or forms to be
\ndesignated by Regco. REI shall select any investment banker(s) and manager(s) in
\nconnection with the Distribution, as well as any financial printer, solicitation
\nand\/or exchange agent and outside counsel for Regco; provided, however, that
\nnothing herein shall prohibit Resources from engaging (at its own expense) its
\nown financial, legal, accounting and other advisors in connection with the
\nDistribution.<\/p>\n
7.4 CONDITIONS TO THE DISTRIBUTION. The following are conditions to the
\nconsummation of the Distribution. The conditions are for the sole benefit of
\nRegco and shall not give rise to or create any duty on the part of Regco or the
\nRegco Board of Directors to waive or not waive any such condition.<\/p>\n
(a) IRS Ruling. Regco shall have obtained a private letter ruling from
\nthe Internal Revenue Service in form and substance satisfactory to Regco (in its
\nsole discretion), and such ruling shall remain in effect as of the Distribution
\nDate, to the effect that (i) the contribution by REI of all of its Resources
\nCommon Stock to Regco will qualify as a reorganization under Section 355 of the
\nCode, (ii) the distribution by Regco of all of its Resources Common Stock to the
\nshareholders of Regco will qualify as a reorganization under Section 355 of the
\nCode; (iii) no gain or loss will be recognized by (and no amount will otherwise
\nbe included in the income of) the shareholders of Regco upon their receipt of
\nResources Common Stock pursuant to the Distribution; (iv) no gain or loss will
\nbe recognized by REI upon the contribution of its Resources Common Stock to
\nRegco; and (v) no gain or loss will be recognized by Regco pursuant to the
\nDistribution.<\/p>\n
(b) Holding Company Restructuring. The Holding Company Restructuring
\nshall have occurred.<\/p>\n
(c) Governmental Approvals. Any material Governmental Approvals
\nnecessary to consummate the Distribution shall have been obtained and be in full
\nforce and effect;<\/p>\n
(d) No Legal Restraints. No order, injunction or decree issued by any
\ncourt or agency of competent jurisdiction or other legal restraint or
\nprohibition preventing the consummation of the Distribution shall be in effect
\nand no other event outside the control of <\/p>\n
28
\n 35<\/p>\n
Regco shall have occurred or failed to occur that prevents the consummation of
\nthe Distribution; and<\/p>\n
(e) No Material Adverse Effect. No other events or developments shall
\nhave occurred subsequent to the IPO Closing Date that, in the judgment of the
\nBoard of Directors of Regco, would result in the Distribution having a material
\nadverse effect on Regco or on the shareholders of Regco.<\/p>\n
7.5 FRACTIONAL SHARES. As soon as practicable after the Distribution Date,
\nRegco shall direct the Distribution Agent to determine the number of whole
\nshares and fractional shares of Resources Common Stock allocable to each holder
\nof record or beneficial owner of common stock of REI as of the Record Date, to
\naggregate all such fractional shares and sell the whole shares obtained thereby
\nat the direction of Regco, in open market transactions, at then prevailing
\ntrading prices, and to cause to be distributed to each such holder or for the
\nbenefit of each such beneficial owner to which a fractional share shall be
\nallocable such holder’s or owner’s ratable share of the proceeds of such sale,
\nafter making appropriate deductions of the amount required to be withheld for
\nfederal income tax purposes and after deducting an amount equal to all brokerage
\ncharges, commissions and transfer taxes attributed to such sale. Regco and the
\nDistribution Agent shall use their reasonable commercial efforts to aggregate
\nthe shares of common stock of REI that may be held by any beneficial owner
\nthereof through more than one account in determining the fractional share
\nallocable to such beneficial owner.<\/p>\n
ARTICLE VIII<\/p>\n
GENCO TRANSACTIONS<\/p>\n
8.1 ORGANIZATION OF GENCO LP. In connection with the Holding Company
\nRestructuring, REI shall cause the Genco Assets to be contributed to Genco LP,
\nfree and clear of the lien of the Mortgage and all other liens and security
\ninterests securing Indebtedness, and shall cause Genco LP to assume the Genco
\nLiabilities. The date on which such contribution and assumption occurs is
\nreferred to herein as the “Genco Organization Date.” On the Genco Organization
\nDate, all of the outstanding partnership interests in Genco LP shall be
\nindirectly owned by Regco.<\/p>\n
8.2 GENCO CONTRACTS. On the Genco Organization Date, Genco LP shall be
\nassigned, and will assume the obligations of REI under, the Technical Services
\nAgreement.<\/p>\n
8.3 INSTRUMENTS OF TRANSFER AND ASSUMPTION. Transfers of the Genco Assets
\nshall be effected by delivery by REI or the other transferring entity, as
\napplicable, to the transferee, of (i) with respect to those assets that
\nconstitute stock, certificates endorsed in blank or evidenced or accompanied by
\nstock powers or other instruments of transfer endorsed in blank, against
\nreceipt, (ii) with respect to real property interests and improvements thereon,
\na general warranty deed with general warranty of limited application limiting
\nrecourse and remedies to title insurance and warranties by predecessors in title
\nto REI, and (iii) with respect to all other Assets, such good and sufficient
\ninstruments of contribution, conveyance, assignment and transfer, in form and
\nsubstance reasonably satisfactory to REI and Resources, as shall be necessary to
\nvest in the designated transferee, all of the title and ownership interest of
\nthe transferor in and to any such <\/p>\n
29
\n 36<\/p>\n
Asset, (b) to the extent necessary, the assumption of the Liabilities
\ncontemplated pursuant to Section 8.1 hereof shall be effected by delivery by the
\ntransferee to the transferor of such good and sufficient instruments of
\nassumption, in form and substance reasonably satisfactory to REI and Resources,
\nas shall be necessary for the assumption by the transferee of such Liabilities.
\nEach instrument of transfer shall contain a representation and warranty that the
\nportion of the Genco Assets transferred thereby shall be free and clear of the
\nlien of the Mortgage and all other liens and security interests securing
\nIndebtedness. Each of the parties hereto also agrees to deliver to any other
\nparty hereto such other documents, instruments and writings as may be reasonably
\nrequested by such other parties hereto in connection with the transactions
\ncontemplated hereby. Notwithstanding any other provisions of this Agreement to
\nthe contrary, (x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO IN THIS ARTICLE VIII
\nWILL BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY NATURE (a) AS TO THE
\nVALUE OR FREEDOM FROM ENCUMBRANCE OF, ANY ASSETS, (b) AS TO ANY WARRANTY OF
\nMERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OF, OR ANY OTHER
\nMATTER CONCERNING, ANY ASSETS OR (c) AS TO THE LEGAL SUFFICIENCY TO CONVEY TITLE
\nTO ANY ASSETS, and (y) the instruments of transfer or assumption referred to in
\nthis Section 8.3 shall not include any representations and warranties other than
\nas specifically provided herein. REI and Resources hereby acknowledge and agree
\nthat ALL ASSETS ARE BEING TRANSFERRED “AS IS, WHERE IS.”<\/p>\n
8.4 ORGANIZATION OF GENCO INC. Prior to the Genco Public Ownership Date,
\nREI shall organize Genco Inc. and shall contribute to Genco Inc. all of the
\nmembership interests in Genco GP LLC and Genco LP LLC. Immediately following
\nsuch transactions, all the outstanding common stock of Genco Inc. shall be owned
\nby Regco.<\/p>\n
8.5 RELEASES AND INDEMNITIES. In connection with the organization of Genco
\nLP or the Genco Public Ownership Event, REI and Genco will enter into agreements
\nregarding such mutual releases and indemnities similar in effect to those set
\nforth in Article III as REI shall specify.<\/p>\n
ARTICLE IX<\/p>\n
ARBITRATION; DISPUTE RESOLUTION<\/p>\n
9.1 AGREEMENT TO ARBITRATE. Except as otherwise specifically provided in
\nany Ancillary Agreement, the procedures for discussion, negotiation and
\narbitration set forth in this Article IX shall apply to all disputes,
\ncontroversies or claims (whether sounding in contract, tort or otherwise) that
\nmay rise out of or relate to, or arise under or in connection with this
\nAgreement or any Ancillary Agreement, or the transactions contemplated hereby or
\nthereby (including all actions taken in furtherance of the transactions
\ncontemplated hereby or thereby on or prior to the date hereof), or (for a period
\nof ten years after the date hereof) the commercial or economic relationship of
\nthe parties relating hereto or thereto, between or among any member of the REI
\nGroup and the Resources Group. Each party agrees on behalf of itself and each
\nmember of its respective Group that the procedures set forth in this Article IX
\nshall be the sole and exclusive remedy in connection with any dispute,
\ncontroversy or claim relating to any of the foregoing matters and irrevocably
\nwaives any right to commence any Action in or before any <\/p>\n
30
\n 37<\/p>\n
Governmental Authority, except as expressly provided in Section 9.7(b) and
\nexcept to the extent provided under the Arbitration Act in the case of judicial
\nreview of arbitration results or awards. Each party on behalf of itself and each
\nmember of its respective Group irrevocably waives any right to any trial by jury
\nwith respect to any claim, controversy or dispute set forth in this Section 9.1.<\/p>\n
9.2 ESCALATION. (a) It is the intent of the parties to use their respective
\nreasonable best efforts to resolve expeditiously any dispute, controversy or
\nclaim between or among them with respect to the matters covered hereby that may
\narise from time to time on a mutually acceptable negotiated basis. In
\nfurtherance of the foregoing, any party involved in a dispute, controversy or
\nclaim may deliver a notice (an “Escalation Notice”) demanding an in-person
\nmeeting involving representatives of the parties at a senior level of management
\nof the parties (or if the parties agree, of the appropriate strategic business
\nunit or division within such entity). A copy of any such Escalation Notice shall
\nbe given to the General Counsel, or like officer or official, of each party
\ninvolved in the dispute, controversy or claim (which copy shall state that it is
\nan Escalation Notice pursuant to this Agreement). Any agenda, location or
\nprocedures for such discussions or negotiations between the parties may be
\nestablished by the parties from time to time; provided, however, that the
\nparties shall use their reasonable best efforts to meet within 30 days of the
\nEscalation Notice.<\/p>\n
(b) The parties may, by mutual consent, retain a mediator to aid the
\nparties in their discussions and negotiations by informally providing advice to
\nparties. Any opinion expressed by the mediator shall be strictly advisory and
\nshall not be binding on the parties, nor shall any opinion expressed by the
\nmediator be admissible in any arbitration proceedings. The mediator may be
\nchosen from a list of mediators previously selected by the parties or by other
\nagreement of the parties. Costs of the mediation shall be borne equally by the
\nparties involved in the matter, except that each party shall be responsible for
\nits own expenses. Mediation is not a prerequisite to a demand for arbitration
\nunder Section 9.3.<\/p>\n
9.3 DEMAND FOR ARBITRATION. (a) At any time after the first to occur of (i)
\nthe date of the meeting actually held pursuant to the applicable Escalation
\nNotice or (ii) 45 days after the delivery of an Escalation Notice (as
\napplicable, the “Arbitration Demand Date”), any party involved in the dispute,
\ncontroversy or claim (regardless of whether such party delivered the Escalation
\nNotice) may deliver a notice demanding arbitration of such dispute, controversy
\nor claim (a “Arbitration Demand Notice”). In the event that any party shall
\ndeliver an Arbitration Demand Notice to another party, such other party may
\nitself deliver an Arbitration Demand Notice to such first party with respect to
\nany related dispute, controversy or claim with respect to which the Applicable
\nDeadline has not passed without the requirement of delivering an Escalation
\nNotice. No party may assert that the failure to resolve any matter during any
\ndiscussions or negotiations, the course of conduct during the discussions or
\nnegotiations or the failure to agree on a mutually acceptable time, agenda,
\nlocation or procedures for the meeting, in each case, as contemplated by Section
\n9.2, is a prerequisite to a demand for arbitration under Section 9.3. In the
\nevent that any party delivers an Arbitration Demand Notice with respect to any
\ndispute, controversy or claim that is the subject of any then pending
\narbitration proceeding or of a previously delivered Arbitration Demand Notice,
\nall such disputes, controversies and claims shall be resolved in the arbitration
\nproceeding for which an Arbitration Demand Notice was first <\/p>\n
31
\n 38<\/p>\n
delivered unless the arbitrator in his or her sole discretion determines that it
\nis impracticable or otherwise inadvisable to do so.<\/p>\n
(b) Except as may be expressly provided in any Ancillary Agreement,
\nany Arbitration Demand Notice may be given until one year and 45 days after the
\nlater of the occurrence of the act or event giving rise to the underlying claim
\nor the date on which such act or event was, or should have been, in the exercise
\nof reasonable due diligence, discovered by the party asserting the claim (as
\napplicable and as it may in a particular case be specifically extended by the
\nparties in writing, the “Applicable Deadline”). Any discussions, negotiations or
\nmediations between the parties pursuant to this Agreement or otherwise will not
\ntoll the Applicable Deadline unless expressly agreed in writing by the parties.
\nEach of the parties agrees on behalf of itself and each member of its Group that
\nif an Arbitration Demand Notice with respect to a dispute, controversy or claim
\nis not given prior to the expiration of the Applicable Deadline, as between or
\namong the parties and the members of their Groups, such dispute, controversy or
\nclaim will be barred. Subject to Sections 9.7(d) and 9.8, upon delivery of an
\nArbitration Demand Notice pursuant to Section 9.3(a) prior to the Applicable
\nDeadline, the dispute, controversy or claim shall be decided by a sole
\narbitrator in accordance with the rules set forth in this Article IX.<\/p>\n
9.4 ARBITRATORS. (a) Within 15 days after a valid Arbitration Demand Notice
\nis given, the parties involved in the dispute, controversy or claim referenced
\ntherein shall attempt to select a sole arbitrator satisfactory to all such
\nparties.<\/p>\n
(b) In the event that such parties are not able jointly to select a
\nsole arbitrator within such 15-day period, such parties shall each appoint an
\narbitrator (who need not be disinterested as to the parties or the matter)
\nwithin 30 days after delivery of the Arbitration Demand Notice. If one party
\nappoints an arbitrator within such time period and the other party or parties
\nfail to appoint an arbitrator within such time period, the arbitrator appointed
\nby the one party shall be the sole arbitrator of the matter.<\/p>\n
(c) In the event that a sole arbitrator is not selected pursuant to
\nparagraph (a) or (b) above, the two arbitrators will, within 30 days after the
\nappointment of the later of them to be appointed, select an additional
\narbitrator who shall act as the sole arbitrator of the dispute. After selection
\nof such sole arbitrator, the initial arbitrators shall have no further role with
\nrespect to the dispute. In the event that the arbitrators so appointed do not,
\nwithin 30 days after the appointment of the later of them to be appointed, agree
\non the selection of the sole arbitrator, any party involved in such dispute may
\napply to the Senior Judge of the U.S. District Court for the Southern District
\nof Texas to select the sole arbitrator, which selection shall be made by such
\norganization within 30 days after such application. Any arbitrator selected
\npursuant to this paragraph (c) shall be disinterested with respect to each of
\nthe parties and shall be reasonably competent in the applicable subject matter.<\/p>\n
(d) The sole arbitrator selected pursuant to paragraph (a), (b) or (c)
\nabove will set a time for the hearing of the matter which will commence no later
\nthan 90 days after the date of appointment of the sole arbitrator pursuant to
\nparagraph (a), (b) or (c) above and which hearing will be no longer than 30 days
\n(unless in the judgment of the arbitrator the matter is unusually complex and
\nsophisticated and thereby requires a longer time, in which event such <\/p>\n
32
\n 39<\/p>\n
hearing shall be no longer than 90 days). The final decision of such arbitrator
\nwill be rendered in writing to the parties not later than 60 days after the last
\nhearing date, unless otherwise agreed by the parties in writing.<\/p>\n
(e) The place of any arbitration hereunder will be Houston, Texas,
\nunless otherwise agreed by the parties.<\/p>\n
9.5 HEARINGS. Within the time period specified in Section 9.4(d), the
\nmatter shall be presented to the arbitrator at a hearing by means of written
\nsubmissions of memoranda and verified witness statements, filed simultaneously,
\nand responses, if necessary in the judgment of the arbitrator or both the
\nparties. If the arbitrator deems it to be essential to a fair resolution of the
\ndispute, live cross-examination or direct examination may be permitted, but is
\nnot generally contemplated to be necessary. The arbitrator shall actively manage
\nthe arbitration with a view to achieving a just, speedy and cost-effective
\nresolution of the dispute, claim or controversy. The arbitrator may, in his or
\nher discretion, set time and other limits on the presentation of each party’s
\ncase, its memoranda or other submissions, and refuse to receive any proffered
\nevidence, which the arbitrator, in his or her discretion, finds to be
\ncumulative, unnecessary, irrelevant or of low probative nature. Except as
\notherwise set forth herein, any arbitration hereunder will be conducted in
\naccordance with the procedures of the Center for Public Resources of New York
\n(“CPR”). Except as expressly set forth in Section 9.8(b), the decision of the
\narbitrator will be final and binding on the parties, and judgment thereon may be
\nhad and will be enforceable in any court having jurisdiction over the parties.
\nArbitration awards will bear interest at an annual rate of the Prime Rate plus
\n2% per annum, subject to any maximum amount permitted by applicable law. To the
\nextent that the provisions of this Agreement and the prevailing rules of the CPR
\nconflict, the provisions of this Agreement shall govern.<\/p>\n
9.6 DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any party involved in a
\ndispute subject to this Article IX may request limited document production from
\nthe other party or parties of specific and expressly relevant documents, with
\nthe reasonable expenses of the producing party incurred in such production paid
\nby the requesting party. Any such discovery (which right to documents shall be
\nsubstantially less than document discovery rights prevailing under the Federal
\nRules of Civil Procedure) shall be conducted expeditiously and shall not cause
\nthe hearing provided for in Section 9.5 to be adjourned except upon consent of
\nall parties involved in the applicable dispute or upon an extraordinary showing
\nof cause demonstrating that such adjournment is necessary to permit discovery
\nessential to a party to the proceeding. Depositions, interrogatories or other
\nforms of discovery (other than the document production set forth above) shall
\nnot occur except by consent of the parties involved in the applicable dispute.
\nDisputes concerning the scope of document production and enforcement of the
\ndocument production requests will be determined by written agreement of the
\nparties involved in the applicable dispute or, failing such agreement, will be
\nreferred to the arbitrator for resolution. All discovery requests will be
\nsubject to the parties’ rights to claim any applicable privilege. The arbitrator
\nwill adopt procedures to protect the proprietary rights of the parties and to
\nmaintain the confidential treatment of the arbitration proceedings (except as
\nmay be required by law). Subject to the foregoing, the arbitrator shall have the
\npower to issue subpoenas to compel the production or documents relevant to the
\ndispute, controversy or claim.<\/p>\n
33
\n 40<\/p>\n
(b) The arbitrator shall have full power and authority to determine
\nissues of arbitrability but shall otherwise be limited to interpreting or
\nconstruing the applicable provisions of this Agreement or any Ancillary
\nAgreement, and will have no authority or power to limit, expand, alter, amend,
\nmodify, revoke or suspend any condition or provision of this Agreement or any
\nAncillary Agreement; it being understood, however, that the arbitrator will have
\nfull authority to implement the provisions of this Agreement or any Ancillary
\nAgreement, and to fashion appropriate remedies for breaches of this Agreement
\n(including interim or permanent injunctive relief); provided that the arbitrator
\nshall not have (i) any authority in excess of the authority a court having
\njurisdiction over the parties and the controversy or dispute would have absent
\nthese arbitration provisions or (ii) any right or power to award punitive or
\ntreble damages. It is the intention of the parties that in rendering a decision
\nthe arbitrator give effect to the applicable provisions of this Agreement and
\nthe Ancillary Agreements and follow applicable law (it being understood and
\nagreed that this sentence shall not give rise to a right of judicial review of
\nthe arbitrator’s award).<\/p>\n
(c) If a party fails or refuses to appear at and participate in an
\narbitration hearing after due notice, the arbitrator may hear and determine the
\ncontroversy upon evidence produced by the appearing party.<\/p>\n
(d) Arbitration costs will be borne equally by each party involved in
\nthe mater, except that each party will be responsible for its own attorney’s
\nfees and other costs and expenses, including the costs of witnesses selected by
\nsuch party.<\/p>\n
9.7 CERTAIN ADDITIONAL MATTERS. (a) Except as to arbitration of cases
\narising under or related to the Genco Option Agreement, any arbitration award
\nshall be a bare award limited to a holding for or against a party and shall be
\nwithout findings as to facts, issues or conclusions of law (including with
\nrespect to any matters relating to the validity or infringement of patents or
\npatent applications) and shall be without a statement of the reasoning on which
\nthe award rests, but must be in adequate form so that a judgment of a court may
\nbe entered thereupon. Judgment upon any arbitration award hereunder may be
\nentered in any court having jurisdiction thereof.<\/p>\n
(b) Prior to the time at which an arbitrator is appointed pursuant to
\nSection 9.4, any party may seek one or more temporary restraining orders in a
\ncourt of competent jurisdiction if necessary in order to preserve and protect
\nthe status quo. Neither the request for, or grant or denial of, any such
\ntemporary restraining order shall be deemed a waiver of the obligation to
\narbitrate as set forth herein and the arbitrator may dissolve, continue or
\nmodify any such order. Any such temporary restraining order shall remain in
\neffect until the first to occur of the expiration of the order in accordance
\nwith its terms or the dissolution thereof by the arbitrator.<\/p>\n
(c) Except as required by law, the parties shall hold, and shall cause
\ntheir respective officers, directors, employees, agents and other
\nrepresentatives to hold, the existence, content and result of mediation or
\narbitration in confidence in accordance with the provisions of Article X and
\nexcept as may be required in order to enforce any award. Each of the parties
\nshall request that any mediator or arbitrator comply with such confidentiality
\nrequirement.<\/p>\n
34
\n 41<\/p>\n
(d) In the event that at any time the sole arbitrator shall fail to
\nserve as an arbitrator for any reason, the parties shall select a new arbitrator
\nwho shall be disinterested as to the parties and the matter in accordance with
\nthe procedures set forth herein for the selection of the initial arbitrator. The
\nextent, if any, to which testimony previously given shall be repeated or as to
\nwhich the replacement arbitrator elects to rely on the stenographic record (if
\nthere is one) of such testimony shall be determined by the replacement
\narbitrator.<\/p>\n
9.8 ARBITRATION OF GENCO OPTION AGREEMENT CASES. In cases arising under or
\nrelated to the Genco Option Agreement:<\/p>\n
(a) The proposed final decision of the Arbitrator shall be rendered
\npursuant to Section 9.4(d), but shall invite the parties to submit findings of
\nfacts and conclusions of law for use by the Arbitrator in drawing up his final
\narbitral award.<\/p>\n
(b) The final award shall expressly set forth sufficient findings of
\nfact and conclusions of law to support a final judgment under Texas law based
\nupon the arbitration award. Any exercise of discretion shall be limited by the
\nstandards applicable to trial court judges.<\/p>\n
(c) A full record, including a stenographic transcription of oral
\ntestimony, evidence shall be maintained by the Arbitrator and forwarded to a
\ncourt of competent jurisdiction in the event of appeal.<\/p>\n
(d) The final award shall be appealable to the courts of Texas to the
\nfull extent permitted by laws, and such courts shall have all of such power to
\nreview, correct, reverse, modify, remand or otherwise adjudicate such appeal as
\nTexas law may allow.<\/p>\n
9.9 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
\nwriting, the parties will continue to provide service and honor all other
\ncommitments under this Agreement and each Ancillary Agreement during the course
\nof dispute resolution pursuant to the provisions of this Article IX with respect
\nto all matters not subject to such dispute, controversy or claim.<\/p>\n
9.10 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
\nprovisions of this Article IX, only insofar as they relate to the agreement to
\narbitrate and any procedures pursuant thereto, shall be governed by the
\nArbitration Act and other applicable federal law. In all other respects, the
\ninterpretation of this Agreement shall be governed as set forth in Section 11.3.<\/p>\n
ARTICLE X<\/p>\n
COVENANTS AND OTHER MATTERS<\/p>\n
10.1 OTHER AGREEMENTS. In addition to the specific agreements, documents
\nand instruments annexed to this Agreement, REI and Resources agree to execute or
\ncause to be executed by the appropriate parties and deliver, as appropriate,
\nsuch other agreements, instruments and other documents as may be necessary or
\ndesirable in order to effect the purposes of this Agreement and the Ancillary
\nAgreements.<\/p>\n
35
\n 42<\/p>\n
10.2 FURTHER INSTRUMENTS. At the request of Resources and without further
\nconsideration, REI will execute and deliver, and will cause its applicable
\nSubsidiaries to execute and deliver, to Resources and its Subsidiaries such
\nother instruments of transfer, conveyance, assignment, substitution and
\nconfirmation and take such action as Resources may reasonably deem necessary or
\ndesirable in order more effectively to transfer, convey and assign to Resources
\nand its Subsidiaries and confirm Resources’ and its Subsidiaries’ title to all
\nof the assets, rights and other things of value contemplated to be transferred
\nto Resources and its Subsidiaries pursuant to this Agreement, the Ancillary
\nAgreements, and any documents referred to therein, to put Resources and its
\nSubsidiaries in actual possession and operating control thereof and to permit
\nResources and its Subsidiaries to exercise all rights with respect thereto
\n(including, without limitation, rights under contracts and other arrangements as
\nto which the consent of any third party to the transfer thereof shall not have
\npreviously been obtained). At the request of REI and without further
\nconsideration, Resources will execute and deliver, and will cause its applicable
\nSubsidiaries to execute and deliver, to REI and its Subsidiaries all
\ninstruments, assumptions, novations, undertakings, substitutions or other
\ndocuments and take such other action as REI may reasonably deem necessary or
\ndesirable in order to have Resources fully and unconditionally assume and
\ndischarge the liabilities contemplated to be assumed by Resources under this
\nAgreement, any Ancillary Agreement or any document in connection herewith and to
\nrelieve the REI Group of any liability or obligation with respect thereto and
\nevidence the same to third parties. Neither REI nor Resources shall be
\nobligated, in connection with the foregoing, to expend money other than
\nreasonable out-of-pocket expenses, attorneys’ fees and recording or similar
\nfees. Furthermore, each party, at the request of another party hereto, shall
\nexecute and deliver such other instruments and do and perform such other acts
\nand things as may be necessary or desirable for effecting completely the
\nconsummation of the transactions contemplated hereby.<\/p>\n
10.3 AGREEMENT FOR EXCHANGE OF INFORMATION. Each of REI and Resources
\nagrees to provide, or cause to be provided, to each other as soon as reasonably
\npracticable after written request therefor, any Information in the possession or
\nunder the control of such party that the requesting party reasonably needs (i)
\nto comply with reporting, disclosure, filing or other requirements imposed on
\nthe requesting party (including under applicable securities laws) by a
\nGovernmental Authority having jurisdiction over the requesting party, (ii) for
\nuse in any Regulatory Proceeding, judicial proceeding or other proceeding or in
\norder to satisfy audit, accounting, claims, regulatory, litigation or other
\nsimilar requirements, (iii) to comply with its obligations under this Agreement
\nor any Ancillary Agreement or (iv) in connection with the ongoing businesses of
\nREI or Resources as it relates to the conduct of such businesses prior to the
\nDistribution Date, as the case may be; provided, however, that in the event that
\nany party determines that any such provision of Information could be
\ncommercially detrimental, violate any law or agreement, or waive any
\nattorney-client privilege, the parties shall take all reasonable measures to
\npermit the compliance with such obligations in a manner that avoids any such
\nharm or consequence.<\/p>\n
(a) After the Separation Date, (i) each party shall maintain in effect
\nat its own cost and expense adequate systems and controls for its business to
\nthe extent necessary to enable the other party to satisfy its reporting,
\naccounting, audit and other obligations, and (ii) each party shall provide, or
\ncause to be provided, to the other party and its Subsidiaries in such form as
\nsuch requesting party shall request, at no charge to the requesting party, all
\nfinancial and other data <\/p>\n
36
\n 43<\/p>\n
and information as the requesting party determines necessary or advisable in
\norder to prepare its financial statements and reports or filings with any
\nGovernmental Authority.<\/p>\n
(b) Any Information owned by a party that is provided to a requesting
\nparty pursuant to this Section 10.3 shall be deemed to remain the property of
\nthe providing party. Unless specifically set forth herein, nothing contained in
\nthis Agreement shall be construed as granting or conferring rights of license or
\notherwise in any such Information.<\/p>\n
(c) To facilitate the possible exchange of Information pursuant to
\nthis Section 10.3 and other provisions of this Agreement after the Distribution
\nDate, each party agrees to use its reasonable commercial efforts to retain all
\nInformation in its respective possession or control on the Distribution Date
\nsubstantially in accordance with its policies as in effect on the Separation
\nDate. Resources shall not amend its or its Subsidiaries’ record retention
\npolicies prior to the Distribution Date without the consent of REI. However,
\nexcept as set forth in the Tax Allocation Agreement, at any time after the
\nDistribution Date, each party may amend their respective record retention
\npolicies at such party’s discretion; provided, however, that if a party desires
\nto effect the amendment within three (3) years after the Distribution Date, the
\namending party must give thirty (30) days prior written notice of such change in
\nthe policy to the other party to this Agreement. No party will destroy, or
\npermit any of its Subsidiaries to destroy, any Information that exists on the
\nSeparation Date (other than Information that is permitted to be destroyed under
\nthe current record retention policy of such party) without first using its
\nreasonable commercial efforts to notify the other party of the proposed
\ndestruction and giving the other party the opportunity to take possession of
\nsuch Information prior to such destruction.<\/p>\n
(d) No party shall have any liability to any other party in the event
\nthat any Information exchanged or provided pursuant to this Section is found to
\nbe inaccurate, in the absence of willful misconduct by the party providing such
\nInformation. No party shall have any liability to any other party if any
\nInformation is destroyed or lost after reasonable commercial efforts by such
\nparty to comply with the provisions of Section 10.3(c).<\/p>\n
(e) The rights and obligations granted under this Section 10.3 are
\nsubject to any specific limitations, qualifications or additional provisions on
\nthe sharing, exchange or confidential treatment of Information set forth in this
\nAgreement and any Ancillary Agreement.<\/p>\n
(f) Each party hereto shall, except in the case of a dispute subject
\nto this Article IX brought by one party against another party (which shall be
\ngoverned by such discovery rules as may be applicable under Article IX or
\notherwise), use its reasonable commercial efforts to make available to each
\nother party, upon written request, the former, current and future directors,
\nofficers, employees, other personnel and agents of such party as witnesses and
\nany books, records or other documents within its control or which it otherwise
\nhas the ability to make available, to the extent that any such person (giving
\nconsideration to business demands of such directors, officers, employees, other
\npersonnel and agents) or books, records or other documents may reasonably be
\nrequired in connection with any Regulatory Proceeding, judicial proceeding or
\nother proceeding in which the requesting party may from time to time be
\ninvolved, regardless of whether such Regulatory Proceeding, judicial proceeding
\nor other proceeding is a matter with respect to which indemnification may be
\nsought hereunder. The requesting party shall bear all costs and expenses in
\nconnection therewith.<\/p>\n
37
\n 44<\/p>\n
(g) To the extent Resources or a member of the Resources Group is
\ndeemed or determined by the PUCT by final order no longer subject to rehearing
\nby the PUCT to be an “affiliate” or a “competitive affiliate” of REI, Resources
\nand REI shall observe any applicable requirements of the Utilities Code, PUCT
\nrules and of the REI code of conduct and shall require their respective
\npersonnel and contractor personnel to observe that code of conduct. No member of
\nthe REI Group or the Resources Group shall directly or indirectly make
\napplication or request to the PUCT to make such a finding or determination nor
\nwill any member of the REI Group or the Resources Group directly or indirectly
\ntake a position in support of such a finding or determination.<\/p>\n
10.4 AUDITORS AND AUDITS; ANNUAL AND QUARTERLY STATEMENTS AND ACCOUNTING.
\n(a) Each party agrees that, for so long as Resources remains a Subsidiary of
\nREI, and with respect to any financial reporting period during which Resources
\nwas a Subsidiary of REI:<\/p>\n
(i) Resources shall not select a different accounting firm than
\n the firm selected by REI to audit its financial statements to serve as
\n its independent certified public accountants (the “Resources
\n Auditors”) for purposes of providing an opinion on its consolidated
\n financial statements without REI’s prior written consent (which shall
\n not be unreasonably withheld).<\/p>\n
(ii) Resources shall use its reasonable commercial efforts to
\n enable the accounting firm that audits its financial statements (the
\n “Resources Auditors”) to complete their audit such that they will date
\n their opinion on Resources’ audited annual financial statements on the
\n same date that REI’s Auditors date their opinion on REI’s audited
\n annual financial statements, and to enable REI to meet its timetable
\n for the printing, filing and public dissemination of REI’s annual
\n financial statements. Resources shall use its reasonable commercial
\n efforts to enable the Resources Auditors to complete their quarterly
\n review procedures such that they will provide clearance on Resources’
\n quarterly financial statements on the same date that REI’s Auditors
\n provide clearance on REI’s quarterly financial statements.<\/p>\n
(iii) Resources shall provide to REI on a timely basis all
\n Information that REI reasonably requires to meet its schedule for the
\n preparation, printing, filing, and public dissemination of REI’s
\n annual and quarterly financial statements. Without limiting the
\n generality of the foregoing, Resources will provide all required
\n financial information with respect to Resources and its Subsidiaries
\n to the Resources Auditors in a sufficient and reasonable time and in
\n sufficient detail to permit the Resources Auditors to take all steps
\n and perform all reviews necessary to provide sufficient assistance to
\n REI’s Auditors with respect to Information to be included or contained
\n in REI’s annual and quarterly financial statements. Similarly, REI
\n shall provide to Resources on a timely basis all Information that
\n Resources reasonably requires to meet its schedule for the
\n preparation, printing, filing, and public dissemination of Resources’
\n annual and quarterly financial statements. Without limiting the
\n generality of the foregoing, REI will provide all required financial
\n Information with respect to REI and its <\/p>\n
38
\n 45<\/p>\n
Subsidiaries to REI’s Auditors in a sufficient and reasonable time and
\n in sufficient detail to permit REI’s Auditors to take all steps and
\n perform all reviews necessary to provide sufficient assistance to the
\n Resources Auditors with respect to Information to be included or
\n contained in Resources’ annual and quarterly financial statements.<\/p>\n
(iv) Resources shall authorize the Resources Auditors to make
\n available to REI’s Auditors both the personnel who performed or are
\n performing the annual audits and quarterly reviews of Resources and
\n work papers related to the annual audits and quarterly reviews of
\n Resources, in all cases within a reasonable time prior to the
\n Resources Auditors’ opinion date, so that REI’s Auditors are able to
\n perform the procedures they consider necessary to take responsibility
\n for the work of the Resources Auditors as it relates to REI’s
\n Auditors’ report on REI’s financial statements, all within sufficient
\n time to enable REI to meet its timetable for the printing, filing and
\n public dissemination of REI’s annual and quarterly statements.
\n Similarly, REI shall authorize REI’s Auditors to make available to the
\n Resources Auditors both the personnel who performed or are performing
\n the annual audits and quarterly reviews of REI and work papers related
\n to the annual audits and quarterly reviews of REI, in all cases within
\n a reasonable time prior to REI’s Auditors’ opinion date, so that the
\n Resources Auditors are able to perform the procedures they consider
\n necessary to take responsibility for the work of REI’s Auditors as it
\n relates to the Resources Auditors’ report on Resources’ financial
\n statements, all within sufficient time to enable Resources to meet its
\n timetable for the printing, filing and public dissemination of
\n Resources’ annual and quarterly financial statements. <\/p>\n
(v) Resources may not change its accounting principles or
\n practices if a change in such accounting principle or practice would
\n be required to be disclosed in Resources’ financial statements as
\n filed with the SEC or otherwise publicly disclosed therein without the
\n prior written consent of REI, except for changes which are required by
\n GAAP and as to which there is no discretion on the part of Resources,
\n as concurred in by Resources Auditors prior to its implementation.
\n Resources shall give REI as much prior notice as reasonably practical
\n of any proposed determination of, or any significant changes in, its
\n accounting estimates or, subject as aforesaid, accounting principles
\n from those in effect on the Separation Date. Resources will consult
\n with REI and, if requested by REI, Resources will consult with REI’s
\n Auditors with respect thereto. REI shall give Resources as much prior
\n notice as reasonably practical of any proposed determination of, or
\n any significant changes in, its accounting estimates or accounting
\n principles from those in effect on the Separation Date.<\/p>\n
(vi) Nothing in Sections 10.3 and 10.4 shall require Resources to
\n violate any agreement with any third parties regarding the
\n confidentiality of confidential and proprietary information relating
\n to that third party or its business; provided, however, that in the
\n event that Resources is required under Sections 10.3 and 10.4 to
\n disclose any such information, Resources shall use all commercially
\n reasonable efforts to seek to obtain such third party’s consent to the<\/p>\n
39
\n 46<\/p>\n
disclosure of such information. Similarly, nothing in Sections 10.3
\n and 10.4 shall require REI to violate any agreement with any third
\n parties regarding the confidentiality of confidential and proprietary
\n information relating to that third party or its business; provided,
\n however, that in the event that REI is required under Sections 10.3
\n and 10.4 to disclose any such information, REI shall use all
\n commercially reasonable efforts to seek to obtain such third party’s
\n consent to the disclosure of such information.<\/p>\n
(b) For so long as REI beneficially owns shares representing 20% or
\nmore of the voting power of the outstanding Resources Common Stock (i) Resources
\nwill furnish REI within nine (9) business days after the end of each quarter and
\neleven (11) business days after the end of each fiscal year, the unaudited
\nbalance sheet, income statement and statement of cash flows of Resources and its
\nSubsidiaries as at the end of such period, (ii) Resources shall furnish to REI
\nsuch financial information or documents in the possession of Resources and any
\nof its Subsidiaries as REI may reasonably request, and (iii) Resources shall
\nfurnish to REI on a monthly basis such management and other periodic reports
\nrelated to financial information in the form and substance consistent with the
\npractice of Resources as of the date of this Agreement. For so long as REI
\nbeneficially owns shares representing 50% or more of the voting power of all of
\nthe outstanding Resources Common Stock, Resources will furnish REI the
\nconsolidated balance sheet, consolidated income statement and consolidated
\nstatement of cash flows, if any, of Resources and its Subsidiaries as at the end
\nof each such quarterly and annual period in the form and substance consistent
\nwith the practice of Resources as of the date of this Agreement.<\/p>\n
10.5 AUDIT RIGHTS. To the extent any member of the REI group provides goods
\nor services to any member of the Resources Group or any member of the Resources
\nGroup provides goods or services to a member of the REI Group under this
\nAgreement or under any Ancillary Agreement, the company providing such goods or
\nservices (the “Providing Company”) shall maintain complete and accurate books
\nand records relating to costs and charges made to the company receiving such
\ngoods and services (the “Receiving Company”). Books and accounts shall be
\nmaintained in accordance with generally accepted accounting principles,
\nconsistently applied, and to the extent such books and records relate to
\nregulated business activities, shall conform to any applicable regulatory code
\nof accounts which the Receiving Company is required to comply with, to the
\nextent such conformity is reasonably feasible. If conformity to a regulatory
\ncode of accounts is infeasible, the Providing Company shall maintain its books
\nand records related to the provision of goods and services in such a manner that
\nthe Receiving Company may readily reconcile such books and records to the
\napplicable code of accounts. Annually, the Receiving Company shall be entitled
\nto audit the Providing Company’s books and records related to the goods and
\nservices provided, using its own personnel or personnel from its independent
\nauditing firm. Discrepancies identified as a result of any audit shall be
\npromptly reconciled between the parties in accordance with any provisions of the
\nAncillary Agreement or, if no such provision is applicable, in accordance with
\nthe dispute resolution provisions of this Agreement. Any charge which is not
\nquestioned by the Receiving Company within the calendar year after the charge
\nwas rendered shall be deemed incontestable.<\/p>\n
10.6 PRESERVATION OF LEGAL PRIVILEGES. REI and Resources recognize that the
\nmembers of their respective groups possess and will possess information and
\nadvice that has been previously developed but is legally protected from
\ndisclosure under legal privileges, such as <\/p>\n
40
\n 47<\/p>\n
the attorney-client privilege or work product exemption and other concepts of
\nlegal protection (“Privilege”). Each party recognizes that they shall be jointly
\nentitled to the Privilege with respect to such privileged information and that
\neach shall be entitled to maintain and use for its own benefit all such
\ninformation and advice, but both parties shall ensure that such information is
\nmaintained so as to protect the Privileges with respect to the other party’s
\ninterest. To that end neither party will knowingly waive or compromise any
\nPrivilege associated with such information and advice without the consent of the
\nother party. In the event that privileged information is required to be
\ndisclosed to any arbitrator or mediator in connection with a dispute between the
\nparties, such disclosure shall not be deemed a waiver of Privilege with respect
\nto such information, and any party receiving it in connection with a proceeding
\nshall be informed of its nature and shall be required to safeguard and protect
\nit.<\/p>\n
10.7 PAYMENT OF EXPENSES. Resources shall pay all underwriting fees,
\ndiscounts and commissions and other direct costs incurred in connection with the
\nIPO. Except as otherwise provided in this Agreement, the Ancillary Agreements or
\nany other agreement between the parties relating to the Separation, the IPO or
\nthe Distribution, all other out-of-pocket costs and expenses of the parties
\nhereto in connection with the preparation of this Agreement and the Ancillary
\nAgreements, the Separation, the IPO and the Distribution shall be paid by REI.
\nNotwithstanding the foregoing, Resources shall pay any internal fees, costs and
\nexpenses incurred by Resources in connection with the Separation, the IPO and
\nthe Distribution.<\/p>\n
10.8 GOVERNMENTAL APPROVALS. The parties acknowledge that certain of the
\ntransactions contemplated by this Agreement and the Ancillary Agreements are
\nsubject to certain conditions established by applicable government regulations,
\norders, and approvals (“Existing Authority”). The parties intend to implement
\nthis Agreement, the Ancillary Agreements and the transactions contemplated
\nthereby consistent with and to the extent permitted by Existing Authority and to
\ncooperate toward obtaining and maintaining in effect such Governmental Approvals
\nas may be required in order to implement this Agreement and each of the
\nAncillary Agreements as fully as possible in accordance with their respective
\nterms. To the extent that any of the transactions contemplated by this Agreement
\nor any Ancillary Agreement require any Governmental Approvals, the parties will
\nuse their reasonable commercial efforts to obtain any such Governmental
\nApprovals.<\/p>\n
10.9 REGULATORY PROCEEDINGS. It is recognized and understood that high
\nlevels of cooperation and assistance will be required between members of the REI
\nGroup and the Resources Group in connection with Regulatory Proceedings
\nnecessary to implement the Separation and the Business Separation Plan approved
\nby the PUCT and all matters relating to the Genco Option. During the period from
\nthe Separation Date until an order issued by the PUCT in connection with the
\nstranded cost determination regarding the Genco Assets becomes final and
\nnonappealable, the parties agree as follows:<\/p>\n
(a) Upon reasonable request, members of the REI Group and of the
\nResources Group will provide personnel, information and other assistance to
\nmembers of the other group in order to prepare, file and prosecute to completion
\nRegulatory Proceedings which are either (i) required to be filed under the
\nUtilities Code or under the Business Separation Plan or (ii) deemed by the
\nrequesting party to be desirable to implement or preserve some aspect of the
\nSeparation contemplated herein.<\/p>\n
41
\n 48<\/p>\n
(b) Assistance provided may, without limitation, relate to information
\nthat has been transferred to or retained by the assisting party in the
\nseparation or which the assisting party is uniquely qualified to provide in
\nconnection with Regulatory Proceedings that relate to the Separation and its
\nimplementation under the Utilities Code. Assistance may take the form of
\ndeveloping, filing and giving testimony and reports to the PUCT or other
\nregulatory authority.<\/p>\n
(c) The appropriate members of the REI Group or the Resources Group
\nshall timely file with the PUCT or other regulatory authority or court and shall
\nprosecute to completion all Regulatory Proceedings required to implement the
\nBusiness Separation Plan approved by the PUCT, the Genco Option and the other
\nprovisions of this Agreement, such as, without limitation, filings to terminate
\nthe “Price To Beat” obligation, if appropriate, the determination of any
\n“clawback” related to retail customers served by Reliant Energy Retail Services,
\nand the determination of stranded costs related to the Genco Assets.<\/p>\n
(d) A member of the REI Group shall make all regulatory filings
\ncontemplated above in this Section 10.9 except where a member of the Resources
\nGroup is required by the Utilities Code to file separately or join in such
\nfilings. A member of the REI Group will be responsible for the direction and
\nprosecution of all Regulatory Proceedings in which REI Group filings are made,
\nexcept as follows: A member of the Resources Group will be responsible for
\nfiling on behalf of and in the name of the REI Group, and shall have sole
\nresponsibility and control of the direction and prosecution of (i) any filing
\npursuant to Utilities Code Section 39.202(j) and (ii) that portion of any filing
\npursuant to Utilities Code Section 39.262(e) which pertains to the
\nreconciliation of the Price to Beat and market prices and the determination of
\nany credits to REI under that subsection. With respect to the filings specified
\nin the immediately preceding sentence, the Resources Group shall be entitled to
\nact for and be subrogated to the interests of the REI Group. A member of the
\nResources Group will be responsible for filing in its own name and shall have
\nsole responsibility and control of proceedings to establish, revise or adjust
\nthe Price to Beat.<\/p>\n
(e) Except as provided below, the party supplying assistance shall be
\nreimbursed for costs incurred in providing assistance. For time expended by its
\npersonnel, the assisting party shall be reimbursed for actual salary costs, plus
\npayroll burdens and overhead allocations in accordance with its standard
\nprocedures for reimbursing other members of its group. Services provided for
\ninformation technology or other internal services shall be charged in the same
\nmanner they would be charged among the members of the providing company’s Group,
\nand out of pocket costs paid to third parties shall be reimbursed at actual
\ncost.<\/p>\n
(f) The party requesting assistance shall endeavor to minimize the
\nimpacts of such assistance on the other business needs of the assisting party.<\/p>\n
(g) Until the issuance of a Final Order determining the stranded costs
\nwith respect to the Genco Assets (the “Stranded Cost Order”), no member of the
\nREI Group or the Resources Group will, directly or indirectly, without express
\nwritten permission, assert a position which is adverse to the position of a
\nmember of the other in a Regulatory Proceeding before the PUCT, the Texas
\nLegislature or any other regulatory authority having jurisdiction over a member
\nof such Group, with respect to amendment or other revision to Senate Bill 7 or
\nthe Utilities Code.<\/p>\n
42
\n 49<\/p>\n
(h) Until the issuance of the Stranded Cost Order, no member of the
\nResources Group will, directly or indirectly, without the express written
\npermission of REI, assert a position which is adverse to the position of a
\nmember of the REI Group in Regulatory Proceedings before the PUCT or any other
\nregulatory authority having jurisdiction over a member of the REI Group with
\nrespect to the following matters: (i) stranded cost quantification or recovery
\nor (ii) the proper level or components of T&D Utility rates, provided, however,
\nthat positions taken by a member of the Resources Group relating solely to the
\nallocation of costs or the use of a rate design consistent with Price to Beat
\nrate designs will not be considered adverse positions even if such positions
\ndiffer from those asserted by members of the REI Group. REI will not
\nunreasonably withhold permission for a member of the Resources Group to take
\npositions which may be indirectly adverse to its own position. In any T&D
\nUtility rate case that proposes rates to be effective prior to the issuance of
\nthe Stranded Cost Order, any direct case presented by the REI Group shall be
\nbased upon a T&D Utility rate design that is substantially similar to either the
\nPrice to Beat rate design or the rate design approved by the PUCT in PUCT Docket
\nNo. 22355.<\/p>\n
10.10 CONTINUANCE OF REI CREDIT SUPPORT; BORROWINGS. Notwithstanding any
\nother provision of this Agreement or the provisions of any Ancillary Agreement
\nto the contrary, the parties hereby agree that REI and each Subsidiary of REI
\nshall maintain in full force and effect each guarantee, letter of credit,
\nkeepwell or support agreement or other credit support document, instrument or
\nother similar arrangement issued for the benefit of any Person in the Resources
\nGroup by or on behalf of REI or a Subsidiary of REI (the “Credit Support
\nArrangements”) which is outstanding as of the Separation Date, until the earlier
\nof (a) such time as such Credit Support Arrangement terminates in accordance
\nwith its terms or is otherwise released at the request of Resources or (b) the
\nDistribution Date; provided, that Resources shall use commercially reasonable
\nefforts, at the request of REI, to attempt to release or replace any Credit
\nSupport Arrangement for which such replacement or release is reasonably
\navailable. All such obligations shall be deemed Resources Liabilities. For so
\nlong as REI or any Subsidiary of REI remains liable with respect to any such
\nCredit Support Arrangement, (1) Resources shall pay, or cause the Person in the
\nResources Group for whose benefit the Credit Support Arrangement is provided to
\npay, the underlying obligation as and when the same shall become due and
\npayable, to the end that neither REI nor such Subsidiary of REI shall be
\nrequired to make any payment under or by reason of its obligation under such
\nCredit Support Arrangement and (2) REI or such Subsidiary shall retain all
\nrights of reimbursement and subrogation it may have, whether arising by law, by
\ncontract or otherwise, with respect to such Credit Support Arrangement and such
\nrights shall be enforceable against Resources as well as the Subsidiary of
\nResources for whose benefit the Credit Support Arrangement was made. Members of
\nthe REI Group may advance funds to or borrow funds from members of the Resources
\nGroup from time to time at market-based rates; provided, however, that except as
\nprovided in the Genco Option Agreement, no member of the REI Group or the
\nResources Group shall have any obligation to do so.<\/p>\n
To the extent covenants and agreements contained in any loan or credit agreement
\nor other financing document in effect on the date of this Agreement to which any
\nmember of the REI Group is a party requires, or requires such party to cause,
\nany member of the Resources Group to take or refrain from taking any action, or
\nprovides for a default or event of default if any member of the Resources Group
\ntakes or refrains from taking any action, such member of the Resources <\/p>\n
43
\n 50<\/p>\n
Group shall at all times prior to the Distribution Date, take or refrain from
\ntaking any such action as would result in a breach or violation of, or a default
\nunder, such agreement.<\/p>\n
10.11 CERTAIN NON-COMPETITION PROVISIONS; FREEDOM OF ACTION. In order to
\npreserve the separation of its Texas businesses as contemplated in the Business
\nSeparation Plan as approved by the PUCT and to protect the goodwill associated
\nwith the separate businesses, for a period of three years after the Choice Date
\nthe parties agree that they will conduct their respective businesses as follows:<\/p>\n
(a) Neither REI, Regco nor any Affiliate or successor in interest of
\nREI or Regco will sell electricity at retail or provide data, voice or video
\ntransmission services as a commercial activity for profit to retail customers
\nwithin the State of Texas, and<\/p>\n
(b) Neither REI, Regco nor any Affiliate or successor in interest of
\nREI or Regco will acquire or operate any electric generating facilities within
\nthe State of Texas other than the Genco Assets;<\/p>\n
provided, however, neither REI nor Resources shall be restricted from providing
\nnatural gas and other non-electric energy commodities, and REI and its
\naffiliates shall not be restricted from providing fuel cells, microturbines and
\nsimilar distributed generating devices having an individual unit capacity less
\nthan 10 MW, including the installation, operation and maintenance associated
\nwith those devices. Nor shall REI and its Affiliates be precluded from providing
\nenergy services of the type and character currently being provided so long as it
\ndoes not provide sales of electricity to customers as a Retail Electric
\nProvider.<\/p>\n
10.12 CLAWBACK PAYMENT. Resources will pay to REI the lesser of (i) the
\namount required to be credited to REI by its affiliated retail electric provider
\npursuant to Section 39.262(e) of the Utilities Code promptly following the
\ndetermination that such a payment is owed and the amount thereof and (ii) $150
\nmultiplied by the number of residential or small commercial customers served by
\nthe affiliated transmission and distribution utility that are buying electricity
\nfrom the affiliated retail electric provider at the price to beat on the second
\nanniversary of the beginning of competition, minus the number of new customers
\nobtained outside the service area.<\/p>\n
10.13 NUCLEAR DECOMMISSIONING TRUST AND INVESTMENT. Upon transfer of the
\nGenco Assets to Genco LP, all rights and obligations associated with REI’s
\ninterest in the South Texas Project Electric Generating Station shall become the
\nrights and obligations of Genco LP, including, without limitation, the interest
\nof beneficiary under that certain Trust Agreement, originally dated as of July
\n2, 1990, as amended and restated to date, between Houston Lighting & Power
\nCompany and Mellon Bank, N.A., as Trustee. That Trust Agreement, commonly
\nreferred to as the “STP Decommissioning Trust,” provides for the funding of
\nREI’s share of the costs of decontamination and decommissioning of STP. As owner
\nof STP, Genco shall maintain the STP Decommissioning Trust in accordance with
\nNRC requirements and shall order disbursements of funds as provided in the STP
\nDecommissioning Trust and NRC regulations. REI shall continue to collect through
\nrates, or other authorized charges to customers, amounts designated for funding
\nthe STP Decommissioning Trust, and shall promptly pay all such <\/p>\n
44
\n 51<\/p>\n
amounts that it collects to Genco. Genco shall deposit and maintain all such
\namounts with the Trustee under the STP Decommissioning Trust.<\/p>\n
Under the STP Decommissioning Trust, REI has appointed an Investment
\nAdvisory Committee to provide guidelines for the Trustee in the investment of
\nthe trust funds. Genco shall maintain that Investment Advisory Committee as a
\nfour-member committee, and following the Restructuring, Genco and REI shall each
\nappoint two representatives to the Investment Advisory Committee.<\/p>\n
Upon decommissioning of STP, in the event that funds from the STP
\nDecommissioning Trust should prove inadequate to fund Genco’s obligations under
\nthe terms of its NRC license and NRC regulations, REI shall collect through
\nrates, or other authorized charges to customers, as contemplated by Section
\n39.205 of the Utilities Code, all additional amounts required to fund Genco’s
\nobligations related to the decommissioning of STP and pay all amounts so
\ncollected to Genco, and shall indemnify Genco from and against any obligations
\nrelated to such decommissioning not otherwise satisfied through such collections
\nand pay over the amount of any such shortfall to Genco upon request. Following
\nthe completion of decommissioning, if surplus funds remain in the STP
\nDecommissioning Trust, such excess shall be refunded to REI.<\/p>\n
10.14 AUCTIONS OF CAPACITY. Prior to the Option Expiration Date, Genco LP
\n(and Genco, as applicable) shall auction all its capacity to purchasers other
\nthan Regco or an Affiliate of Regco on the following terms:<\/p>\n
(a) 15% REQUIREMENT: Fifteen percent (15%) of its capacity shall be
\nauctioned in accordance with rules prescribed by the PUCT so long as the PUCT
\nrules require an affiliated Power Generation Company to auction capacity.
\nResources shall not be entitled to participate in or reserve for itself any
\nportion of such capacity that is offered pursuant to PUCT requirements.<\/p>\n
(b) REMAINING CAPACITY AUCTION: After deducting capacity required to
\nsatisfy operational requirements associated with the capacity auctioned pursuant
\nto PUCT rules, including without limitation the capacity auction and Price to
\nBeat rules and the obligation under the Agreement for Spinning Reserve Service
\nwith Central Power and Light Company dated December 30, 1992, the remaining
\ncapacity and related ancillary services shall be auctioned to purchasers other
\nthan Regco. Prior to each such auction, Genco LP (and Genco, as applicable)
\nshall determine the types of products to be auctioned, taking into consideration
\nanticipated market demand and the Auction Principles included in Schedule
\n10.14(b). Terms and conditions for the remaining capacity auction shall be
\nestablished by Genco LP (and Genco, as applicable), and reasonable notice of the
\nproducts and terms for the auction will be given to Resources but no less than
\nten business days prior to the scheduled auction date.<\/p>\n
(c) ENTITLEMENT AND OBLIGATIONS OF RESOURCES: Resources shall be
\nentitled to purchase at the prices established in each auction fifty percent
\n(50%) (but not less than such percentage) of the capacity auctioned. To exercise
\nits entitlement, Resources will notify Genco LP (and Genco, as applicable)
\nwhether it elects to purchase fifty percent (50%) of each product auctioned, and
\nGenco LP (and Genco, as applicable) shall exclude such capacity from the
\nauction. Resources shall give such notification no later than three business
\ndays prior to the date <\/p>\n
45
\n 52<\/p>\n
of the auction. Any portion of the capacity that Resources does not reserve
\nthrough such notification shall be auctioned along with the balance of the
\ncapacity being auctioned. Upon determination of auction prices for the products
\nauctioned, Resources shall be obligated to purchase the capacity it elected to
\nreserve from the auction process at the prices set during the auction for that
\nproduct. If energy and ancillary services are auctioned separately by Genco LP
\n(and Genco, as applicable), Resources shall be entitled to participate in fifty
\npercent (50%) of the offered capacity of each. In addition to its reservation of
\ncapacity, and whether or not it has reserved capacity in the auction, Resources
\nshall be entitled to participate in each auction of the remaining capacity.<\/p>\n
If Resources exercises the Genco Option, then after the Option Exercise
\nDate and until the Option Closing Date occurs or the Option terminates pursuant
\nto the Genco Option Agreement, Genco shall conduct no auctions of capacity other
\nthan those required pursuant to PUCT rules without consulting with Resources and
\nobtaining its reasonable concurrence, not to be unreasonably withheld.<\/p>\n
(d) COMPLIANCE WITH PUCT RULES. In the event the rules of the PUCT
\nrelating to Price to Beat do not allow for the fuel factor to be adjusted based
\non the auction of capacity as contemplated in this Section 10.14 or in the event
\nthe PUCT, by rule or order, otherwise indicates that the auction of capacity as
\ncontemplated in this Section 10.14 would be inconsistent with its requirements,
\nGenco LP (or Genco, as applicable) shall, in consultation with Resources, modify
\nthe auction procedures set forth herein or, if an auction would not be
\nacceptable, Resources and Genco LP (or Genco, as applicable) will use their best
\nefforts to reach agreement on a power purchase agreement which would satisfy
\nPUCT requirements and preserve, as nearly as possible, Resources’ entitlement to
\nobtain 50 percent of Genco’s available capacity at market prices.<\/p>\n
(e) RECONCILIATION PAYMENT OBLIGATIONS. Genco or its parent company
\nshall reconcile any difference between the price of power obtained through
\ncapacity auctions required by PUCT rules with the PUCT’s ECOM model, as required
\nby PUCT rules, and Genco or its parent company shall pay to REI, or REI shall
\npay to Genco or its parent company as appropriate, the difference between such
\namounts during the period, to the extent and in the manner required by rules of
\nthe PUCT.<\/p>\n
10.15 CONFIDENTIALITY.<\/p>\n
(a) REI and Resources shall hold and shall cause the members of the
\nREI Group and the Resources Group, respectively, to hold, and shall each cause
\ntheir respective officers, employees, agents, consultants and advisors to hold,
\nin strict confidence and not to disclose or release without the prior written
\nconsent of the other party, any and all Confidential Information (as defined
\nherein); provided, that the parties may disclose, or may permit disclosure of,
\nConfidential Information (i) to their respective auditors, attorneys, financial
\nadvisors, bankers and other appropriate consultants and advisors who have a need
\nto know such information and are informed of their obligation to hold such
\ninformation confidential to the same extent as is applicable to the parties
\nhereto and in respect of whose failure to comply with such obligations, REI or
\nResources, as the case may be, will be responsible or (ii) to the extent any
\nmember of the REI Group or the Resources Group is compelled to disclose any such
\nConfidential Information <\/p>\n
46
\n 53<\/p>\n
by judicial or administrative process or, in the opinion of legal counsel, by
\nother requirements of law. Notwithstanding the foregoing, in the event that any
\ndemand or request for disclosure of Confidential Information is made pursuant to
\nclause (ii) above, REI or Resources, as the case may be, shall promptly notify
\nthe other of the existence of such request or demand and shall provide the other
\na reasonable opportunity to seek an appropriate protective order or other
\nremedy, which both parties will cooperate in seeking to obtain. In the event
\nthat such appropriate protective order or other remedy is not obtained, the
\nparty whose Confidential Information is required to be disclosed shall or shall
\ncause the other party to furnish, or cause to be furnished, only that portion of
\nthe Confidential Information that is legally required to be disclosed. As used
\nin this Section 10.15, “Confidential Information” shall mean all proprietary,
\ntechnical or operational information, data or material of one party which, prior
\nto or following the IPO Closing Date, has been disclosed by REI or members of
\nthe REI Group, on the one hand, or Resources or members of the Resources Group,
\non the other hand, in written, oral (including by recording), electronic, or
\nvisual form to, or otherwise has come into the possession of, the other,
\nincluding pursuant to the access provisions of Section 10.3 hereof or any other
\nprovision of this Agreement (except to the extent that such Information can be
\nshown to have been (a) in the public domain through no fault of such party (or,
\nin the case of REI, any other member of the REI Group or, in the case of
\nResources, any other member of the Resources Group) or (b) later lawfully
\nacquired from other sources by the party (or, in the case of REI, such member of
\nthe REI Group or, in the case of Resources, such member of the Resources Group)
\nto which it was furnished; provided, however, in the case of (b) that such
\nsources did not provide such Information in breach of any confidentiality
\nobligations).<\/p>\n
(b) Notwithstanding anything to the contrary set forth herein, (i) REI
\nand the other members of the REI Group, on the one hand, and Resources and the
\nother members of the Resources Group, on the other hand, shall be deemed to have
\nsatisfied their obligations hereunder with respect to Confidential Information
\nif they exercise the same degree of care (but no less than a reasonable degree
\nof care) as they take to preserve confidentiality for their own similar
\nInformation and (ii) confidentiality obligations provided for in any agreement
\nbetween REI or any other member of the REI Group, or Resources or any other
\nmembers of the Resources Group, on the one hand, and any employee of REI or any
\nother member of the REI Group, or Resources or any other members of the
\nResources Group, on the other hand, shall remain in full force and effect.
\nConfidential Information of REI or any other member of the REI Group, on the one
\nhand, or Resources or any other member of the Resources Group, on the other
\nhand, in the possession of and used by the other as of the IPO Closing Date may
\ncontinue to be used by such Person in possession of the Confidential Information
\nin and only in the operation of the REI Business or the Resources Business, as
\nthe case may be, and may be used only so long as the Confidential Information is
\nmaintained in confidence and not disclosed in violation of Section 10.15(a).
\nSuch continued right to use may not be transferred to any third party unless the
\nthird party purchases all or substantially all of the business and assets in
\nwhich the relevant Confidential Information is used or employed in one
\ntransaction or in a series or related transactions. In the event that such right
\nto use is transferred in accordance with the preceding sentence, the
\ntransferring party shall not disclose the source of the relevant Confidential
\nInformation.<\/p>\n
10.16 1000 MAIN LEASE. As soon as reasonably practicable, following the
\nIPO, REI will transfer and assign to Resources the Lease Agreement dated as of
\nFebruary 26, 2001 <\/p>\n
47
\n 54<\/p>\n
between Main\/Lamar Partnership, L.P. and REI (the “1000 Main Lease”) and
\nResources will assume the obligations of REI thereunder. Such assignment shall
\nbe made pursuant to the provisions of Section 8.1.1 of the 1000 Main Lease.
\nResources will concurrently deliver to the landlord under such 1000 Main Lease a
\nconfirmation of assignment and assumption pursuant to Section 8.1.1 of the 1000
\nMain Lease and will take such action as REI may reasonably request to establish
\nthe satisfaction of the Release Conditions referred to therein.<\/p>\n
ARTICLE XI<\/p>\n
MISCELLANEOUS<\/p>\n
11.1 LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT SPECIFICALLY PROVIDED IN
\nANY ANCILLARY AGREEMENT IN NO EVENT SHALL ANY MEMBER OF THE REI GROUP OR THE
\nRESOURCES GROUP OR THEIR RESPECTIVE DIRECTORS, OFFICERS AND EMPLOYEES BE LIABLE
\nTO ANY OTHER MEMBER OF THE REI GROUP OR THE RESOURCES GROUP FOR ANY SPECIAL,
\nCONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER
\nCAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY
\nOUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE
\nPOSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE FOREGOING LIMITATIONS
\nSHALL NOT LIMIT EACH PARTY’S INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO
\nTHIRD PARTIES AS SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY AGREEMENT.<\/p>\n
11.2 ENTIRE AGREEMENT. This Agreement, the other Ancillary Agreements and
\nthe Exhibits and Schedules referenced or attached hereto and thereto,
\nconstitutes the entire agreement between the parties with respect to the subject
\nmatter hereof and shall supersede all prior written and oral and all
\ncontemporaneous oral agreements and understandings with respect to the subject
\nmatter hereof.<\/p>\n
11.3 GOVERNING LAW. This Agreement shall be governed and construed and
\nenforced in accordance with the laws of the State of Texas as to all matters
\nregardless of the laws that might otherwise govern under the principles of
\nconflicts of laws applicable thereto.<\/p>\n
11.4 TERMINATION. This Agreement and all Ancillary Agreements may be
\nterminated at any time prior to the IPO Closing Date by and in the sole
\ndiscretion of REI without the approval of Resources. This Agreement may be
\nterminated at any time after the IPO Closing Date by mutual consent of REI and
\nResources. In the event of termination pursuant to this Section, neither party
\nshall have any liability of any kind to the other party.<\/p>\n
11.5 NOTICES. Unless expressly provided herein, all notices, claims,
\ncertificates, requests, demands and other communications hereunder shall be in
\nwriting and shall be deemed to be duly given (i) when personally delivered or
\n(ii) if mailed registered or certified mail, postage prepaid, return receipt
\nrequested, on the date the return receipt is executed or the letter refused by
\nthe addressee or its agent or (iii) if sent by overnight courier which delivers
\nonly upon the signed receipt of the addressee, on the date the receipt
\nacknowledgment is executed or refused by the addressee or its agent or (iv) if
\nsent by facsimile or other generally accepted <\/p>\n
48
\n 55<\/p>\n
means of electronic transmission, on the date confirmation of transmission is
\nreceived (provided that a copy of any notice delivered pursuant to this clause
\n(iv) shall also be sent pursuant to clause (ii) or (iii)), addressed to the
\nattention of the addressee’s General Counsel at the address of its principal
\nexecutive office or to such other address or facsimile number for a party as it
\nshall have specified by like notice.<\/p>\n
11.6 COUNTERPARTS. This Agreement, including the Schedules and Exhibits
\nhereto and the other documents referred to herein, may be executed in
\ncounterparts, each of which shall be deemed to be an original but all of which
\nshall constitute one and the same agreement.<\/p>\n
11.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the benefit
\nof and be binding upon the parties hereto and their respective legal
\nrepresentatives and successors, and nothing in this Agreement, express or
\nimplied, is intended to confer upon any other Person any rights or remedies of
\nany nature whatsoever under or by reason of this Agreement. This Agreement may
\nnot be assigned by any party hereto.<\/p>\n
11.8 SEVERABILITY. If any term or other provision of this Agreement or the
\nSchedules or Exhibits attached hereto is determined by a nonappealable decision
\nby a court, administrative agency or arbitrator to be invalid, illegal or
\nincapable of being enforced by any rule of law or public policy, all other
\nconditions and provisions of this Agreement shall nevertheless remain in full
\nforce and effect so long as the economic or legal substance of the transactions
\ncontemplated hereby is not affected in any manner materially adverse to either
\nparty. Upon such determination that any term or other provision is invalid,
\nillegal or incapable of being enforced, the parties hereto shall negotiate in
\ngood faith to modify this Agreement so as to effect the original intent of the
\nparties as closely as possible in an acceptable manner to the end that
\ntransactions contemplated hereby are fulfilled to the fullest extent possible.<\/p>\n
11.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure or
\ndelay on the part of either party hereto in the exercise of any right hereunder
\nshall impair such right or be construed to be a waiver of, or acquiescence in,
\nany breach of any representation, warranty or agreement herein, nor shall any
\nsingle or partial exercise of any such right preclude other or further exercise
\nthereof or of any other right. All rights and remedies existing under this
\nAgreement or the Schedules or Exhibits attached hereto are cumulative to, and
\nnot exclusive of, any rights or remedies otherwise available.<\/p>\n
11.10 AMENDMENT. No change or amendment will be made to this Agreement
\nexcept by an instrument in writing signed on behalf of each of the parties to
\nthis Agreement.<\/p>\n
11.11 AUTHORITY. Each of the parties hereto represents to the other that
\n(a) it has the corporate or other requisite power and authority to execute,
\ndeliver and perform this Agreement and the Ancillary Agreements, (b) the
\nexecution, delivery and performance of this Agreement and the Ancillary
\nAgreements by it have been duly authorized by all necessary corporate or other
\nactions, (c) it has duly and validly executed and delivered this Agreement and
\nthe Ancillary Agreements to be executed and delivered on or prior to the
\nSeparation Date, and (d) this Agreement and such Ancillary Agreements are legal,
\nvalid and binding obligations, enforceable against it in accordance with their
\nrespective terms subject to applicable bankruptcy, insolvency, <\/p>\n
49
\n 56<\/p>\n
reorganization, moratorium or other similar laws affecting creditors’ rights
\ngenerally and general equity principles.<\/p>\n
11.12 INTERPRETATION. The headings contained in this Agreement, in any
\nExhibit or Schedule hereto and in the table of contents to this Agreement are
\nfor reference purposes only and shall not affect in any way the meaning or
\ninterpretation of this Agreement. Any capitalized term used in any Schedule or
\nExhibit but not otherwise defined therein, shall have the meaning assigned to
\nsuch term in this Agreement. When a reference is made in this Agreement to an
\nArticle or a Section, Exhibit or Schedule, such reference shall be to an Article
\nor Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
\nindicated.<\/p>\n
11.13 CONFLICTING AGREEMENTS. In the event of conflict between this
\nAgreement and any Ancillary Agreement or other agreement executed in connection
\nherewith, the provisions of such other agreement shall prevail.<\/p>\n
WHEREFORE, the parties have signed this Master Separation Agreement
\neffective as of the date first set forth above.<\/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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