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EXHIBIT 10.1
MASTER SEPARATION AGREEMENT
BETWEEN
RELIANT ENERGY, INCORPORATED
AND
RELIANT RESOURCES, INC.
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TABLE OF CONTENTS
ARTICLE I DEFINITIONS................................................................2
1.1 Action.....................................................................2
1.2 Affiliates.................................................................2
1.3 Ancillary Agreements.......................................................2
1.4 Business Day...............................................................2
1.5 Business Separation Plan...................................................2
1.6 Choice Date................................................................2
1.7 Code.......................................................................2
1.8 Commission.................................................................2
1.9 Customer Care LLC..........................................................2
1.10 Distribution...............................................................2
1.11 Distribution Agent.........................................................2
1.12 Distribution Date..........................................................3
1.13 Exchange Act...............................................................3
1.14 Final Order................................................................3
1.15 Genco Assets...............................................................3
1.16 Genco Business.............................................................3
1.17 Genco; Genco Inc...........................................................3
1.18 Genco Liabilities..........................................................3
1.19 Xxxxx XX...................................................................4
1.20 Genco Option...............................................................4
1.21 Genco Option Agreement.....................................................4
1.22 Genco Organization Date....................................................4
1.23 Genco Public Ownership Event...............................................4
1.24 Governmental Approvals.....................................................4
1.25 Governmental Authority.....................................................4
1.26 Group......................................................................4
1.27 Holding Company Restructuring..............................................4
1.28 Indebtedness...............................................................4
1.29 Indemnifying Party.........................................................5
1.30 Indemnitee.................................................................5
1.31 Information................................................................5
1.32 Insurance Proceeds.........................................................5
1.33 IPO........................................................................5
1.34 IPO Closing Date...........................................................5
1.35 IPO Prospectus.............................................................5
1.36 IPO Registration Statement.................................................5
1.37 Liabilities................................................................5
1.38 Losses.....................................................................5
1.39 Mortgage...................................................................6
1.40 MRT Energy Marketing Assets and Liabilities................................6
1.41 NYSE.......................................................................6
1.42 Person.....................................................................6
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1.43 PUCT.......................................................................6
1.44 RECI.......................................................................6
1.45 Record Date................................................................6
1.46 Regco......................................................................6
1.47 Regulated Retail Assets....................................................6
1.48 Regulated Retail Business..................................................6
1.49 Regulated Retail Liabilities...............................................6
1.50 Regulatory Proceedings.....................................................7
1.51 REI's Auditors.............................................................7
1.52 REI Business...............................................................7
1.53 REI Group..................................................................7
1.54 REI Indemnitees............................................................7
1.55 REPG.......................................................................7
1.56 RERC.......................................................................7
1.57 RES........................................................................7
1.58 Resources Auditors.........................................................7
1.59 Resources Balance Sheet....................................................7
1.60 Resources Business.........................................................7
1.61 Resources Common Stock.....................................................8
1.62 Resources Debt Obligations.................................................8
1.63 Resources Excluded Liabilities.............................................8
1.64 Resources Group............................................................8
1.65 Resources Indemnitees......................................................8
1.66 Resources Liabilities......................................................8
1.67 Resources Rights Plan......................................................9
1.68 Retail Electric Provider LLC...............................................9
1.69 Retail Holdings LLC........................................................9
1.70 Separation.................................................................9
1.71 Separation Date............................................................9
1.72 Subsidiary................................................................10
1.73 Taxes.....................................................................10
1.74 Tax Allocation Agreement..................................................10
1.75 Third Party Claim.........................................................10
1.76 Underwriters..............................................................10
1.77 Underwriting Agreement....................................................10
1.78 Unregulated Retail Assets.................................................10
1.79 Unregulated Retail Business...............................................10
1.80 Unregulated Retail Liabilities............................................10
1.81 Utilities Code............................................................10
ARTICLE II SEPARATION................................................................10
2.1 Separation Date...........................................................10
2.2 Restructuring Transactions................................................11
2.3 Release from Mortgage, etc................................................11
2.4 Instruments of Transfer and Assumption....................................12
2.5 Agreements................................................................12
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ARTICLE III MUTUAL RELEASES; INDEMNIFICATION..........................................13
3.1 Release of Pre-Closing Claims.............................................13
3.2 Indemnification by Resources..............................................15
3.3 Indemnification by REI....................................................15
3.4 Indemnification Obligations Net of Insurance Proceeds and Other Amounts...16
3.5 Procedures for Indemnification of Third Party Claims......................17
3.6 Additional Matters........................................................18
3.7 Remedies Cumulative.......................................................18
3.8 Survival of Indemnities...................................................18
3.9 Indemnification of Directors and Officers.................................18
ARTICLE IV THE IPO AND ACTIONS PENDING THE IPO.......................................19
4.1 Transactions Prior to the IPO.............................................19
4.2 Use of Proceeds...........................................................19
4.3 Cooperation...............................................................20
4.4 Conditions Precedent to Consummation of the IPO...........................20
4.5 Cancellation of Outstanding Intercompany Indebtedness.....................21
ARTICLE V CORPORATE GOVERNANCE AND CERTAIN FINANCIAL
REPORTING AND OTHER MATTERS...............................................21
5.1 Charter and Bylaws........................................................21
5.2 Rights Plan Amendments....................................................21
5.3 Charter/Bylaw Amendments..................................................22
5.4 Resources Board Representation............................................22
5.5 Issuance of Stock.........................................................24
ARTICLE VI HOLDING COMPANY RESTRUCTURING.............................................24
6.1 Intent to Effect Holding Company Restructuring............................24
6.2 Restructuring Steps.......................................................24
6.3 Actions Prior to the Holding Company Restructuring........................25
6.4 Conditions to Holding Company Restructuring...............................25
6.5 Sole Discretion of REI....................................................26
ARTICLE VII THE DISTRIBUTION..........................................................26
7.1 The Distribution..........................................................26
7.2 Actions Prior to the Distribution.........................................27
7.3 Sole Discretion of REI....................................................27
7.4 Conditions to the Distribution............................................28
7.5 Fractional Shares.........................................................29
ARTICLE VIII GENCO TRANSACTIONS........................................................29
8.1 Organization of Xxxxx XX..................................................29
8.2 Genco Contracts...........................................................29
8.3 Instruments of Transfer and Assumption....................................29
8.4 Organization of Genco Inc.................................................30
8.5 Releases and Indemnities..................................................30
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ARTICLE IX ARBITRATION; DISPUTE RESOLUTION...........................................30
9.1 Agreement to Arbitrate....................................................30
9.2 Escalation................................................................30
9.3 Demand for Arbitration....................................................31
9.4 Arbitrators...............................................................32
9.5 Hearings..................................................................32
9.6 Discovery and Certain Other Matters.......................................33
9.7 Certain Additional Matters................................................34
9.8 Arbitration of Genco Option Agreement Cases...............................34
9.9 Continuity of Service and Performance.....................................35
9.10 Law Governing Arbitration Procedures......................................35
ARTICLE X COVENANTS AND OTHER MATTERS...............................................35
10.1 Other Agreements..........................................................35
10.2 Further Instruments.......................................................35
10.3 Agreement For Exchange of Information.....................................36
10.4 Auditors and Audits; Annual and Quarterly Statements and Accounting.......38
10.5 Audit Rights..............................................................40
10.6 Preservation of Legal Privileges..........................................40
10.7 Payment of Expenses.......................................................41
10.8 Governmental Approvals....................................................41
10.9 Regulatory Proceedings....................................................41
10.10 Continuance of REI Credit Support; Borrowings.............................43
10.11 Certain Non-competition Provisions; Freedom of Action.....................44
10.12 Clawback Payment..........................................................44
10.13 Nuclear Decommissioning Trust and Investment..............................44
10.14 Auctions of Capacity......................................................45
10.15 Confidentiality...........................................................46
ARTICLE XI MISCELLANEOUS.............................................................48
11.1 Limitation of Liability...................................................48
11.2 Entire Agreement..........................................................48
11.3 Governing Law.............................................................48
11.4 Termination...............................................................48
11.5 Notices...................................................................48
11.6 Counterparts..............................................................49
11.7 Binding Effect; Assignment................................................49
11.8 Severability..............................................................49
11.9 Failure or Indulgence Not Waiver; Remedies Cumulative.....................49
11.10 Amendment.................................................................49
11.11 Authority.................................................................49
11.12 Interpretation............................................................49
11.13 Conflicting Agreements....................................................50
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MASTER SEPARATION AGREEMENT
THIS MASTER SEPARATION AGREEMENT (this "Agreement") is entered
into as of December 31, 2000, between Reliant Energy, Incorporated, a Texas
corporation ("REI"), and Reliant Resources, Inc., a Delaware corporation
("Resources"). Capitalized terms used herein and not otherwise defined shall
have the meanings ascribed to such terms in Article I hereof.
RECITALS
WHEREAS, Resources is a wholly owned subsidiary of REI; and
WHEREAS, the Board of Directors of REI has determined that it
would be appropriate and desirable for REI to separate the Resources Group from
the REI Group, and, in that connection, for Resources or its Subsidiaries to
acquire certain entities currently associated with the Resources Business and
certain other assets from REI or its Subsidiaries and to assume related
liabilities; and
WHEREAS, the Board of Directors of Resources has also approved
such transactions; and
WHEREAS, REI and Resources currently contemplate that
Resources will make an initial public offering ("IPO") of an amount of its
common stock pursuant to a registration statement on Form S-1 filed pursuant to
the Securities Act of 1933, as amended, that will reduce REI's ownership of
Resources by less than 20%; and
WHEREAS, REI currently contemplates that, following the IPO,
REI's successor holding company will distribute to the holders of its common
stock, by means of a pro rata distribution, all of the shares of Resources
common stock it then owns (the "Distribution"); and
WHEREAS, REI and Resources intend that the Distribution will
qualify as a tax-free distribution under Section 355 of the Internal Revenue
Code of 1986, as amended (the "Code"), and that this Agreement is intended to
be, and is hereby adopted as, a plan of reorganization under Section 368 of the
Code; and
WHEREAS, the parties intend in this Agreement, including the
Exhibits and Schedules hereto, to set forth the principal arrangements between
them regarding the separation of the Resources Group from the REI Group, the
IPO, and the Distribution.
NOW, THEREFORE, in consideration of the foregoing and the
covenants and agreements set forth below, the parties hereto agree as follows:
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ARTICLE I
DEFINITIONS
1.1 ACTION. "Action" means any demand, action, suit, countersuit,
arbitration, inquiry, proceeding or investigation by or before any federal,
state, local, foreign or international Governmental Authority or any arbitration
or mediation tribunal.
1.2 AFFILIATES. An "Affiliate" of any Person means another Person that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person. For this purpose
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of the Person controlled,
whether through ownership of voting securities, by contract or otherwise. The
fact that any Person may be deemed at any time an Affiliate of another Person
for purposes of the Utilities Code shall not create any implication that such
Persons are "affiliates" for purposes of this Agreement. Notwithstanding
anything herein to the contrary, no member of the Resources Group shall be
deemed an Affiliate of any member of the REI Group and no member of the REI
Group shall be deemed an Affiliate of any member of the Resources Group.
1.3 ANCILLARY AGREEMENTS. "Ancillary Agreements" has the meaning set
forth in Section 2.5.
1.4 BUSINESS DAY. "Business Day" means a day other than a Saturday, a
Sunday or a day on which banking institutions located in the State of Texas are
authorized or obligated by law or executive order to close.
1.5 BUSINESS SEPARATION PLAN. "Business Separation Plan" means the
Business Separation Plan, as amended, filed by REI with the PUCT in accordance
with Section 39.051 of the Utilities Code and approved by the PUCT at its open
meeting on December 1, 2000 (Docket No. 21956).
1.6 CHOICE DATE. "Choice Date" shall mean January 1, 2002, or such
other date as may be fixed by the PUCT for the commencement of customer retail
electric choice in the area served by REI's retail electric business.
1.7 CODE. "Code" means the Internal Revenue Code of 1986, as amended
from time to time.
1.8 COMMISSION. "Commission" means the Securities and Exchange
Commission.
1.9 CUSTOMER CARE LLC. "Customer Care LLC" means Reliant Energy
Customer Care Services LLC, a Delaware limited liability company all of the
membership interests in which are owned by Retail Holdings LLC.
1.10 DISTRIBUTION. The "Distribution" has the meaning set forth in the
Recitals hereof.
1.11 DISTRIBUTION AGENT. "Distribution Agent" has the meaning set forth
in Section 7.1.
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1.12 DISTRIBUTION DATE. "Distribution Date" has the meaning set forth
in Section 7.1.
1.13 EXCHANGE ACT. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
1.14 FINAL ORDER. Unless the context requires otherwise, "Final Order,"
"Order," "Injunction," "Decree," "Legal Restraint," "Prohibition," "Writ" or
other words of similar import shall mean final adjudication by a court or
regulatory agency that is no longer subject to rehearing or appeal.
1.15 GENCO ASSETS. "Genco Assets" means all of the generation assets
(as that term is defined in Section 39.251(3) of the Utilities Code) of the
Reliant Energy HL&P Division of REI. The Genco Assets shall include, without
limitation, the generation plants and other assets set forth in Schedule 1.15
and contract and permit rights associated with those generation plants. The
methodology for determining the demarcation between Genco Assets and
transmission and distribution assets is set forth in Section D of the Business
Separation Plan.
1.16 GENCO BUSINESS. "Genco Business" shall mean the electric
generation business and operations conducted with the Genco Assets.
1.17 GENCO; GENCO INC. "Genco Inc." means the corporation to which the
membership interests in Xxxxx XX LLC and Xxxxx XX LLC will be contributed as
provided in Section 8.4. Genco means Genco Inc. or Xxxxx XX, as the context may
require.
1.18 GENCO LIABILITIES. "Genco Liabilities" shall mean (without
duplication)
(i) any and all Liabilities under contracts for the
purchase of fuel, equipment or other goods and services for
use in the Genco Business;
(ii) any and all Liabilities that are expressly
contemplated by this Agreement or any Ancillary Agreement as
Liabilities to be assumed by Xxxxx XX, including Liabilities
under the Technical Services Agreement and the contracts,
agreements and permits included in the Genco Assets;
(iii) all Liabilities (other than Taxes based on, or
measured by reference to, net income), primarily relating to,
arising out of, or resulting from:
(A) the operation of the Genco Business, as
conducted at any time prior to, on or after, the
Genco Organization Date (including any Liability
relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee,
agent or representative (whether or not such act or
failure to act is or was within such Person's
authority));
(B) the operation of any business conducted
by Genco at any time after the Genco Organization
Date (including any Liability relating to, arising
out of or resulting from any act or failure to act by
any director, officer, employee, agent or
representative (whether or not such act or failure to
act is or was within such Person's authority)); or
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(C) the ownership or use of the Genco
Assets.
1.19 XXXXX XX. "Xxxxx XX" means a yet-to-be formed Delaware limited
partnership, being the limited partnership to which the Genco Assets will be
transferred as provided in Section 8.1.
1.20 GENCO OPTION. "Genco Option" means the "Option" as defined in the
Genco Option Agreement.
1.21 GENCO OPTION AGREEMENT. "Genco Option Agreement" means the Texas
Genco Option Agreement dated as of December 31, 2000 between REI and Resources.
1.22 GENCO ORGANIZATION DATE. "Genco Organization Date" means the date
on which the Genco Assets are contributed to Xxxxx XX as provided in Section
8.1.
1.23 GENCO PUBLIC OWNERSHIP EVENT. "Genco Public Ownership Event" has
the meaning assigned to that term in the Genco Option Agreement.
1.24 GOVERNMENTAL APPROVALS. "Governmental Approvals" means any
notices, reports or other filings to be made, or any consents, registrations,
approvals, permits or authorizations to be obtained from, any Governmental
Authority.
1.25 GOVERNMENTAL AUTHORITY. "Governmental Authority" shall mean any
federal, state, local, foreign or international court, government, department,
commission, board, bureau, agency, official or other regulatory, administrative
or governmental authority.
1.26 GROUP. "Group" means either of the REI Group or the Resources
Group, as the context requires.
1.27 HOLDING COMPANY RESTRUCTURING. "Holding Company Restructuring"
means the corporate restructuring consisting of the transactions set forth in
Section 6.2, as such transactions may be modified at the election of REI as
contemplated by Section 6.5.
1.28 INDEBTEDNESS. "Indebtedness" of any Person means, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person upon which interest charges are customarily paid, (d)
all obligations of such Person under conditional sale or other title retention
agreements relating to property or assets purchased by such Person, (e) all
obligations of such Person issued or assumed as the deferred purchase price of
property or services, (f) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any mortgage, lien, pledge, or other encumbrance on property
owned or acquired by such Person, whether or not the obligations secured thereby
have been assumed, (g) all guarantees by such Person of Indebtedness of others,
(h) all capital lease obligations of such Person, and (i) all securities or
other similar instruments convertible or exchangeable into any of the foregoing,
but excluding daily cash overdrafts associated with routine cash operations.
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1.29 INDEMNIFYING PARTY. "Indemnifying Party" has the meaning set forth
in Section 3.4(a).
1.30 INDEMNITEE. "Indemnitee" shall have the meaning set forth in
Section 3.4(a).
1.31 INFORMATION. "Information" means information, whether or not
patentable or copyrightable, in written, oral, electronic or other tangible or
intangible forms, stored in any medium, including studies, reports, records,
books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how,
techniques, designs, specifications, drawings, blueprints, diagrams, models,
prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes,
computer programs or other software, marketing plans, customer names,
communications by or to attorneys (including attorney-client privileged
communications), memos and other materials prepared by attorneys or under their
direction (including attorney work product), and other technical, financial,
employee or business information or data.
1.32 INSURANCE PROCEEDS. "Insurance Proceeds" means those monies:
(a) received by an insured from an insurance carrier; or
(b) paid by an insurance carrier on behalf of the insured;
in any such case net of any applicable premium adjustments (including reserves
and retrospectively rated premium adjustments) and net of any costs or expenses
(including allocated costs of in-house counsel and other personnel) incurred in
the collection thereof.
1.33 IPO. "IPO" has the meaning set forth in the Recitals hereof.
1.34 IPO CLOSING DATE. "IPO Closing Date" means the first date on which
the proceeds of any sale of Resources Common Stock to the underwriters in the
IPO are received.
1.35 IPO PROSPECTUS. "IPO Prospectus" means the prospectus included in
the IPO Registration Statement, including any prospectus subject to completion,
final prospectus or any supplement to or amendment of any of the foregoing.
1.36 IPO REGISTRATION STATEMENT. "IPO Registration Statement" means the
Registration Statement on Form S-1 (Registration No. 333-48038) of Resources
filed with the Commission pursuant to the Securities Act of 1933, as amended,
registering the shares of Resources Common Stock to be issued in the IPO,
together with all amendments thereto.
1.37 LIABILITIES. "Liabilities" shall mean any and all Indebtedness,
liabilities and obligations, whether accrued, fixed or contingent, mature or
inchoate, known or unknown, reflected on a balance sheet or otherwise,
including, but not limited to, those arising under any law, rule, regulation,
Action, order, injunction or consent decree of any Governmental Authority or any
judgment of any court of any kind or any award of any arbitrator of any kind,
and those arising under any contract, commitment or undertaking.
1.38 LOSSES. "Losses" shall mean any and all damages, losses,
deficiencies, Liabilities, obligations, penalties, judgments, settlements,
claims, payments, fines, interest costs
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and expenses (including, without limitation, the costs and expenses of any and
all Actions and demands, assessments, judgments, settlements and compromises
relating thereto and the costs and expenses of attorneys', accountants',
consultants' and other professionals' fees and expenses incurred in the
investigation or defense thereof or the enforcement of rights hereunder),
including direct and consequential damages, but excluding punitive damages
(other than punitive damages awarded to any third party against an Indemnified
Party).
1.39 MORTGAGE. "Mortgage" means the Mortgage and Deed of Trust dated
November 1, 1944 between Houston Lighting & Power Company and The Chase
Manhattan Bank (successor to South Texas Commercial National Bank of Houston) as
Trustee, as amended and supplemented.
1.40 MRT ENERGY MARKETING ASSETS AND LIABILITIES. "MRT Energy Marketing
Assets" shall mean the assets identified or described in Schedule 1.40 and "MRT
Energy Marketing Liabilities" shall mean the liabilities identified or described
in that Schedule.
1.41 NYSE. "NYSE" means the New York Stock Exchange.
1.42 PERSON. "Person" means an individual, a partnership, a
corporation, a limited liability company, an association, a joint stock company,
a trust, a joint venture, an unincorporated organization and a governmental
entity or any department, agency or political subdivision thereof.
1.43 PUCT. "PUCT" means the Public Utility Commission of Texas.
1.44 RECI. "RECI" means Reliant Energy Communications, Inc., a Delaware
corporation all of the stock of which is owned by REI.
1.45 RECORD DATE. "Record Date" means the close of business on the date
to be determined by the Board of Directors of REI as the record date for
determining the shareholders of REI entitled to receive shares of common stock
of Resources in the Distribution.
1.46 REGCO. "Regco" means Reliant Energy Regco, Inc., a Delaware
corporation, the corporation organized by REI and, by means of a merger of a
wholly owned subsidiary of Regco with and into REI, that will become a holding
company for REI's regulated businesses, as described in Section 6.2; provided,
however, that if any provision of this Agreement referring to Regco applies at a
time when Regco has not become such a holding company, references to Regco in
such provision shall be deemed to refer to REI or the ultimate parent entity of
REI, as the case may be.
1.47 REGULATED RETAIL ASSETS. "Regulated Retail Assets" shall mean the
assets identified or described in Schedule 1.47.
1.48 REGULATED RETAIL BUSINESS. "Regulated Retail Business" shall mean
the businesses identified or described in Schedule 1.48.
1.49 REGULATED RETAIL LIABILITIES. "Regulated Retail Liabilities" shall
mean (without duplication), any and all Liabilities, whether arising before or
after the Separation Date, of REI
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or its Subsidiaries or any of their predecessor companies or businesses,
including any employee-related Liabilities, primarily relating to, arising out
of or resulting from the ownership or use of the Regulated Retail Assets or the
operations or conduct of the Regulated Retail Business (including any such
Liability relating to, arising out of or resulting from any act or failure to
act by any director, officer, employee, agent or representative (whether or not
such act or failure to act is or was within such Person's authority)).
1.50 REGULATORY PROCEEDINGS. "Regulatory Proceedings" shall mean
filings, notices, adjudicatory proceedings, rulemakings, enforcement actions
before an agency or in court relative to regulatory activity, and any other
proceedings at or before any regulatory or administrative agency. The term shall
also refer to appellate activities relative to any of the foregoing, including
actions seeking injunctions, writs of mandamus and appeals.
1.51 REI'S AUDITORS. "REI's Auditors" means REI's independent certified
public accountants.
1.52 REI BUSINESS. "REI Business" means any business of REI and its
Subsidiaries other than the Resources Business.
1.53 REI GROUP. "REI Group" means REI, each Subsidiary of REI (other
than any member of the Resources Group) immediately after the Separation Date,
including the Subsidiaries set forth in Schedule 1.53, and each Person that
becomes a Subsidiary of REI after the Separation Date. After the Holding Company
Restructuring, references to the REI Group shall also include Regco and each
Subsidiary of Regco (other than any member of the Resources Group).
Notwithstanding anything herein to the contrary, after the closing of the
exercise of the Genco Option, the REI Group shall not include Genco Inc. or any
Subsidiary of Genco Inc.
1.54 REI INDEMNITEES. "REI Indemnitees" has the meaning assigned to
that term in Section 3.2.
1.55 REPG. "REPG" means Reliant Energy Power Generation, Inc. ("REPG"),
a Delaware corporation all of the stock of which is owned by REI.
1.56 RERC. "RERC" means Reliant Energy Resources Corp., a Delaware
corporation all of the stock of which is owned by REI.
1.57 RES. "RES" means Reliant Energy Services, Inc., a Delaware
corporation all of the stock of which is owned by RERC.
1.58 RESOURCES AUDITORS. "Resources Auditors" means Resources'
independent certified public accountants.
1.59 RESOURCES BALANCE SHEET. "Resources Balance Sheet" means the
combined balance sheet of Resources and affiliates as of September 30, 2000.
1.60 RESOURCES BUSINESS. "Resources Business" means (a) the business
and operations conducted by Resources and its Subsidiaries after giving effect
to the transactions described in Article II, as described in the caption "Our
Business" in the IPO Prospectus, and
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including without limitation the following assets and operations conducted by
REI and its Subsidiaries prior to the Separation:
(i) the non-Reliant Energy HL&P power generation
assets and related energy trading, marketing and risk
management operations in North America and Europe;
(ii) the retail electric operations; and
(iii) the eBusiness group, the communications
business and venture capital operations,
and (b) except as otherwise specifically provided herein, any terminated,
divested or discontinued business or operations that at the time of termination,
divestiture or discontinuation related primarily to the Resources Business as
then conducted.
1.61 RESOURCES COMMON STOCK. "Resources Common Stock" means the Common
Stock, par value $.001 per share, of Resources.
1.62 RESOURCES DEBT OBLIGATIONS. "Resources Debt Obligations" means all
Indebtedness of Resources or any other member of the Resources Group, excluding
all Indebtedness of any member of the REI Group to the extent it constitutes
Indebtedness of Resources by virtue of clause (f) or clause (g) of the
definition of Indebtedness. Resources Debt Obligations shall include, as of the
date of the most recent balance sheet of Resources included in the IPO
Prospectus, the Indebtedness of Resources reflected on such balance sheet.
1.63 RESOURCES EXCLUDED LIABILITIES. "Resources Excluded Liabilities"
shall mean any and all Liabilities that are expressly contemplated by this
Agreement or any Ancillary Agreement as Liabilities to be retained or assumed by
REI or any other member of the REI Group, and all agreements and obligations of
any member of the REI Group under this Agreement or any of the Ancillary
Agreements.
1.64 RESOURCES GROUP. "Resources Group" means Resources, each
Subsidiary of Resources immediately after the Separation Date, including the
Subsidiaries set forth in Schedule 1.64, and each Person that becomes a
Subsidiary of Resources after the Separation Date.
1.65 RESOURCES INDEMNITEES. "Resources Indemnitees" has the meaning
assigned to that term in Section 3.3.
1.66 RESOURCES LIABILITIES. "Resources Liabilities" shall mean (without
duplication):
(i) any and all Liabilities that are expressly
contemplated by this Agreement or any Ancillary Agreement to
be assumed by Resources or any member of the Resources Group,
and all agreements, obligations and Liabilities of any member
of the Resources Group under this Agreement or any of the
Ancillary Agreements;
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(ii) all Liabilities (other than Taxes based on, or
measured by reference to, net income) primarily relating to,
arising out of or resulting from:
(A) the operation of the Resources Business,
as conducted at any time prior to, on or after the
IPO Closing Date (including any Liability relating
to, arising out of or resulting from any act or
failure to act by any director, officer, employee,
agent or representative (whether or not such act or
failure to act is or was within such Person's
authority));
(B) the operation of any business conducted
at any time after the IPO Closing Date by any member
of the Resources Group (including any Liability
relating to, arising out of or resulting from any act
or failure to act by any director, officer, employee,
agent or representative (whether or not such act or
failure to act is or was within such Person's
authority));
(C) any Resources Assets; or
(D) the Resources Debt Obligations;
and in any case whether arising before, on or after the IPO
Closing Date; and
(iii) all Liabilities reflected as liabilities or
obligations of Resources in the Resources Balance Sheet,
subject to any discharge of such Liabilities subsequent to the
date of the Resources Balance Sheet.
Notwithstanding the foregoing, the Resources Liabilities shall not include the
Resources Excluded Liabilities.
1.67 RESOURCES RIGHTS PLAN. "Resources Rights Plan" shall mean the
stockholders rights plan of Resources as evidenced by the Rights Agreement,
dated as of December 31, 2000, by and among Resources and The Chase Manhattan
Bank, as Rights Agent.
1.68 RETAIL ELECTRIC PROVIDER LLC. "Retail Electric Provider LLC" means
Reliant Energy Retail Services LLC, a Delaware limited liability company all of
the membership interests in which are owned by Retail Holdings LLC.
1.69 RETAIL HOLDINGS LLC. "Retail Holdings LLC" means Reliant Energy
Retail Holdings LLC, a Delaware limited liability company all of the membership
interests in which are owned by REI.
1.70 SEPARATION. "Separation" means the transfer of the Resources
Business to Resources and its Subsidiaries and the assumption by Resources and
its Subsidiaries of the Resources Liabilities, all as more fully described in
this Agreement and the Ancillary Agreements.
1.71 SEPARATION DATE. "Separation Date" has the meaning set forth in
Section 2.1 hereof.
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1.72 SUBSIDIARY. A "Subsidiary" of any Person means any corporation or
other organization whether incorporated or unincorporated of which at least a
majority of the securities or interests having by the terms thereof ordinary
voting power to elect at least a majority of the board of directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries.
1.73 TAXES. "Taxes" has the meaning set forth in the Tax Allocation
Agreement.
1.74 TAX ALLOCATION AGREEMENT. "Tax Allocation Agreement" means the Tax
Allocation Agreement dated as of December 31, 2000 between REI and Resources.
1.75 THIRD PARTY CLAIM. "Third Party Claim" has the meaning set forth
in Section 3.5(a).
1.76 UNDERWRITERS. "Underwriters" means the underwriters named in the
Underwriting Agreement.
1.77 UNDERWRITING AGREEMENT. "Underwriting Agreement" has the meaning
set forth in Section 4.1(b) hereof.
1.78 UNREGULATED RETAIL ASSETS. "Unregulated Retail Assets" shall mean
the assets identified or described in Schedule 1.78.
1.79 UNREGULATED RETAIL BUSINESS. "Unregulated Retail Business" shall
mean the businesses identified or described in Schedule 1.79.
1.80 UNREGULATED RETAIL LIABILITIES. "Unregulated Retail Liabilities"
shall mean (without duplication), any and all Liabilities, whether arising
before or after the Separation Date, of REI or its Subsidiaries or any of their
predecessor companies or businesses, including any employee-related Liabilities,
primarily relating to, arising out of or resulting from the ownership or use of
the Unregulated Retail Assets or the operations or conduct of the Unregulated
Retail Business (including any such Liability relating to, arising out of or
resulting from any act or failure to act by any director, officer, employee,
agent or representative (whether or not such act or failure to act is or was
within such Person's authority).
1.81 UTILITIES CODE. "Utilities Code" means the Utilities Code of
Texas.
ARTICLE II
SEPARATION
2.1 SEPARATION DATE. Unless otherwise provided in this Agreement, or in
any agreement to be executed in connection with this Agreement, the effective
time and date of each action in connection with the Separation shall be as of
11:59 p.m., Houston Time, December 31, 2000 or such other date as may be fixed
by REI (the "Separation Date").
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2.2 RESTRUCTURING TRANSACTIONS. In order to effect the Separation, REI
will take, or cause to be taken, the following actions:
(a) REI will transfer the Regulated Retail Assets to Resources
and Resources will assume the Regulated Retail Liabilities.
(b) Resources will transfer the Regulated Retail Assets to
Retail Holdings LLC and Retail Holdings LLC will assume the Regulated Retail
Liabilities.
(c) Retail Holdings LLC will transfer the Regulated Retail
Assets to Customer Care LLC and Customer Care LLC will assume the Regulated
Retail Liabilities.
(d) REI will transfer the Unregulated Retail Assets to
Resources and Resources will assume the Unregulated Retail Liabilities.
(e) Resources will transfer the Unregulated Retail Assets to
Retail Holdings LLC and Retail Holdings LLC will assume the Unregulated Retail
Liabilities.
(f) Retail Holdings LLC will transfer the Unregulated Retail
Assets to Retail Electric Provider LLC and Retail Electric Provider LLC will
assume the Unregulated Retail Liabilities.
(g) RERC will transfer to Resources the stock of each of its
Subsidiaries listed on Schedule 2.2(g) in exchange for the consideration listed
on Schedule 2.2(g).
(h) REI will contribute to Resources, as a contribution to
capital, (i) all of the stock of REPG, (ii) all of the stock of RECI, and (iii)
all of the stock and membership interests of each of its Subsidiaries listed on
Schedule 2.2(h).
(i) RES will contribute the MRT Energy Marketing Assets to the
capital of MRT Energy Marketing Company and MRT Energy Marketing Company will
assume the MRT Energy Marketing Liabilities.
(j) RES will distribute to RERC all of the stock of MRT Energy
Marketing Company.
(k) A newly formed wholly owned subsidiary of Resources will
merge with and into RES, with the result that RES will survive the merger as a
wholly owned subsidiary of Resources and RERC will receive cash in exchange for
all of the stock of RES.
(l) REI will contribute to Resources the Genco Option, and in
that connection REI and Resources will execute and deliver the Genco Option
Agreement.
(m) REI will contribute to Resources, as a contribution to
capital, the assets listed in Schedule 2.2 (m).
2.3 RELEASE FROM MORTGAGE, ETC. REI shall obtain such releases from the
Mortgage as may be necessary for the transfers referred to in Section 2.2(a) and
Section 2.2(c).
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2.4 INSTRUMENTS OF TRANSFER AND ASSUMPTION. REI and Resources agree
that (a) transfers of the Regulated Retail Assets, the Unregulated Retail Assets
and all other assets required to be transferred by this Agreement shall be
effected by delivery by REI or the other transferring entity, as applicable, to
the transferee, of (i) with respect to those assets that constitute stock,
certificates endorsed in blank or evidenced or accompanied by stock powers or
other instruments of transfer endorsed in blank, against receipt, (ii) with
respect to any real property interest or any improvements thereon, a general
warranty deed with general warranty of limited application limiting recourse and
remedies to title insurance and warranties by predecessors in title to REI, and
(iii) with respect to all other Assets, such good and sufficient instruments of
contribution, conveyance, assignment and transfer, in form and substance
reasonably satisfactory to REI and Resources, as shall be necessary to vest in
the designated transferee, all of the title and ownership interest of the
transferor in and to any such Asset, and (b) to the extent necessary, the
assumption of the Liabilities contemplated pursuant to Section 2.2 hereof shall
be effected by delivery by the transferee to the transferor of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to REI and Resources, as shall be necessary for the assumption by
the transferee of such Liabilities. Each of the parties hereto also agrees to
deliver to any other party hereto such other documents, instruments and writings
as may be reasonably requested by such other parties hereto in connection with
the transactions contemplated hereby. Notwithstanding any other provisions of
this Agreement to the contrary, (x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO IN
THIS ARTICLE II WILL BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY
NATURE (a) AS TO THE VALUE OR FREEDOM FROM ENCUMBRANCE OF, ANY ASSETS, (b) AS TO
ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR (c) AS TO THE LEGAL
SUFFICIENCY TO CONVEY TITLE TO ANY ASSETS, and (y) the instruments of transfer
or assumption referred to in this Section 2.4 shall not include any
representations and warranties other than as specifically provided herein. REI
and Resources hereby acknowledge and agree that ALL ASSETS ARE BEING TRANSFERRED
"AS IS, WHERE IS."
2.5 AGREEMENTS. On the Separation Date, or as soon as practicable after
the Separation Date, REI and Resources shall execute and deliver (or shall cause
their appropriate Subsidiaries to execute and deliver, as applicable) the
agreements between them designated as follows:
(i) the Transition Services Agreement,
(ii) the Employee Matters Agreement,
(iii) the Tax Allocation Agreement,
(iv) the Retail Agreement,
(v) the Genco Option Agreement,
(vi) the Technical Services Agreement,
(vii) the Registration Rights Agreement,
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(viii) the Miscellaneous Transitions Matters
Agreement,
(ix) the REP Lease,
(x) the EDC Lease,
(xi) the EC/DC Lease,
(xii) the Intellectual Property Agreement, and
(xiii) such other agreements, documents or
instruments as the parties may agree are necessary or
desirable.
(collectively, the "Ancillary Agreements"). To the extent such documents are not
executed and delivered on the Separation Date, they shall be executed and
delivered as soon as practicable thereafter and (except as otherwise provided
therein) shall be effective as of the Separation Date.
ARTICLE III
MUTUAL RELEASES; INDEMNIFICATION
3.1 RELEASE OF PRE-CLOSING CLAIMS.
(a) Except as provided in Section 3.1(c), effective as of the
IPO Closing Date, Resources does hereby, for itself and each other member of the
Resources Group, their respective Affiliates (other than any member of the REI
Group), successors and assigns, and all Persons who at any time prior to the IPO
Closing Date have been shareholders, directors, officers, agents or employees of
any member of the Resources Group (in each case, in their respective capacities
as such), remise, release and forever discharge REI, each member of the REI
Group and their respective Affiliates (other than any member of the Resources
Group), successors and assigns, and all Persons who at any time prior to the IPO
Closing Date have been shareholders, directors, officers, agents or employees of
any member of the REI Group (in each case, in their respective capacities as
such), and their respective heirs, executors, administrators, successors and
assigns, from any and all Liabilities whatsoever to Resources and each other
member of the Resources Group, whether at law or in equity (including any right
of contribution), whether arising under any contract or agreement, by operation
of law or otherwise, existing or arising from any acts or events occurring or
failing to occur or alleged to have occurred or to have failed to occur or any
conditions existing or alleged to have existed on or before the IPO Closing
Date, including in connection with the transactions and all other activities to
implement any of the Separation, the IPO, the Restructuring and the
Distribution.
(b) Except as provided in Section 3.1(c), effective as of the
IPO Closing Date, REI does hereby, for itself and each other member of the REI
Group, their respective Affiliates (other than any member of the Resources
Group), successors and assigns, and all Persons who at any time prior to the IPO
Closing Date have been shareholders, directors, officers, agents or employees of
any member of the REI Group (in each case, in their respective capacities as
such), remise, release and forever discharge Resources, each member of the
Resources Group, and their respective Affiliates (other than any member of the
REI Group), successors and assigns, and all
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Persons who at any time prior to the IPO Closing Date have been shareholders,
directors, officers, agents or employees of any member of the Resources Group
(in each case, in their respective capacities as such), and their respective
heirs, executors, administrators, successors and assigns, from any and all
Liabilities whatsoever to REI and each other member of the REI Group, whether at
law or in equity (including any right of contribution), whether arising under
any contract or agreement, by operation of law or otherwise, existing or arising
from any acts or events occurring or failing to occur or alleged to have
occurred or to have failed to occur or any conditions existing or alleged to
have existed on or before the IPO Closing Date, including in connection with the
transactions and all other activities to implement any of the Separation, the
IPO, the Restructuring and the Distribution.
(c) Nothing contained in Section 3.1(a) or (b) shall impair
any right of any Person to enforce this Agreement, any Ancillary Agreement or
any agreements, arrangements, commitments or understandings that are specified
in this Agreement or in any Ancillary Agreement. Nothing contained in Section
3.1(a) or (b) shall release any Person from:
(i) any Liability, contingent or otherwise, assumed,
transferred, assigned or allocated to the Group of which such
Person is a member in accordance with, or any other Liability
of any member of any Group under, this Agreement or any
Ancillary Agreement;
(ii) any Liability for the sale, lease, construction
or receipt of goods, property or services purchased, obtained
or used in the ordinary course of business by a member of one
Group from a member of any other Group prior to the IPO
Closing Date;
(iii) any Liability for unpaid amounts for products
or services or refunds owing on products or services due on a
value-received basis for work done by a member of one Group at
the request or on behalf of a member of another Group;
(iv) any Liability that the parties may have with
respect to indemnification or contribution pursuant to this
Agreement for claims brought against the parties by third
Persons, which Liability shall be governed by the provisions
of this Article III and, if applicable, the appropriate
provisions of the Ancillary Agreements; or
(v) any Liability the release of which would result
in the release of any Person other than a Person released
pursuant to this Section 3.1; provided that the parties agree
not to bring suit or permit any of their Subsidiaries to bring
suit against any Person with respect to any Liability to the
extent that such Person would be released with respect to such
Liability by this Section 3.1 but for the provisions of this
clause (v).
(d) Resources shall not make, and shall not permit any member
of the Resources Group to make, any claim or demand, or commence any Action
asserting any claim or demand, including any claim of contribution or any
indemnification, against REI or any member
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of the REI Group, or any other Person released pursuant to Section 3.1(a), with
respect to any Liabilities released pursuant to Section 3.1(a). REI shall not
make, and shall not permit any member of the REI Group to make, any claim or
demand, or commence any Action asserting any claim or demand, including any
claim of contribution or any indemnification, against Resources or any member of
the Resources Group, or any other Person released pursuant to Section 3.1(b),
with respect to any Liabilities released pursuant to Section 3.1(b).
(e) It is the intent of each of REI and Resources by virtue of
the provisions of this Section 3.1 to provide for a full and complete release
and discharge of all Liabilities existing or arising from all acts and events
occurring or failing to occur or alleged to have occurred or to have failed to
occur and all conditions existing or alleged to have existed on or before the
IPO Closing Date, between or among Resources or any member of the Resources
Group, on the one hand, and REI or any member of the REI Group, on the other
hand (including any contractual agreements or arrangements existing or alleged
to exist between or among any such members on or before the IPO Closing Date),
except as expressly set forth in Section 3.1(c). At any time, at the request of
any other party, each party shall cause each member of its respective Group to
execute and deliver releases reflecting the provisions hereof.
3.2 INDEMNIFICATION BY RESOURCES. Except as provided in Section 3.4,
Resources shall, and in the case of clauses (a), (b) and (c) below shall in
addition cause the Appropriate Member of the Resources Group to, indemnify,
defend and hold harmless REI, each member of the REI Group and each of their
respective directors, officers and employees, and each of the heirs, executors,
successors and assigns of any of the foregoing (collectively, the "REI
Indemnitees") from and against any and all Losses of the REI Indemnitees
relating to, arising out of or resulting from any of the following (without
duplication):
(a) the failure of Resources or any other member of the
Resources Group or any other Person to pay, perform or otherwise promptly
discharge any Resources Liabilities in accordance with their respective terms,
whether prior to or after the IPO Closing Date or the date thereof;
(b) the Resources Business or any Resources Liability;
(c) any breach by Resources or any member of the Resources
Group of this Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
with respect to all information contained in the IPO Registration Statement or
any IPO Prospectus (other than information regarding REI provided by REI to
Resources for inclusion in the IPO Registration Statement or any IPO
Prospectus).
As used in this Section 3.2, "Appropriate Member of the Resources Group" means
the member or members of the Resources Group, if any, whose acts, conduct or
omissions or failures to act caused, gave rise to or resulted in the loss from
and against which indemnity is provided.
3.3 INDEMNIFICATION BY REI. Except as provided in Section 3.4, REI
shall, and in the case of clauses (a), (b) and (c) below shall in addition cause
the Appropriate Member of the
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REI Group to, indemnify, defend and hold harmless Resources, each member of the
Resources Group and each of their respective directors, officers and employees,
and each of the heirs, executors, successors and assigns of any of the foregoing
(collectively, the "Resources Indemnitees") from and against any and all Losses
of the Resources Indemnitees relating to, arising out of or resulting from any
of the following (without duplication):
(a) the failure of REI or any other member of the REI Group or
any other Person to pay, perform or otherwise promptly discharge any Liabilities
of any member of the REI Group other than the Resources Liabilities, in
accordance with their respective terms, whether prior to or after the IPO
Closing Date or the date hereof;
(b) the REI Business or any Liability of any member of the REI
Group other than the Resources Liabilities;
(c) any breach by REI or any member of the REI Group of this
Agreement or any of the Ancillary Agreements; and
(d) any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated therein or necessary to make the statements therein not misleading,
with respect to information regarding REI provided by REI to Resources for
inclusion in the IPO Registration Statement or any IPO Prospectus.
As used in this Section 3.3, "Appropriate Member of the REI Group" means the
member or members of the REI Group, if any, whose acts, conduct or omissions or
failures to act caused, gave rise to or resulted in the Loss from and against
which indemnity is provided.
3.4 INDEMNIFICATION OBLIGATIONS NET OF INSURANCE PROCEEDS AND OTHER
AMOUNTS. (a) The parties intend that any Loss subject to indemnification or
reimbursement pursuant to this Article III will be net of Insurance Proceeds
that actually reduce the amount of the Loss. Accordingly, the amount which any
party (an "Indemnifying Party") is required to pay to any Person entitled to
indemnification hereunder (an "Indemnitee") will be reduced by any Insurance
Proceeds theretofore actually recovered by or on behalf of the Indemnitee in
reduction of the related Loss. If an Indemnitee receives a payment (an
"Indemnity Payment") required by this Agreement from an Indemnifying Party in
respect of any Loss and subsequently receives Insurance Proceeds, then the
Indemnitee will pay to the Indemnifying Party an amount equal to the excess of
the Indemnity Payment received over the amount of the Indemnity Payment that
would have been due if the Insurance Proceeds recovery had been received,
realized or recovered before the Indemnity Payment was made.
(b) An insurer who would otherwise be obligated to pay any
claims shall not be relieved of the responsibility with respect thereto or,
solely by virtue of the indemnification provisions hereof, have any subrogation
rights with respect thereto, it being expressly understood and agreed that no
insurer or any other third party shall be entitled to a "windfall" (i.e., a
benefit they would not be entitled to receive in the absence of the
indemnification provisions) by virtue of the indemnification provisions hereof.
Nothing contained in this Agreement or any Ancillary Agreement shall obligate
any member of any Group to seek to collect or recover any Insurance Proceeds.
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3.5 PROCEDURES FOR INDEMNIFICATION OF THIRD PARTY CLAIMS. (a) If an
Indemnitee shall receive notice or otherwise learn of the assertion by a Person
(including any Governmental Authority) who is not a member of the REI Group or
the Resources Group of any claims or of the commencement by any such Person of
any Action (collectively, a "Third Party Claim") with respect to which an
Indemnifying Party may be obligated to provide indemnification to such
Indemnitee pursuant to Section 3.2 or 3.3, or any other Section of this
Agreement or any Ancillary Agreement, such Indemnitee shall give such
Indemnifying Party written notice thereof within 20 days after becoming aware of
such Third Party Claim. Any such notice shall describe the Third Party Claim in
reasonable detail. Notwithstanding the foregoing, the failure of any Indemnitee
or other Person to give notice as provided in this Section 3.5(a) shall not
relieve the related Indemnifying Party of its obligations under this Article
III, except to the extent that such Indemnifying Party is actually prejudiced by
such failure to give notice.
(b) An Indemnifying Party may elect to defend (and, unless the
Indemnifying Party has specified any reservations or exceptions, to seek to
settle or compromise), at such Indemnifying Party's own expense and by such
Indemnifying Party's own counsel, any Third Party Claim. Within 30 days after
the receipt of notice from an Indemnitee in accordance with Section 3.5(a) (or
sooner, if the nature of such Third Party Claim so requires), the Indemnifying
Party shall notify the Indemnitee of its election whether the Indemnifying Party
will assume responsibility for defending such Third Party Claim, which election
shall specify any reservations or exceptions. After notice from an Indemnifying
Party to an Indemnitee of its election to assume the defense of a Third Party
Claim, such Indemnitee shall have the right to employ separate counsel and to
participate in (but not control) the defense, compromise, or settlement thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnitee except as set forth in the next sentence. In the event that the
Indemnifying Party has elected to assume the defense of the Third Party Claim
but has specified, and continues to assert, any reservations or exceptions in
such notice, then, in any such case, the reasonable fees and expenses of one
separate counsel for all Indemnitees shall be borne by the Indemnifying Party.
(c) If an Indemnifying Party elects not to assume
responsibility for defending a Third Party Claim, or fails to notify an
Indemnitee of its election as provided in Section 3.5(b), such Indemnitee may
defend such Third Party Claim at the cost and expense (included allocated costs
of in-house counsel and other personnel) of the Indemnifying Party.
(d) Unless the Indemnifying Party has failed to assume the
defense of the Third Party Claim in accordance with the terms of this Agreement,
no Indemnitee may settle or compromise any Third Party Claim without the consent
of the Indemnifying Party.
(e) No Indemnifying Party shall consent to entry of any
judgment or enter into any settlement of the Third Party Claim without the
consent of an Indemnitee if the effect thereof is to permit any injunction,
declaratory judgment, other order or other nonmonetary relief to be entered,
directly or indirectly, against such Indemnitee.
(f) The provisions of Section 3.2 through 3.5 shall not apply
to Taxes (which are covered by the Tax Allocation Agreement).
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3.6 ADDITIONAL MATTERS. (a) Any claim on account of a Loss which does
not result from a Third Party Claim shall be asserted by written notice given by
the Indemnitee to the related Indemnifying Party. Such Indemnifying Party shall
have a period of 30 days after the receipt of such notice within which to
respond thereto. If such Indemnifying Party does not respond within such 30-day
period, such Indemnifying Party shall be deemed to have refused to accept
responsibility to make payment. If such Indemnifying Party does not respond
within such 30-day period or rejects such claim in whole or in part, such
Indemnitee shall be free to pursue such remedies as may be available to such
party as contemplated by this Agreement and the Ancillary Agreements.
(b) In the event of payment by or on behalf of any
Indemnifying Party to any Indemnitee in connection with any Third Party Claim,
such Indemnifying Party shall be subrogated to and shall stand in the place of
such Indemnitee as to any events or circumstances in respect of which such
Indemnitee may have any right, defense or claim relating to such Third Party
Claim against any claimant or plaintiff asserting such Third Party Claim or
against any other person. Such Indemnitee shall cooperate with such Indemnifying
Party in a reasonable manner, and at the cost and expense (including allocated
costs of in-house counsel and other personnel) of such Indemnifying Party, in
prosecuting any subrogated right, defense or claim.
(c) In the event of an Action in which the Indemnifying Party
is not a named defendant, if either the Indemnified Party or Indemnifying Party
shall so request, the parties shall endeavor to substitute the Indemnifying
Party for the named defendant, if at all practicable. If such substitution or
addition cannot be achieved for any reason or is not requested, the named
defendant shall allow the Indemnifying Party to manage the Action as set forth
in this Section and the Indemnifying Party shall fully indemnify the named
defendant against all costs of defending the Action (including court costs,
sanctions imposed by a court, attorneys' fees, experts' fees and all other
external expenses, and the allocated costs of in-house counsel and other
personnel), the costs of any judgment or settlement, and the cost of any
interest or penalties relating to any judgment or settlement.
3.7 REMEDIES CUMULATIVE. The remedies provided in this Article III
shall be cumulative and, subject to the provisions of Article IX, shall not
preclude assertion by any Indemnitee of any other rights or the seeking of any
and all other remedies against any Indemnifying Party.
3.8 SURVIVAL OF INDEMNITIES. The rights and obligations of each REI and
Resources and their respective Indemnitees under this Article III shall survive
the sale or other transfer by any party of any Assets or businesses or the
assignment by it of any Liabilities.
3.9 INDEMNIFICATION OF DIRECTORS AND OFFICERS. For purpose of Sections
3.2 through 3.8, inclusive, and notwithstanding anything to the contrary
contained herein, Persons who serve on both the Board of Directors of Resources
and the Board of Directors of REI and persons who serve as officers of both
Resources and REI shall be deemed both Resources Indemnitees and REI
Indemnitees.
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ARTICLE IV
THE IPO AND ACTIONS PENDING THE IPO
4.1 TRANSACTIONS PRIOR TO THE IPO. Subject to the conditions specified
in Section 4.4, REI and Resources shall use their reasonable commercial efforts
to consummate the IPO. Such efforts shall include, but not necessarily be
limited to, those specified in this Section 4.1:
(a) Resources has filed the IPO Registration Statement, and
shall use its best efforts to cause such IPO Registration Statement to become
effective, including by filing such amendments thereto as may be necessary or
appropriate, responding promptly to any comments of the Commission and taking
such other action in that connection as may be reasonably requested by REI. REI
and Resources shall also cooperate in preparing, filing with the Commission and
causing to become effective a registration statement registering the Resources
Common Stock under the Exchange Act, and any registration statements or
amendments thereof which are required to reflect the establishment of, or
amendments to, any employee benefit and other plans necessary or appropriate in
connection with the IPO, the Separation, the Restructuring, the Distribution or
the other transactions contemplated by this Agreement.
(b) Resources shall enter into an underwriting agreement with
the underwriters named in the IPO Registration Statement (the "Underwriting
Agreement"), in form and substance reasonably satisfactory to Resources, and
shall comply with its obligations thereunder.
(c) REI and Resources shall consult with each other and the
Underwriters regarding the timing, pricing and other material matters with
respect to the IPO.
(d) Resources shall use its reasonable commercial efforts to
take all such action as may be necessary or appropriate under state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) in connection with the IPO.
(e) Resources shall prepare, file and use reasonable
commercial efforts to seek to make effective, an application for listing of the
Resources Common Stock issued in the IPO on the NYSE, subject to official notice
of issuance.
4.2 USE OF PROCEEDS. Resources shall use the net proceeds from the IPO
(after deduction of all expenses in connection with the IPO payable by Resources
as provided in Section 10.7) initially to increase working capital and as and
when needed to fund capital expenditures, and, depending on the timing of future
acquisitions of generation facilities, may also use a portion of such net
proceeds to finance one or more such acquisitions. Should the net proceeds from
the IPO exceed $1,400,000,000, 50% of the net proceeds above such amount shall
be applied to prepay indebtedness owing from REPG to REI outstanding as of
December 31, 2000 in respect of the indebtedness of Reliant Energy FinanceCo III
LP, including accrued and unpaid interest on the amount so prepaid to the date
of prepayment (the amount thereof to be so prepaid, assuming exercise in full of
any underwriters' overallotment option, being called the "Specified
Indebtedness"). If the net proceeds are sufficient to result in the repayment in
full of all such indebtedness owing from REPG to REI outstanding as of December
31, 2000 in respect
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of the indebtedness of Reliant Energy FinanceCo III LP in accordance with the
preceding sentence, any excess shall be retained by Resources.
4.3 COOPERATION. Resources shall consult with, and cooperate in all
respects with, REI in connection with the pricing of the Resources Common Stock
to be offered in the IPO and shall, at REI's direction, promptly take any and
all actions necessary or desirable to consummate the IPO as contemplated by the
IPO Registration Statement and the Underwriting Agreement.
4.4 CONDITIONS PRECEDENT TO CONSUMMATION OF THE IPO. As soon as
practicable after the Separation Date, the parties hereto shall use their
reasonable commercial efforts to satisfy the conditions listed below to the
consummation of the IPO. The obligations of the parties to use their reasonable
commercial efforts to consummate the IPO shall be conditioned on the
satisfaction, or waiver by REI, of the following conditions:
(a) The IPO Registration Statement shall have been filed and
declared effective by the Commission, and there shall be no stop order in effect
with respect thereto.
(b) The actions and filings with regard to state securities
and blue sky laws of the United States (and any comparable laws under any
foreign jurisdictions) described in Section 4.1(d) shall have been taken and,
where applicable, have become effective or been accepted.
(c) The Resources Common Stock to be issued in the IPO shall
have been accepted for listing on the NYSE, on official notice of issuance.
(d) Resources shall have entered into the Underwriting
Agreement and all conditions to the obligations of Resources and the
Underwriters shall have been satisfied or waived.
(e) REI shall be satisfied in its sole discretion that (1) it
will own more than 80% of the outstanding Resources Common Stock following the
IPO, (2) it will control Resources within the meaning of Section 368(c) of the
Code, and (3) it will satisfy the stock ownership requirements of Section
1504(a)(2) of the Code with respect to the stock of Resources. All other
conditions to permit the Distribution to qualify as a tax-free distribution to
REI, Resources and REI's shareholders shall, to the extent applicable as of the
time of the IPO, be satisfied, and there shall be no event or condition that is
likely to cause any of such conditions not to be satisfied as of the time of the
Distribution or thereafter.
(f) Any material Governmental Approvals necessary to
consummate the IPO shall have been obtained and be in full force and effect.
(g) No order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Separation or the IPO or any of the other
transactions contemplated by this Agreement or any Ancillary Agreement shall be
in effect.
(h) The Separation shall have become effective.
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(i) Such other actions as the parties hereto may, based upon
the advice of counsel, reasonably request to be taken prior to the IPO in order
to assure the successful completion of the IPO shall have been taken.
(j) This Agreement and all Ancillary Agreements have been
executed and shall not have been terminated.
(k) A pricing committee designated by the Board of Directors
of REI shall have determined that the terms of the IPO are acceptable to REI.
4.5 CANCELLATION OF OUTSTANDING INTERCOMPANY INDEBTEDNESS. Prior to the
IPO Closing Date, REI shall convert into a capital contribution, without the
issuance of any additional shares of Resources Common Stock to REI, all
Indebtedness owed by Resources or its Subsidiaries to any member of the REI
Group as of December 31, 2000, including all amounts owed by REPG to REI as of
such date in respect of the indebtedness of Reliant Energy FinanceCo III LP
other than the portion thereof constituting "Specified Indebtedness" as defined
in Section 4.2 but excluding any Indebtedness as of such date consisting of (a)
borrowings made to provide cash collateral for margin obligations of RES and any
replacements or refinancings thereof or (b) reimbursement and other obligations
under letters of credit, surety bonds or similar instruments provided as
security for obligations of RES and its subsidiaries. If the terms of the IPO
include an underwriters' overallotment option and upon the exercise of such
option in full, the total net proceeds from the IPO would exceed $1,400,000,000
(whether or not the total net proceeds would exceed such amount if the option
were not exercised), then
(a) prior to the IPO Closing Date, no Specified Indebtedness
shall be converted into a capital contribution;
(b) if and to the extent the overallotment option is
exercised, 50% of the net proceeds attributable to such exercise shall
immediately be applied to the prepayment of any Specified Indebtedness not
otherwise prepaid on the IPO Closing Date; and
(c) if and to the extent the overallotment option expires or
terminates without being exercised, the entire remaining amount of Specified
Indebtedness not theretofore prepaid shall be converted into a capital
contribution without the issuance of any additional shares of Resources Common
Stock to REI.
ARTICLE V
CORPORATE GOVERNANCE AND CERTAIN
FINANCIAL REPORTING AND OTHER MATTERS
5.1 CHARTER AND BYLAWS. As of the IPO Closing Date, the Restated
Certificate of Incorporation and Bylaws of Resources shall be in the forms of
Schedule 5.1(a) and 5.1(b), respectively, with such changes therein as may be
agreed to in writing by REI.
5.2 RIGHTS PLAN AMENDMENTS. Following the Closing Date and for so long
as REI beneficially owns shares representing at least 30% of the voting power of
all of the outstanding
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shares of Resources Common Stock, without the prior written consent of REI,
Resources shall not amend or modify the Resources Rights Plan.
5.3 CHARTER/BYLAW AMENDMENTS. So long as REI owns shares representing
30% of the voting power of all of the outstanding shares of Resources Common
Stock, Resources will not, without the prior consent of REI, adopt any
amendments to its Restated Certificate of Incorporation or Bylaws or take or
recommend to its stockholders any action during the terms of this Agreement
which would (i) impose limitations on the legal rights of REI or any other
member of the REI Group as a stockholder of Resources other than those imposed
pursuant to the express terms of this Agreement or the form of Resources'
Restated Certificate of Incorporation set forth as Schedule 5.1(a) hereto,
including, without limitation, any action which would impose restrictions (A)
based upon the size of security holding, the business in which a security holder
is engaged or other considerations applicable to REI or any other member of the
REI Group and not to security holders generally, or (B) by means of the issuance
of or proposal to issue any other class of securities having voting power
disproportionately greater than the equity investment in Resources represented
by such securities; (ii) involve the issuance or corporate action providing for
the issuance of any warrant, right capital stock or other security (A) which is,
or under specified circumstances will become, convertible into or represent the
right to acquire any securities of REI or any other member of the REI Group or
(B) which is dependent upon the amount of voting securities owned by REI or any
other member of the REI Group, (iii) deny any benefit to REI or any other member
of the REI Group proportionately as holders of any class of voting securities
generally; or (iv) alter voting or other rights of the holders of any class of
voting securities so that any such rights (or the vote required with respect to
any matter) are determined with reference to the amount of voting securities
held by REI or any other member of the REI Group; provided, that this Section
5.3 shall not prohibit Resources from adopting the Resources Rights Plan or
taking any action otherwise prohibited hereby, so long as REI and the other
members of the REI Group are, either expressly or as part of a class of
stockholders which includes REI and the other members of the REI Group, exempted
from such action or the limitations on legal rights imposed thereby.
5.4 RESOURCES BOARD REPRESENTATION.
(a) Beginning on the IPO Closing Date, and for so long as REI
beneficially owns shares representing a majority of the voting power of all of
the outstanding Resources Common Stock, REI shall have the right to designate
for nomination by the Resources Board (or any nominating committee thereof) to
the Resources Board a majority of the members of the Resources Board. For so
long as REI beneficially owns shares representing less than a majority but at
least 20% of the voting power of all of the outstanding Resources Common Stock,
REI shall have the right to designate for nomination by the Resources Board (or
any nominating committee thereof) to the Resources Board a proportionate number
of members of the Resources Board, as calculated in accordance with Section 5.4.
Notwithstanding anything to the contrary set forth herein, Resources'
obligations with respect to the election or appointment of Resources' designated
members shall be limited to the obligations set forth under subsections (b) and
(c) below.
(b) Resources shall exercise all authority under applicable
law and shall use its best efforts to cause at least three persons designated by
REI to be elected to the Resources
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Board effective as of the IPO Closing Date (or at the first regularly scheduled
meeting thereafter). For so long as REI beneficially owns shares representing a
majority of the voting power of all of the outstanding Resources Common Stock,
commencing with the annual meeting of stockholders of Resources to be held in
2002 and prior to each annual meeting of stockholders of Resources thereafter,
REI shall be entitled to present to the Resources Board or any nominating
committee thereof such number of designees of REI (each, an "REI Designee") for
election to the Resources Board (or if there is a classified board, the class of
directors up for election) at such annual meeting as would result in REI having
the appropriate number of REI Designees on the Resources Board as determined
pursuant to subsection (a) above.
(c) Resources shall at all such times exercise all authority
under applicable law and use its best efforts to cause all such designees to be
nominated as Board members by the nominating committee of the Resources Board if
there is such a committee. Resources shall cause each REI Designee for election
to the Resources Board to be included in the slate of designees recommended by
the Resources Board to holders of Resources Common Stock (including at any
special meeting of stockholders held for the election of directors) and shall
use its best efforts to cause the election of each such REI Designee, including
soliciting proxies in favor of the election of such persons. In the event that
any REI Designee elected to the Resources Board shall cease to serve as a
director for any reason, the vacancy resulting therefrom shall be filled by the
Resources Board with a substitute REI Designee, unless such vacancy was caused
by action of stockholders (in which case, in accordance with Resources' Restated
Certificate of Incorporation, the stockholders shall fill such vacancy). In the
event that as a result of any increase in the size of the Resources Board, REI
is entitled to have one or more additional REI Designees elected to the
Resources Board pursuant to subsection (a) above, the REI Board shall appoint
the appropriate number of such additional REI Designees, unless such increase in
size of the Resources Board was caused by the action of stockholders (in which
case, in accordance with Resources' Restated Certificate of Incorporation, the
stockholders shall elect such additional director or directors). The parties
hereto agree that the directors of Resources identified in the IPO Registration
Statement include at least three REI Designees.
(d) If at any time that REI Designees are serving on the
Resources Board, REI beneficially owns shares representing less than 50% but at
least 20% of the total voting power of all of the outstanding Resources Common
Stock, the number of persons REI shall be entitled to designate for nomination
by the Resources Board (or any nominating committee thereof) for election to the
Resources Board shall be equal to the number of directors computed using the
following formula (rounded to the nearest whole number): the product of (1) the
percentage of the voting power of all of the outstanding shares of Resources
Common Stock beneficially owned by REI and (2) the number of directors then on
the Resources Board (assuming no vacancies exist). Notwithstanding the
foregoing, if REI beneficially owns shares of Resources Common Stock
representing less than a majority of the total voting power of all outstanding
shares of Resources Common Stock and the calculation of the formula set forth in
the foregoing sentence would result in REI being entitled to elect a majority of
the members of the Resources Board, the formula will be recalculated with the
product being rounded down to the nearest whole number; provided, however, that
if REI, at any time, acquires additional shares of Resources Common Stock so
that REI beneficially owns shares of Resources Common Stock representing a
majority of the total voting power of all of the outstanding shares of Resources
Common Stock, then the number of persons REI shall be entitled to designate for
nomination by
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the Resources Board (or any nominating committee thereof) for election to the
Resources Board shall be adjusted upward, if appropriate as a result of
rounding, in accordance with the provisions of this Section 5.4(d). If the
number of REI Designees serving on the Resources Board exceeds the number
determined pursuant to the foregoing sentences of this Section 5.4(d) (such
difference being herein called the "Excess Director Number), then REI in its
sole discretion shall instruct a number of REI Designees (the number of which
designees shall be equal to the Excess Director Number) to promptly resign from
the Resources Board, and, to the extent such persons do not so resign, REI shall
assist Resources in increasing the size of the Resources Board, so that after
giving effect to such increase, the number of REI Designees on the Resources
Board is in accordance with the provisions of this Section 5.4(d).
5.5 ISSUANCE OF STOCK. Following the IPO Closing Date and prior to the
Distribution Date, without the prior consent of REI, Resources shall not issue
any stock of Resources or any securities, options, warrants or rights
convertible into or exercisable or exchangeable for stock of Resources if the
issuance would cause REI to fail to control Resources within the meaning of
Section 368(c) of the Code or if the issuance would cause REI to fail to satisfy
the stock ownership requirements of Section 1504(a)(2) of the Code with respect
to the stock of Resources.
ARTICLE VI
HOLDING COMPANY RESTRUCTURING
6.1 INTENT TO EFFECT HOLDING COMPANY RESTRUCTURING. REI intends to
cause the Holding Company Restructuring described in this Article VI to occur as
soon as the conditions precedent set forth in Section 6.4 are satisfied.
6.2 RESTRUCTURING STEPS. The Holding Company Restructuring shall
consist of the following transactions:
(a) REI will form a new wholly owned Subsidiary ("Genco
Holding Company") to become a transitory holding company of Xxxxx XX.
(b) Genco Holding Company will form two wholly owned limited
liability companies ("Xxxxx XX LLC" and "Xxxxx XX LLC") that form Xxxxx XX of
which Xxxxx XX LLC is the 1% general partner and Xxxxx XX LLC is the 99% limited
partner.
(c) REI will contribute the Genco Assets to the capital of
Xxxxx XX for the benefit of Genco Holding Company, Xxxxx XX LLC and Xxxxx XX
LLC.
(d) Regco will organize a wholly owned subsidiary
("MergerCo2") for purposes of effecting the Restructuring Merger.
(e) MergerCo2 will merge (the "Restructuring Merger") with and
into REI; in the merger the Regco stock owned by REI will be cancelled and each
outstanding share of common stock of REI will be automatically converted into an
outstanding share of common stock of Regco.
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(f) REI will distribute to Regco the stock of the Genco
Holding Company and the stock of the Subsidiaries identified in Schedule 6.2(f)
owned by REI.
(g) Regco will expressly assume all obligations of REI under
this Agreement and under each of the Ancillary Agreements and all other
obligations under this Agreement and under each of the Ancillary Agreements
which are expressed as requiring performance by, or imposing obligations on,
Regco.
(h) Genco Holding Company will merge with and into Regco.
(i) REI will reincorporate in Delaware.
6.3 ACTIONS PRIOR TO THE HOLDING COMPANY RESTRUCTURING. (a) Regco shall
file a Registration Statement on Form S-4 with respect to the offer and sale of
common stock of Regco in the Restructuring Merger and use reasonable commercial
efforts to cause the same to become effective and the proxy statement and
prospectus contained therein shall be mailed to shareholders of REI in
accordance with the requirements of the Securities Act of 1933, as amended.
(b) Regco shall prepare and file, and use reasonable
commercial efforts to have approved, a listing of its common stock issued in the
Restructuring Merger on the NYSE, subject to official notice of issuance.
(c) REI and Regco shall use reasonable commercial efforts to
make appropriate filings and applications with the Commission in order to
satisfy the condition set forth in Section 6.4(b).
6.4 CONDITIONS TO HOLDING COMPANY RESTRUCTURING. The following are
conditions to the Holding Company Restructuring. The conditions are for the sole
benefit of REI and shall not give rise to or create any duty on the part of REI
or the REI Board of Directors to waive or not waive any such condition.
(a) The shareholders of REI shall have approved an agreement
and plan of merger necessary to effect the Restructuring Merger.
(b) The Commission shall have issued an order acceptable to
REI under Sections 9(a)(2) and 10 of the Public Utility Holding Company Act of
1935, as amended, approving the acquisition by Regco of securities of "public
utility companies" in the Holding Company Restructuring and the registration of
Regco as a "holding company" under such Act shall have become effective.
(c) Any other material Governmental Approvals necessary to
consummate the Holding Company Restructuring shall have been obtained and be in
full force and effect.
(d) No order, injunction or decree issued by any court or
agency of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Holding Company Restructuring shall be in
effect and no other event outside the control of REI shall have occurred or
failed to occur that prevents the consummation of the Holding Company
Restructuring.
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(e) Regco shall have obtained a private letter ruling from the
Internal Revenue Service in form and substance satisfactory to Regco (in its
sole discretion), to the effect that the transfer from REI to Xxxxx XX of the
ownership of the nuclear decommissioning trust assets referred to in Section
10.13 and those Genco Assets that are subject to regulation by the Nuclear
Regulatory Commission will not adversely affect the tax status of Genco or of
the nuclear decommissioning trust or of further contributions to such trust.
(f) Such amendments, consents, waivers, approvals,
refinancings or other actions as may be necessary in connection with the Holding
Company Restructuring under debt obligations of REI and its Subsidiaries and
material contracts and agreements to which REI or any of its Subsidiaries are
parties shall have been obtained or taken.
6.5 SOLE DISCRETION OF REI. REI currently intends, following the
consummation of the IPO, to complete the Holding Company Restructuring as
promptly as practicable after the IPO Closing Date. REI shall, in its sole and
absolute discretion, determine the date of the consummation of the Holding
Company Restructuring and the steps therein and all terms thereof, including,
without limitation, the form, structure and terms of any transaction(s) to
effect the Holding Company Restructuring and the timing of and conditions to the
consummation thereof. In addition, REI may at any time and from time to time
until the completion of the Holding Company Restructuring decide to abandon the
Holding Company Restructuring or modify or change the terms of the Holding
Company Restructuring including, without limitation, by accelerating or delaying
the timing of the consummation of all or part of the Holding Company
Restructuring. Resources shall cooperate with REI in all respects to accomplish
the Holding Company Restructuring and shall, at REI's direction, promptly take
any and all actions necessary or desirable to effect the Holding Company
Restructuring.
ARTICLE VII
THE DISTRIBUTION
7.1 THE DISTRIBUTION.
(a) Delivery of Shares for Distribution. Subject to Section
7.4 hereof, on or prior to the date the Distribution is made (the "Distribution
Date"), Regco will deliver to the distribution agent to be appointed by Regco,
or if no distribution agent is appointed, then Regco (the "Distribution Agent"),
to distribute to the shareholders of Regco the shares of Resources Common Stock
held by Regco pursuant to the Distribution for the benefit of holders of record
of common stock of Regco on the record date, a single stock certificate,
endorsed by Regco in blank, representing all of the outstanding shares of
Resources Common Stock then owned by Regco, and shall cause the transfer agent
for the shares of common stock of Regco to instruct the Distribution Agent to
distribute on the Distribution Date the appropriate number of such shares of
Resources Common Stock to each such holder or designated transferee or
transferees of such holder.
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(b) Shares Received. Subject to Sections 7.4 and 7.5, each
holder of common stock of Regco on the Record Date (or such holder's designated
transferee or transferees) will be entitled to receive in the Distribution a
number of shares of Resources Common Stock equal to the number of shares of
common stock of Regco held by such holder on the Record Date multiplied by a
fraction the numerator of which is the number of shares of Resources Common
Stock beneficially owned by Regco on the Record Date and the denominator of
which is the number of shares of common stock of Regco outstanding on the Record
Date.
(c) Obligation to Provide Information. Resources and Regco, as
the case may be, will provide to the Distribution Agent all share certificates
and any information required in order to complete the Distribution on the basis
specified above.
7.2 ACTIONS PRIOR TO THE DISTRIBUTION.
(a) Regco and Resources shall prepare and mail, prior to the
Distribution Date, to the holders of common stock of Regco such information
concerning Resources and the Distribution and such other matters as Regco shall
reasonably determine are necessary and as may be required by law. Regco and
Resources will prepare, and Resources will, to the extent required under
applicable law, file with the Commission any such documentation which Regco and
Resources determine is necessary or desirable to effectuate the Distribution,
and Regco and Resources shall each use its reasonable commercial efforts to
obtain all necessary approvals from the Commission with respect thereto as soon
as practicable.
(b) Regco and Resources shall take all such actions as may be
necessary or appropriate under the securities or blue sky laws of the United
States (and any comparable laws under any foreign jurisdiction) in connection
with the Distribution.
(c) Resources shall prepare and file, and shall use its
reasonable commercial efforts to have approved, an application for the listing
of the Resources Common Stock to be distributed in the Distribution on the NYSE,
subject to official notice of distribution.
(d) Immediately prior to the Distribution, (i) each person who
is an officer or employee of any member of the REI Group and an officer or
employee of any member of the Resources Group immediately prior to the
Distribution (each a "Joint Employee") and who is to continue as an officer or
employee of any member of the REI Group after the Distribution shall resign from
each of such person's positions as an officer or employee with each member of
the Resources Group, and (ii) each such Joint Employee who is to continue as an
officer or employee of any member of the Resources Group, after the
Distribution, shall resign from each of such person's positions as an officer or
employee with each member of the REI Group.
7.3 SOLE DISCRETION OF REI. REI currently intends, following the
consummation of the IPO, that Regco shall complete the Distribution as promptly
as practicable after the IPO Closing Date. Regco shall, in its sole and absolute
discretion, determine the date of the consummation of the Distribution and all
terms of the Distribution, including, without limitation, the form, structure
and terms of any transaction(s) and/or offering(s) to effect the Distribution
and the timing of and conditions to the consummation of the Distribution. In
addition, REI (or Regco) may at any time and from time to time until the
completion of the Distribution decide to
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abandon the Distribution or modify or change the terms of the Distribution,
including, without limitation, by accelerating or delaying the timing of the
consummation of all or part of the Distribution. Resources shall cooperate with
Regco in all respects to accomplish the Distribution and shall, at Regco's
direction, promptly take any and all actions necessary or desirable to effect
the Distribution, including, without limitation, the registration under the
Securities Act of 1933, as amended, of the Resources Common Stock on an
appropriate registration form or forms to be designated by Regco. REI shall
select any investment banker(s) and manager(s) in connection with the
Distribution, as well as any financial printer, solicitation and/or exchange
agent and outside counsel for Regco; provided, however, that nothing herein
shall prohibit Resources from engaging (at its own expense) its own financial,
legal, accounting and other advisors in connection with the Distribution.
7.4 CONDITIONS TO THE DISTRIBUTION. The following are conditions to the
consummation of the Distribution. The conditions are for the sole benefit of
Regco and shall not give rise to or create any duty on the part of Regco or the
Regco Board of Directors to waive or not waive any such condition.
(a) IRS Ruling. Regco shall have obtained a private letter
ruling from the Internal Revenue Service in form and substance satisfactory to
Regco (in its sole discretion), and such ruling shall remain in effect as of the
Distribution Date, to the effect that (i) the contribution by REI of all of its
Resources Common Stock to Regco will qualify as a reorganization under Section
355 of the Code, (ii) the distribution by Regco of all of its Resources Common
Stock to the shareholders of Regco will qualify as a reorganization under
Section 355 of the Code; (iii) no gain or loss will be recognized by (and no
amount will otherwise be included in the income of) the shareholders of Regco
upon their receipt of Resources Common Stock pursuant to the Distribution; (iv)
no gain or loss will be recognized by REI upon the contribution of its Resources
Common Stock to Regco; and (v) no gain or loss will be recognized by Regco
pursuant to the Distribution.
(b) Holding Company Restructuring. The Holding Company
Restructuring shall have occurred.
(c) Governmental Approvals. Any material Governmental
Approvals necessary to consummate the Distribution shall have been obtained and
be in full force and effect;
(d) No Legal Restraints. No order, injunction or decree issued
by any court or agency of competent jurisdiction or other legal restraint or
prohibition preventing the consummation of the Distribution shall be in effect
and no other event outside the control of Regco shall have occurred or failed to
occur that prevents the consummation of the Distribution; and
(e) No Material Adverse Effect. No other events or
developments shall have occurred subsequent to the IPO Closing Date that, in the
judgment of the Board of Directors of Regco, would result in the Distribution
having a material adverse effect on Regco or on the shareholders of Regco.
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7.5 FRACTIONAL SHARES. As soon as practicable after the Distribution
Date, Regco shall direct the Distribution Agent to determine the number of whole
shares and fractional shares of Resources Common Stock allocable to each holder
of record or beneficial owner of common stock of REI as of the Record Date, to
aggregate all such fractional shares and sell the whole shares obtained thereby
at the direction of Regco, in open market transactions, at then prevailing
trading prices, and to cause to be distributed to each such holder or for the
benefit of each such beneficial owner to which a fractional share shall be
allocable such holder's or owner's ratable share of the proceeds of such sale,
after making appropriate deductions of the amount required to be withheld for
federal income tax purposes and after deducting an amount equal to all brokerage
charges, commissions and transfer taxes attributed to such sale. Regco and the
Distribution Agent shall use their reasonable commercial efforts to aggregate
the shares of common stock of REI that may be held by any beneficial owner
thereof through more than one account in determining the fractional share
allocable to such beneficial owner.
ARTICLE VIII
GENCO TRANSACTIONS
8.1 ORGANIZATION OF XXXXX XX. In connection with the Holding Company
Restructuring, REI shall cause the Genco Assets to be contributed to Xxxxx XX,
free and clear of the lien of the Mortgage and all other liens and security
interests securing Indebtedness, and shall cause Xxxxx XX to assume the Genco
Liabilities. The date on which such contribution and assumption occurs is
referred to herein as the "Genco Organization Date." On the Genco Organization
Date, all of the outstanding partnership interests in Xxxxx XX shall be
indirectly owned by Regco.
8.2 GENCO CONTRACTS. On the Genco Organization Date, Xxxxx XX shall be
assigned, and will assume the obligations of REI under, the Technical Services
Agreement.
8.3 INSTRUMENTS OF TRANSFER AND ASSUMPTION. Transfers of the Genco
Assets shall be effected by delivery by REI or the other transferring entity, as
applicable, to the transferee, of (i) with respect to those assets that
constitute stock, certificates endorsed in blank or evidenced or accompanied by
stock powers or other instruments of transfer endorsed in blank, against
receipt, (ii) with respect to real property interests and improvements thereon,
a general warranty deed with general warranty of limited application limiting
recourse and remedies to title insurance and warranties by predecessors in title
to REI, and (iii) with respect to all other Assets, such good and sufficient
instruments of contribution, conveyance, assignment and transfer, in form and
substance reasonably satisfactory to REI and Resources, as shall be necessary to
vest in the designated transferee, all of the title and ownership interest of
the transferor in and to any such Asset, (b) to the extent necessary, the
assumption of the Liabilities contemplated pursuant to Section 8.1 hereof shall
be effected by delivery by the transferee to the transferor of such good and
sufficient instruments of assumption, in form and substance reasonably
satisfactory to REI and Resources, as shall be necessary for the assumption by
the transferee of such Liabilities. Each instrument of transfer shall contain a
representation and warranty that the portion of the Genco Assets transferred
thereby shall be free and clear of the lien of the Mortgage and all other liens
and security interests securing Indebtedness. Each of the parties hereto also
agrees to deliver to any other party hereto such other documents, instruments
and writings as may be
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reasonably requested by such other parties hereto in connection with the
transactions contemplated hereby. Notwithstanding any other provisions of this
Agreement to the contrary, (x) THE TRANSFERS AND ASSUMPTIONS REFERRED TO IN THIS
ARTICLE VIII WILL BE MADE WITHOUT ANY REPRESENTATION OR WARRANTY OF ANY NATURE
(a) AS TO THE VALUE OR FREEDOM FROM ENCUMBRANCE OF, ANY ASSETS, (b) AS TO ANY
WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE OF,
OR ANY OTHER MATTER CONCERNING, ANY ASSETS OR (c) AS TO THE LEGAL SUFFICIENCY TO
CONVEY TITLE TO ANY ASSETS, and (y) the instruments of transfer or assumption
referred to in this Section 8.3 shall not include any representations and
warranties other than as specifically provided herein. REI and Resources hereby
acknowledge and agree that ALL ASSETS ARE BEING TRANSFERRED "AS IS, WHERE IS."
8.4 ORGANIZATION OF GENCO INC. Prior to the Genco Public Ownership
Date, REI shall organize Genco Inc. and shall contribute to Genco Inc. all of
the membership interests in Xxxxx XX LLC and Xxxxx XX LLC. Immediately following
such transactions, all the outstanding common stock of Genco Inc. shall be owned
by Regco.
8.5 RELEASES AND INDEMNITIES. In connection with the organization of
Xxxxx XX or the Genco Public Ownership Event, REI and Genco will enter into
agreements regarding such mutual releases and indemnities similar in effect to
those set forth in Article III as REI shall specify.
ARTICLE IX
ARBITRATION; DISPUTE RESOLUTION
9.1 AGREEMENT TO ARBITRATE. Except as otherwise specifically provided
in any Ancillary Agreement, the procedures for discussion, negotiation and
arbitration set forth in this Article IX shall apply to all disputes,
controversies or claims (whether sounding in contract, tort or otherwise) that
may rise out of or relate to, or arise under or in connection with this
Agreement or any Ancillary Agreement, or the transactions contemplated hereby or
thereby (including all actions taken in furtherance of the transactions
contemplated hereby or thereby on or prior to the date hereof), or (for a period
of ten years after the date hereof) the commercial or economic relationship of
the parties relating hereto or thereto, between or among any member of the REI
Group and the Resources Group. Each party agrees on behalf of itself and each
member of its respective Group that the procedures set forth in this Article IX
shall be the sole and exclusive remedy in connection with any dispute,
controversy or claim relating to any of the foregoing matters and irrevocably
waives any right to commence any Action in or before any Governmental Authority,
except as expressly provided in Section 9.7(b) and except to the extent provided
under the Arbitration Act in the case of judicial review of arbitration results
or awards. Each party on behalf of itself and each member of its respective
Group irrevocably waives any right to any trial by jury with respect to any
claim, controversy or dispute set forth in this Section 9.1.
9.2 ESCALATION. (a) It is the intent of the parties to use their
respective reasonable best efforts to resolve expeditiously any dispute,
controversy or claim between or among them
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with respect to the matters covered hereby that may arise from time to time on a
mutually acceptable negotiated basis. In furtherance of the foregoing, any party
involved in a dispute, controversy or claim may deliver a notice (an "Escalation
Notice") demanding an in-person meeting involving representatives of the parties
at a senior level of management of the parties (or if the parties agree, of the
appropriate strategic business unit or division within such entity). A copy of
any such Escalation Notice shall be given to the General Counsel, or like
officer or official, of each party involved in the dispute, controversy or claim
(which copy shall state that it is an Escalation Notice pursuant to this
Agreement). Any agenda, location or procedures for such discussions or
negotiations between the parties may be established by the parties from time to
time; provided, however, that the parties shall use their reasonable best
efforts to meet within 30 days of the Escalation Notice.
(b) The parties may, by mutual consent, retain a mediator to
aid the parties in their discussions and negotiations by informally providing
advice to parties. Any opinion expressed by the mediator shall be strictly
advisory and shall not be binding on the parties, nor shall any opinion
expressed by the mediator be admissible in any arbitration proceedings. The
mediator may be chosen from a list of mediators previously selected by the
parties or by other agreement of the parties. Costs of the mediation shall be
borne equally by the parties involved in the matter, except that each party
shall be responsible for its own expenses. Mediation is not a prerequisite to a
demand for arbitration under Section 9.3.
9.3 DEMAND FOR ARBITRATION. (a) At any time after the first to occur of
(i) the date of the meeting actually held pursuant to the applicable Escalation
Notice or (ii) 45 days after the delivery of an Escalation Notice (as
applicable, the "Arbitration Demand Date"), any party involved in the dispute,
controversy or claim (regardless of whether such party delivered the Escalation
Notice) may deliver a notice demanding arbitration of such dispute, controversy
or claim (a "Arbitration Demand Notice"). In the event that any party shall
deliver an Arbitration Demand Notice to another party, such other party may
itself deliver an Arbitration Demand Notice to such first party with respect to
any related dispute, controversy or claim with respect to which the Applicable
Deadline has not passed without the requirement of delivering an Escalation
Notice. No party may assert that the failure to resolve any matter during any
discussions or negotiations, the course of conduct during the discussions or
negotiations or the failure to agree on a mutually acceptable time, agenda,
location or procedures for the meeting, in each case, as contemplated by Section
9.2, is a prerequisite to a demand for arbitration under Section 9.3. In the
event that any party delivers an Arbitration Demand Notice with respect to any
dispute, controversy or claim that is the subject of any then pending
arbitration proceeding or of a previously delivered Arbitration Demand Notice,
all such disputes, controversies and claims shall be resolved in the arbitration
proceeding for which an Arbitration Demand Notice was first delivered unless the
arbitrator in his or her sole discretion determines that it is impracticable or
otherwise inadvisable to do so.
(b) Except as may be expressly provided in any Ancillary
Agreement, any Arbitration Demand Notice may be given until one year and 45 days
after the later of the occurrence of the act or event giving rise to the
underlying claim or the date on which such act or event was, or should have
been, in the exercise of reasonable due diligence, discovered by the party
asserting the claim (as applicable and as it may in a particular case be
specifically extended by the parties in writing, the "Applicable Deadline"). Any
discussions, negotiations or
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mediations between the parties pursuant to this Agreement or otherwise will not
toll the Applicable Deadline unless expressly agreed in writing by the parties.
Each of the parties agrees on behalf of itself and each member of its Group that
if an Arbitration Demand Notice with respect to a dispute, controversy or claim
is not given prior to the expiration of the Applicable Deadline, as between or
among the parties and the members of their Groups, such dispute, controversy or
claim will be barred. Subject to Sections 9.7(d) and 9.8, upon delivery of an
Arbitration Demand Notice pursuant to Section 9.3(a) prior to the Applicable
Deadline, the dispute, controversy or claim shall be decided by a sole
arbitrator in accordance with the rules set forth in this Article IX.
9.4 ARBITRATORS. (a) Within 15 days after a valid Arbitration Demand
Notice is given, the parties involved in the dispute, controversy or claim
referenced therein shall attempt to select a sole arbitrator satisfactory to all
such parties.
(b) In the event that such parties are not able jointly to
select a sole arbitrator within such 15-day period, such parties shall each
appoint an arbitrator (who need not be disinterested as to the parties or the
matter) within 30 days after delivery of the Arbitration Demand Notice. If one
party appoints an arbitrator within such time period and the other party or
parties fail to appoint an arbitrator within such time period, the arbitrator
appointed by the one party shall be the sole arbitrator of the matter.
(c) In the event that a sole arbitrator is not selected
pursuant to paragraph (a) or (b) above, the two arbitrators will, within 30 days
after the appointment of the later of them to be appointed, select an additional
arbitrator who shall act as the sole arbitrator of the dispute. After selection
of such sole arbitrator, the initial arbitrators shall have no further role with
respect to the dispute. In the event that the arbitrators so appointed do not,
within 30 days after the appointment of the later of them to be appointed, agree
on the selection of the sole arbitrator, any party involved in such dispute may
apply to the Senior Judge of the U.S. District Court for the Southern District
of Texas to select the sole arbitrator, which selection shall be made by such
organization within 30 days after such application. Any arbitrator selected
pursuant to this paragraph (c) shall be disinterested with respect to each of
the parties and shall be reasonably competent in the applicable subject matter.
(d) The sole arbitrator selected pursuant to paragraph (a),
(b) or (c) above will set a time for the hearing of the matter which will
commence no later than 90 days after the date of appointment of the sole
arbitrator pursuant to paragraph (a), (b) or (c) above and which hearing will be
no longer than 30 days (unless in the judgment of the arbitrator the matter is
unusually complex and sophisticated and thereby requires a longer time, in which
event such hearing shall be no longer than 90 days). The final decision of such
arbitrator will be rendered in writing to the parties not later than 60 days
after the last hearing date, unless otherwise agreed by the parties in writing.
(e) The place of any arbitration hereunder will be Houston,
Texas, unless otherwise agreed by the parties.
9.5 HEARINGS. Within the time period specified in Section 9.4(d), the
matter shall be presented to the arbitrator at a hearing by means of written
submissions of memoranda and
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verified witness statements, filed simultaneously, and responses, if necessary
in the judgment of the arbitrator or both the parties. If the arbitrator deems
it to be essential to a fair resolution of the dispute, live cross-examination
or direct examination may be permitted, but is not generally contemplated to be
necessary. The arbitrator shall actively manage the arbitration with a view to
achieving a just, speedy and cost-effective resolution of the dispute, claim or
controversy. The arbitrator may, in his or her discretion, set time and other
limits on the presentation of each party's case, its memoranda or other
submissions, and refuse to receive any proffered evidence, which the arbitrator,
in his or her discretion, finds to be cumulative, unnecessary, irrelevant or of
low probative nature. Except as otherwise set forth herein, any arbitration
hereunder will be conducted in accordance with the procedures of the Center for
Public Resources of New York ("CPR"). Except as expressly set forth in Section
9.8(b), the decision of the arbitrator will be final and binding on the parties,
and judgment thereon may be had and will be enforceable in any court having
jurisdiction over the parties. Arbitration awards will bear interest at an
annual rate of the Prime Rate plus 2% per annum, subject to any maximum amount
permitted by applicable law. To the extent that the provisions of this Agreement
and the prevailing rules of the CPR conflict, the provisions of this Agreement
shall govern.
9.6 DISCOVERY AND CERTAIN OTHER MATTERS. (a) Any party involved in a
dispute subject to this Article IX may request limited document production from
the other party or parties of specific and expressly relevant documents, with
the reasonable expenses of the producing party incurred in such production paid
by the requesting party. Any such discovery (which right to documents shall be
substantially less than document discovery rights prevailing under the Federal
Rules of Civil Procedure) shall be conducted expeditiously and shall not cause
the hearing provided for in Section 9.5 to be adjourned except upon consent of
all parties involved in the applicable dispute or upon an extraordinary showing
of cause demonstrating that such adjournment is necessary to permit discovery
essential to a party to the proceeding. Depositions, interrogatories or other
forms of discovery (other than the document production set forth above) shall
not occur except by consent of the parties involved in the applicable dispute.
Disputes concerning the scope of document production and enforcement of the
document production requests will be determined by written agreement of the
parties involved in the applicable dispute or, failing such agreement, will be
referred to the arbitrator for resolution. All discovery requests will be
subject to the parties' rights to claim any applicable privilege. The arbitrator
will adopt procedures to protect the proprietary rights of the parties and to
maintain the confidential treatment of the arbitration proceedings (except as
may be required by law). Subject to the foregoing, the arbitrator shall have the
power to issue subpoenas to compel the production or documents relevant to the
dispute, controversy or claim.
(b) The arbitrator shall have full power and authority to
determine issues of arbitrability but shall otherwise be limited to interpreting
or construing the applicable provisions of this Agreement or any Ancillary
Agreement, and will have no authority or power to limit, expand, alter, amend,
modify, revoke or suspend any condition or provision of this Agreement or any
Ancillary Agreement; it being understood, however, that the arbitrator will have
full authority to implement the provisions of this Agreement or any Ancillary
Agreement, and to fashion appropriate remedies for breaches of this Agreement
(including interim or permanent injunctive relief); provided that the arbitrator
shall not have (i) any authority in excess of the authority a court having
jurisdiction over the parties and the controversy or dispute would have absent
these arbitration provisions or (ii) any right or power to award punitive or
treble damages.
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It is the intention of the parties that in rendering a decision the arbitrator
give effect to the applicable provisions of this Agreement and the Ancillary
Agreements and follow applicable law (it being understood and agreed that this
sentence shall not give rise to a right of judicial review of the arbitrator's
award).
(c) If a party fails or refuses to appear at and participate
in an arbitration hearing after due notice, the arbitrator may hear and
determine the controversy upon evidence produced by the appearing party.
(d) Arbitration costs will be borne equally by each party
involved in the mater, except that each party will be responsible for its own
attorney's fees and other costs and expenses, including the costs of witnesses
selected by such party.
9.7 CERTAIN ADDITIONAL MATTERS. (a) Except as to arbitration of cases
arising under or related to the Genco Option Agreement, any arbitration award
shall be a bare award limited to a holding for or against a party and shall be
without findings as to facts, issues or conclusions of law (including with
respect to any matters relating to the validity or infringement of patents or
patent applications) and shall be without a statement of the reasoning on which
the award rests, but must be in adequate form so that a judgment of a court may
be entered thereupon. Judgment upon any arbitration award hereunder may be
entered in any court having jurisdiction thereof.
(b) Prior to the time at which an arbitrator is appointed
pursuant to Section 9.4, any party may seek one or more temporary restraining
orders in a court of competent jurisdiction if necessary in order to preserve
and protect the status quo. Neither the request for, or grant or denial of, any
such temporary restraining order shall be deemed a waiver of the obligation to
arbitrate as set forth herein and the arbitrator may dissolve, continue or
modify any such order. Any such temporary restraining order shall remain in
effect until the first to occur of the expiration of the order in accordance
with its terms or the dissolution thereof by the arbitrator.
(c) Except as required by law, the parties shall hold, and
shall cause their respective officers, directors, employees, agents and other
representatives to hold, the existence, content and result of mediation or
arbitration in confidence in accordance with the provisions of Article X and
except as may be required in order to enforce any award. Each of the parties
shall request that any mediator or arbitrator comply with such confidentiality
requirement.
(d) In the event that at any time the sole arbitrator shall
fail to serve as an arbitrator for any reason, the parties shall select a new
arbitrator who shall be disinterested as to the parties and the matter in
accordance with the procedures set forth herein for the selection of the initial
arbitrator. The extent, if any, to which testimony previously given shall be
repeated or as to which the replacement arbitrator elects to rely on the
stenographic record (if there is one) of such testimony shall be determined by
the replacement arbitrator.
9.8 ARBITRATION OF GENCO OPTION AGREEMENT CASES. In cases arising under
or related to the Genco Option Agreement:
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(a) The proposed final decision of the Arbitrator shall be
rendered pursuant to Section 9.4(d), but shall invite the parties to submit
findings of facts and conclusions of law for use by the Arbitrator in drawing up
his final arbitral award.
(b) The final award shall expressly set forth sufficient
findings of fact and conclusions of law to support a final judgment under Texas
law based upon the arbitration award. Any exercise of discretion shall be
limited by the standards applicable to trial court judges.
(c) A full record, including a stenographic transcription of
oral testimony, evidence shall be maintained by the Arbitrator and forwarded to
a court of competent jurisdiction in the event of appeal.
(d) The final award shall be appealable to the courts of Texas
to the full extent permitted by laws, and such courts shall have all of such
power to review, correct, reverse, modify, remand or otherwise adjudicate such
appeal as Texas law may allow.
9.9 CONTINUITY OF SERVICE AND PERFORMANCE. Unless otherwise agreed in
writing, the parties will continue to provide service and honor all other
commitments under this Agreement and each Ancillary Agreement during the course
of dispute resolution pursuant to the provisions of this Article IX with respect
to all matters not subject to such dispute, controversy or claim.
9.10 LAW GOVERNING ARBITRATION PROCEDURES. The interpretation of the
provisions of this Article IX, only insofar as they relate to the agreement to
arbitrate and any procedures pursuant thereto, shall be governed by the
Arbitration Act and other applicable federal law. In all other respects, the
interpretation of this Agreement shall be governed as set forth in Section 11.3.
ARTICLE X
COVENANTS AND OTHER MATTERS
10.1 OTHER AGREEMENTS. In addition to the specific agreements,
documents and instruments annexed to this Agreement, REI and Resources agree to
execute or cause to be executed by the appropriate parties and deliver, as
appropriate, such other agreements, instruments and other documents as may be
necessary or desirable in order to effect the purposes of this Agreement and the
Ancillary Agreements.
10.2 FURTHER INSTRUMENTS. At the request of Resources and without
further consideration, REI will execute and deliver, and will cause its
applicable Subsidiaries to execute and deliver, to Resources and its
Subsidiaries such other instruments of transfer, conveyance, assignment,
substitution and confirmation and take such action as Resources may reasonably
deem necessary or desirable in order more effectively to transfer, convey and
assign to Resources and its Subsidiaries and confirm Resources' and its
Subsidiaries' title to all of the assets, rights and other things of value
contemplated to be transferred to Resources and its Subsidiaries pursuant to
this Agreement, the Ancillary Agreements, and any documents referred to therein,
to put Resources and its Subsidiaries in actual possession and operating control
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thereof and to permit Resources and its Subsidiaries to exercise all rights with
respect thereto (including, without limitation, rights under contracts and other
arrangements as to which the consent of any third party to the transfer thereof
shall not have previously been obtained). At the request of REI and without
further consideration, Resources will execute and deliver, and will cause its
applicable Subsidiaries to execute and deliver, to REI and its Subsidiaries all
instruments, assumptions, novations, undertakings, substitutions or other
documents and take such other action as REI may reasonably deem necessary or
desirable in order to have Resources fully and unconditionally assume and
discharge the liabilities contemplated to be assumed by Resources under this
Agreement, any Ancillary Agreement or any document in connection herewith and to
relieve the REI Group of any liability or obligation with respect thereto and
evidence the same to third parties. Neither REI nor Resources shall be
obligated, in connection with the foregoing, to expend money other than
reasonable out-of-pocket expenses, attorneys' fees and recording or similar
fees. Furthermore, each party, at the request of another party hereto, shall
execute and deliver such other instruments and do and perform such other acts
and things as may be necessary or desirable for effecting completely the
consummation of the transactions contemplated hereby.
10.3 AGREEMENT FOR EXCHANGE OF INFORMATION. Each of REI and Resources
agrees to provide, or cause to be provided, to each other as soon as reasonably
practicable after written request therefor, any Information in the possession or
under the control of such party that the requesting party reasonably needs (i)
to comply with reporting, disclosure, filing or other requirements imposed on
the requesting party (including under applicable securities laws) by a
Governmental Authority having jurisdiction over the requesting party, (ii) for
use in any Regulatory Proceeding, judicial proceeding or other proceeding or in
order to satisfy audit, accounting, claims, regulatory, litigation or other
similar requirements, (iii) to comply with its obligations under this Agreement
or any Ancillary Agreement or (iv) in connection with the ongoing businesses of
REI or Resources as it relates to the conduct of such businesses prior to the
Distribution Date, as the case may be; provided, however, that in the event that
any party determines that any such provision of Information could be
commercially detrimental, violate any law or agreement, or waive any
attorney-client privilege, the parties shall take all reasonable measures to
permit the compliance with such obligations in a manner that avoids any such
harm or consequence.
(a) After the Separation Date, (i) each party shall maintain
in effect at its own cost and expense adequate systems and controls for its
business to the extent necessary to enable the other party to satisfy its
reporting, accounting, audit and other obligations, and (ii) each party shall
provide, or cause to be provided, to the other party and its Subsidiaries in
such form as such requesting party shall request, at no charge to the requesting
party, all financial and other data and information as the requesting party
determines necessary or advisable in order to prepare its financial statements
and reports or filings with any Governmental Authority.
(b) Any Information owned by a party that is provided to a
requesting party pursuant to this Section 10.3 shall be deemed to remain the
property of the providing party. Unless specifically set forth herein, nothing
contained in this Agreement shall be construed as granting or conferring rights
of license or otherwise in any such Information.
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(c) To facilitate the possible exchange of Information
pursuant to this Section 10.3 and other provisions of this Agreement after the
Distribution Date, each party agrees to use its reasonable commercial efforts to
retain all Information in its respective possession or control on the
Distribution Date substantially in accordance with its policies as in effect on
the Separation Date. Resources shall not amend its or its Subsidiaries' record
retention policies prior to the Distribution Date without the consent of REI.
However, except as set forth in the Tax Allocation Agreement, at any time after
the Distribution Date, each party may amend their respective record retention
policies at such party's discretion; provided, however, that if a party desires
to effect the amendment within three (3) years after the Distribution Date, the
amending party must give thirty (30) days prior written notice of such change in
the policy to the other party to this Agreement. No party will destroy, or
permit any of its Subsidiaries to destroy, any Information that exists on the
Separation Date (other than Information that is permitted to be destroyed under
the current record retention policy of such party) without first using its
reasonable commercial efforts to notify the other party of the proposed
destruction and giving the other party the opportunity to take possession of
such Information prior to such destruction.
(d) No party shall have any liability to any other party in
the event that any Information exchanged or provided pursuant to this Section is
found to be inaccurate, in the absence of willful misconduct by the party
providing such Information. No party shall have any liability to any other party
if any Information is destroyed or lost after reasonable commercial efforts by
such party to comply with the provisions of Section 10.3(c).
(e) The rights and obligations granted under this Section 10.3
are subject to any specific limitations, qualifications or additional provisions
on the sharing, exchange or confidential treatment of Information set forth in
this Agreement and any Ancillary Agreement.
(f) Each party hereto shall, except in the case of a dispute
subject to this Article IX brought by one party against another party (which
shall be governed by such discovery rules as may be applicable under Article IX
or otherwise), use its reasonable commercial efforts to make available to each
other party, upon written request, the former, current and future directors,
officers, employees, other personnel and agents of such party as witnesses and
any books, records or other documents within its control or which it otherwise
has the ability to make available, to the extent that any such person (giving
consideration to business demands of such directors, officers, employees, other
personnel and agents) or books, records or other documents may reasonably be
required in connection with any Regulatory Proceeding, judicial proceeding or
other proceeding in which the requesting party may from time to time be
involved, regardless of whether such Regulatory Proceeding, judicial proceeding
or other proceeding is a matter with respect to which indemnification may be
sought hereunder. The requesting party shall bear all costs and expenses in
connection therewith.
(g) To the extent Resources or a member of the Resources Group
is deemed or determined by the PUCT by final order no longer subject to
rehearing by the PUCT to be an "affiliate" or a "competitive affiliate" of REI,
Resources and REI shall observe any applicable requirements of the Utilities
Code, PUCT rules and of the REI code of conduct and shall require their
respective personnel and contractor personnel to observe that code of conduct.
No member of the REI Group or the Resources Group shall directly or indirectly
make application or request to the PUCT to make such a finding or determination
nor will any member of the REI Group or the Resources Group directly or
indirectly take a position in support of such a finding or determination.
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10.4 AUDITORS AND AUDITS; ANNUAL AND QUARTERLY STATEMENTS AND
ACCOUNTING. (a) Each party agrees that, for so long as Resources remains a
Subsidiary of REI, and with respect to any financial reporting period during
which Resources was a Subsidiary of REI:
(i) Resources shall not select a different accounting
firm than the firm selected by REI to audit its financial
statements to serve as its independent certified public
accountants (the "Resources Auditors") for purposes of
providing an opinion on its consolidated financial statements
without REI's prior written consent (which shall not be
unreasonably withheld).
(ii) Resources shall use its reasonable commercial
efforts to enable the accounting firm that audits its
financial statements (the "Resources Auditors") to complete
their audit such that they will date their opinion on
Resources' audited annual financial statements on the same
date that REI's Auditors date their opinion on REI's audited
annual financial statements, and to enable REI to meet its
timetable for the printing, filing and public dissemination of
REI's annual financial statements. Resources shall use its
reasonable commercial efforts to enable the Resources Auditors
to complete their quarterly review procedures such that they
will provide clearance on Resources' quarterly financial
statements on the same date that REI's Auditors provide
clearance on REI's quarterly financial statements.
(iii) Resources shall provide to REI on a timely
basis all Information that REI reasonably requires to meet its
schedule for the preparation, printing, filing, and public
dissemination of REI's annual and quarterly financial
statements. Without limiting the generality of the foregoing,
Resources will provide all required financial information with
respect to Resources and its Subsidiaries to the Resources
Auditors in a sufficient and reasonable time and in sufficient
detail to permit the Resources Auditors to take all steps and
perform all reviews necessary to provide sufficient assistance
to REI's Auditors with respect to Information to be included
or contained in REI's annual and quarterly financial
statements. Similarly, REI shall provide to Resources on a
timely basis all Information that Resources reasonably
requires to meet its schedule for the preparation, printing,
filing, and public dissemination of Resources' annual and
quarterly financial statements. Without limiting the
generality of the foregoing, REI will provide all required
financial Information with respect to REI and its Subsidiaries
to REI's Auditors in a sufficient and reasonable time and in
sufficient detail to permit REI's Auditors to take all steps
and perform all reviews necessary to provide sufficient
assistance to the Resources Auditors with respect to
Information to be included or contained in Resources' annual
and quarterly financial statements.
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(iv) Resources shall authorize the Resources Auditors
to make available to REI's Auditors both the personnel who
performed or are performing the annual audits and quarterly
reviews of Resources and work papers related to the annual
audits and quarterly reviews of Resources, in all cases within
a reasonable time prior to the Resources Auditors' opinion
date, so that REI's Auditors are able to perform the
procedures they consider necessary to take responsibility for
the work of the Resources Auditors as it relates to REI's
Auditors' report on REI's financial statements, all within
sufficient time to enable REI to meet its timetable for the
printing, filing and public dissemination of REI's annual and
quarterly statements. Similarly, REI shall authorize REI's
Auditors to make available to the Resources Auditors both the
personnel who performed or are performing the annual audits
and quarterly reviews of REI and work papers related to the
annual audits and quarterly reviews of REI, in all cases
within a reasonable time prior to REI's Auditors' opinion
date, so that the Resources Auditors are able to perform the
procedures they consider necessary to take responsibility for
the work of REI's Auditors as it relates to the Resources
Auditors' report on Resources' financial statements, all
within sufficient time to enable Resources to meet its
timetable for the printing, filing and public dissemination of
Resources' annual and quarterly financial statements.
(v) Resources may not change its accounting
principles or practices if a change in such accounting
principle or practice would be required to be disclosed in
Resources' financial statements as filed with the SEC or
otherwise publicly disclosed therein without the prior written
consent of REI, except for changes which are required by GAAP
and as to which there is no discretion on the part of
Resources, as concurred in by Resources Auditors prior to its
implementation. Resources shall give REI as much prior notice
as reasonably practical of any proposed determination of, or
any significant changes in, its accounting estimates or,
subject as aforesaid, accounting principles from those in
effect on the Separation Date. Resources will consult with REI
and, if requested by REI, Resources will consult with REI's
Auditors with respect thereto. REI shall give Resources as
much prior notice as reasonably practical of any proposed
determination of, or any significant changes in, its
accounting estimates or accounting principles from those in
effect on the Separation Date.
(vi) Nothing in Sections 10.3 and 10.4 shall require
Resources to violate any agreement with any third parties
regarding the confidentiality of confidential and proprietary
information relating to that third party or its business;
provided, however, that in the event that Resources is
required under Sections 10.3 and 10.4 to disclose any such
information, Resources shall use all commercially reasonable
efforts to seek to obtain such third party's consent to the
disclosure of such information. Similarly, nothing in Sections
10.3 and 10.4 shall require REI to violate any agreement with
any third parties regarding the confidentiality of
confidential and proprietary information relating to that
third party or its business; provided, however, that in the
event that REI is required under Sections 10.3 and 10.4 to
disclose any such information, REI shall use all
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commercially reasonable efforts to seek to obtain such third
party's consent to the disclosure of such information.
(b) For so long as REI beneficially owns shares representing
20% or more of the voting power of the outstanding Resources Common Stock (i)
Resources will furnish REI within nine (9) business days after the end of each
quarter and eleven (11) business days after the end of each fiscal year, the
unaudited balance sheet, income statement and statement of cash flows of
Resources and its Subsidiaries as at the end of such period, (ii) Resources
shall furnish to REI such financial information or documents in the possession
of Resources and any of its Subsidiaries as REI may reasonably request, and
(iii) Resources shall furnish to REI on a monthly basis such management and
other periodic reports related to financial information in the form and
substance consistent with the practice of Resources as of the date of this
Agreement. For so long as REI beneficially owns shares representing 50% or more
of the voting power of all of the outstanding Resources Common Stock, Resources
will furnish REI the consolidated balance sheet, consolidated income statement
and consolidated statement of cash flows, if any, of Resources and its
Subsidiaries as at the end of each such quarterly and annual period in the form
and substance consistent with the practice of Resources as of the date of this
Agreement.
10.5 AUDIT RIGHTS. To the extent any member of the REI group provides
goods or services to any member of the Resources Group or any member of the
Resources Group provides goods or services to a member of the REI Group under
this Agreement or under any Ancillary Agreement, the company providing such
goods or services (the "Providing Company") shall maintain complete and accurate
books and records relating to costs and charges made to the company receiving
such goods and services (the "Receiving Company"). Books and accounts shall be
maintained in accordance with generally accepted accounting principles,
consistently applied, and to the extent such books and records relate to
regulated business activities, shall conform to any applicable regulatory code
of accounts which the Receiving Company is required to comply with, to the
extent such conformity is reasonably feasible. If conformity to a regulatory
code of accounts is infeasible, the Providing Company shall maintain its books
and records related to the provision of goods and services in such a manner that
the Receiving Company may readily reconcile such books and records to the
applicable code of accounts. Annually, the Receiving Company shall be entitled
to audit the Providing Company's books and records related to the goods and
services provided, using its own personnel or personnel from its independent
auditing firm. Discrepancies identified as a result of any audit shall be
promptly reconciled between the parties in accordance with any provisions of the
Ancillary Agreement or, if no such provision is applicable, in accordance with
the dispute resolution provisions of this Agreement. Any charge which is not
questioned by the Receiving Company within the calendar year after the charge
was rendered shall be deemed incontestable.
10.6 PRESERVATION OF LEGAL PRIVILEGES. REI and Resources recognize that
the members of their respective groups possess and will possess information and
advice that has been previously developed but is legally protected from
disclosure under legal privileges, such as the attorney-client privilege or work
product exemption and other concepts of legal protection ("Privilege"). Each
party recognizes that they shall be jointly entitled to the Privilege with
respect to such privileged information and that each shall be entitled to
maintain and use for its own benefit all such information and advice, but both
parties shall ensure that such information is maintained so as to protect the
Privileges with respect to the other party's interest. To that end
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neither party will knowingly waive or compromise any Privilege associated with
such information and advice without the consent of the other party. In the event
that privileged information is required to be disclosed to any arbitrator or
mediator in connection with a dispute between the parties, such disclosure shall
not be deemed a waiver of Privilege with respect to such information, and any
party receiving it in connection with a proceeding shall be informed of its
nature and shall be required to safeguard and protect it.
10.7 PAYMENT OF EXPENSES. Resources shall pay all underwriting fees,
discounts and commissions and other direct costs incurred in connection with the
IPO. Except as otherwise provided in this Agreement, the Ancillary Agreements or
any other agreement between the parties relating to the Separation, the IPO or
the Distribution, all other out-of-pocket costs and expenses of the parties
hereto in connection with the preparation of this Agreement and the Ancillary
Agreements, the Separation, the IPO and the Distribution shall be paid by REI.
Notwithstanding the foregoing, Resources shall pay any internal fees, costs and
expenses incurred by Resources in connection with the Separation, the IPO and
the Distribution.
10.8 GOVERNMENTAL APPROVALS. The parties acknowledge that certain of
the transactions contemplated by this Agreement and the Ancillary Agreements are
subject to certain conditions established by applicable government regulations,
orders, and approvals ("Existing Authority"). The parties intend to implement
this Agreement, the Ancillary Agreements and the transactions contemplated
thereby consistent with and to the extent permitted by Existing Authority and to
cooperate toward obtaining and maintaining in effect such Governmental Approvals
as may be required in order to implement this Agreement and each of the
Ancillary Agreements as fully as possible in accordance with their respective
terms. To the extent that any of the transactions contemplated by this Agreement
or any Ancillary Agreement require any Governmental Approvals, the parties will
use their reasonable commercial efforts to obtain any such Governmental
Approvals.
10.9 REGULATORY PROCEEDINGS. It is recognized and understood that high
levels of cooperation and assistance will be required between members of the REI
Group and the Resources Group in connection with Regulatory Proceedings
necessary to implement the Separation and the Business Separation Plan approved
by the PUCT and all matters relating to the Genco Option. During the period from
the Separation Date until an order issued by the PUCT in connection with the
stranded cost determination regarding the Genco Assets becomes final and
nonappealable, the parties agree as follows:
(a) Upon reasonable request, members of the REI Group and of
the Resources Group will provide personnel, information and other assistance to
members of the other group in order to prepare, file and prosecute to completion
Regulatory Proceedings which are either (i) required to be filed under the
Utilities Code or under the Business Separation Plan or (ii) deemed by the
requesting party to be desirable to implement or preserve some aspect of the
Separation contemplated herein.
(b) Assistance provided may, without limitation, relate to
information that has been transferred to or retained by the assisting party in
the separation or which the assisting party is uniquely qualified to provide in
connection with Regulatory Proceedings that relate to the
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Separation and its implementation under the Utilities Code. Assistance may take
the form of developing, filing and giving testimony and reports to the PUCT or
other regulatory authority.
(c) The appropriate members of the REI Group or the Resources
Group shall timely file with the PUCT or other regulatory authority or court and
shall prosecute to completion all Regulatory Proceedings required to implement
the Business Separation Plan approved by the PUCT, the Genco Option and the
other provisions of this Agreement, such as, without limitation, filings to
terminate the "Price To Beat" obligation, if appropriate, the determination of
any "clawback" related to retail customers served by Reliant Energy Retail
Services, and the determination of stranded costs related to the Genco Assets.
(d) A member of the REI Group shall make all regulatory
filings contemplated above in this Section 10.9 except where a member of the
Resources Group is required by the Utilities Code to file separately or join in
such filings. A member of the REI Group will be responsible for the direction
and prosecution of all Regulatory Proceedings in which REI Group filings are
made, except as follows: A member of the Resources Group will be responsible for
filing on behalf of and in the name of the REI Group, and shall have sole
responsibility and control of the direction and prosecution of (i) any filing
pursuant to Utilities Code Section 39.202(j) and (ii) that portion of any filing
pursuant to Utilities Code Section 39.262(e) which pertains to the
reconciliation of the Price to Beat and market prices and the determination of
any credits to REI under that subsection. With respect to the filings specified
in the immediately preceding sentence, the Resources Group shall be entitled to
act for and be subrogated to the interests of the REI Group. A member of the
Resources Group will be responsible for filing in its own name and shall have
sole responsibility and control of proceedings to establish, revise or adjust
the Price to Beat.
(e) Except as provided below, the party supplying assistance
shall be reimbursed for costs incurred in providing assistance. For time
expended by its personnel, the assisting party shall be reimbursed for actual
salary costs, plus payroll burdens and overhead allocations in accordance with
its standard procedures for reimbursing other members of its group. Services
provided for information technology or other internal services shall be charged
in the same manner they would be charged among the members of the providing
company's Group, and out of pocket costs paid to third parties shall be
reimbursed at actual cost.
(f) The party requesting assistance shall endeavor to minimize
the impacts of such assistance on the other business needs of the assisting
party.
(g) Until the issuance of a Final Order determining the
stranded costs with respect to the Genco Assets (the "Stranded Cost Order"), no
member of the REI Group or the Resources Group will, directly or indirectly,
without express written permission, assert a position which is adverse to the
position of a member of the other in a Regulatory Proceeding before the PUCT,
the Texas Legislature or any other regulatory authority having jurisdiction over
a member of such Group, with respect to amendment or other revision to Senate
Xxxx 7 or the Utilities Code.
(h) Until the issuance of the Stranded Cost Order, no member
of the Resources Group will, directly or indirectly, without the express written
permission of REI, assert a position which is adverse to the position of a
member of the REI Group in Regulatory
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Proceedings before the PUCT or any other regulatory authority having
jurisdiction over a member of the REI Group with respect to the following
matters: (i) stranded cost quantification or recovery or (ii) the proper level
or components of T&D Utility rates, provided, however, that positions taken by a
member of the Resources Group relating solely to the allocation of costs or the
use of a rate design consistent with Price to Beat rate designs will not be
considered adverse positions even if such positions differ from those asserted
by members of the REI Group. REI will not unreasonably withhold permission for a
member of the Resources Group to take positions which may be indirectly adverse
to its own position. In any T&D Utility rate case that proposes rates to be
effective prior to the issuance of the Stranded Cost Order, any direct case
presented by the REI Group shall be based upon a T&D Utility rate design that is
substantially similar to either the Price to Beat rate design or the rate design
approved by the PUCT in PUCT Docket No. 22355.
10.10 CONTINUANCE OF REI CREDIT SUPPORT; BORROWINGS. Notwithstanding
any other provision of this Agreement or the provisions of any Ancillary
Agreement to the contrary, the parties hereby agree that REI and each Subsidiary
of REI shall maintain in full force and effect each guarantee, letter of credit,
keepwell or support agreement or other credit support document, instrument or
other similar arrangement issued for the benefit of any Person in the Resources
Group by or on behalf of REI or a Subsidiary of REI (the "Credit Support
Arrangements") which is outstanding as of the Separation Date, until the earlier
of (a) such time as such Credit Support Arrangement terminates in accordance
with its terms or is otherwise released at the request of Resources or (b) the
Distribution Date; provided, that Resources shall use commercially reasonable
efforts, at the request of REI, to attempt to release or replace any Credit
Support Arrangement for which such replacement or release is reasonably
available. All such obligations shall be deemed Resources Liabilities. For so
long as REI or any Subsidiary of REI remains liable with respect to any such
Credit Support Arrangement, (1) Resources shall pay, or cause the Person in the
Resources Group for whose benefit the Credit Support Arrangement is provided to
pay, the underlying obligation as and when the same shall become due and
payable, to the end that neither REI nor such Subsidiary of REI shall be
required to make any payment under or by reason of its obligation under such
Credit Support Arrangement and (2) REI or such Subsidiary shall retain all
rights of reimbursement and subrogation it may have, whether arising by law, by
contract or otherwise, with respect to such Credit Support Arrangement and such
rights shall be enforceable against Resources as well as the Subsidiary of
Resources for whose benefit the Credit Support Arrangement was made. Members of
the REI Group may advance funds to or borrow funds from members of the Resources
Group from time to time at market-based rates; provided, however, that except as
provided in the Genco Option Agreement, no member of the REI Group or the
Resources Group shall have any obligation to do so.
To the extent covenants and agreements contained in any loan or credit agreement
or other financing document in effect on the date of this Agreement to which any
member of the REI Group is a party requires, or requires such party to cause,
any member of the Resources Group to take or refrain from taking any action, or
provides for a default or event of default if any member of the Resources Group
takes or refrains from taking any action, such member of the Resources Group
shall at all times prior to the Distribution Date, take or refrain from taking
any such action as would result in a breach or violation of, or a default under,
such agreement.
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10.11 CERTAIN NON-COMPETITION PROVISIONS; FREEDOM OF ACTION. In order
to preserve the separation of its Texas businesses as contemplated in the
Business Separation Plan as approved by the PUCT and to protect the goodwill
associated with the separate businesses, for a period of three years after the
Choice Date the parties agree that they will conduct their respective businesses
as follows:
(a) Neither REI, Regco nor any Affiliate or successor in
interest of REI or Regco will sell electricity at retail or provide data, voice
or video transmission services as a commercial activity for profit to retail
customers within the State of Texas, and
(b) Neither REI, Regco nor any Affiliate or successor in
interest of REI or Regco will acquire or operate any electric generating
facilities within the State of Texas other than the Genco Assets;
provided, however, neither REI nor Resources shall be restricted from providing
natural gas and other non-electric energy commodities, and REI and its
affiliates shall not be restricted from providing fuel cells, microturbines and
similar distributed generating devices having an individual unit capacity less
than 10 MW, including the installation, operation and maintenance associated
with those devices. Nor shall REI and its Affiliates be precluded from providing
energy services of the type and character currently being provided so long as it
does not provide sales of electricity to customers as a Retail Electric
Provider.
10.12 CLAWBACK PAYMENT. Resources will pay to REI the lesser of (i) the
amount required to be credited to REI by its affiliated retail electric provider
pursuant to Section 39.262(e) of the Utilities Code promptly following the
determination that such a payment is owed and the amount thereof and (ii) $150
multiplied by the number of residential or small commercial customers served by
the affiliated transmission and distribution utility that are buying electricity
from the affiliated retail electric provider at the price to beat on the second
anniversary of the beginning of competition, minus the number of new customers
obtained outside the service area.
10.13 NUCLEAR DECOMMISSIONING TRUST AND INVESTMENT. Upon transfer of
the Genco Assets to Xxxxx XX, all rights and obligations associated with REI's
interest in the South Texas Project Electric Generating Station shall become the
rights and obligations of Xxxxx XX, including, without limitation, the interest
of beneficiary under that certain Trust Agreement, originally dated as of July
2, 1990, as amended and restated to date, between Houston Lighting & Power
Company and Mellon Bank, N.A., as Trustee. That Trust Agreement, commonly
referred to as the "STP Decommissioning Trust," provides for the funding of
REI's share of the costs of decontamination and decommissioning of STP. As owner
of STP, Genco shall maintain the STP Decommissioning Trust in accordance with
NRC requirements and shall order disbursements of funds as provided in the STP
Decommissioning Trust and NRC regulations. REI shall continue to collect through
rates, or other authorized charges to customers, amounts designated for funding
the STP Decommissioning Trust, and shall promptly pay all such amounts that it
collects to Genco. Genco shall deposit and maintain all such amounts with the
Trustee under the STP Decommissioning Trust.
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Under the STP Decommissioning Trust, REI has appointed an Investment
Advisory Committee to provide guidelines for the Trustee in the investment of
the trust funds. Genco shall maintain that Investment Advisory Committee as a
four-member committee, and following the Restructuring, Genco and REI shall each
appoint two representatives to the Investment Advisory Committee.
Upon decommissioning of STP, in the event that funds from the STP
Decommissioning Trust should prove inadequate to fund Genco's obligations under
the terms of its NRC license and NRC regulations, REI shall collect through
rates, or other authorized charges to customers, as contemplated by Section
39.205 of the Utilities Code, all additional amounts required to fund Genco's
obligations related to the decommissioning of STP and pay all amounts so
collected to Genco, and shall indemnify Genco from and against any obligations
related to such decommissioning not otherwise satisfied through such collections
and pay over the amount of any such shortfall to Genco upon request. Following
the completion of decommissioning, if surplus funds remain in the STP
Decommissioning Trust, such excess shall be refunded to REI.
10.14 AUCTIONS OF CAPACITY. Prior to the Option Expiration Date, Xxxxx
XX (and Xxxxx, as applicable) shall auction all its capacity to purchasers other
than Regco or an Affiliate of Regco on the following terms:
(a) 15% REQUIREMENT: Fifteen percent (15%) of its capacity
shall be auctioned in accordance with rules prescribed by the PUCT so long as
the PUCT rules require an affiliated Power Generation Company to auction
capacity. Resources shall not be entitled to participate in or reserve for
itself any portion of such capacity that is offered pursuant to PUCT
requirements.
(b) REMAINING CAPACITY AUCTION: After deducting capacity
required to satisfy operational requirements associated with the capacity
auctioned pursuant to PUCT rules, including without limitation the capacity
auction and Price to Beat rules and the obligation under the Agreement for
Spinning Reserve Service with Central Power and Light Company dated December 30,
1992, the remaining capacity and related ancillary services shall be auctioned
to purchasers other than Regco. Prior to each such auction, Xxxxx XX (and Genco,
as applicable) shall determine the types of products to be auctioned, taking
into consideration anticipated market demand and the Auction Principles included
in Schedule 10.14(b). Terms and conditions for the remaining capacity auction
shall be established by Xxxxx XX (and Xxxxx, as applicable), and reasonable
notice of the products and terms for the auction will be given to Resources but
no less than ten business days prior to the scheduled auction date.
(c) ENTITLEMENT AND OBLIGATIONS OF RESOURCES: Resources shall
be entitled to purchase at the prices established in each auction fifty percent
(50%) (but not less than such percentage) of the capacity auctioned. To exercise
its entitlement, Resources will notify Xxxxx XX (and Genco, as applicable)
whether it elects to purchase fifty percent (50%) of each product auctioned, and
Xxxxx XX (and Xxxxx, as applicable) shall exclude such capacity from the
auction. Resources shall give such notification no later than three business
days prior to the date of the auction. Any portion of the capacity that
Resources does not reserve through such notification shall be auctioned along
with the balance of the capacity being auctioned. Upon determination of auction
prices for the products auctioned, Resources shall be obligated to
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purchase the capacity it elected to reserve from the auction process at the
prices set during the auction for that product. If energy and ancillary services
are auctioned separately by Xxxxx XX (and Genco, as applicable), Resources shall
be entitled to participate in fifty percent (50%) of the offered capacity of
each. In addition to its reservation of capacity, and whether or not it has
reserved capacity in the auction, Resources shall be entitled to participate in
each auction of the remaining capacity.
If Resources exercises the Genco Option, then after the Option Exercise
Date and until the Option Closing Date occurs or the Option terminates pursuant
to the Genco Option Agreement, Genco shall conduct no auctions of capacity other
than those required pursuant to PUCT rules without consulting with Resources and
obtaining its reasonable concurrence, not to be unreasonably withheld.
(d) COMPLIANCE WITH PUCT RULES. In the event the rules of the
PUCT relating to Price to Beat do not allow for the fuel factor to be adjusted
based on the auction of capacity as contemplated in this Section 10.14 or in the
event the PUCT, by rule or order, otherwise indicates that the auction of
capacity as contemplated in this Section 10.14 would be inconsistent with its
requirements, Xxxxx XX (or Xxxxx, as applicable) shall, in consultation with
Resources, modify the auction procedures set forth herein or, if an auction
would not be acceptable, Resources and Xxxxx XX (or Genco, as applicable) will
use their best efforts to reach agreement on a power purchase agreement which
would satisfy PUCT requirements and preserve, as nearly as possible, Resources'
entitlement to obtain 50 percent of Genco's available capacity at market prices.
(e) RECONCILIATION PAYMENT OBLIGATIONS. Genco or its parent
company shall reconcile any difference between the price of power obtained
through capacity auctions required by PUCT rules with the PUCT's ECOM model, as
required by PUCT rules, and Genco or its parent company shall pay to REI, or REI
shall pay to Genco or its parent company as appropriate, the difference between
such amounts during the period, to the extent and in the manner required by
rules of the PUCT.
10.15 CONFIDENTIALITY.
(a) REI and Resources shall hold and shall cause the members
of the REI Group and the Resources Group, respectively, to hold, and shall each
cause their respective officers, employees, agents, consultants and advisors to
hold, in strict confidence and not to disclose or release without the prior
written consent of the other party, any and all Confidential Information (as
defined herein); provided, that the parties may disclose, or may permit
disclosure of, Confidential Information (i) to their respective auditors,
attorneys, financial advisors, bankers and other appropriate consultants and
advisors who have a need to know such information and are informed of their
obligation to hold such information confidential to the same extent as is
applicable to the parties hereto and in respect of whose failure to comply with
such obligations, REI or Resources, as the case may be, will be responsible or
(ii) to the extent any member of the REI Group or the Resources Group is
compelled to disclose any such Confidential Information by judicial or
administrative process or, in the opinion of legal counsel, by other
requirements of law. Notwithstanding the foregoing, in the event that any demand
or request for disclosure of Confidential Information is made pursuant to clause
(ii) above, REI or Resources, as the case
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may be, shall promptly notify the other of the existence of such request or
demand and shall provide the other a reasonable opportunity to seek an
appropriate protective order or other remedy, which both parties will cooperate
in seeking to obtain. In the event that such appropriate protective order or
other remedy is not obtained, the party whose Confidential Information is
required to be disclosed shall or shall cause the other party to furnish, or
cause to be furnished, only that portion of the Confidential Information that is
legally required to be disclosed. As used in this Section 10.15, "Confidential
Information" shall mean all proprietary, technical or operational information,
data or material of one party which, prior to or following the IPO Closing Date,
has been disclosed by REI or members of the REI Group, on the one hand, or
Resources or members of the Resources Group, on the other hand, in written, oral
(including by recording), electronic, or visual form to, or otherwise has come
into the possession of, the other, including pursuant to the access provisions
of Section 10.3 hereof or any other provision of this Agreement (except to the
extent that such Information can be shown to have been (a) in the public domain
through no fault of such party (or, in the case of REI, any other member of the
REI Group or, in the case of Resources, any other member of the Resources Group)
or (b) later lawfully acquired from other sources by the party (or, in the case
of REI, such member of the REI Group or, in the case of Resources, such member
of the Resources Group) to which it was furnished; provided, however, in the
case of (b) that such sources did not provide such Information in breach of any
confidentiality obligations).
(b) Notwithstanding anything to the contrary set forth herein,
(i) REI and the other members of the REI Group, on the one hand, and Resources
and the other members of the Resources Group, on the other hand, shall be deemed
to have satisfied their obligations hereunder with respect to Confidential
Information if they exercise the same degree of care (but no less than a
reasonable degree of care) as they take to preserve confidentiality for their
own similar Information and (ii) confidentiality obligations provided for in any
agreement between REI or any other member of the REI Group, or Resources or any
other members of the Resources Group, on the one hand, and any employee of REI
or any other member of the REI Group, or Resources or any other members of the
Resources Group, on the other hand, shall remain in full force and effect.
Confidential Information of REI or any other member of the REI Group, on the one
hand, or Resources or any other member of the Resources Group, on the other
hand, in the possession of and used by the other as of the IPO Closing Date may
continue to be used by such Person in possession of the Confidential Information
in and only in the operation of the REI Business or the Resources Business, as
the case may be, and may be used only so long as the Confidential Information is
maintained in confidence and not disclosed in violation of Section 10.15(a).
Such continued right to use may not be transferred to any third party unless the
third party purchases all or substantially all of the business and assets in
which the relevant Confidential Information is used or employed in one
transaction or in a series or related transactions. In the event that such right
to use is transferred in accordance with the preceding sentence, the
transferring party shall not disclose the source of the relevant Confidential
Information.
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ARTICLE XI
MISCELLANEOUS
11.1 LIMITATION OF LIABILITY. EXCEPT TO THE EXTENT SPECIFICALLY
PROVIDED IN ANY ANCILLARY AGREEMENT IN NO EVENT SHALL ANY MEMBER OF THE REI
GROUP OR THE RESOURCES GROUP OR THEIR RESPECTIVE DIRECTORS, OFFICERS AND
EMPLOYEES BE LIABLE TO ANY OTHER MEMBER OF THE REI GROUP OR THE RESOURCES GROUP
FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST
PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE)
ARISING IN ANY WAY OUT OF THIS AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN
ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED, HOWEVER, THAT THE
FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY'S INDEMNIFICATION OBLIGATIONS
FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN THIS AGREEMENT OR ANY ANCILLARY
AGREEMENT.
11.2 ENTIRE AGREEMENT. This Agreement, the other Ancillary Agreements
and the Exhibits and Schedules referenced or attached hereto and thereto,
constitutes the entire agreement between the parties with respect to the subject
matter hereof and shall supersede all prior written and oral and all
contemporaneous oral agreements and understandings with respect to the subject
matter hereof.
11.3 GOVERNING LAW. This Agreement shall be governed and construed and
enforced in accordance with the laws of the State of Texas as to all matters
regardless of the laws that might otherwise govern under the principles of
conflicts of laws applicable thereto.
11.4 TERMINATION. This Agreement and all Ancillary Agreements may be
terminated at any time prior to the IPO Closing Date by and in the sole
discretion of REI without the approval of Resources. This Agreement may be
terminated at any time after the IPO Closing Date by mutual consent of REI and
Resources. In the event of termination pursuant to this Section, neither party
shall have any liability of any kind to the other party.
11.5 NOTICES. Unless expressly provided herein, all notices, claims,
certificates, requests, demands and other communications hereunder shall be in
writing and shall be deemed to be duly given (i) when personally delivered or
(ii) if mailed registered or certified mail, postage prepaid, return receipt
requested, on the date the return receipt is executed or the letter refused by
the addressee or its agent or (iii) if sent by overnight courier which delivers
only upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent or (iv) if
sent by facsimile or other generally accepted means of electronic transmission,
on the date confirmation of transmission is received (provided that a copy of
any notice delivered pursuant to this clause (iv) shall also be sent pursuant to
clause (ii) or (iii)), addressed to the attention of the addressee's General
Counsel at the address of its principal executive office or to such other
address or facsimile number for a party as it shall have specified by like
notice.
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11.6 COUNTERPARTS. This Agreement, including the Schedules and Exhibits
hereto and the other documents referred to herein, may be executed in
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
11.7 BINDING EFFECT; ASSIGNMENT. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective legal
representatives and successors, and nothing in this Agreement, express or
implied, is intended to confer upon any other Person any rights or remedies of
any nature whatsoever under or by reason of this Agreement. This Agreement may
not be assigned by any party hereto.
11.8 SEVERABILITY. If any term or other provision of this Agreement or
the Schedules or Exhibits attached hereto is determined by a nonappealable
decision by a court, administrative agency or arbitrator to be invalid, illegal
or incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to either
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the fullest extent possible.
11.9 FAILURE OR INDULGENCE NOT WAIVER; REMEDIES CUMULATIVE. No failure
or delay on the part of either party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing
under this Agreement or the Schedules or Exhibits attached hereto are cumulative
to, and not exclusive of, any rights or remedies otherwise available.
11.10 AMENDMENT. No change or amendment will be made to this Agreement
except by an instrument in writing signed on behalf of each of the parties to
this Agreement.
11.11 AUTHORITY. Each of the parties hereto represents to the other
that (a) it has the corporate or other requisite power and authority to execute,
deliver and perform this Agreement and the Ancillary Agreements, (b) the
execution, delivery and performance of this Agreement and the Ancillary
Agreements by it have been duly authorized by all necessary corporate or other
actions, (c) it has duly and validly executed and delivered this Agreement and
the Ancillary Agreements to be executed and delivered on or prior to the
Separation Date, and (d) this Agreement and such Ancillary Agreements are legal,
valid and binding obligations, enforceable against it in accordance with their
respective terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally and
general equity principles.
11.12 INTERPRETATION. The headings contained in this Agreement, in any
Exhibit or Schedule hereto and in the table of contents to this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Any capitalized term used in any Schedule or
Exhibit but not otherwise defined therein, shall have the meaning
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assigned to such term in this Agreement. When a reference is made in this
Agreement to an Article or a Section, Exhibit or Schedule, such reference shall
be to an Article or Section of, or an Exhibit or Schedule to, this Agreement
unless otherwise indicated.
11.13 CONFLICTING AGREEMENTS. In the event of conflict between this
Agreement and any Ancillary Agreement or other agreement executed in connection
herewith, the provisions of such other agreement shall prevail.
WHEREFORE, the parties have signed this Master Separation Agreement effective as
of the date first set forth above.
RELIANT ENERGY, INCORPORATED
By:
------------------------------
Name:
Title:
RELIANT RESOURCES, INC.
By:
------------------------------
Name:
Title:
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